Unknown. Affirmation of interim rule as final rule
33,763 words·~153 min read·
/register/2006/10/18/06-8761·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
--- schema: federal-register doc_type: fedreg source_file: FR-2006-10-18.xml --- 71 201 Wednesday, October 18, 2006 Contents Administration Administration on Aging See Aging Administration Agency Agency for Toxic Substances and Disease Registry NOTICES Superfund program: Hazardous substances priorities list (toxicological profiles), 61479-61480 E6-17331 Aging Aging Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 61480-61481 E6-17325 Agriculture Agriculture Department See Animal and Plant Health Inspection Service See Grain Inspection, Packers and Stockyards Administration See National Agricultural Statistics Service NOTICES Agency information collection activities; proposals, submissions, and approvals, E6-17299 61457-61458 E6-17332 Animal Animal and Plant Health Inspection Service RULES Plant-related quarantine, domestic:
Imported fire ant, 61373 E6-17336 Plant-related quarantine, foreign: Mexican Hass avocados; correction, 61373-61374 E6-17335 Arts Arts and Humanities, National Foundation See National Foundation on the Arts and the Humanities Centers Centers for Medicare & Medicaid Services See Inspector General Office, Health and Human Services Department PROPOSED RULES Medicare: Part D prescription drugs; data collection, 61445-61455 06-8750 NOTICES Medicaid: State plan amendments, reconsideration; hearings— Minnesota, 61482-61483 E6-17368 New York, 61481-61482 E6-17361 Coast Guard Coast Guard RULES Drawbridge operations:
New Jersey, 61409-61410 E6-17390 New York, 61410 E6-17385 Vessel documentation and measurement: Coastwise trade vessels; lease financing, 61413-61425 E6-17037 Commerce Commerce Department See Industry and Security Bureau See International Trade Administration See National Oceanic and Atmospheric Administration Comptroller Comptroller of the Currency NOTICES Privacy Act; systems of records, 61538-61539 E6-17300 Consumer Consumer Product Safety Commission NOTICES Meetings; Sunshine Act, 61462 06-8786 Council Council on Environmental Quality NOTICES Reports and guidance documents; availability, etc.:
Establishing, revising, and using categorical exclusions under the National Environmental Policy Act, 61468 E6-17359 Customs Customs and Border Protection Bureau RULES Merchandise, special classes: Canada; softwood lumber products; special entry requirements, 61399-61403 06-8761 Drug Drug Enforcement Administration PROPOSED RULES Controlled substances; importation and exportation: Reexportation, 61436-61441 E6-17275 NOTICES *Applications, hearings, determinations, etc.:* Applied Science Labs, Inc., 61510 E6-17291 Boehringer Ingelheim Chemicals, Inc., E6-17276 61510-61511 E6-17293 Roche Diagnostics Operations, Inc., 61511 E6-17289 Varian, Inc., 61511 E6-17277 Education Education Department PROPOSED RULES Vocational and adult education:
National Reporting System for Adult Education; measuring educational gain, 61580-61593 06-8709 NOTICES Agency information collection activities; proposals, submissions, and approvals, 61462 E6-17334 Meetings: Historically Black Colleges and Universities Capital Financing Advisory Board, 61462-61463 E6-17387 Employment Employment and Training Administration PROPOSED RULES Trade Adjustment Assistance Program: Alternative trade adjustment assistance for older workers, 61618-61626 06-8752 EPA Environmental Protection Agency RULES Pesticides; tolerances in food, animal feeds, and raw agricultural commodities:
Flumioxazin, 61410-61413 E6-17138 NOTICES Pesticide, food, and feed additive petitions: Interregional Research Project (No. 4), 61465-61466 E6-17100 Pesticide registration, cancellation, etc.: Aberco, Inc.; correction, 61463-61464 E6-17227 Woodstream Corp., 61464-61465 E6-17228 Pesticides; experimental use permits, etc. E.I. du Pont de Nemours & Co., 61466-61467 E6-17101 Environment Environmental Quality Council See Council on Environmental Quality Executive Executive Office of the President See Council on Environmental Quality See Presidential Documents FAA Federal Aviation Administration RULES Airworthiness directives:
Boeing, 61391-61395 E6-17187 Pratt & Whitney Correction, 61395-61399 E6-17327 PROPOSED RULES Airworthiness standards: Special conditions— Boeing Model 777-200 series airplanes, 61432-61435 E6-17345 Dassault Aviation Model Falcon 7X airplane, 61427-61432 06-8762 FCC Federal Communications Commission RULES Radio stations; table of assignments: Maryland and Virginia, 61425 E6-17349 Oklahoma and Kansas, 61425-61426 E6-17346 PROPOSED RULES Radio stations; table of assignments: Arizona, 61456 E6-17347 Missouri, 61456 E6-17350 Texas, 61455-61456 E6-17348 NOTICES Agency information collection activities; proposals, submissions, and approvals, 61468-61470 E6-17184 E6-17342 E6-17343 Meetings:
Consumer Advisory Committee, 61470-61471 E6-17351 FDIC Federal Deposit Insurance Corporation RULES Assessments: Dividend requirements; implementation, 61385-61391 E6-17304 One-time assessment credit; implementation, 61374-61385 E6-17305 Federal Highway Federal Highway Administration NOTICES Grants and cooperative agreements; availability, etc.: Interstate Oasis Program, 61529-61534 E6-17367 FMC Federal Maritime Commission NOTICES Agreements filed, etc., 61471 E6-17363 Ocean transportation intermediary licenses:
Global Cargo Corp., 61471 E6-17366 Hirdes Freight Ltd. et al., 61471 E6-17365 International Import Export Service, Inc., 61471 E6-17364 Sunspeed Transportation, et al., 61471-61472 E6-17360 Federal Reserve Federal Reserve System NOTICES Agency information collection activities; proposals, submissions, and approvals, 61472-61474 E6-17312 E6-17337 FTC Federal Trade Commission NOTICES Meetings; Sunshine Act, 61474 06-8783 Prohibited trade practices: Information and Real Estate Services, LLC, et al., 61474-61478 E6-17357 Federal Transit Federal Transit Administration NOTICES Transfer of federally assisted land or facility:
Union City, NJ; transfer of Union City Bus Maintenance Facility, 61534-61535 E6-17264 Financial Financial Management Service See Fiscal Service Fiscal Fiscal Service NOTICES Federal debt collection and discount and rebate evaluation; Treasury current value of funds rate, 61539 06-8751 Fish Fish and Wildlife Service PROPOSED RULES Endangered and threatened species: Critical habitat designations— Yadon's piperia, 61546-61578 06-8600 NOTICES Endangered and threatened species: Incidental take permits— Adams County, ID; northern Idaho ground squirrel, 61501-61502 E6-17280 Brevard County, FL;
Florida scrub-jay, 61503-61504 E6-17341 Monterey County, CA; Smith's blue butterfly, 61502-61503 E6-17329 Food Food and Drug Administration NOTICES Reports and guidance documents; availability, etc.: Fixed dose combinations, co-packaged drug products, and single-entity versions of previously approved antiretrovirals for treatment of HIV, 61483-61484 E6-17324 Pediatric studies; medical and clinical pharmacology reviews; summaries, 61484-61485 E6-17284 GSA General Services Administration PROPOSED RULES Federal Management Regulation:
Personal property disposition, 61445 E6-17340 GIPSA Grain Inspection, Packers and Stockyards Administration NOTICES Committees; establishment, renewal, termination, etc.: Grain Inspection Advisory Committee, 61458-61459 E6-17333 Health Health and Human Services Department See Agency for Toxic Substances and Disease Registry See Aging Administration See Centers for Medicare & Medicaid Services See Food and Drug Administration See Health Resources and Services Administration See Inspector General Office, Health and Human Services Department NOTICES Meetings:
American Health Information Community, 61478-61479 06-8733 06-8736 06-8737 Health Health Resources and Services Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 61485 E6-17318 Homeland Homeland Security Department See Coast Guard See Customs and Border Protection Bureau Housing Housing and Urban Development Department NOTICES Agency information collection activities; proposals, submissions, and approvals, E6-17285 61492-61496 E6-17287 E6-17288 Correction, 61543 Z6-16716 Grants and cooperative agreements; availability, etc.:
Healthy Homes and Lead Hazard Control Grant Programs, 61496-61498 E6-17311 Organization, functions, and authority delegations: Assistant Secretary for Administration; order of succession, 61498-61499 E6-17056 Assistant Secretary for Fair Housing and Equal Opportunity; order of succession, 61498 E6-17045 Chief Procurement Office Officer; order of succession, 61499 E6-17053 Community Planning and Development Office; order of succession, 61499-61500 E6-17044 Housing Office; order of succession, 61500 E6-17059 Public and Indian Housing Office; order of succession, 61500-61501 E6-17054 Regulatory waiver requests; quarterly listing, 61596-61616 06-8670 Indian Indian Affairs Bureau NOTICES Agency information collection activities; proposals, submissions, and approvals, 61505-61506 E6-17354 Industry Industry and Security Bureau PROPOSED RULES Export administration regulations:
Knowledge and red flags; definition and guidance revisions; safe harbor; withdrawn, 61435-61436 E6-17265 Inspector Inspector General Office, Health and Human Services Department NOTICES Programs exclusions; list, 61485-61492 E6-17330 Interior Interior Department See Fish and Wildlife Service See Indian Affairs Bureau See Land Management Bureau See National Park Service IRS Internal Revenue Service PROPOSED RULES Income taxes: Annuity contracts; property exchanges, 61441-61445 E6-17301 NOTICES Meetings:
Taxpayer Advocacy Panels, E6-17290 61539-61541 E6-17292 E6-17309 E6-17310 International International Trade Administration NOTICES North American Free Trade Agreement (NAFT; binational panel reviews: Softwood lumber products from— Canada, 61459-61460 E6-17352 Justice Justice Department See Drug Enforcement Administration NOTICES Pollution control; consent judgments: Afton Chemeical Corp. et al., 61507 06-8744 Cooper Industries, LLC, 61507-61508 06-8741 Cummings Engine Co., Inc., 61508 06-8742 Indianapolis, 61508-61509 06-8745 Mallinckrodt, et al., 61509 06-8743 Union Pacific Railroad Co., 61509-61510 06-8746 Labor Labor Department See Employment and Training Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 61511-61512 E6-17356 Land Land Management Bureau NOTICES Meetings:
Resource Advisory Councils— Central California, 61506 E6-17282 National Agricultural National Agricultural Statistics Service NOTICES Agency information collection activities; proposals, submissions, and approvals, 61459 E6-17302 National Foundation National Foundation on the Arts and the Humanities NOTICES Meetings: Arts and Artifacts Indemnity Panel, 61512 E6-17362 NOAA National Oceanic and Atmospheric Administration RULES Fishery conservation and management: Alaska; fisheries of Exclusive Economic Zone— Pacific cod, 61426 06-8747 NOTICES Environmental statements; notice of intent:
Bowhead whales subsistence harvest by Alaska Natives; annual quotas establishment, 61460-61461 E6-17370 Scientific research permit applications, determinations, etc., 61461 E6-17383 National Park National Park Service NOTICES National Register of Historic Places; pending nominations, 61506-61507 E6-17297 Nuclear Nuclear Regulatory Commission NOTICES Applications; exemptions, renewals, etc. Wolf Creek Nuclear Operating Corp, 61512 E6-17323 Pipeline Pipeline and Hazardous Materials Safety Administration NOTICES Hazardous materials:
Special permit applications; list, 61535-61537 06-8748 06-8749 Postal Postal Service NOTICES Privacy Act; computer matching programs, 61512-61516 E6-17391 E6-17453 Presidential Presidential Documents PROCLAMATIONS *Special observances:* National Character Counts Week (Proc. 8070), 61627-61630 06-8807 National Forest Products Week (Proc. 8071), 61631-61632 06-8808 Public Public Debt Bureau See Fiscal Service Railroad Railroad Retirement Board NOTICES Agency information collection activities; proposals, submissions, and approvals, 61516-61517 E6-17281 SEC Securities and Exchange Commission NOTICES Self-regulatory organizations; proposed rule changes:
International Securities Exchange, LLC, 61518-61519 E6-17316 National Association of Securities Dealers, Inc., 61519-61524 E6-17319 New York Stock Exchange LLC, 61524-61525 E6-17321 NYSE Arca, Inc., 61525-61528 E6-17317 *Applications, hearings, determinations, etc.:* Consolidated Tape Association, 61517-61518 E6-17315 Social Social Security Administration RULES Social security benefits and supplemental security income: Federal old age, survivors, and disability insurance; and aged, blind, and disabled— False or misleading statements or withholding of information; representative payment policies and administrative procedure for imposing penalties, 61403-61409 E6-17320 State State Department NOTICES Agency information collection activities; proposals, submissions, and approvals, 61528 E6-17339 Committees; establishment, renewal, termination, etc.:
Democracy Promotion Advisory Committee, 61528 E6-17338 Statistical Statistical Reporting Service See National Agricultural Statistics Service Toxic Toxic Substances and Disease Registry Agency See Agency for Toxic Substances and Disease Registry Transportation Transportation Department See Federal Aviation Administration See Federal Highway Administration See Federal Transit Administration See Pipeline and Hazardous Materials Safety Administration Treasury Treasury Department See Comptroller of the Currency See Fiscal Service See Internal Revenue Service See United States Mint NOTICES Agency information collection activities; proposals, submissions, and approvals, 61537 E6-17303 Meetings:
Debt Management Advisory Committee, 61537-61538 06-8732 MISSING FOR: U.S.-China Economic and Security Review Commission U.S.-China Economic and Security Review Commission NOTICES Meetings: Annual report preparation, 61541-61542 E6-17306 U.S. Mint United States Mint NOTICES Meetings: Citizens Coinage Advisory Committee, 61541 E6-17296 Separate Parts In This Issue Part II Interior Department, Fish and Wildlife Service, 61546-61578 06-8600 Part III Education Department, 61580-61593 06-8709 Part IV Housing and Urban Development Department, 61596-61616 06-8670 Part V Labor Department, Employment and Training Administration, 61618-61626 06-8752 Part VI Executive Office of the President, Presidential Documents, 61627-61632 06-8807 06-8808 Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions. 71 201 Wednesday, October 18, 2006 Rules and Regulations DEPARTMENT OF AGRICULTURE Animal and Plant Health Inspection Service 7 CFR Part 301 [Docket No. APHIS-2006-0080] Imported Fire Ant; Addition of Counties in Arkansas and Tennessee to the List of Quarantined Areas AGENCY:
Animal and Plant Health Inspection Service, USDA. ACTION: Affirmation of interim rule as final rule. SUMMARY: We are adopting as a final rule, without change, an interim rule that amended the imported fire ant regulations by designating as quarantined areas all of 2 counties in Arkansas and all or portions of 21 counties in Tennessee. As a result of that action, the interstate movement of regulated articles from those areas is restricted. The interim rule was necessary to prevent the artificial spread of imported fire ant to noninfested areas of the United States.
DATES: Effective on October 18, 2006, we are adopting as a final rule the interim rule that was published at 71 FR 42246-42249 on July 26, 2006. FOR FURTHER INFORMATION CONTACT: Mr. Charles L. Brown, Imported Fire Ant Quarantine Program Manager, Pest Detection and Management Programs, PPQ, APHIS, 4700 River Road, Unit 134, Riverdale, MD 20737-1236;
(301)734-4838. SUPPLEMENTARY INFORMATION: Background The imported fire ant regulations (contained in 7 CFR 301.81 through 301.81-10 and referred to below as the regulations) quarantine infested States or infested areas within States and restrict the interstate movement of regulated articles to prevent the artificial spread of the imported fire ant. The regulations in § 301.81-3 provide that the Administrator of the Animal and Plant Health Inspection Service will list as a quarantined area each State, or each portion of a State, that is infested with the imported fire ant. The Administrator will designate less than an entire State as a quarantined area only under the following conditions:
(1)The State has adopted and is enforcing restrictions on the intrastate movement of the regulated articles listed in § 301.81-2 that are equivalent to the interstate movement restrictions imposed by the regulations; and
(2)designating less than the entire State will prevent the spread of the imported fire ant. The Administrator may include uninfested acreage within a quarantined area due to its proximity to an infestation or its inseparability from an infested locality for quarantine purposes. In an interim rule 1 effective and published in the **Federal Register** on July 26, 2006 (71 FR 42246-42249, Docket No. APHIS-2006-0080), we amended the regulations by adding Perry County and the remainder of Polk County to the list of quarantined areas in Arkansas, and by adding portions of Anderson, Davidson, Gibson, Knox, Rutherford, Tipton, Van Buren, and Williamson Counties to the list of quarantined areas in Tennessee and expanding the quarantined areas in Bedford, Benton, Blount, Carroll, Cumberland, Grundy, Haywood, Hickman, Humphreys, Loudon, Maury, Roane, and Sequatchie Counties, TN. 1 To view the interim rule, go to *http://www.regulations.gov* , click on the “Advanced Search” tab, and select “Docket Search.” In the Docket ID field, enter APHIS-2006-0080, then click “Submit.” Clicking on the Docket ID link in the search results page will produce a list of all documents in the docket. Comments on the interim rule were required to be received on or before September 25, 2006. We did not receive any comments. Therefore, for the reasons given in the interim rule, we are adopting the interim rule as a final rule. This action also affirms the information contained in the interim rule concerning Executive Order 12866 and the Regulatory Flexibility Act, Executive Orders 12372 and 12988, and the Paperwork Reduction Act. Further, for this action, the Office of Management and Budget has waived its review under Executive Order 12866. List of Subjects in 7 CFR Part 301 Agricultural commodities, Plant diseases and pests, Quarantine, Reporting and recordkeeping requirements, Transportation. PART 301—DOMESTIC QUARANTINE NOTICES Accordingly, we are adopting as a final rule, without change, the interim rule that amended 7 CFR part 301 and that was published at 71 FR 42246-42249 on July 26, 2006. Done in Washington, DC, this 12th day of October 2006. Kevin Shea, Acting Administrator, Animal and Plant Health Inspection Service. [FR Doc. E6-17336 Filed 10-17-06; 8:45 am] BILLING CODE 3410-34-P DEPARTMENT OF AGRICULTURE Animal and Plant Health Inspection Service 7 CFR Part 319 [Docket No. 03-022-7] RIN 0579-AB81 Mexican Hass Avocado Import Program; Technical Amendment AGENCY: Animal and Plant Health Inspection Service, USDA. ACTION: Final rule; technical amendment. SUMMARY: In a final rule published in the **Federal Register** on November 30, 2004, we amended the fruits and vegetables regulations to expand the number of States in which fresh Hass avocado fruit grown in approved orchards in approved municipalities in Michoacan, Mexico, may be distributed and to allow the distribution of the avocados during all months of the year. The final rule contained an error in the rule portion. This document corrects that error. EFFECTIVE DATE: November 17, 2006. FOR FURTHER INFORMATION CONTACT: Mr. David B. Lamb, Import Specialist, Commodity Import Analysis and Operations, PPQ, APHIS, 4700 River Road, Unit 133, Riverdale, MD 20737-1236;
(301)734-8758. SUPPLEMENTARY INFORMATION: In a proposed rule published in the **Federal Register** on May 24, 2004 (69 FR 29466-29477, Docket No. 03-022-3), we proposed to amend the regulations in 7 CFR 319.56-2ff to expand, from 31 to 50, the number of States (plus the District of Columbia) in which fresh Hass avocado fruit grown in approved orchards in approved municipalities in Michoacan, Mexico, may be distributed. In a rule published in the **Federal Register** on November 30, 2004 (69 FR 69747-69774, Docket No. 03-022-5), and effective on January 31, 2005, we adopted our proposed rule as a final rule, with changes made in response to public comments we received on the proposed rule. Those changes included the adoption of temporary restrictions on the distribution of avocados (contained in § 319.56-2ff(c)(3)(vii) of the regulations) which provided that between January 31, 2005, and January 31, 2007, avocados may be imported into and distributed in all States except California, Florida, Hawaii, and that the boxes or crates in which avocados are shipped must be clearly marked with the statement “Not for importation or distribution in CA, FL, and HI.” Prior to the effective date of our November 2004 final rule, the regulations had required that the boxes or crates be marked “Not for distribution in AL, AK, AZ, AR, CA, FL, GA, HI, LA, MS, NV, NM, NC, OK, OR, SC, TN, TX, WA, Puerto Rico, and all other U.S. Territories.” When we amended the regulations to expand, from 31 to 50, the number of States (plus the District of Columbia) in which fresh Hass avocado fruit grown in approved orchards in approved municipalities in Michoacan, Mexico, may be distributed, we should not have removed that portion of the box marking requirement that pertained to Puerto Rico and U.S. Territories. The proposed and final rules only discussed importations into the 50 States and the District of Columbia, and the pest risk analysis that supported the proposed and final rules only evaluated the risks associated with the movement of the avocados into the 50 States and the District of Columbia. Therefore, in this document we are amending § 319.56-2ff(a)(2), which describes the shipping restrictions that apply to the avocados, and § 319.56-2ff(c)(3), which describes the box marking requirements, in order to correct the November 2004 final rule's removal of the distribution limitations that apply to Puerto Rico and U.S. Territories. List of Subjects in 7 CFR Part 319 Coffee, Cotton, Fruits, Honey, Imports, Logs, Nursery stock, Plant diseases and pests, Quarantine, Reporting and recordkeeping requirements, Rice, Vegetables. Accordingly, we are amending 7 CFR part 319 as follows: PART 319—FOREIGN QUARANTINE NOTICES 1. The authority citation for part 319 continues to read as follows: Authority: 7 U.S.C. 450, 7701-7772, and 7781-7786; 21 U.S.C. 136 and 136a; 7 CFR 2.22, 2.80, and 371.3. 2. In § 319.56-2ff, paragraphs (a)(2) and (c)(3)(vii) are revised to read as follows: § 319.56-2ff Administrative instructions governing movement of Hass avocados from Michoacan, Mexico.
(a)* * *
(2)Between January 31, 2005, and January 31, 2007, the avocados may be imported into and distributed in all States except California, Florida, Hawaii, Puerto Rico, and U.S. Territories. After January 31, 2007, the avocados may be imported into and distributed in all States, but not Puerto Rico or any U.S. Territory.
(c)* * *
(3)* * *
(vii)The avocados must be packed in clean, new boxes, or clean plastic reusable crates. The boxes or crates must be clearly marked with the identity of the grower, packinghouse, and exporter. Between January 31, 2005, and January 31, 2007, the boxes or crates must be clearly marked with the statement “Not for importation or distribution in CA, FL, HI, Puerto Rico, or U.S. Territories.” After January 31, 2007, the boxes or crates must be clearly marked with the statement “Not for importation or distribution in Puerto Rico or U.S. Territories.” Done in Washington, DC, this 12th day of October 2006. Kevin Shea, Acting Administrator, Animal and Plant Health Inspection Service. [FR Doc. E6-17335 Filed 10-17-06; 8:45 am] BILLING CODE 3410-34-P FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 327 RIN 3064—AD08 One-Time Assessment Credit AGENCY: Federal Deposit Insurance Corporation (FDIC). ACTION: Final rule. SUMMARY: The FDIC is amending its assessments regulations to implement the one-time assessment credit required by the Federal Deposit Insurance Act (FDI Act), as amended by the Federal Deposit Insurance Reform Act of 2005 (Reform Act). The final rule covers: The aggregate amount of the one-time credit; the institutions that are eligible to receive credits; and how to determine the amount of each eligible institution's credit, which for some institutions may be largely dependent on how the FDIC defines “successor” for these purposes. The final rule also establishes the qualifications and procedures governing the application of assessment credits, and provides a reasonable opportunity for an institution to challenge administratively the amount of the credit. EFFECTIVE DATE: The final rule is effective on November 17, 2006. FOR FURTHER INFORMATION CONTACT: Munsell W. St. Clair, Senior Policy Analyst, Division of Insurance and Research,
(202)898-8967; Donna M. Saulnier, Senior Assessment Policy Specialist, Division of Finance,
(703)562-6167; or Joseph A. DiNuzzo, Counsel, Legal Division,
(202)898-7349. SUPPLEMENTARY INFORMATION: This supplementary information section contains a discussion of the statutory basis for this rulemaking and the proposed rule published in May 2006, a summary of the comments received on the proposed rule, and the final rule, which responds to the comments. I. Background The Reform Act made numerous revisions to the deposit insurance assessment provisions of the FDI Act. 1 Specifically, the Reform Act amended Section 7(e)(3) of the Federal Deposit Insurance Act to require that the FDIC's Board of Directors (Board) provide by regulation an initial, one-time assessment credit to each “eligible” insured depository institution (or its successor) based on the assessment base of the institution as of December 31, 1996, as compared to the combined aggregate assessment base of all eligible institutions as of that date (the 1996 assessment base ratio), taking into account such other factors as the Board may determine to be appropriate. The aggregate amount of one-time credits is to equal the amount that the FDIC could have collected if it had imposed an assessment of 10.5 basis points on the combined assessment base of the Bank Insurance Fund
(BIF)and Savings Association Insurance Fund
(SAIF)as of December 31, 2001. 12 U.S.C. 1817(e)(3). 1 The Reform Act was included as Title II, Subtitle B, of the Deficit Reduction Act of 2005, Public Law 109-171, 120 Stat. 9, which was signed into law by the President on February 8, 2006. An “eligible” insured depository institution is one that: was in existence on December 31, 1996, and paid a Federal deposit insurance assessment prior to that date; 2 or is a “successor” to any such insured depository institution. The FDI Act requires the Board to define “successor” for these purposes and provides that the Board “may consider any factors as the Board may deem appropriate.” The amount of a credit to any eligible insured depository institution must be applied by the FDIC to the deposit insurance assessments imposed on such institution that become due for assessment periods beginning after the effective date of the one-time credit regulations required to be issued within 270 days after enactment. 3 12 U.S.C. 1817(e)(3)(D)(i). 2 Prior to 1997, the assessments that SAIF member institutions paid the SAIF were diverted to the Financing Corporation (FICO), which had a statutory priority to those funds. Beginning with enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA, Public Law 101-73, 103 Stat. 183) and ending with the Deposit Insurance Funds Act of 1996 (DIFA, Public Law 104-208, 110 Stat. 3009, 3009-479), FICO had authority, with the approval of the Board of Directors of the FDIC, to assess against SAIF members to cover anticipated interest payments, issuance costs, and custodial fees on FICO bonds. The FICO assessment could not exceed the amount authorized to be assessed against SAIF members pursuant to section 7 of the FDI Act, and FICO had first priority against the assessment. 12 U.S.C. 1441(f), as amended by FIRREA. Beginning in 1997, the FICO assessments were no longer drawn from SAIF. Rather, the FDIC began collecting a separate FICO assessment. 12 U.S.C. 1441(f), as amended by DIFA. Payments to SAIF prior to December 31, 1996, even if diverted to FICO, are considered deposit insurance assessments for purposes of the one-time assessment credit. The new law does not change the existing process through which the FDIC collects FICO assessments. 3 Section 2109 of the Reform Act also requires the FDIC to prescribe, within 270 days, rules on the designated reserve ratio, changes to deposit insurance coverage, the dividend requirements, and assessments. The final rule on deposit insurance coverage was published on September 12, 2006, 71 FR 53547. The final rule on the dividend requirements is being published on the same day as this final rule. Final rules on the other matters are expected to be published in the near future. There are three statutory restrictions on the use of credits. First, as a general rule, for assessments that become due for assessment periods beginning in fiscal years 2008, 2009, and 2010, credits may not be applied to more than 90 percent of an institution's assessment. 4 12 U.S.C. 1817(e)(3)(D)(ii). (This 90 percent limit does not apply to 2007 assessments.) Second, for an institution that exhibits financial, operational or compliance weaknesses ranging from moderately severe to unsatisfactory, or is not at least adequately capitalized (as defined pursuant to section 38 of the FDI Act) at the beginning of an assessment period, the amount of any credit that may be applied against the institution's assessment for the period may not exceed the amount the institution would have been assessed had it been assessed at the average rate for all institutions for the period. 12 U.S.C. 1817(e)(3)(E). And, third, if the FDIC is operating under a restoration plan to recapitalize the Deposit Insurance Fund
(DIF)pursuant to section 7(b)(3)(E) of the FDI Act, as amended by the Reform Act, the FDIC may elect to restrict credit use; however, an institution must still be allowed to apply credits up to three basis points of its assessment base or its actual assessment, whichever is less. 12 U.S.C. 1817(b)(3)(E)(iii). 4 As proposed, the FDIC is interpreting a “fiscal year” as a calendar year. The one-time credit regulations must include the qualifications and procedures governing the application of assessment credits. These regulations also must include provisions allowing a bank or thrift a reasonable opportunity to challenge administratively the amount of credits it is awarded. 5 Any determination of the amount of an institution's credit by the FDIC pursuant to these administrative procedures is final and not subject to judicial review. 12 U.S.C. 1817(e)(4). 5 Similarly, for dividends under the FDI Act, as amended by the Reform Act, the regulations must include provisions allowing a bank or thrift a reasonable opportunity to challenge administratively the amount of dividends it is awarded. 12 U.S.C. 1817(e)(4). II. The Proposed Rule As part of this rulemaking, the FDIC was required, among other things, to: Determine the aggregate amount of the one-time credit; determine the institutions that are eligible to receive credits; and determine the amount of each eligible institution's credit, which for some institutions may be largely dependent on how the FDIC defines “successor” for these purposes. The FDIC also must establish the qualifications and procedures governing the application of assessment credits, and provide a reasonable opportunity for an institution to challenge administratively the amount of the credit. The FDIC's determination after such challenge will be final and not subject to judicial review. As set out more fully in the proposed rule, 6 the FDIC proposed to:
(1)Rely on the 1996 assessment base figures contained in the Assessment Information Management System
(AIMS)7 ;
(2)define “successor” as the resulting institution in a merger or consolidation, while seeking comment on alternative definitions;
(3)automatically apply each institution's credit against future assessments to the maximum extent allowed consistent with the limitations in the FDI Act; and
(4)provide an appeals process for administrative challenges to the amounts of credits that culminates in review by the FDIC's Assessment Appeals Committee. 6 71 FR 28808 (May 18, 2006). 7 The current Assessment Information Management Systems
(AIMS)contains records from quarterly reports of condition data from institutions with bank and thrift charters. The FFIEC Central Data Repository (FFIEC-CDR) for banks and the Thrift Financial Report for thrifts provide AIMS with the values of the deposit line items that are used in the calculation of an institution's assessment base. Shortly after publication of the proposed rule, the FDIC made available a searchable database with the FDIC's calculation of every institution's 1996 assessment base (if any) to give institutions the opportunity to review and verify both their 1996 assessment base and preliminary, estimated credit amount, as well as information related to mergers or consolidations to which it was a party. The comment period for the proposed rule was extended to August 16, 2006, to allow all interested parties to consider the proposed rule while proposed rules on the designated reserve ratio and risk-based assessments were pending. A. Aggregate Amount of One-Time Assessment Credit The aggregate amount of the one-time assessment credit is $4,707,580,238.19, which was calculated by applying an assessment rate of 10.5 basis points to the combined assessment base of BIF and SAIF as of December 31, 2001. The FDIC proposed to rely on the assessment base numbers available from each institution's certified statement (or amended certified statement), filed quarterly and preserved in AIMS, which records the assessment base for each insured depository institution as of that date. AIMS is the FDIC's official system of records for determination of assessment bases and assessments due. B. Determination of Eligible Insured Depository Institutions and Each Institution's 1996 Assessment Base Ratio The FDIC must determine the assessment base of each eligible institution as of December 31, 1996, and any successor institutions, to determine the eligible institution's 1996 assessment base ratio. In making these determinations, the Board has the authority to take into account such factors as the Board may determine to be appropriate. 12 U.S.C. 1817(e)(3)(A). As described in the proposed rule, the denominator of the 1996 assessment base ratio is the combined aggregate assessment base of all eligible insured depository institutions and their successors. The numerator of each eligible institution's 1996 assessment base ratio is its assessment base as of December 31, 1996, combined with the assessment base on December 31, 1996, of each institution (if any) to which it is a successor. An eligible insured depository institution is one in existence as of December 31, 1996, that paid a deposit insurance assessment prior to that date (or a successor to such institution). 1. Determination of Eligible Institutions Similar to the determination of the aggregate amount of the credit, the FDIC proposed to use the December 31, 1996 assessment base for each institution, as it appears on the institution's certified statement or as subsequently amended and as recorded in AIMS, to identify eligible institutions. Those numbers reflect the bases on which institutions that existed on December 31, 1996, paid assessments. As of June 30, 2006, there were approximately 7,300 active insured depository institutions that may be eligible for the one-time assessment credit—that is, they were in existence on December 31, 1996, and had paid an assessment prior to that date or are a successor to such an institution. a. Effect of Voluntary Termination or Failure The FDIC identified institutions that voluntarily terminated their insurance or failed since December 31, 1996, which otherwise would have been considered eligible insured depository institutions for purposes of the one-time credit. Whether an institution that voluntarily terminated would have a successor would depend on the specific circumstances surrounding its termination. The FDIC proposed that an insured depository institution that has failed would not have a successor. b. *De Novo* Institutions The FDIC also identified institutions newly in existence as of December 31, 1996 ( *de novo* institutions) that did not pay deposit insurance premiums prior to December 31, 1996. Under the statute, those institutions could not be eligible insured depository institutions for purposes of the one-time assessment credit. However, the FDIC proposed that certain *de novo* institutions, which did not directly pay assessments prior to December 31, 1996, but which acquired by merger or consolidation before that date another insured depository institution that had paid assessments, would be considered eligible insured depository institutions. The FDIC viewed those *de novo* institutions as having stepped into the shoes of the existing institution for purposes of determining eligibility for the one-time assessment credit, consistent with the proposed successor definition. 2. Definition of “Successor” Many institutions that existed at the end of 1996 no longer exist. Some have disappeared through merger or consolidation. In fact, it appears that approximately 4,000 institutions that were in existence on December 31, 1996, have since combined with other institutions. In addition, 38 institutions have failed and no longer exist, while the FDIC has to date identified approximately 100 institutions that voluntarily relinquished Federal deposit insurance coverage or had their coverage terminated. The FDIC does not maintain complete records on sales of branches or blocks of deposits, but various sources suggest that at least 1,400 and possibly over 1,800 branch or deposit transactions have occurred since 1996. Section 7(e)(3)(F) of the FDI Act expressly charges the FDIC with defining “successor” by regulation for purposes of the one-time credit, and it provides the FDIC with broad discretion to do so. The Board may consider any factors it deems appropriate. The FDIC's proposed definition of “successor” reflected its consideration of what would be most consistent with the purpose of the one-time credit and what would be operationally viable. While a number of definitions of “successor” are possible in light of the discretion accorded the FDIC in defining the term, on balance, the FDIC concluded that the definition that focused on the institution and relied on traditional principles of corporate law was both more consistent with the purpose of the credit and more operationally viable. For a number of reasons (discussed more fully in the proposed rule), the FDIC proposed to define “successor” for purposes of the one-time credit as the resulting institution in a merger or consolidation occurring after December 31, 1996. As proposed, the definition would not include a purchase and assumption transaction, even if substantially all of the assets and liabilities of an institution were acquired by the assuming institution. However, the FDIC requested comment on whether to include in this definition a regulatory definition of a *de facto* merger to recognize that the results of some transactions, which are not technically or legally mergers or consolidations, may largely mirror the results of a merger or consolidation. The FDIC also requested comment on a definition that would link credits to deposits, sometimes referred to as a “follow-the-deposits” approach. If there is no successor to an institution that would have been eligible for the one-time assessment credit *before* the effective date of the final rule, because an otherwise eligible institution ceased to be an insured depository institution before that date, then the FDIC proposed that that portion of the aggregate one-time credit amount be redistributed among the eligible institutions. On the other hand, if there is no successor to an eligible insured depository institution that ceases to exist after the Board issues the final rule and allocates the one-time assessment credit among eligible insured depository institutions, it is proposed that that institution's credits expire unused. C. Notification of 1996 Assessment Base Ratio and Credit Amount Along with the publication of the proposed rule, the FDIC made available a searchable database provided through the FDIC's public Web site ( *http://www.fdic.gov* ) that shows each currently existing institution and its predecessors by merger or consolidation from January 1, 1997, onward, based on information contained in certified statements, AIMS, and the FDIC's Structure Information Management System (“SIMS”). 8 The database included corresponding December 31, 1996 assessment base amounts for each institution and its predecessors and preliminary estimates of the amount of one-time credit that the existing institution would receive based on the proposed definition of successor. 8 SIMS maintains current and historical non-financial data for all institutions that is retrieved by AIMS to identify the current assessable universe for each quarterly assessment invoice cycle. SIMS offers institution-specific demographic data, including a complete set of information on merger or consolidation transactions. SIMS, however, does not contain complete information about deposit or branch sales. The database could be searched by institution name or insurance certificate number to ascertain which current institution (if any) would be considered a successor to an institution that no longer exists. Institutions had the opportunity to review this information, but were advised that this preliminary estimate could change, for example, because of a change in the definition of “successor” adopted in the final rule or because of a change to the information available to the FDIC for determining successorship. As soon as practicable after the Board approves the final rule, the FDIC proposed to notify each insured depository institution of its 1996 assessment base ratio and share of the one-time assessment credit. The notice would take the form of a Statement of One-Time Credit (or Statement): Informing every institution of its current, preliminary 1996 assessment base ratio; itemizing the 1996 assessment bases to which the institution may now have claims pursuant to the successor rule based on existing successor information in the database; providing the preliminary amount of the institution's one-time credit based on that 1996 assessment base ratio as applied to the aggregate amount of the credit; and providing the explanation as to how ratios and resulting amounts were calculated generally. The FDIC proposed to provide the Statement of One-Time Credit through FDIC *connect* and by mail in accordance with existing practices for assessment invoices. D. Requests for Review of Credit Amounts As noted above, the statute requires the FDIC's credit regulations to include provisions allowing an institution a reasonable opportunity to challenge administratively the amount of its one-time credit. The FDIC's determination of the amount following any such challenge is to be final and not subject to judicial review. The proposed rule largely paralleled the procedures for requesting revision of computation of a quarterly assessment payment as shown on the quarterly invoice with requests for review being considered by the Director of the Division of Finance and appeals of those decisions made to the FDIC's Assessment Appeals Committee (“AAC”). As with the notice of proposed rulemaking on assessment dividends, 9 the FDIC proposed shorter timeframes in the credit process so that requests for review could be resolved to allow application of credits against upcoming assessments to the extent possible. The FDIC further proposed to freeze temporarily the allocation of the credit amount in dispute for institutions involved in a challenge until the challenge is resolved. After determination of the request for review or appeal, if filed, appropriate adjustments would be reflected in the next quarterly invoice. 9 71 *FR* 22804 (May 18, 2006). E. Using Credits The FDIC proposed to track each institution's one-time credit amount and automatically apply an institution's credits to its assessment to the maximum extent allowed by law. For 2007 assessment periods, all credits available to an institution may be used to offset the institution's insurance assessment, subject to certain statutory limitations described below. For assessments that become due for assessment periods beginning in fiscal years 2008, 2009, and 2010, the FDI Act provides that credits may not be applied to more than 90 percent of an institution's assessment. For an institution that exhibits financial, operational or compliance weaknesses ranging from moderately severe to unsatisfactory, or is not adequately capitalized at the beginning of an assessment period, the amount of any credit that may be applied against the institution's assessment for the period may not exceed the amount the institution would have been assessed had it been assessed at the average assessment rate for all institutions for the period. The FDIC proposed to interpret the phrase “average assessment rate” to mean the aggregate assessment charged all institutions in a period divided by the aggregate assessment base for that period. As described above, the FDIC further has the discretion to limit the application of the one-time credit when the FDIC establishes a restoration plan to restore the reserve ratio of the DIF to the range established for it. 10 10 Section 2105 of the Reform Act, amending section 7(b)(3) of the FDI Act to establish a range for the reserve ratio of the DIF, will take effect on the date that final regulations implementing the legislation with respect to the designated reserve ratio become effective. Those regulations are required to be prescribed within 270 days of enactment. Reform Act Section 2109(a)(1). As the proposed rule recognized, credit amounts may not be used to pay FICO assessments pursuant to section 21(f) of the Federal Home Loan Bank Act, 12 U.S.C. 1441(f). The Reform Act does not affect the authority of FICO to impose and collect, with the approval of the FDIC's Board, assessments for anticipated interest payments, issuance costs, and custodial fees on obligations issued by FICO. F. Transferring Credits In addition to the transfer of credits to successors, the FDIC proposed to allow transfer of credits and adjustments to 1996 assessment base ratios by express agreement between insured depository institutions prior to the FDIC's final determination of an eligible insured depository institution's 1996 assessment base ratio and one-time credit amount pursuant to these regulations. Under the proposal, the FDIC would require the institutions to submit a written agreement signed by legal representatives of the involved institutions. Upon the FDIC's receipt of the agreement, appropriate adjustments would be made to the institutions' affected one-time credit amounts and 1996 assessment base ratios. Similarly, after an institution's credit share has been finally determined and no request for review is pending with respect to that credit amount, the FDIC proposed to recognize an agreement between insured depository institutions to transfer any portion of the one-time credit from the eligible institution to another institution. With respect to these transactions occurring after the final determination of each eligible institution's 1996 assessment base ratio and share of the one-time credit, the FDIC proposed not to adjust the transferring institution's 1996 assessment base ratio. III. Comments on the Proposed Rule We received twenty-six comments on the proposed rule. Most of the comments focused to some extent on the definition of “successor.” Five institutions and one trade association supported the proposed definition of successor, which relies on traditional principles of corporate law. Five institutions appeared to support including a *de facto* merger rule to recognize purchase and assumption transactions that may be viewed by some as the functional equivalent of a merger or consolidation. One institution emphasized that such a rule would have to be narrowly crafted. Four industry trade associations supported adding a *de facto* merger rule. Six institutions and a trade association commented in favor of a definition that would link credits to deposits, arguing that assessments are paid on deposits and rights and responsibilities associated with those deposits transfer when they are sold. One institution raised the question of so-called stripped charters, where one institution might acquire the assets and liabilities of another, while a third institution would merely merge with the charter of the acquired institution. Two United States Senators filed a joint comment letter asking the FDIC to reexamine its definition of successor, expressing their concern that the proposed rule “provides absolutely no opportunity for a bank that purchased deposits to receive credits for those deposits, whether deposits are easily traceable, or whether awarding credits to the selling bank would create a windfall for that selling bank and create a new free rider on the Fund.” One institution requested that the FDIC reconsider the definitions of “eligible insured depository institution” and “successor,” as well as the redistribution of credits where no successor exists, to recognize the actual assessments paid before December 31, 1996, by institutions that no longer had the deposits on which those assessments were paid on December 31, 1996, the date established by the statute. A trade association commented that the time-frames for the request for review process should be extended to parallel those applicable to requests for review of assessments. Six letters suggested that the FDIC phase in the one-time credit and some suggested three approaches for phasing in the application of credits—allowing institutions to use fifty percent of credits against assessments; allowing institutions to use a certain number of basis points of credit to offset assessments in any one year; or implementing a graduated credit schedule to offset assessments. These commenters argued that the proposal to apply credits to quarterly assessments to the maximum extent allowed by law would disproportionately adversely affect institutions chartered since 1996. One trade association supported the proposed rule, under which the FDIC would automatically offset quarterly assessments with the maximum amount of credits available and allowed by law. Another trade association suggested that the FDIC allow institutions to elect to restrict the application of their credits to budget for future expected expenses. One institution took the position that credits should not expire unused if an institution terminated after the effective date of the final rule; rather, that institution recommended that any remaining credit from that institution be redistributed among all eligible institutions. One institution opposed allowing the transfer of credits except to successors. Two trade associations supported the transferability described in the proposed rule. A trade association also opined that it was critical that the accounting treatment of these credits be determined before the effective date of the final rule and further offered its opinion that credits should not be considered assets or income. All of the comment letters have been considered and are available on the FDIC's Web site, *http://www.fdic.gov/regulations/laws/federal/propose.html.* IV. The Final Rule Upon considering the comments on the proposed rule, the FDIC is adopting the final rule. Under the final rule, the FDIC will rely on the 1996 assessment base figures as contained in AIMS in determining the aggregate amount of the one-time assessment credit and each institution's share of that aggregate amount; define “successor” as the resulting institution in a merger or consolidation, as well as the acquiring institution under a *de facto* rule; automatically apply each institution's credit against future assessments to the maximum extent allowed by the statute; and provide an appeals process for administrative challenges to individual institution's credit amounts that culminates in review by the AAC. A. Eligible Insured Depository Institutions and Their Successors To be eligible to receive a share of the one-time assessment credit, an insured depository institution must have been in existence on December 31, 1996, and paid a deposit insurance assessment prior to that date or be a successor to such an institution. The statute, in essence, takes a snapshot of the industry as of year-end 1996, and uses that as a proxy to recognize the assessments that had been paid by some institutions to recapitalize the deposit insurance funds at that time. Because it is a proxy, there may not be perfect alignment between institutions that paid significant assessments over years and their credit amounts. As the comments reflect, the principal issue in this rulemaking has been the definition of “successor.” In the proposed rule, the FDIC proposed to define successor for purposes of the one-time credit as the resulting institution in a merger or consolidation occurring after December 31, 1996. We requested specific comment on whether to include in the definition of “successor” a regulatory definition of a *de facto* merger to recognize that the results of some transactions, which are not technically or legally mergers or consolidations, may largely mirror the results of a merger or consolidation. A number of approaches were possible, and the FDIC carefully considered the alternatives presented in the proposed rule and the comments on them. The final rule defines successor as
(1)the resulting institution in a merger or consolidation or
(2)as an insured depository institution that acquired part of another insured depository institution's 1996 assessment base ratio under a *de facto* rule, as described below. The FDIC believes this definition is consistent with the purpose of the one-time credit—that is, to recognize the contributions that certain institutions made to capitalize the Bank Insurance Fund and Savings Association Insurance Fund, now merged into the Deposit Insurance Fund. Thus, a resulting institution in a merger occurring after December 31, 1996, will be considered a successor to an eligible insured depository institution. This definition also is consistent with traditional principles of corporate law. 15 William Meade Fletcher *et al.* , Fletcher Cyclopedia of the Law of Private Corporations §§ 7041-7100 (perm. ed., rev. vol. 1999). Under the statute, Congress has provided the FDIC with broad discretion to define “successor” considering any factors that the Board deems appropriate. Several commenters noted, and the Board recognizes, the consolidation of the industry, the numerous transactions that have occurred since 1996, and that parties would not have taken into account future credits when structuring transactions. Accordingly, under the final rule, “successor” is defined as the acquiring, assuming or resulting institution in a merger 11 or the acquiring institution under a *de facto* rule. The *de facto* rule applies to any transaction in which an insured depository institution assumes substantially all of the deposit liabilities and acquires substantially all of the assets of any other insured depository institution. 11 The definition of merger in the final rule specifically excludes transactions in which an insured depository institution either directly or indirectly acquires the assets of, or assumes liability to pay any deposits made in, any other insured depository institution where there is not a legal merger or consolidation of the two insured depository institutions. For these purposes, the FDIC considers an assumption and acquisition of at least 90 percent of the transferring institution's deposit liabilities and assets at the time of transfer as substantially all of that institution's assets and deposit liabilities. Any successor institution qualifying under that threshold would be entitled to a pro rata share, based on the deposit liabilities assumed, of the transferring institution's remaining 1996 assessment base ratio at the time of the transfer. The FDIC recognizes that including a *de facto* rule in the definition of successor departs, to a certain extent, from the clear, bright line that a strictly applied merger definition would provide. However, in keeping with the comments we received in favor of defining mergers to include *de facto* mergers, the FDIC believes this approach is fairer than excluding *de facto* transactions from the definition of successor. It is also consistent with Congressional intent in giving the FDIC broad discretion to define successor institutions for purposes of the one-time assessment credit. As some commenters point out, the insurance fund benefited from certain of these transactions by avoiding failure of an insured depository institution and associated losses. The FDIC believes that the merger and consolidation approach for successor is the most consistent with the purpose of the one-time assessment credit; however, a strict merger definition would exclude certain transactions that are also consistent with the purpose of the one-time credit. A *de facto* rule recognizes that a transfer of at least 90 percent of an institution's assets and deposit liabilities indicates a substantial divestiture of the transferring institution's business. We recognize some institutions that assumed deposit liabilities would not qualify, but a lower threshold would be less consistent with the purpose of the one-time credit in recognizing past contributions by institutions. Although the FDIC does not have records evidencing all transactions that would qualify under the *de facto* rule, we expect these situations to be limited and, as some commenters noted, the acquiring institutions in such transactions should be able to provide supporting documents to the FDIC. We note, however, that institutions will have thirty days from the effective date of the final rule to advise the FDIC if they disagree with the computation of the credit amount, or their claim will be barred. It is important to have a final determination regarding any *de facto* rule credit claims in order to determine the amounts institutions will be entitled to under the one-time assessment credit. Some commenters suggested a more expansive definition of successor up to and including the very inclusive “follow the deposits.” Ultimately, the FDIC believes, for the reasons stated below, that if the term “successor” were expanded to include deposit acquisitions other than through merger or under the *de facto* rule, it would become very difficult to distinguish on a principled basis who should be included and who should be excluded, and that a “follow-the-deposits” approach which brings with it a potentially large administrative complication is incompatible with the need to timely and efficiently administer the credit. As noted above, the FDIC has significant discretion under the statute to define “successor” for these purposes, and a single, clear, easily administered Federal standard is essential to allow the FDIC to implement and administer the one-time credit requirement in a timely and efficient manner. As one trade association wrote, institutions on “opposite sides of deposit sales transactions * * * have strong and legitimate arguments for why they would be the successor.” In contrast, if a “follow-the-deposits” approach were adopted, because the aggregate one-time assessment credit is a finite pool, disputes over credits resulting from deposit/branch purchases would have to be identified and to some extent resolved before the universe of eligible insured depository institutions could even be identified, which is essential to determining each institution's share based on its 1996 assessment base as adjusted for successorship. Under that scenario, until the 1996 assessment base for all eligible institutions was finalized, use of credits could be delayed and administration would be complicated. Record deposit growth could further complicate these determinations because, in addition to tracing deposits sometimes through numerous transactions, the FDIC might need to account for deposit growth over time attributable to the transferring deposits. One of the trade groups that supports the “follow the deposits” approach acknowledged that “ ‘following the deposits’ significantly complicates the FDIC's job of allocating the credit * * *.” Some commenters suggest that the merger rule “discriminates” and “arbitrarily places institutions which acquired deposits through asset acquisition at a competitive disadvantage based merely on the method by which they acquired deposits.” The FDIC disagrees with that characterization. The adopted definition recognizes past payments made by depository institutions to build the insurance funds. By providing the credit to depository institutions that actually paid the assessments or the institution resulting from their merger or consolidation into another insured institution, the final rule ensures that credits are awarded to the entity that bore the financial burden of recapitalizing the funds, either by directly paying into the funds or acquiring the institutions that did. Similarly, a successor under the *de facto* rule may be viewed as acquiring substantially all of the business of the transferring institution. Some commenters that would benefit from a “follow the deposits” approach argue that the adopted definition of “successor” is not consistent with congressional intent. Contrary to the contention of some commenters, Congress's broad delegation of authority to the FDIC to define “successor” does not evidence Congressional intent either to expand or contract the group of qualified institutions. Rather, the broad delegation ensured that the FDIC could consider the full range of facts and circumstances in developing a definition of successor—which we have done. The adopted definition is well within the broad discretion Congress gave the FDIC to implement the statute and with our understanding of the intent. The statute uses the term “eligible insured depository institution” and defines it to include those that paid assessments prior to December 31, 1996. The legislative history is replete with statements indicating that credits were intended to recognize those institutions that recapitalized the funds. In testimony before Congress, then-Chairman Powell stated, “Institutions that never paid premiums would receive no assessment credit.” Testimony of Chairman Powell before the Senate Committee on Banking, Housing and Urban Affairs (April 23, 2002); see also Testimony of Chairman Powell before the House Financial Services Committee (October 17, 2001) (indicating that an acquiring institution would get credit for past assessments paid by the acquired institution). In a statement before the House, one of the co-sponsors of the legislation stated, “We have reforms in this bill that compensate banks for the adverse effect of these so-called free riders. We give transition assessment credits, recognizing the contribution of those banks to the insurance reserves that they made during the early and mid-1990s, and those credits will offset future premiums for all but the newest and the most recent new institutions and also those fast-growing institutions.” Statement of Rep. Spencer Bachus, 148 Cong. Rec. H 2799 (daily ed. May 21, 2002). Also in a statement before the House, another co-sponsor of the legislation stated, “The bill includes a mechanism for determining credits for past contributions to the insurance funds * * *. This is a very, very important provision as a matter of fairness to institutions that recapitalized the funds.” Statement of Rep. Carolyn Maloney, 151 Cong. Rec. 2019, at 8-9 (2005). The successor definition adopted in this rule responds to comments supportive of a *de facto* merger rule by providing an opportunity for an acquirer of all or substantially all deposits to share in the credit for those deposits, absent a merger or consolidation. As indicated in the proposed rule, if there is no successor to an institution that would have been eligible for the one-time assessment credit before the effective date of the final rule, because an otherwise eligible institution ceased to be an insured depository institution before that date, then that portion of the aggregate one-time credit amount will be redistributed among the eligible institutions. On the other hand, if there is no successor to an eligible insured depository institution that ceases to exist after the effective date of the final rule, that institution's credits will expire unused. B. Notice of Credit Amount As soon as practicable after the publication date of the final rule, the FDIC will notify each insured depository institution of its 1996 assessment base ratio and preliminary determination of its share of the one-time assessment credit, based on the information derived from its official system of records (AIMS). The Statement of One-Time Credit: Will inform each institution of its current, preliminary 1996 assessment base ratio; itemize the 1996 assessment bases to which the institution is believed to have claims pursuant to the definition of successor; provide the preliminary amount of the institution's one-time credit based on the institution's 1996 assessment base ratio as applied to the aggregate amount of the credit; and explain how the ratios and resulting amounts were calculated generally. The FDIC will provide the Statement through FDIC *connect* and by mail in accordance with existing practices for assessment invoices. After the initial notification by the Statement described above, periodic updated notices will be provided to reflect the adjustments that may be made up or down as a result of requests for review of credit amounts, as well as subsequent adjustments reflecting the application of credits to assessments and any appropriate adjustment to an institution's 1996 assessment base ratio due to a subsequent merger or consolidation. If the FDIC's responses to individual institutions' requests for review of their initial credit amount are not finalized prior to the invoices for collection of assessments for the first calendar quarter of 2007, the FDIC will freeze the credit amounts in dispute while making any credits not in dispute available for use. From that point on, an individual institution's credit share might increase, but it should not generally decrease except when its credits are used or transferred. Adjustments to credits would be included with each quarterly assessment invoice until an institution's credits have been exhausted. The initial Statement and any subsequent updates notices or assessment invoices advising of an adjustment to the assessment base ratio would also advise institutions of their right to challenge the calculation and the procedures to follow. C. Requests for Review Involving Credits Within 30 days from the effective date of the final rule (or an adjusted invoice), an institution may request review if—
(1)It disagrees with the FDIC's determination of eligibility or ineligibility for the credit;
(2)It disagrees with the computation of the credit amount on the initial Statement or any subsequent invoice; or
(3)It believes that the Statement, an updated notice, or a subsequently updated invoice does not fully or accurately reflect appropriate adjustments to the institution's 1996 assessment base ratio. One commenter requested that this time frame be extended to parallel the assessment appeals process. Because institutions have had access to the online search tool since May, the FDIC does not believe the 30-day deadline for requests for review will be overly burdensome. In addition, compressing the schedule for reviews is necessary to resolve as many requests as possible before the collection of assessments for the first calendar quarter of 2007, thereby allowing most institutions to offset those assessments with available credits. The request for review must be filed with the Division of Finance and be accompanied by any documentation supporting the institution's claim. If an institution does not submit a timely request for review, the institution is barred from subsequently requesting review of its one-time assessment credit amount. In addition, the requesting institution must identify all other institutions of which it knew or had reason to believe would be directly and materially affected by granting the request for review and provide those institutions with copies of the request for review and supporting documentation, as well as the FDIC's procedures for these requests for review. In addition, the FDIC will also make reasonable efforts, based on its official systems of records, to determine that such institutions have been identified and notified. These institutions then have 30 days to submit a response and any supporting documentation to the FDIC's Division of Finance, copying the institution making the original request for review. If an institution identified and notified through this process does not submit a timely response, that institution would be:
(1)Foreclosed from subsequently disputing the information submitted by any other institution on the transaction(s) at issue in the review process; and
(2)foreclosed from any appeal of the decision by the Director of the Division of Finance (discussed below). Upon receipt of a request for review or a response from a potentially affected institution, the FDIC also may request additional information as part of its review and require the institution to supply that information within 21 days of the date of the FDIC's request for additional information. The FDIC will freeze temporarily the amount of the proposed credit in controversy for the institutions involved in the request for review until the request is resolved. The final rule requires a written response from the FDIC's Director of the Division of Finance (Director), or his or her designee, which notifies the requesting institution and any materially affected institutions of the determination of the Director as to whether the requested change is warranted, whenever feasible:
(1)Within 60 days of receipt by the FDIC of the request for revision;
(2)if additional institutions have been notified by the FDIC, within 60 days of the last response; or
(3)if additional information has been requested by the FDIC, within 60 days of receipt of any additional information due to such request, whichever is later. The requesting institution, or an institution materially affected by the Director's decision, that disagrees with that decision may appeal its credit determination to the AAC. The final rule extends the time for filing an appeal; an appeal to the AAC must be filed within 30 calendar days from the date of the Director's written determination. Notice of the procedures applicable to appeals will be included with that written determination. The AAC's determination will be final and not subject to judicial review. As noted in the proposed rule, the FDIC believes that a number of challenges may arise in connection with the distribution of the one-time assessment credit, in large part because many transactions occurred after 1996 and before the Reform Act provided for a one-time credit, and because this will be the first time that an institution's 1996 assessment base ratio is calculated. Once those challenges are resolved, and each institution's 1996 assessment base ratio for purposes of its one-time credit share is established, unforeseen circumstances or issues may lead to other challenges of credit share, and administrative procedures will remain in place to address those challenges. Once the Director or the AAC, as appropriate, has made the final determination, the FDIC will make appropriate adjustments to credit amounts or shares consistent with that determination and correspondingly update each affected institution's next invoice. Adjustments to credit amounts will not be applied retroactively to reduce or increase prior period assessments. D. Application or Use of Credits The one-time assessment credits offset the collection of deposit insurance assessments beginning with the collection of assessments for the first assessment period of 2007. Under the final rule, the FDIC will track each institution's one-time credits and automatically apply them to that institution's assessment to the maximum extent allowed by law. For 2007 assessment periods, all credits available to an institution may be used to offset the institution's insurance assessment, subject to certain statutory limitations described below. For the following three years (2008, 2009, and 2010), the final rule, consistent with the statute, provides that credits may not be applied to more than 90 percent of an institution's assessment. Assuming that an institution has sufficient credits, those credits will automatically apply to 90 percent of that institution's assessment, subject to the two other statutory limitations on usage. 12 12 However, this rule will not affect or apply to deposit insurance assessment adjustments for assessment periods beginning before 2007 when these adjustments are made prior to the assessments imposed prior to the effective date of this rule. By statute, for an institution that exhibits financial, operational, or compliance weaknesses ranging from moderately severe to unsatisfactory, or is not adequately capitalized at the beginning of an assessment period, the amount of any credit that may be applied against that institution's assessment for the period may not exceed the amount the institution would have been assessed had it been assessed at the average assessment rate for all institutions for the period. The final rule interprets “average assessment rate” to mean the aggregate assessment charged all institutions in a period divided by the aggregate assessment base for that period. The final statutory limit on the use of credits may be imposed by the FDIC in a restoration plan when the reserve ratio falls below 1.15 percent of estimated insured deposits. The FDIC's discretion to limit the use of credits during that period is, however, circumscribed by the statute. During the time that a restoration plan is in effect, the FDIC may elect to limit the use of credits, but an institution with credits could apply them against any assessment imposed on an institution for any assessment period in an amount equal to the lesser of
(1)the amount of the assessment, or
(2)the amount equal to three basis points of the institution's assessment base. Five letters on behalf of *de novo* institutions suggest that the FDIC should phase in the use of credits or allow credits to offset assessments only on a graduated scale—that is, the FDIC should, in some manner, further limit the use of credits over the next few years. These commenters argue that, if the credit regulation is implemented as proposed, “it would have an immediate negative impact on rates paid on consumer savings accounts by new growth institutions because they will be required to bear the burden on the cost of deposit insurance not just for their own institution, but also for utilizing assessment credits.” In the FDIC's view, any such impact would be short-term. Moreover, the purpose of the credits, as previously discussed, is to recognize past payments by depository institutions to build the fund, so, by definition, institutions that did not pay assessments will be treated differently. As these commenters acknowledge, the proposal to apply credits against assessments to the maximum extent allowed by law is easily understood and simple to administer. In addition, the better reading of the statute indicates that there was no congressional intent to allow the FDIC to restrict further the use of credits, except in specifically enumerated circumstances. The FDI Act, as amended by the Reform Act, requires the FDIC to apply credit amounts to future assessments, mandates certain limits on the use of credits at specific times or in specific circumstances, and expressly provides the FDIC with the discretion to restrict the use of credits only during a restoration plan and only to a limited extent. This reading of the statute is more consistent with the intent of the one-time credit (also referred to as a “transitional credit” in the Conference Report on the legislation 13 ), which, as noted above, was to recognize the contributions of certain institutions to capitalize the DIF. 13 *See* H.R. Rep. No. 109-362, at 197 (2005). One commenter recommended that institutions be allowed to adjust their use of credits to budget for future expected expenses, so that if assessments climb significantly higher than the proposed base rates, institutions could choose to pay smaller assessments over time rather than large assessments all at once as credits are completely exhausted. The Board believes this flexibility in using credits would be undesirable because of its potential operational complexities for the FDIC. More importantly, the one-time credit is not interest bearing; therefore, application of the credit against an institution's future assessments other than to the maximum extent allowed consistent with the limitations in the FDI Act will reduce the economic benefit of the credit to the institution. In response to the comment on the characterization of credits for accounting purposes, the FDIC concurs that the determination and allocation of the one-time assessment credit to eligible insured depository institutions does not result in the recognition of an asset or income by these institutions, for accounting purposes. The FDIC does not believe that the one-time credit meets the characteristics of an asset described in Statement of Financial Accounting Concepts No. 6, * Elements of Financial Statements* . In this regard, the reduction in an institution's future insurance assessment payments from the application of the one-time credit does not represent a cash inflow to the institution, but rather represents contingent future relief from future cash outflows. The timing and ultimate recoverability of the one-time credit is not completely within the control of an eligible institution and no transaction or other event will have occurred at the date when the FDIC notifies the institution of the amount of its credit that gives rise to the institution's right to or control of the benefit. The benefit is contingent on a future event, the payment of future insurance assessments. Moreover, the amount of benefit to an institution is dependent on the assessment rates charged by the FDIC and the applicability of the statutory restrictions on the use of the one-time credit, which is not interest-bearing. Credit amounts may not be used to pay FICO assessments. 14 The Reform Act does not affect the authority of FICO to impose and collect, with the approval of the FDIC's Board, assessments for anticipated interest payments, issuance costs, and custodial fees on obligations issued by FICO. 14 *See* section 21(f) of the Federal Home Loan Bank Act, 12 U.S.C. 1441(f). E. Transfer of Credits In addition to the transfer of credits to successors, the final rule allows transfers of credits and adjustments to 1996 assessment base ratios by express agreement between insured depository institutions prior to the FDIC's final determination of an eligible insured depository institution's 1996 assessment base ratio and one-time credit amount pursuant to this final rule. While the statute does not expressly address transferability, the final rule recognizes that it is possible that such agreements might already be part of deposit transfer contracts drafted in anticipation of deposit insurance reform legislation, which was pending in Congress over several years. Alternatively, institutions involved in a dispute over successorship, their 1996 assessment base ratio, and their shares of the one-time credit might reach a settlement over the disposition of the one-time credit. Given the FDIC's role in administering credits, it is most efficient to allow the FDIC to recognize these contractual provisions or settlements. In either case, for the FDIC to recognize the transfer, the final rule requires the institutions to notify the FDIC and submit a written agreement signed by legal representatives of the involved institutions. The agreement must include documentation that each representative has the legal authority to bind the institution. Upon the FDIC's receipt of the agreement, appropriate adjustments will be made to the institutions' affected one-time credit amounts and 1996 assessment base ratios. These adjustments will be reflected with the next quarterly assessment invoice, so long as the institutions submit the written agreement at least 10 days prior to the FDIC's issuance of the next invoices. Similarly, after an institution's credit share has been finally determined and no request for review is pending with respect to that credit amount, the FDIC will recognize an agreement between insured depository institutions to transfer any portion of the one-time credit from an eligible institution to another institution. Nothing in the statute suggests that such transfers are precluded. In addition, no compelling reasons to prevent such transfers have been raised by the commenters. Because credits do not earn interest, there may be some interest among eligible insured depository institutions to sell credits that could not otherwise be used promptly. The same rules for notification to the FDIC and adjustments to invoices would apply as under the prior discussion, except that the FDIC will not adjust institutions' 1996 assessment base ratios. Except as provided in the preceding paragraph, adjustments to 1996 ratios will be made only to reflect mergers or consolidations occurring after the effective date of these regulations. V. Regulatory Analysis and Procedure Plain Language Section 722 of the Gramm-Leach-Bliley Act (GLBA), 15 U.S.C. 6801 *et seq.* , requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The proposed rule requested comments on how the rule might be changed to reflect the requirements of GLBA. No GLBA comments were received. Regulatory Flexibility Act Analysis The Regulatory Flexibility Act
(RFA)(5 U.S.C. 601 *et seq.* ) requires that each Federal agency either certify that a proposed rule would not, if adopted in final form, have a significant impact on a substantial number of small entities or prepare an initial flexibility analysis of the proposal and publish the analysis for comment. *See* U.S.C. 603-605. Certain types of rules, such as rules of particular applicability relating to rates or corporate or financial structures, or practices relating to such rates or structures, are expressly excluded from the definition of “rule” for purposes of the RFA. 5 U.S.C. 601. The one-time assessment credit rule relates directly to the rates imposed on insured depository institutions for deposit insurance, as they will offset future deposit insurance assessments. Nonetheless, the FDIC has voluntarily undertaken an initial and final regulatory flexibility analysis of the final rule. Pursuant to 5 U.S.C. 605(b), the FDIC certifies that the final rule will not have a significant economic impact on a substantial number of small businesses within the meaning of the RFA. No comments on this issue were received. The final rule affects all “eligible” insured depository institutions. Of the approximately 8,790 insured depository institutions as of June 30, 2006, approximately 5,269 institutions fell within the definition of “small entity” in the RFA—that is, having total assets of no more than $165 million. Approximately 4,280 small institutions appear to be eligible for the one-time credit under the FDI Act definition of “eligible insured depository institution.” These institutions would have approximately $239 million in one-time credits out of a total of approximately $4.7 billion in one-time credits, given the FDI Act definition of “eligible insured depository institution” and the definition of “successor” in this rulemaking. 15 These one-time credits represent approximately 9.5 basis points of the combined assessment base of eligible small institutions as of June 30, 2006. Assuming, for purposes of illustration, that small institutions were charged an average annual assessment rate of 2 basis points, these one-time credits would last, on average, approximately 4.75 years. Clearly, if small institutions are charged a higher average annual assessment rate, given the final rule's requirement that credits be applied to assessment payments to the maximum extent allowed by law, the one-time credits would not last as long. Not all small institutions will benefit from one-time credits. New institutions, in particular, will not have credits unless they are a successor to an eligible institution or have purchased them. Most small, eligible institutions, however, would benefit to some extent from the final rule. 15 The present value of these one-time credits depends upon when they are used, which in turn depends on the assessment rates charged. The one-time credits do not earn interest; therefore, the higher the assessment rate charged—and the faster credits are used—the greater their present value. These one-time assessment credits are transferable, which could increase their present value. Paperwork Reduction Act In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 *et seq.* ), the FDIC may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid Office of Management and Budget
(OMB)control number. The information collection occurs when an institution participates in a transaction that results in the transfer of one-time credits or an institution's 1996 assessment base, as permitted under the final rule, and seeks the FDIC's recognition of that transfer. Institutions are required to notify the FDIC of these transactions so that the FDIC can accurately track the transfer of credits, apply available credits appropriately against institutions' deposit insurance assessments, and determine an institution's 1996 assessment base if the transaction involved both the base and the credit amount. The need for credit transfer information will expire when the credit pool has been exhausted. Moreover, it is expected that most transactions will occur during the first year. The FDIC solicited public comment on this information collection in accordance with 44 U.S.C. 3506(c)(2)(B). No comments were received on this information collection. The FDIC also submitted the information collection to OMB for review in accordance with 44 U.S.C. 3507(d). The OMB has approved the information collection under control number 3065-0151. *Respondents:* Insured depository institutions. *Frequency of response:* Occasional. *Annual burden estimate:* *Number of responses:* 200-500 during the first year with fewer than 10 per year thereafter. *Average number of hours to prepare a response:* 2 hours. *Total annual burden:* 400-1,000 hours the first year, and fewer than 100 hours thereafter. The Treasury and General Government Appropriations Act, 1999—Assessment of Federal Regulations and Policies on Families The FDIC has determined that the final rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681). Small Business Regulatory Enforcement Fairness Act The Office of Management and Budget has determined that the final rule is not a “major rule” within the meaning of the relevant sections of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) (5 U.S.C. 801 *et seq.* ). As required by SBREFA, the FDIC will file the appropriate reports with Congress and the Government Accountability Office so that the final rule may be reviewed. List of Subjects in 12 CFR Part 327 Bank deposit insurance, Banks, Banking, Savings associations. Authority and Issuance For the reasons set forth in the preamble, the FDIC is amending chapter III of title 12 of the Code of Federal Regulations as follows: 1. Revise subpart B, consisting of §§ 327.30 through 327.36, to read as follows: PART 327—ASSESSMENTS Subpart B—Implementation of One-Time Assessment Credit Sec. 327.30 Purpose and scope. 327.31 Definitions. 327.32 Determination of aggregate credit amount. 327.33 Determination of eligible institution's credit amount. 327.34 Transferability of credits. 327.35 Application of credits. 327.36 Requests for review of credit amount. Subpart B—Implementation of One-Time Assessment Credit Authority: 12 U.S.C. 1817(e)(3). § 327.30 Purpose and scope.
(a)*Scope.* This subpart B of part 327 implements the one-time assessment credit required by section 7(e)(3) of the Federal Deposit Insurance Act, 12 U.S.C. 1817(e)(3) and applies to insured depository institutions.
(b)*Purpose.* This subpart B of part 327 sets forth the rules for:
(1)Determination of the aggregate amount of the one-time credit;
(2)Identification of eligible insured depository institutions;
(3)Determination of the amount of each eligible institution's December 31, 1996 assessment base ratio and one-time credit;
(4)Transferability of credit amounts among insured depository institutions;
(5)Application of such credit amounts against assessments; and
(6)An institution's request for review of the FDIC's determination of a credit amount. § 327.31 Definitions. For purposes of this subpart and subpart C:
(a)The *average assessment rate* for any assessment period means the aggregate assessment charged all insured depository institutions for that period divided by the aggregate assessment base for that period.
(b)*Board* means the Board of Directors of the FDIC.
(c)*De facto rule* means any transaction in which an insured depository institution assumes substantially all of the deposit liabilities and acquires substantially all of the assets of any other insured depository institution at the time of the transaction.
(d)An *eligible insured depository institution:*
(1)Means an insured depository institution that:
(i)Was in existence on December 31, 1996, and paid a deposit insurance assessment before December 31, 1996; or
(ii)Is a successor to an insured depository institution referred to in paragraph (d)(1)(i) of this section; and
(2)does not include an institution if its insured status has terminated as of or after the effective date of this regulation.
(e)*Merger* means any transaction in which an insured depository institution merges or consolidates with any other insured depository institution. Notwithstanding part 303, subpart D, for purposes of this subpart B and subpart C of this part, *merger* does not include transactions in which an insured depository institution either directly or indirectly acquires the assets of, or assumes liability to pay any deposits made in, any other insured depository institution, but there is not a legal merger or consolidation of the two insured depository institutions.
(f)*Resulting institution* refers to the acquiring, assuming, or resulting institution in a merger.
(g)*Successor* means a resulting institution or an insured depository institution that acquired part of another insured depository institution's 1996 assessment base ratio under paragraph 327.33(c) of this subpart under the *de facto* rule. § 327.32 Determination of aggregate credit amount. The aggregate amount of the one-time credit shall equal $4,707,580,238.19. § 327.33 Determination of eligible institution's credit amount.
(a)Subject to paragraph
(c)of this section, allocation of the one-time credit shall be based on each eligible insured depository institution's 1996 assessment base ratio.
(b)Subject to paragraph
(c)of this section, an eligible insured depository institution's 1996 assessment base ratio shall consist of:
(1)Its assessment base as of December 31, 1996 (adjusted as appropriate to reflect the assessment base of December 31, 1996, of all institutions for which it is the successor), as the numerator; and
(2)The combined aggregate assessment bases of all eligible insured depository institutions, including any successor institutions, as of December 31, 1996, as the denominator.
(c)If an insured depository institution is a successor to an eligible insured depository institution under the * de facto* rule, as defined in paragraph 327.31(c) of this subpart, the successor and the eligible insured depository institution will divide the eligible insured depository institution's 1996 assessment base ratio pro rata, based on the deposit liabilities assumed in the transaction. In any subsequent transaction involving an insured depository institution that previously engaged in a transaction to which the *de facto* rule applied, the insured depository institution may not be deemed to have transferred more than its remaining 1996 assessment base ratio. If the transferring institution is no longer an insured depository institution after the transfer, the last successor will acquire the transferring institution's remaining 1996 assessment base ratio. § 327.34 Transferability of credits.
(a)Any remaining amount of the one-time assessment credit and the associated 1996 assessment base ratio shall transfer to a successor of an eligible insured depository institution.
(b)Prior to the final determination of its 1996 assessment base and one-time assessment credit amount by the FDIC, an eligible insured depository institution may enter into an agreement to transfer any portion of such institution's one-time credit amount and 1996 assessment base ratio to another insured depository institution. The parties to the agreement shall notify the FDIC's Division of Finance and submit a written agreement, signed by legal representatives of both institutions. The parties must include documentation stating that each representative has the legal authority to bind the institution. The adjustment to credit amount and the associated 1996 assessment base ratio shall be made in the next assessment invoice that is sent at least 10 days after the FDIC's receipt of the written agreement.
(c)An eligible insured depository institution may enter into an agreement after the final determination of its 1996 assessment base ratio and one-time credit amount by the FDIC to transfer any portion of such institution's one-time credit amount to another insured depository institution. The parties to the agreement shall notify the FDIC's Division of Finance and submit a written agreement, signed by legal representatives of both institutions. The parties must include documentation stating that each representative has the legal authority to bind the institution. The adjustment to the credit amount shall be made in the next assessment invoice that is sent at least 10 days after the FDIC's receipt of the written agreement. § 327.35 Application of credits.
(a)Subject to the limitations in paragraph
(b)of this section, the amount of an eligible insured depository institution's one-time credit shall be applied to the maximum extent allowable by law against that institution's quarterly assessment payment under subpart A of this part, until the institution's credit is exhausted.
(b)The following limitations shall apply to the application of the credit against assessment payments.
(1)For assessments that become due for assessment periods beginning in calendar years 2008, 2009, and 2010, the credit may not be applied to more than 90 percent of the quarterly assessment.
(2)For an insured depository institution that exhibits financial, operational, or compliance weaknesses ranging from moderately severe to unsatisfactory, or is not at least adequately capitalized (as defined pursuant to section 38 of the Federal Deposit Insurance Act) at the beginning of an assessment period, the amount of the credit that may be applied against the institution's quarterly assessment for that period shall not exceed the amount that the institution would have been assessed if it had been assessed at the average assessment rate for all insured institutions for that period. The FDIC shall determine the average assessment rate for an assessment period based upon its best estimate of the average rate for the period. The estimate shall be made using the best information available, but shall be made no earlier than 30 days and no later than 20 days prior to the payment due date for the period.
(3)If the FDIC has established a restoration plan pursuant to section 7(b)(3)(E) of the Federal Deposit Insurance Act, the FDIC may elect to restrict the application of credit amounts, in any assessment period, up to the lesser of:
(i)The amount of an insured depository institution's assessment for that period; or
(ii)The amount equal to 3 basis points of the institution's assessment base. § 327.36 Requests for review of credit amount. (a)(1) As soon as practicable after the publication date of this rule, the FDIC shall notify each insured depository institution by FDIC *connect* or mail of its 1996 assessment base ratio and credit amount in a Statement of One-Time Credit (“Statement”), if any. An insured depository institution may submit a request for review of the FDIC's determination of the institution's 1996 assessment base ratio or credit amount as shown on the Statement within 30 days after the effective date of this rule. Such review may be requested if:
(i)The institution disagrees with a determination as to eligibility for the credit that relates to that institution's credit amount;
(ii)The institution disagrees with the calculation of the credit as stated on the Statement; or
(iii)The institution believes that the 1996 assessment base ratio attributed to the institution on the Statement does not fully or accurately reflect its own 1996 assessment base or appropriate adjustments for successors.
(2)If an institution does not submit a timely request for review, that institution is barred from subsequently requesting review of its credit amount, subject to paragraph
(e)of this section. (b)(1) An insured depository institution may submit a request for review of the FDIC's adjustment to the credit amount in a quarterly invoice within 30 days of the date on which the FDIC provides the invoice. Such review may be requested if:
(i)The institution disagrees with the calculation of the credit as stated on the invoice; or
(ii)The institution believes that the 1996 assessment base ratio attributed to the institution due to the adjustment to the invoice does not fully or accurately reflect appropriate adjustments for successors since the last quarterly invoice.
(2)If an institution does not submit a timely request for review, that institution is barred from subsequently requesting review of its credit amount, subject to paragraph
(e)of this section.
(c)The request for review shall be submitted to the Division of Finance and shall provide documentation sufficient to support the change sought by the institution. At the time of filing with the FDIC, the requesting institution shall notify, to the extent practicable, any other insured depository institution that would be directly and materially affected by granting the request for review and provide such institution with copies of the request for review, the supporting documentation, and the FDIC's procedures for requests under this subpart. In addition, the FDIC also shall make reasonable efforts, based on its official systems of records, to determine that such institutions have been identified and notified.
(d)During the FDIC's consideration of the request for review, the amount of credit in dispute shall not be available for use by any institution.
(e)Within 30 days of being notified of the filing of the request for review, those institutions identified as potentially affected by the request for review may submit a response to such request, along with any supporting documentation, to the Division of Finance, and shall provide copies to the requesting institution. If an institution that was notified under paragraph
(c)does not submit a response to the request for review, that institution may not:
(1)Subsequently dispute the information submitted by other institutions on the transaction(s) at issue in the review process; or
(2)Appeal the decision by the Director of the Division of Finance.
(f)If additional information is requested of the requesting or affected institutions by the FDIC, such information shall be provided by the institution within 21 days of the date of the FDIC's request for additional information.
(g)Any institution submitting a timely request for review will receive a written response from the FDIC's Director of the Division of Finance, (or his or her designee), notifying the requesting and affected institutions of the determination of the Director as to whether the requested change is warranted. Notice of the procedures applicable to appeals under paragraph
(h)of this section will be included with the Director's written determination. Whenever feasible, the FDIC will provide the institution with the aforesaid written response the later of:
(1)Within 60 days of receipt by the FDIC of the request for revision;
(2)If additional institutions have been notified by the requesting institution or the FDIC, within 60 days of the date of the last response to the notification; or
(3)If additional information has been requested by the FDIC, within 60 days of receipt of the additional information.
(h)Subject to paragraph
(e)of this section, the insured depository institution that requested review under this section, or an insured depository institution materially affected by the Director's determination, that disagrees with that determination may appeal to the FDIC's Assessment Appeals Committee on the same grounds as set forth under paragraph
(a)of this section. Any such appeal must be submitted within 30 calendar days from the date of the Director's written determination. Notice of the procedures applicable to appeals under this section will be included with the Director's written determination. The decision of the Assessment Appeals Committee shall be the final determination of the FDIC.
(i)Any adjustment to an institution's credits resulting from a determination by the Director of the FDIC's Assessment Appeals Committee shall be reflected in the institution's next assessment invoice. The adjustment to credits shall affect future assessments only and shall not result in a retroactive adjustment of assessment amounts owed for prior periods. Dated at Washington, DC, this 10th day of October, 2006. By order of the Board of Directors. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. E6-17305 Filed 10-17-06; 8:45 am] BILLING CODE 6714-01-P FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 327 RIN 3064-AD07 Assessment Dividends AGENCY: Federal Deposit Insurance Corporation (FDIC). ACTION: Final rule. SUMMARY: The FDIC is adopting a final rule to implement the dividend requirements of the Federal Deposit Insurance Reform Act of 2005 (Reform Act) and the Federal Deposit Insurance Reform Conforming Amendments Act of 2005 (Amendments Act) for an initial two-year period. The final rule will take effect on January 1, 2007, and sunset on December 31, 2008. During this period the FDIC expects to initiate a second, more comprehensive notice-and-comment rulemaking on dividends beginning with an advanced notice of proposed rulemaking to explore alternative methods for distributing future dividends after this initial two-year period. EFFECTIVE DATE: January 1, 2007. FOR FURTHER INFORMATION CONTACT: Munsell W. St.Clair, Senior Policy Analyst, Division of Insurance and Research,
(202)898-8967; Donna M. Saulnier, Senior Assessment Policy Specialist, Division of Finance,
(703)562-6167; or Joseph A. DiNuzzo, Counsel, Legal Division,
(202)898-7349. SUPPLEMENTARY INFORMATION: I. Background In May of this year, the FDIC published a proposed rule (the proposed rule) to implement the dividend requirements of the Reform Act. 71 FR 28804 (May 18, 2006). The Reform Act requires the FDIC to prescribe final regulations, within 270 days of enactment, to implement the assessment dividend requirements, including regulations governing the method for the calculation, declaration, and payment of dividends and administrative appeals of individual dividend amounts. See sections 2107(a) and 2109(a)(3) of the Reform Act. 1 1 The Reform Act was included as Title II, Subtitle B, of the Deficit Reduction Act of 2005, Public Law 109-171, 120 Stat. 9, which was signed into law by the President on February 8, 2006. Section 2109 of the Reform Act also requires the FDIC to prescribe, within 270 days, rules on the designated reserve ratio, changes to deposit insurance coverage, the one-time assessment credit, and assessments. The final rule on deposit insurance coverage was published on September 12, 2006, 71 FR 53547. The final rule on the one-time assessment credit is being published on the same day as this final rule. Final rules on the remaining matters are expected to be published in the near future. Section 7(e)(2) of the Federal Deposit Insurance Act (FDI Act), as amended by the Reform Act, requires that the FDIC, under most circumstances, declare dividends from the Deposit Insurance Fund (DIF or fund) when the reserve ratio at the end of a calendar year exceeds 1.35 percent, but is no greater than 1.5 percent. In that event, the FDIC must generally declare one-half of the amount in the DIF in excess of the amount required to maintain the reserve ratio at 1.35 percent as dividends to be paid to insured depository institutions. However, the FDIC's Board of Directors (Board) may suspend or limit dividends to be paid, if the Board determines in writing, after taking a number of statutory factors into account, that: 1. The DIF faces a significant risk of losses over the next year; and 2. It is likely that such losses will be sufficiently high as to justify a finding by the Board that the reserve ratio should temporarily be allowed to grow without requiring dividends when the reserve ratio is between 1.35 and 1.5 percent or exceeds 1.5 percent. 2 2 This provision would allow the FDIC's Board to suspend or limit dividends in circumstances where the reserve ratio has exceeded 1.5 percent, if the Board made a determination to continue a suspension or limitation that it had imposed initially when the reserve ratio was between 1.35 and 1.5 percent. In addition, the statute requires that the FDIC, absent certain limited circumstances (discussed in footnote 2), declare a dividend from the DIF when the reserve ratio at the end of a calendar year exceeds 1.5 percent. In that event, the FDIC must declare the amount in the DIF in excess of the amount required to maintain the reserve ratio at 1.5 percent as dividends to be paid to insured depository institutions. If the Board decides to suspend or limit dividends, it must submit, within 270 days of making the determination, a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and to the Committee on Financial Services of the House of Representatives. The report must include a detailed explanation for the determination and a discussion of the factors required to be considered. 3 3 See section 5 of the Amendments Act. Public Law 109-173, 119 Stat. 3601, which was signed into law by the President on February 15, 2006. The FDI Act directs the FDIC to consider each insured depository institution's relative contribution to the DIF (or any predecessor deposit insurance fund) when calculating such institution's share of any dividend. More specifically, when allocating dividends, the Board must consider: 1. The ratio of the assessment base of an insured depository institution (including any predecessor) on December 31, 1996, to the assessment base of all eligible insured depository institutions on that date; 2. The total amount of assessments paid on or after January 1, 1997, by an insured depository institution (including any predecessor) to the DIF (and any predecessor fund); 4 4 This factor is limited to deposit insurance assessments paid to the DIF (or previously to the Bank Insurance Fund
(BIF)or the Savings Association Insurance Fund (SAIF)) and does not include assessments paid to the Financing Corporation
(FICO)used to pay interest on outstanding FICO bonds, although the FDIC collects those assessments on behalf of FICO. Beginning in 1997, the FDIC collected separate FICO assessments from both SAIF and BIF members. 3. That portion of assessments paid by an insured depository institution (including any predecessor) that reflects higher levels of risk assumed by the institution; and 4. Such other factors as the Board deems appropriate. The statute does not define the term “predecessor” for purposes of the distribution of dividends to insured depository institutions. Predecessor deposit insurance funds are the BIF and the SAIF, as those were the deposit insurance funds in existence after 1996 and prior to enactment of the Reform Act, and which merged into the DIF. That merger was effective on March 31, 2006. The statute expressly requires the FDIC to prescribe by regulation the method for calculating, declaring, and paying dividends. As with the one-time assessment credit, the dividend regulation must include provisions allowing a bank or thrift a reasonable opportunity to challenge administratively the amount of dividends it is awarded. Any review by the FDIC pursuant to these administrative procedures is final and not subject to judicial review. II. The Proposed Rule In May, the FDIC proposed a temporary rule for dividends that would sunset after two years, which would allow the FDIC to undertake a more comprehensive rulemaking that would not be subject to the 270-day deadline. The proposed rule: Described a process for the Board's annual determination of whether a declaration of a dividend is required and consideration, to the extent appropriate, of whether circumstances indicate that a dividend should be limited or suspended; set forth the procedures for calculating the aggregate amount of any dividend, allocating that aggregate amount among insured depository institutions considering the statutory factors provided, and paying such dividends to individual insured depository institutions; and provided insured depository institutions with a reasonable opportunity to challenge the amount of their dividends. The FDIC proposed that the Board announce its determination regarding dividends by May 15th of each year, which would allow for the Board's consideration of the dividend determination using complete data for the reserve ratio for the preceding December 31st. Absent a Board determination that dividends should be limited or foregone, the aggregate amount of a dividend would be calculated as set forth in the statute. 5 5 In most circumstances, if the reserve ratio exceeds 1.5 percent, the FDIC would declare a dividend of the amount in excess of the amount required to maintain the reserve ratio at 1.5 percent, as determined by the FDIC. At the same time, the FDIC would generally expect to declare a dividend of one-half of the amount necessary to maintain the reserve ratio at 1.35 percent, unless the Board makes a determination that suspension or limitation of that dividend is justified under section 7(e)(2)(E) of the FDI Act. That might happen, for example, if based on its consideration of the various statutory factors, the Board determines that it is appropriate, in light of foreseen risks cited in the statute, for the reserve ratio to rise to 1.5 percent and set assessments to maintain the reserve ratio at that level. Sections 2104(a) and 2105(a) of the Reform Act (to be codified at 12 U.S.C. 1817(b)(2) and (3), respectively). With respect to allocation of the aggregate dividend amount, the FDIC proposed adopting initially a simple system that would remain in place for two years with a definite sunset date (December 31, 2008). During the two-year lifespan of the initial dividend regulations, the FDIC plans to undertake another rulemaking, beginning with the issuance of an advance notice of proposed rulemaking, seeking industry comment on more comprehensive alternatives for allocating future dividends. Specifically, after considering and weighing all the statutory factors, including other factors the Board deemed appropriate, the FDIC proposed that, during the life of this rule, any dividends be awarded simply in proportion to an institution's 1996 assessment base ratio (including any predecessors' 1996 ratios). This factor essentially parallels the basis for distribution of the one-time assessment credit, and institutions' 1996 assessment base ratios will have been determined under the final rule for the one-time assessment credit. The ratio will continue in effect for dividend purposes, subject to subsequent adjustments for transactions that result in the combination of insured depository institutions, thereby recognizing “predecessor” institutions as time goes by. As noted above, the statute also requires that the FDIC consider other factors in allocating dividends—the total amount of assessments paid after 1996; the portion of those assessments paid that reflects higher levels of risk; and other factors that the Board may deem appropriate. Because no institution while in the lowest risk category (sometimes referred to as “the 1A category”) has paid any deposit insurance assessments since the end of 1996, all assessments paid since then have reflected higher levels of risk. Moreover, within the proposed initial two-year period, any assessments that institutions pay that do not reflect higher levels of risk are likely to be small in comparison to the assessments that institutions paid over time to capitalize the deposit insurance funds, for which the 1996 assessment base is intended to act as a proxy. As a result, the FDIC proposed that payments since 1996 should not be included in the proposed temporary allocation method. 6 6 It is in large part because post-2006 payments may become material over time that the FDIC proposed adoption of a transitional rule, with the expectation that in 2007 the process of developing a more comprehensive long-term rule will begin. In the FDIC's view, other factors supported an initially simple allocation based upon institutions' 1996 ratio. As a practical matter, it appears quite unlikely that the reserve ratio of the DIF will equal or exceed 1.35 percent in the near future. The FDI Act does not define the term “predecessor” for purposes of the distribution of dividends to individual insured depository institutions. In addition, unlike the term “successor” used in the context of the one-time assessment credit, the FDI Act does not expressly charge the FDIC with defining “predecessor.” Nonetheless, in order to implement the dividend requirements, the FDIC must define “predecessor” for these purposes when it is used in connection with an insured depository institution and the distribution of dividends. The FDIC proposed a definition of “predecessor” that is consistent with general principles of corporate law and the proposed definition of “successor” in the one-time assessment credit proposed rulemaking. Therefore, a “predecessor” would be defined as an institution that combined with another institution through merger or consolidation and did not survive as an entity. The FDIC proposed that the FDIC advise each institution of its dividend amount as soon as practicable after the Board's declaration of a dividend on or before May 15th. Depending on circumstances, notification would take place through a special notice of dividend or, at the latest, with the institution's next assessment invoice. To allow time for requests for review of dividend amounts, the FDIC proposed that the individual dividend amounts be paid to insured depository institutions at the time of the assessment collection for the second calendar quarter beginning after the declaration of the dividend and offset each institution's assessment amount. Under the proposed rule, the settlement would be handled through the Automated Clearing House consistent with existing procedures for underpayment or overpayment of assessments. Thus, in the event that the institution owes assessments in excess of the dividend amount, there would be a net debit (resulting in payment to the FDIC). Conversely, if the FDIC owes an additional dividend amount in excess of the assessment to the institution, there would be a net credit (resulting in payment from the FDIC). As it does for the regulations governing the one-time assessment credit, the FDI Act requires the FDIC to include in its dividend regulations provisions allowing an insured depository institution a reasonable opportunity to challenge administratively the amount of its dividend. The FDIC's determination under such procedures is to be final and not subject to judicial review. The proposed rule largely paralleled the procedures for requesting revision of computation of a quarterly assessment payment as shown on the quarterly invoice. Requests for review of dividend amounts would be considered by the Director of the Division of Finance, and appeals of those decisions would be made to the FDIC's Assessment Appeals Committee. As with the one-time credit notice of proposed rulemaking, the FDIC proposed shorter timeframes in the dividend appeals process so that requests for review could be resolved by the time payment of dividends is due, to the extent possible. The FDIC further proposed to freeze temporarily the distribution of the dividend amount in dispute for the institutions involved in a request for review or appeal until the request for review or appeal is resolved. If an institution prevails on its request for review or appeal, then any additional amount of dividend would be remitted to the institution, with interest for the period of time between the payment of dividends that were not in dispute and the resolution of the dispute. The comment period for this proposed rule was extended to August 16, 2006, to allow all interested parties to consider the proposed rule while proposed rules on the designated reserve ratio and risk-based assessments were pending. III. Comments on the Proposed Rule We received ten comment letters, six from insured depository institutions, one from a coalition of seven institutions, and three from banking industry trade associations. Commenters focused on the proposed temporary allocation method, the definition of “predecessor,” and the timing for dividend declaration and payment. Three institutions and three trade groups supported the proposed temporary allocation method for dividends during the life of the rule; whereas, four letters from institutions opposed it, instead supporting an allocation method that immediately takes into account payments made under the new assessments system. One trade association recommended that, if a dividend becomes likely in the next two years, the FDIC accelerate the adoption of the planned, more comprehensive rule. Three institutions and one trade association supported the proposed definition of predecessor, which relied on whether the resulting institution acquired another institution through merger or consolidation. One trade association favored a “follow-the-deposits” approach to the definition. A number of commenters indicated that the definition of “predecessor” essentially should parallel the definition of “successor” for purposes of the one-time assessment credit rule. One institution suggested that the declaration of dividends could be moved earlier to March 31st. A trade association commented that the FDIC should provide for the payment of dividends prior to the time of the assessment collection for the second calendar quarter beginning after the declaration of the dividend. It further commented that requests for review should not delay the payment of dividends. All of the comment letters have been considered and are available on the FDIC's Web site, *http://www.fdic.gov/regulations/laws/federal/propose.html.* IV. The Final Rule Upon considering the comments, the FDIC has adopted a final rule similar to the proposed rule with changes to the provisions for the payment of dividends, the definition of *predecessor* and the time period for appealing an FDIC decision on a request to review a dividend determination, as well as minor technical changes. Consistent with the proposal, this rule is temporary; it will take effect on January 1, 2007, and will sunset on December 31, 2008. As proposed, the FDIC will determine annually whether the reserve ratio at the end of the prior year equals or exceeds 1.35 percent of estimated insured deposits or exceeds 1.5 percent, thereby triggering a dividend requirement. At the same time, if a dividend is triggered, the FDIC will determine whether it should limit or suspend the payment of dividends based on the statutory factors. Any determination to limit or suspend dividends would be reviewed annually and would have to be justified to renew or make a new determination to limit or suspend dividends. Each decision to limit or suspend dividends must be reported to Congress. Any declaration with respect to dividends will be made on or before May 15th for the preceding calendar year. This timing allows for the Board's consideration of final data for the end of the preceding year regarding the reserve ratio of the DIF, as well as analysis of what amount is necessary to maintain the fund at the required level and whether circumstances warrant limiting or suspending the payment of dividends. If the FDIC does not limit or suspend the payment of dividends or does not renew such a determination, then the aggregate amount of the dividend will be determined as provided by the statute. When the reserve ratio equals or exceeds 1.35 percent, then the FDIC generally is required to declare the amount that is equal to one-half the amount in excess of the amount required to maintain the reserve ratio at 1.35 as the aggregate amount of dividends to be paid to the insured depository institutions. When the reserve ratio exceeds 1.5 percent, the FDIC generally is required to declare the amount in the DIF in excess of the amount required to maintain the reserve ratio at 1.5 percent as dividends to be paid to institutions. Consistent with the proposal, the FDIC is adopting a simple system for allocating any dividends that might be declared during this two-year period. Any dividends awarded before January 1, 2009, will be distributed simply in proportion to an institution's 1996 assessment base ratio, as determined pursuant to the one-time assessment credit rule. (See 12 CFR part 327, subpart B.) By cross referencing the determination under the credit rule, the FDIC will be able to recognize subsequent changes to an institutions 1996 ratio due to acquisitions by merger or consolidation with another eligible insured depository institution or transfers. Four commenters suggest that this approach does not consider all the statutory factors. The FDIC disagrees. As reflected in the proposed rule, the FDIC considered all the statutory factors for distribution, including payments made since year-end 1996. Because of statutory constraints, deposit insurance assessment payments since that date reflect higher levels of risk. In addition, payments to be made under the new risk-based assessments system during the limited life of this rule are likely to be small when compared to the payments made by the industry before 1997. Also, the FDIC does not believe that it is likely that the reserve ratio of the DIF will trigger a dividend over the next two years. However, the FDIC expects to consider again all payments made, including payments under the new system from its inception, as part of the more comprehensive rulemaking to be undertaken next year. As indicated by the comments, another significant issue for this rulemaking was the definition of “predecessor.” The FDIC is adopting a definition of “predecessor” that simply cross references the definition of “successor” for purposes of the one-time assessment credit rule. In effect, a predecessor is the mirror image of successor. As noted above, a number of commenters agreed that the definitions of “predecessor” and “successor” raise the same issues and should be parallel. The FDIC is simultaneously issuing a final rule on one-time credits. An analysis of the “successor” issue is contained in that final rule. Notably, the definition of successor in the one-time credit final rule expressly includes a de facto rule, defined as any transaction in which an insured depository institution assumes substantially all of the deposit liabilities and acquires substantially all of the assets of any other insured depository institution. As proposed, the FDIC would advise each institution of its dividend amount as soon as practicable after the Board's declaration of a dividend on or before May 15th. That is the earliest practical time for the declaration of dividends given the data availability and the statutory analysis required. We agree, however, that earlier payment of dividends than in the proposed rule should be workable. To allow time for requests for review of dividend amounts, the FDIC had proposed that the individual dividend amounts be paid to institutions at the time of the assessment collection for the second calendar quarter beginning after the declaration of the dividend. In contrast, under the final rule, the individual dividend amounts generally will be paid to institutions no later than 45 days after the issuance of the special notice, which will allow the FDIC to freeze payment of an individual institution's dividend amount, if that amount is in dispute. Depending on the timing of the Board's declaration, which could occur prior to May 15th, and the expiration of the 30-day period for requesting review, it is possible that dividends could be paid at the same time as the collection of the quarterly assessment and would offset those payments. Dividends will be paid through the Automated Clearing House (ACH). Although it is expected in most instances that dividends will be paid after the first quarter assessment payment, if they are paid at the time of assessment payments, offsets will be made. If the institution owes assessments in excess of the dividend amount, there will be a net debit (resulting in payment to the FDIC). Conversely, if the FDIC owes an additional dividend amount in excess of the assessment to the institution, there will be a net credit (resulting in payment from the FDIC). The FDIC will notify institutions whether dividends will offset the next assessment payments with the next invoice. Under the final rule, the FDIC shall freeze the payment of the disputed portion of dividend amounts involved in requests for review. In the absence of such action, institutions will receive the amount indicated on the notice. Any adjustment to an individual institution's dividend amount resulting from its request for review will be handled through ACH in the same manner as existing procedures for underpayment or overpayment of assessments. As set forth in the proposed rule, an institution may request review of its dividend amount by submitting documentation sufficient to support the change sought to the Division of Finance within 30 days from the date of the notice or invoice advising each institution of its dividend amount. Review may be requested if
(1)an institution disagrees with the computation of the dividend as stated on the invoice, or
(2)it believes that the notice or invoice does not fully or accurately reflect appropriate adjustments to the institution's 1996 assessment base ratio, such as for the acquisition of another institution through merger. If an institution does not submit a timely request for review, it will be barred from subsequently requesting review of that dividend amount. At the time of the request for review, the requesting institution also must notify all other institutions of which it knew or had reason to believe would be directly and materially affected by granting the request for review and provide those institutions with copies of the request for review, supporting documentation, and the FDIC's procedures for these requests for review. In addition, the FDIC will make reasonable efforts, based on its official systems of records, to determine that such institutions have been identified and notified. These institutions will then have 30 days to submit a response and any supporting documentation to the FDIC's Division of Finance, copying the institution making the original request for review. If an institution was identified and notified through this process and does not submit a timely response, that institution will be foreclosed from subsequently disputing the information submitted by any other institution on the transaction(s) at issue in the review process. The FDIC may request additional information as part of its review, and the institution from which such information is requested will be required to supply that information within 21 days of the date of the FDIC's request. The final rule requires a written response from the FDIC's Director of the Division of Finance (Director), or his or her designee, which notifies the requesting institution and any materially affected institutions of the determination of the Director as to whether the requested change is warranted, whenever feasible:
(1)Within 60 days of receipt by the FDIC of the request for revision;
(2)if additional institutions are notified by the requesting institution or the FDIC, within 60 days of the date of the last response to the notification; or
(3)if the FDIC has requested additional information, within 60 days of its receipt of the additional information, whichever is latest. If a requesting institution disagrees with the determination of the Director, that institution may appeal its dividend determination to the FDIC's Assessments Appeals Committee (AAC). The final rule extends the time for filing an appeal; an appeal to the AAC must be filed within 30 calendar days of the date of the Director's written determination. Notice of the procedures applicable to appeals of the Director's determination to the AAC will be included with the written response. The AAC's determination is final and not subject to judicial review. V. Regulatory Analysis and Procedure Regulatory Flexibility Act Under section 605(b) of the Regulatory Flexibility Act (RFA), 5 U.S.C. 605(b), the FDIC certifies that the final rule will not have a significant economic impact on a substantial number of small entities, within the meaning of those terms as used in the RFA. The final rule implementing the dividend requirements of the Reform Act relies on information already collected and maintained by the FDIC in the regular course of business. The rule imposes no new reporting, recordkeeping, or other compliance requirements. For the two-year duration of this rule, it also appears unlikely that a dividend would be required. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis are not applicable. No comments on the RFA were received. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Ch. 3506; 5 CFR 1320 Appendix A.1), the FDIC reviewed the final rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the final rule. Plain Language Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 Stat. 1338, 1471 (Nov. 12, 1999) requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. No commenters suggested that the proposed rule was unclear, and the final rule is substantively similar to the proposed rule. The Treasury and General Government Appropriations Act, 1999—Assessment of Federal Regulations and Policies on Families The FDIC has determined that the final rule will not affect family wellbeing within the meaning of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681). Small Business Regulatory Enforcement Fairness Act The Office of Management and Budget has determined that the final rule is not a “major rule” within the meaning of the relevant sections of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) (5 U.S.C. 801 *et seq.* ). As required by SBREFA, the FDIC will file the appropriate reports with Congress and the Government Accountability Office so that the final rule may be reviewed. List of Subjects in 12 CFR Part 327 Bank deposit insurance, Banks, Banking, Savings associations. 12 CFR Chapter III Authority and Issuance For the reasons set forth in the preamble, chapter III of title 12 of the Code of Federal Regulations is amended as follows: PART 327—ASSESSMENTS 1. Add subpart C, consisting of §§ 327.50 through 327.55, to read as follows: Subpart C—Implementation of Dividend Requirements Sec. 327.50 Purpose and scope. 327.51 Definitions. 327.52 Annual dividend determination. 327.53 Allocation and payment of dividends. 327.54 Requests for review of dividend amount. 327.55 Sunset date. Authority: 12 U.S.C. 1817(e)(2), (4). § 327.50 Purpose and scope.
(a)*Scope.* This subpart C of part 327 implements the dividend provisions of section 7(e)(2) of the Federal Deposit Insurance Act, 12 U.S.C. 1817(e)(2), and applies to insured depository institutions.
(b)*Purpose.* This subpart C of part 327 sets forth the rules for:
(1)The FDIC's annual determination of whether to declare a dividend and the aggregate amount of any dividend;
(2)The FDIC's determination of the amount of each insured depository institution's share of any declared dividend;
(3)The time and manner for the FDIC's payments of dividends; and
(4)An institution's appeal of the FDIC's determination of its dividend amount. § 327.51 Definitions. For purposes of this subpart:
(a)*Board* has the same meaning as under subpart B of this part.
(b)*DIF* means the Deposit Insurance Fund.
(c)An *insured depository institution's 1996 assessment base ratio* means an institution's 1996 assessment base ratio as determined pursuant to § 327.33 of subpart B of this part, adjusted as necessary after the effective date of subpart B of this part to reflect subsequent transactions in which the institution succeeds to another institution's assessment base ratio, or a transfer of the assessment base ratio pursuant to § 327.34.
(d)*Predecessor,* when used in the context of insured depository institutions, refers to the institution merged with or into a resulting institution, consistent with the definition of “successor” in § 327.31. § 327.52 Annual dividend determination.
(a)On or before May 15th of each calendar year, beginning in 2007, the Board shall determine whether to declare a dividend based upon the reserve ratio of the DIF as of December 31st of the preceding year, and the amount of the dividend, if any.
(b)Except as provided in paragraph
(d)of this section, if the reserve ratio of the DIF equals or exceeds 1.35 percent of estimated insured deposits and does not exceed 1.5 percent, the Board shall declare the amount that is equal to one-half of the amount in excess of the amount required to maintain the reserve ratio at 1.35 percent as the aggregate dividend to be paid to insured depository institutions.
(c)If the reserve ratio of the DIF exceeds 1.5 percent of estimated insured deposits, except as provided in paragraph
(d)of this section, the Board shall declare the amount in excess of the amount required to maintain the reserve ratio at 1.5 percent as the aggregate dividend to be paid to insured depository institutions and shall declare a dividend under paragraph
(b)of this section. (d)(1) The Board may suspend or limit a dividend otherwise required to be paid if the Board determines that:
(i)A significant risk of losses to the DIF exists over the next one-year period; and
(ii)It is likely that such losses will be sufficiently high as to justify the Board concluding that the reserve ratio should be allowed:
(A)To grow temporarily without requiring dividends when the reserve ratio is between 1.35 and 1.5 percent; or
(B)To exceed 1.5 percent.
(2)In making a determination under this paragraph, the Board shall consider:
(i)National and regional conditions and their impact on insured depository institutions;
(ii)Potential problems affecting insured depository institutions or a specific group or type of depository institution;
(iii)The degree to which the contingent liability of the FDIC for anticipated failures of insured institutions adequately addresses concerns over funding levels in the DIF; and
(iv)Any other factors that the Board may deem appropriate.
(3)Within 270 days of making a determination under this paragraph, the Board shall submit a report to the Committee on Financial Services and the Committee on Banking, Housing, and Urban Affairs, providing a detailed explanation of its determination, including a discussion of the factors considered.
(e)The Board shall annually review any determination to suspend or limit dividend payments and must either:
(1)Make a new finding justifying the renewal of the suspension or limitation under paragraph
(d)of this section, and submit a report as required under paragraph (d)(3) of this section; or
(2)Reinstate the payment of dividends as required by paragraph
(b)or
(c)of this section. § 327.53 Allocation and payment of dividends.
(a)For any dividend declared before January 1, 2009, allocation of such dividend among insured depository institutions shall be based solely on an insured depository institution's 1996 assessment base ratio, as determined pursuant to paragraph 327.51(c) of this subpart, as of December 31st of the year for which dividends are declared.
(b)The FDIC shall notify each insured depository institution of the amount of such institution's dividend payment based on its share as determined pursuant to paragraph
(a)of this section. Notice shall be given as soon as practicable after the Board's declaration of a dividend through a special notice of dividend.
(c)The FDIC shall pay individual dividend amounts, which are not subject to request for review under section 327.54 of this subpart, to insured depository institutions no later than 45 days after the issuance of the special notices of dividend. The FDIC shall notify institutions whether dividends will offset the next collection of assessments at the time of the invoice. An institution's dividend amount may be remitted with that institution's assessment or paid separately. If remitted with the institution's assessment, any excess dividend amount will be a net credit to the institution and will be deposited into the deposit account designated by the institution for assessment payment purposes pursuant to subpart A of this part. If remitted with the institution's assessment and the dividend amount is less than the amount of assessment due, then the institution's account will be directly debited to the FDIC to reflect the net amount owed to the FDIC as an assessment.
(d)If an insured depository institution's dividend amount is subject to review under § 327.54, and that request is not finally resolved prior to the dividend payment date, the FDIC may credit the institution with the dividend amount provided on the invoice or freeze the amount in dispute. Adjustments to an individual institution's dividend amount based on the final determination of a request for review will be handled in the same manner as assessment underpayments and overpayments. § 327.54 Requests for review of dividend amount.
(a)An insured depository institution may submit a request for review of the FDIC's determination of the institution's dividend amount as shown on the special notice of dividend or assessment invoice, as appropriate. Such review may be requested if:
(1)The institution disagrees with the calculation of the dividend as stated on the special notice of dividend or invoice; or
(2)The institution believes that the 1996 assessment base ratio attributed to the institution has not been adjusted to include the 1996 assessment base ratio of an institution acquired by merger or transfer pursuant to §§ 327.33 and 327.34 of subpart B and the institution has not had an opportunity (whether or not that opportunity was utilized) to appeal that same determination under subpart B.
(b)Any such request for review must be submitted within 30 days of the date of the special notice of dividend or invoice for which a change is requested. The request for review shall be submitted to the Division of Finance and shall provide documentation sufficient to support the change sought by the institution. If an institution does not submit a timely request for review, that institution may not subsequently request review of its dividend amount, subject to paragraph
(d)of this section. At the time of filing with the FDIC, the requesting institution shall notify, to the extent practicable, any other insured depository institution that would be directly and materially affected by granting the request for review and provide such institution with copies of the request for review, the supporting documentation, and the FDIC's procedures for requests under this subpart. The FDIC shall make reasonable efforts, based on its official systems of records, to determine that such institutions have been identified and notified.
(c)During the FDIC's consideration of the request for review, the amount of dividend in dispute may not be available for use by any institution.
(d)Within 30 days of receiving notice of the request for review, those institutions identified as potentially affected by the request for review may submit a response to such request, along with any supporting documentation, to the Division of Finance, and shall provide copies to the requesting institution. If an institution that was notified under paragraph
(b)of this section does not submit a response to the request for review, that institution may not subsequently:
(1)Dispute the information submitted by any other institution on the transaction(s) at issue in that review process; or
(2)Appeal the decision by the Director of the Division of Finance.
(e)If additional information is requested of the requesting or affected institutions by the FDIC, such information shall be provided by the institution within 21 days of the date of the FDIC's request for additional information.
(f)Any institution submitting a timely request for review will receive a written response from the FDIC's Director of the Division of Finance (“Director”), or his or her designee, notifying the affected institutions of the determination of the Director as to whether the requested change is warranted, whenever feasible:
(1)Within 60 days of receipt by the FDIC of the request for revision;
(2)If additional institutions have been notified by the requesting institution or the FDIC, within 60 days of the date of the last response to the notification; or
(3)If additional information has been requested by the FDIC, within 60 days of receipt of the additional information, whichever is later. Notice of the procedures applicable to appeals under paragraph
(g)of this section will be included with the Director's written determination.
(g)An insured depository institution may appeal the determination of the Director to the FDIC's Assessment Appeals Committee on the same grounds as set forth under paragraph
(a)of this section. Any such appeal must be submitted within 30 calendar days from the date of the Director's written determination. The decision of the Assessment Appeals Committee shall be the final determination of the FDIC. § 327.55 Sunset date. Subpart C shall cease to be effective on December 31, 2008. Dated at Washington, DC, this 10th day of October, 2006. By order of the Board of Directors. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. E6-17304 Filed 10-17-06; 8:45 am] BILLING CODE 6714-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. 2000-NM-360-AD; Amendment 39-14789; AD 2006-21-05] RIN 2120-AA64 Airworthiness Directives; Boeing Model 747-400, 777-200, and 777-300 Series Airplanes AGENCY: Federal Aviation Administration, DOT. ACTION: Final rule. SUMMARY: This amendment adopts a new airworthiness directive (AD), applicable to certain Boeing Model 747-400, 777-200, and 777-300 series airplanes. This AD requires, for certain airplanes, replacing the cell stack of the flight deck humidifier with a supplier-tested cell stack, or replacing the cell stack with a blanking plate and subsequently deactivating the flight deck humidifier. For certain other airplanes, this AD requires an inspection of the flight deck humidifier to determine certain part numbers and replacing the cell stack if necessary. This AD also allows blanking plates to be replaced with cell stacks. The actions specified by this AD are intended to prevent an increased pressure drop across the humidifier and consequent reduced airflow to the flight deck, which could result in the inability to clear any smoke that might appear in the flight deck. This action is intended to address the identified unsafe condition. DATES: Effective November 22, 2006. The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of November 22, 2006. ADDRESSES: The service information referenced in this AD may be obtained from Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-2207. This information may be examined at the Federal Aviation Administration (FAA), Transport Airplane Directorate, Rules Docket, 1601 Lind Avenue, SW., Renton, Washington. FOR FURTHER INFORMATION CONTACT: Jeffrey S. Palmer, Aerospace Engineer, Cabin Safety and Environmental Systems Branch, ANM-150S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., Renton, Washington 98055-4056; telephone
(425)917-6481; fax
(425)917-6590. SUPPLEMENTARY INFORMATION: A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive
(AD)that is applicable to certain Boeing Model 747-400, 777-200, and 777-300 series airplanes was published as a second supplemental notice of proposed rulemaking
(NPRM)in the **Federal Register** on January 4, 2006 (71 FR 299). That action proposed to require, for certain airplanes, replacing the cell stack of the flight deck humidifier with a supplier-tested cell stack, or replacing the cell stack with a blanking plate and subsequently deactivating the flight deck humidifier. For certain other airplanes, that action proposed to require an inspection of the flight deck humidifier to determine certain part numbers and replacing the cell stack if necessary. That action also proposed to allow blanking plates to be replaced with cell stacks. That action also proposed to add airplanes to the applicability. Actions Since Second Supplemental NPRM (SNPRM) Was Issued Since we issued the second SNPRM, Boeing has issued Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006; and Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006. Boeing Alert Service Bulletin 747-21A2414, Revision 2, dated July 7, 2005; and Boeing Alert Service Bulletin 777-21A0048, Revision 2, dated July 14, 2005, were referenced as the appropriate sources of service information for doing certain actions proposed in the second SNPRM. Both service bulletins, Revision 3, contain essentially the same procedures as the corresponding service bulletins, Revision 2. We have revised this final rule to refer to Revision 3 of these service bulletins. We have also added Boeing Alert Service Bulletin 747-21A2414, Revision 2, to paragraphs
(b)and
(g)of this final rule and added Boeing Alert Service Bulletin 777-21A0048, Revision 2, to paragraphs
(e)and
(h)of this final rule to allow credit for actions done in accordance with Revision 2 of the service bulletins. Operators should note that Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006, specifies Group 1 as “all 747-400 airplanes with Hamilton Sundstrand flight deck humidifier 821486-01.” However, the correct part number for the humidifier is 821486-1. We have added Note 1 to this final rule to indicate that Group 1 is identified as all 747-400 airplanes with Hamilton Sundstrand flight deck humidifier 821486-1. Comments Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received. Support for the Second SNPRM Boeing, the manufacturer, concurs with the content of the second SNPRM. Request To Remove Airplanes From the Second SNPRM United Airlines
(UAL)does not agree with the contents of the second SNPRM for the Model 747-400 series airplanes and feels that regulatory action is not necessary to ensure the intent of the second SNPRM for these airplanes. UAL states that it took immediate steps to comply with Boeing and Hamilton Sundstrand service bulletins specified in the second SNPRM. UAL notes that because the reliability of the humidifier was extremely poor at the time that the cell stack concern was identified, the humidifier cell stacks have been replaced many times since the year 2000. UAL states that the removed cell stacks were sent to Hamilton Sundstrand for repair and modification and that Hamilton Sundstrand is the sole source for repair and modification. Therefore, UAL concludes that the intent of the second SNPRM for the 747-400 airplanes can be satisfied by examining Hamilton Sundstrand's maintenance records for the cell stack. We disagree. Regulatory action is necessary to ensure that Model 747-400 series airplanes do the actions in this final rule. A review by the airplane manufacturer of the Hamilton Sundstrand records shows that about 10 defective humidifier cell stacks are in circulation among the Model 747-400 fleet. This final rule will prevent any of those humidifiers, having cell stack part number (P/N) 821482-1, from being installed as replacements on any airplanes unless “DEV 13433” is marked next to the cell stack P/N. We have not changed the final rule in this regard. UAL also does not agree with the contents of the second SNPRM for the Model 777-200 series airplanes and feels that regulatory action is not necessary to ensure the intent of the second SNPRM for these airplanes. UAL states that the airplanes identified as Group 6 in Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006, were added to the service bulletin because the airplanes were scheduled to have the humidifiers retrofitted as part of the crew rest project; however, the installation was canceled and no airplanes were retrofitted with the humidifiers. We disagree. Regulatory action is necessary to ensure that Model 777-200 series airplanes do the actions in this final rule. A review by the airplane manufacturer of the Hamilton Sundstrand records shows that about 14 defective humidifier cell stacks are in circulation among the Model 777 fleet. This final rule will prevent any of those humidifiers, having cell stack P/N 822976-2, from being installed as replacements on any airplanes unless “DEV 13433” is marked next to the cell stack P/N. We have not changed the final rule in this regard. Request To Allow Compliance With Maintenance Records UAL also requests that if Model 747-400 series airplanes are not allowed to be removed from the requirements of the second SNPRM as requested above, then the only regulatory actions imposed on operators should be limited to demonstrating compliance through their own maintenance records. We partially agree with the commenter. In paragraph
(c)of this final rule we do allow a review of airplane maintenance records to determine the P/N of the flight deck humidifier instead of doing the inspection. We have determined that a review of the maintenance records is also acceptable if it can be determined that the flight deck humidifier is not installed. We have revised paragraph
(c)to state that “instead of inspecting the flight deck humidifier, a review of airplane maintenance records along with any other applicable data is acceptable if the P/N of the flight deck humidifier can be positively determined from that review or if it can be positively determined that the flight deck humidifier is not installed on the airplane.” Request To Allow Equivalent Blanking Plate Installation UAL also requests that we consider the blanking plate installation and humidifier system deactivation done in accordance with Boeing Service Bulletin 777-21-0087, dated June 17, 2004; and Hamilton Sundstrand Service Bulletin 816086-21-01, dated March 15, 2000; as equivalent to the blanking plate installation done in accordance with Boeing Alert Service Bulletin 777-21A0048, Revision 2, dated July 14, 2005 (specified in paragraph
(f)of the second SNPRM). The commenter states that it has deactivated the humidifiers and replaced the cell stacks with blanking plates on all Group 7 airplanes identified in Boeing Alert Service Bulletin 777-21-0048, registration numbers 09UA and 16UA-29UA, by doing the actions in Boeing Service Bulletin 777-21-0087 and Hamilton Sundstrand Service Bulletin 816086-21-01. The commenter also notes that the airplane having registration number 09UA, was delivered with a deactivated humidifier and only needed modification by doing the blanking plate installation per Hamilton Sundstrand Service Bulletin 816086-21-01. We agree with the commenter. We have revised paragraph (f)(2)(ii) of this final rule to give credit for airplanes on which the replacement and deactivation are done in accordance with Boeing Service Bulletin 777-21-0087 and Hamilton Sundstrand Service Bulletin 816086-21-01 for those Group 7 airplanes listed in Boeing Service Bulletin 777-21-0087, dated June 17, 2004. We have also determined that a review of the maintenance records is acceptable instead of the inspection specified in paragraph
(f)of this final rule if it can be determined that the flight deck humidifier is not installed. We have revised paragraph
(f)to state that “instead of inspecting the flight deck humidifier, a review of airplane maintenance records along with any other applicable data is acceptable if the P/N of the flight deck humidifier can be positively determined from that review or if it can be positively determined that the flight deck humidifier is not installed on the airplane.” Conclusion After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes described previously. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD. Cost Impact There are approximately 176 airplanes of the affected design in the worldwide fleet. The FAA estimates that this AD affects 29 airplanes of U.S. registry. The cost per airplane ranges between $390 and $6,248 per airplane, depending on the actions chosen by the operator. The fleet cost estimate does not exceed $181,192. Estimated Costs Model/series Action Work hours Hourly rate Parts cost Cost per airplane 747-400, 777-200, 777-300 Inspect flight deck humidifier for P/N and inspect flight deck humidifier cell stack for P/N 1 $65 $0 $65 747-400 Replace cell stack with new or supplier-tested cell stack 3 65 5,100 5,295 747-400 Replace cell stack with blanking plate and deactivate humidifier 5 65 0 325 777-200, 777-300 Replace cell stack with blanking plate 3 65 0 195 777-200, 777-300 Replace cell stack with new or supplier-tested cell stack 3 65 6,053 6,248 777-200, 777-300 Replace blanking plate with supplier-tested cell stack 1 65 6,053 6,118 The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Impact The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132. 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 final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES . List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, 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 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. Section 39.13 is amended by adding the following new airworthiness directive: **2006-21-05 Boeing:** Amendment 39-14789. Docket 2000-NM-360-AD. *Applicability:* Model 747-400, 777-200, and 777-300 series airplanes, certificated in any category; as identified in Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006; and Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006. *Compliance:* Required as indicated, unless accomplished previously. To prevent an increased pressure drop across the humidifier and consequent reduced airflow to the flight deck, which could result in the inability to clear any smoke that might appear in the flight deck, accomplish the following: Cell Stack Replacement: Model 747-400 Series Airplanes
(a)For Model 747-400 series airplanes identified as Group 1 in Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006: Within 90 days after the effective date of this AD, do the replacement specified in paragraph (a)(1) or (a)(2) of this AD. For flight deck humidifiers with a blanking plate: If the blanking plate is removed and a new or supplier-tested cell stack is installed, the replacement must be done in accordance with the Accomplishment Instructions of Hamilton Sundstrand Service Bulletins 821486-21-01, dated March 15, 2000; and after the replacement, the flight deck humidifier may be activated in accordance with the Accomplishment Instructions of Boeing Service Bulletin 747-21-2405, Revision 4, dated July 29, 1999. Note 1: Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006, specifies Group 1 as “all 747-400 airplanes with Hamilton Sundstrand flight deck humidifier 821486-01.” The correct part number (P/N) for the humidifier is 821486-1.
(1)Replace the cell stack of the flight deck humidifier with a supplier-tested cell stack, in accordance with Part 1 of the Accomplishment Instructions of Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006.
(2)Replace the cell stack of the flight deck humidifier with a blanking plate and, before further flight, deactivate the flight deck humidifier, in accordance with Part 2 of the Accomplishment Instructions of Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006. Note 2: Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006, refers to Boeing Service Bulletin 747-21-2405, Revision 4, dated July 29, 1999, as an additional source of service information for deactivating the humidifier. Note 3: Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006, refers to Hamilton Sundstrand Service Bulletin 821486-21-01, dated March 15, 2000, as an additional source of service information for the cell stack replacements.
(b)Replacement of the cell stack before the effective date of this AD in accordance with Boeing Alert Service Bulletin 747-21A2414, dated April 13, 2000; Revision 1, dated October 26, 2000; or Revision 2, dated July 7, 2005; is acceptable for compliance with the applicable requirements of paragraphs (a)(1) and (a)(2) of this AD. Inspections/Records Review: Model 747-400 Series Airplanes
(c)For Model 747-400 series airplanes identified as Groups 2 and 3 in Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006: Within 90 days after the effective date of this AD, inspect the flight deck humidifier to determine whether P/N 821486-1 is installed, in accordance with Part 3 of the Accomplishment Instructions of Boeing Service Bulletin 747-21A2414, Revision 3, dated May 12, 2006. Instead of inspecting the flight deck humidifier, a review of airplane maintenance records along with any other applicable data is acceptable if the P/N of the flight deck humidifier can be positively determined from that review or if it can be positively determined that the flight deck humidifier is not installed on the airplane.
(1)If a P/N other than P/N 821486-1 is installed or if the flight deck humidifier is not installed, no further action is required by this paragraph.
(2)If P/N 821486-1 is installed, inspect the flight deck humidifier cell stack to determine whether P/N 821482-1 is installed and “DEV 13433” is not marked next to the cell stack P/N, in accordance with Part 3 of the Accomplishment Instructions of the service bulletin. Instead of inspecting the flight deck humidifier cell stack, a review of airplane maintenance records is acceptable if the P/N, including whether “DEV 13433” is marked next to the P/N, of the flight deck humidifier cell stack can be positively determined from that review.
(i)If the cell stack has P/N 821482-2 or 1003111-2, or if “DEV 13433” is marked next to P/N 821482-1, no further action is required by this paragraph.
(ii)If the cell stack has P/N 821482-1 and does not have “DEV 13433” marked next to the cell stack P/N: Before further flight, do the replacement specified in paragraph
(a)of this AD. Cell Stack Replacement: Model 777-200 and -300 Series Airplanes
(d)For Model 777-200 and 777-300 series airplanes identified as Groups 1 through 5 in Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006: Within 90 days after the effective date of this AD, do the replacement specified in paragraph (d)(1) or (d)(2) of this AD. For flight deck humidifiers with a blanking plate: If a blanking plate is removed and a new or supplier-tested cell stack installed, the cell stack installation must be done in accordance with Part 3 of the Accomplishment Instructions of Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006; and after the installation, the humidifier system may be activated in accordance with Accomplishment Instructions of Boeing Service Bulletin 777-21-0035, Revision 1, dated October 19, 2000.
(1)Replace the cell stack with a blanking plate, in accordance with Part 1 of the Accomplishment Instructions of Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006; and, before further flight, deactivate the humidifier system in accordance with a method approved by the Manager, Seattle Aircraft Certification Office (ACO), FAA, or in accordance with data meeting the certification basis of the airplane approved by an Authorized Representative for the Boeing Commercial Airplanes Delegation Option Authorization who has been authorized by the Manager, Seattle ACO, to make those findings. For a deactivation method to be approved, the deactivation must meet the certification basis of the airplane, and the approval must specifically reference this AD.
(2)Replace the cell stack with a supplier-tested cell stack, in accordance with Part 2 of the Accomplishment Instructions of Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006. Note 4: Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006, refers to Hamilton Sundstrand Service Bulletin 816086-21-01, dated March 15, 2000, as an additional source of service information for the cell stack replacement.
(e)Replacement of the cell stack before the effective date of this AD in accordance with Boeing Service Bulletin 777-21A0048, Revision 1, dated September 7, 2000; or Boeing Alert Service Bulletin 777-21A0048, Revision 2, dated July 14, 2005; is acceptable for compliance with the applicable requirements of paragraphs (d)(1) and (d)(2) of this AD. Inspections/Records Review: Model 777-200 and -300 Series Airplanes
(f)For Model 777-200 and 777-300 series airplanes identified as Groups 6 and 7 in Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006: Within 90 days after the effective date of this AD, inspect the flight deck humidifier to determine if it is P/N 816086-1, in accordance with Part 4 of the Accomplishment Instructions of Boeing Service Bulletin 777-21A0048, Revision 3, dated May 12, 2006. Instead of inspecting the flight deck humidifier, a review of airplane maintenance records along with any other applicable data is acceptable if the P/N of the flight deck humidifier can be positively determined from that review or if it can be positively determined that the flight deck humidifier is not installed on the airplane.
(1)If a P/N other than P/N 816086-1 is installed or if the flight deck humidifier is not installed, no further action is required by this paragraph.
(2)If P/N 816086-1 is installed, inspect the flight deck humidifier cell stack to determine whether P/N 822976-2 is installed and “DEV 13433” is not marked next to the cell stack P/N, in accordance with Part 4 of the Accomplishment Instructions of the service bulletin. Instead of inspecting the flight deck humidifier cell stack, a review of airplane maintenance records is acceptable if the P/N, including whether “DEV 13433” is marked next to the P/N, of the flight deck humidifier cell stack can be positively determined from that review.
(i)If the cell stack has P/N 822976-3 or 1003111-1, or if “DEV 13433” is marked next to P/N 822976-2, no further action is required by this paragraph.
(ii)If the cell stack has P/N 822976-2 and does not have “DEV 13433” marked next to the cell stack P/N, before further flight, do the replacement specified in paragraph
(d)of this AD. Doing the replacement of the cell stack with a blanking plate, in accordance with paragraph 3.A. of the Accomplishment Instructions of Hamilton Sundstrand Service Bulletin 816086-21-01, dated March 15, 2000; and the deactivation of the humidifier system, in accordance with the Accomplishment Instructions of Boeing Service Bulletin 777-21-0087, dated June 17, 2004; is acceptable for compliance with paragraph (d)(1) of this AD for those Group 7 airplanes listed in Boeing Service Bulletin 777-21-0087, dated June 17, 2004. Actions Accomplished According to Previous Issue of Service Bulletin
(g)Inspections accomplished before the effective date of this AD in accordance with Boeing Alert Service Bulletin 747-21A2414, Revision 2, dated July 7, 2005, are considered acceptable for compliance with the corresponding action specified in paragraph
(c)of this AD.
(h)Inspections accomplished before the effective date of this AD in accordance with Boeing Alert Service Bulletin 777-21A0048, Revision 2, dated July 14, 2005, are considered acceptable for compliance with the corresponding action specified in paragraph
(f)of this AD. Parts Installation
(i)On Model 747-400 series airplanes: As of the effective date of this AD, no person may install a flight deck humidifier cell stack having P/N 821482-1, unless “DEV 13433” is also marked next to the cell stack P/N.
(j)On Model 777-200 and 777-300 series airplanes: As of the effective date of this AD, no person may install a flight deck humidifier cell stack having P/N 822976-2, unless “DEV 13433” is also marked next to the cell stack P/N. Alternative Methods of Compliance (k)(1) In accordance with 14 CFR 39.19, the Manager, Seattle ACO, is authorized to approve alternative methods of compliance for this AD.
(2)Before using any AMOC approved in accordance with 14 CFR 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Incorporation by Reference
(l)Unless otherwise specified in this AD, the actions must be done in accordance with the applicable service bulletins listed in Table 1 of this AD. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. To get copies of this service information, contact Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-2207. To inspect copies of this service information, go to the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington. For information on the availability of this material at the NARA, call
(202)741-6030, or go to *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. * Table 1.—Material Incorporated by Reference Service Bulletin Revision level Date Boeing Service Bulletin 747-21A2414 3 May 12, 2006. Boeing Service Bulletin 747-21-2405 4 July 29, 1999. Boeing Service Bulletin 777-21A0048 3 May 12, 2006. Boeing Service Bulletin 777-21-0035 1 October 19, 2000. Boeing Service Bulletin 777-21-0087 Original June 17, 2004. Hamilton Sundstrand Service Bulletin 816086-21-01 Original March 15, 2000. Hamilton Sundstrand Service Bulletin 821486-21-01 Original March 15, 2000. Effective Date
(m)This amendment becomes effective on November 22, 2006. Issued in Renton, Washington, on October 6, 2006. Kalene C. Yanamura, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-17187 Filed 10-17-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-25809; Directorate Identifier 2001-NE-30-AD; Amendment 39-14791; AD 2006-17-07R1] RIN 2120-AA64 Airworthiness Directives; Pratt & Whitney JT8D-1, -1A, -1B, -7, -7A, -7B, -9, -9A, -11, -15, -15A, -17, -17A, -17R, -17AR, -209, -217, -217A, -217C, and -219 Turbofan Engines AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule; correction. SUMMARY: The FAA is revising an existing airworthiness directive
(AD)for Pratt & Whitney
(PW)JT8D-1, -1A, -1B, -7, -7A, -7B, -9, -9A, -11, -15, -15A, -17, -17A, -17R, -17AR, -209, -217, -217A, -217C, and -219 turbofan engines. That AD currently requires either replacing high pressure compressor
(HPC)front hubs and HPC disks that have operated at any time with PWA 110-21 coating and that operated in certain engine models, or, visually inspecting and fluorescent penetrant inspecting
(FMPI)for cracking of those parts and re-plating them if they pass inspection. This AD requires the same actions, but makes necessary corrections to inadvertent reference errors and omissions found in AD 2006-17-07, and relaxes some of the compliance times in Table 5. This AD results from our finding reference errors and omissions in AD 2006-17-07, from determining that the AD as drafted imposed an unnecessary burden on operators if they have to immediately remove engines, and from requests to clarify compliance paragraphs. We are issuing this AD to prevent a rupture of an HPC front hub or an HPC disk that could result in an uncontained engine failure and damage to the airplane. DATES: This AD becomes effective November 2, 2006. The Director of the Federal Register previously approved the incorporation by reference of certain publications listed in the regulations as of October 4, 2006 (71 FR 51459, August 30, 2006). ADDRESSES: You can get the service information identified in this AD from Pratt & Whitney, 400 Main St., East Hartford, CT 06108, telephone
(860)565-7700; fax
(860)565-1605. You may examine the AD docket on the Internet at *http://dms.dot.gov* or in Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Keith Lardie, Aerospace Engineer, Engine Certification Office, FAA, Engine and Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; telephone
(781)238-7189; fax
(781)238-7199. SUPPLEMENTARY INFORMATION: On August 21, 2006, the FAA issued AD 2006-17-07, Amendment 39-14728 (71 FR 51459, August 30, 2006). That AD requires either replacing HPC front hubs and HPC disks that have operated at any time with PWA 110-21 coating and that operated in certain engine models, or, visually inspecting and FMPI for cracking of those parts and re-plating them if they pass inspection. That AD was the result of an investigation by PW, which concluded that any HPC front hub or HPC disk coated with PWA 110-21 that ever operated on JT8D-15, -15A, -17, -17A, -17R, -17AR, -209, -217, -217A, -217C, and -219 turbofan engines, could crack before reaching their published life limit. That condition, if not corrected, could result in an uncontained engine failure and damage to the airplane. Examining the AD Docket You may examine the docket that contains the AD, any comments received, and any final disposition in person at the Docket Management Facility Docket Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone
(800)647-5227) is located on the plaza level of the Department of Transportation Nassif Building at the street address stated in ADDRESSES . Comments will be available in the AD docket shortly after the DMS receives them. Actions Since AD 2006-17-07 Was Issued After we issued AD 2006-17-07, we found reference errors and omissions. These errors and omissions could affect your ability to comply with the AD. The following errors and omissions were discovered. We made the associated corrections: • In the third column of Table 1 of this AD, we omitted “-17A” in two places. We added the missing “-17A” from AD 2006-17-07 in both places. • The third column of Table 4 and Table 5 reads “Paragraph (h)(3) of this AD”. Paragraph (h)(3) does not exist. We corrected it to read “Paragraph
(j)of this AD.” We also determined that based on the compliance times in Table 5 of AD 2006-17-07, some operators might have to immediately remove their engines from service. If so, we concluded that those immediate removals might impose an unanticipated undue burden. Table 5 of AD 2006-17-07, appears below. Table 5 of AD 2006-17-07—HPC Front Hub Inspection Schedule—Hubs Coated With Nickel-Cadmium HPC front hub CSN on the effective date of this AD Inspect before additional CIS or CSN, whichever occurs first Also inspect 7th stage HPC disks and 9th stage-through-12th stage HPC disks using:
(i)19,000 or more 500 CIS or 20,000 CSN Paragraph (h)(3) of this AD.
(ii)17,000 or more, but fewer than 19,000 1,000 CIS or 19,500 CSN Paragraph (h)(3) of this AD.
(iii)9,000 or more, but fewer than 17,000, that have not been inspected 18,000 CSN Paragraph (h)(3) of this AD.
(iv)9,000 or more, but fewer than 17,000, that were inspected before accumulating 9,000 CSN 15,500 CSN Paragraph (h)(3) of this AD. Therefore, we changed Table 5 to reflect relaxed compliance requirements in item (iii), and we changed the compliance requirements in item (iv). With the addition of the “-17A” noted previously, and the changed compliance requirements that relax compliance time, Table 5 now reads as follows: (Changed) Table 5.—HPC Front Hub Inspection Schedule—Hubs Coated With Nickel-Cadmium HPC front hub CSN on the effective date of this AD Inspect before additional CIS or CSN, whichever occurs first Also inspect 7th stage HPC disks and 9th stage-through-12th stage HPC disks using:
(i)19,000 or more 500 CIS or 20,000 CSN Paragraph
(j)of this AD.
(ii)17,000 or more, but fewer than 19,000 1,000 CIS or 19,500 CSN Paragraph
(j)of this AD.
(iii)9,000 or more, but fewer than 17,000 18,000 CSN Paragraph
(j)of this AD.
(iv)Fewer than 9,000 that are accessible If the parts have been inspected and are acceptable, parts may be reinstalled. Inspect again using the criteria in
(iii)of this table Paragraph
(j)of this AD. As part of relaxing the requirements, we also clarified that paragraphs (f)(3) and
(j)pertain to 7th stage HPC disks and 9th stage-through-12th stage HPC disks coated with PWA 110-21. Finally, since AD 2006-17-07 was issued, we received multiple instances of operators requesting clarification of compliance paragraph
(e)in AD 2006-17-07. Based on the frequency of requests, we decided to clarify the paragraph. AD 2006-17-07 paragraph
(e)originally read as follows: ``(e) You must accomplish the actions required by this AD within the compliance times specified, unless the actions have already been done. Any engine with an HPC front hub that has been inspected using AD 2002-23-14, AD 2003-12-07, or AD 2003-16-05, is considered in compliance with this AD.” We rewrote paragraph
(e)to now read as follows: “(e) You must accomplish the actions required by this AD within the compliance times specified, unless the actions have already been done. Any engine with an HPC front hub that has been inspected for fretting wear using AD 2002-23-14, AD 2003-12-07, or AD 2003-16-05, counts as an inspection toward compliance with this AD.” FAA's Determination and Requirements of This AD The unsafe condition described previously is likely to exist or develop on other Pratt & Whitney JT8D-1, -1A, -1B, -7, -7A, -7B, -9, -9A, -11, -15, -15A, -17, -17A, -17R, -17AR, -209, -217, -217A, -217C, and -219 turbofan engines of the same type design. We are issuing this AD to prevent a rupture of an HPC front hub or an HPC disk that could result in an uncontained engine failure and damage to the airplane. This AD requires either replacing HPC front hubs and HPC disks that have operated at any time with PWA 110-21 coating and that operated in certain engine models, or, visually inspecting and FMPI for cracking of those parts and re-plating them if they pass inspection. FAA's Determination of the Effective Date Since an unsafe condition exists that requires the immediate adoption of this AD, we have found that notice and opportunity for public comment before issuing this AD are unnecessary, and that good cause exists for making this amendment effective in less than 30 days. Docket Number Change We are transferring the docket for this AD to the Docket Management System as part of our on-going docket management consolidation efforts. The new Docket No. is FAA-2006-25809. The old Docket No. became the Directorate Identifier, which is 2001-NE-30-AD. This AD might get logged into the DMS docket, ahead of the previously collected documents from the old docket file, as we are in the process of sending those items to the DMS. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that this AD:
(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. We prepared a summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary at the address listed under ADDRESSES . List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Under 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 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The FAA amends § 39.13 by removing Amendment 39-14728 (71 FR 51459, August 30, 2006), and by adding a new airworthiness directive, Amendment 39-14791, to read as follows: **2006-17-07R1 Pratt & Whitney:** Amendment 39-14791. Docket No. FAA-2006-25809; Directorate Identifier 2001-NE-30-AD. Effective Date
(a)This airworthiness directive
(AD)becomes effective November 2, 2006. Affected ADs
(b)This AD revises AD 2006-17-07. Applicability
(c)This AD applies to the following Pratt & Whitney
(PW)JT8D-1, -1A, -1B, -7, -7A, -7B, -9, -9A, -11, -15, -15A, -17, -17A, -17R, -17AR, -209, -217, -217A, -217C, and -219 turbofan engines, with 8th stage high pressure compressor
(HPC)front hubs: Table 1.—AD Applicability If the HPC front hub is coated with: And if the stage 8-9 spacer is coated with: And the HPC front hub: Then this AD is:
(1)PWA 110-21 at any time Any Operated in a JT8D-15, -15A, -17, -17A, -17R, or -17AR engine Applicable. See paragraph
(f)and Table 2 of this AD.
(2)PWA 110-21 at any time Any Operated in a JT8D-209, -217, -217A, -217C, or -219 engine Applicable. See paragraph
(h)and Table 4 of this AD.
(3)Nickel-Cadmium PWA 110-21 at any time Operated in a JT8D-209, -217, -217A, -217C, or -219 engine Applicable. See paragraph
(i)and Table 5 of this AD.
(4)Nickel-Cadmium PWA 110-21 at any time Operated in a JT8D-1, -1A, -1B, -7, -7A, -7B, -9, -9A, -11, -15, -15A, -17, -17A, -17R, or -17AR engine Not applicable.
(5)PWA 110-21 at any time Any Operated in a JT8D-1, -1A, -1B, -7, -7A, -7B, -9, -9A, or -11, but never operated in a JT8D-15, -15A, -17, -17A, -17R, -17AR, -209, -217, -217A, -217C, or -219 engine Not applicable.
(6)Nickel-Cadmium Any type but PWA 110-21 Any Not applicable. These engines are installed on, but not limited to, Boeing DC-9, MD-80 series, 727 series, and 737 series airplanes. Unsafe Condition
(d)This AD results from inadvertent reference errors and omissions found in AD 2006-17-07, which could affect ability to comply with that AD. We are issuing this AD to prevent a rupture of an HPC front hub or an HPC disk that could result in an uncontained engine failure and damage to the airplane. Compliance
(e)You must accomplish the actions required by this AD within the compliance times specified, unless the actions have already been done. Any engine with an HPC front hub that has been inspected for fretting wear using AD 2002-23-14, AD 2003-12-07, or AD 2003-16-05, counts as an inspection toward compliance with this AD. JT8D-1, -1A, -1B, -7, -7A, -7B, -9, -9A, -11, -15, -15A, -17, -17A, -17R, and -17AR Turbofan Engines—Inspect or Replace HPC Front Hubs, HPC Disks, and Stage 8-9 Spacers
(f)For applicable JT8D-1, -1A, -1B, -7, -7A, -7B, -9, -9A, -11, -15, -15A, -17, -17A, -17R, and -17AR turbofan engines specified in Table 1 of this AD, do the following:
(1)Using the inspection schedule in Table 2 of this AD, strip the protective coating, visually inspect for fretting wear, fluorescent magnetic particle inspect
(FMPI)for cracks, reidentify, replate HPC front hubs and stage 8-9 spacers, and replace if necessary.
(2)Use paragraphs 1. through 3.B.(7)(b) under “For Rear Compressor Front Hubs that Have Operated With PWA 110-21 coating AT ANY TIME During Their Service Life in JT8D-15, -15A, -17, -17A, -17R, -17AR Engine Models.” of PW Alert Service Bulletin
(ASB)JT8D A6468, dated December 23, 2004. Table 2.—HPC Front Hub Inspection Schedule HPC front hub cycles-since-new
(CSN)on the effective date of this AD Inspect before additional cycles-in-service
(CIS)or CSN, whichever occurs first Also inspect 7th stage HPC disks and 9th stage-through-12th stage HPC disks using:
(i)19,000 or more 500 CIS or 20,000 CSN Paragraph (f)(3) of this AD.
(ii)15,500 or more, but fewer than 19,000 1,000 CIS or 19,500 CSN Paragraph (f)(3) of this AD.
(iii)5,000 or more, but fewer than 15,500 16,500 CSN Paragraph (f)(3) of this AD.
(iv)Fewer than 5,000 that are accessible If the parts have been inspected and are acceptable, parts may be reinstalled. Inspect again using the criteria in
(iii)of this Table Paragraph (f)(3) of this AD.
(3)When the HPC front hub is inspected, visually inspect for fretting wear and FMPI for cracks on 7th stage HPC disks and 9th stage-through-12th stage HPC disks coated with PWA 110-21. Inspection information can be found in the applicable sections of JT8D Engine Manual Part Number (P/N) 481672, listed in the following Table 3: Table 3.—Seventh Stage HPC Disks and 9th Stage-Through-12th Stage HPC Disks Inspection Information Stage Chapter/ section Visual inspection Fretting inspection FMPI 7 72-36-41 Inspection-01 Inspection-04 Inspection-03. 9 72-36-43 Inspection-01 Inspection-04 Inspection-03. 10 72-36-44 Inspection-01 Inspection-04 Inspection-03. 11 72-36-45 Inspection-01 Inspection-04 Inspection-03. 12 72-36-46 Inspection-01 Inspection-04 Inspection-03. JT8D-15, -15A, -17, -17A, -17R, and -17AR Turbofan Engines—Cycle Adjustment for HPC Front Hubs That Entered Service With Nickel-Cadmium Plating and PWA 110-21 Coating
(g)For JT8D-15, -15A, -17, -17A, -17R, and -17AR turbofan engines with front hubs that entered service with Nickel-Cadmium plating, but have also operated during the life of the hub with PWA 110-21 coating:
(1)You are allowed to make a cycle adjustment if the hub was never operated with a PWA 110-21-coated stage 8-9 spacer.
(2)Use the information under “Compliance” of PW ASB JT8D A6468, dated December 23, 2004, to determine the adjustment. JT8D-209, -217, -217A, -217C, and -219 Turbofan Engines—Inspect or Replace HPC Front Hubs and Stage 8-9 Spacers
(h)For applicable JT8D-209, -217, -217A, -217C, and -219 turbofan engines specified in Table 1, Row
(2)of this AD, do the following:
(1)Using the inspection schedule in Table 4 of this AD, strip the protective coating, visually inspect for fretting wear, FMPI for cracking, reidentify, replate HPC front hubs and the stage 8-9 spacers, and replace if necessary.
(2)Use paragraphs 1. through 1.A. and paragraphs 2. through 2.C.(2)(g)2 of Accomplishment Instructions of PW ASB JT8D A6430, Revision 2, dated December 23, 2004. Table 4.—HPC Front Hub Inspection Schedule—Hubs Coated With PWA 110-21 HPC front hub CSN on the effective date of this AD Inspect before additional CIS or CSN, whichever occurs first Also inspect 7th stage HPC disks and 9th stage-through-12th stage HPC disks using:
(i)19,000 or more 500 CIS or 20,000 CSN Paragraph
(j)of this AD.
(ii)15,500 or more, but fewer than 19,000 1,000 CIS or 19,500 CSN Paragraph
(j)of this AD.
(iii)5,000 or more, but fewer than 15,500 16,500 CSN Paragraph
(j)of this AD.
(iv)Fewer than 5,000 that are accessible. If the parts have been inspected and are acceptable, parts may be reinstalled. Inspect again using the criteria in
(iii)of this Table Paragraph
(j)of this AD.
(i)For applicable JT8D-209, -217, -217A, -217C, and -219 turbofan engines specified in Table 1, Row
(3)of this AD, do the following:
(1)Using the inspection schedule in Table 5 of this AD, strip the protective coating, visually inspect for fretting wear, FMPI for cracking, reidentify, replate HPC front hubs and the stage 8-9 spacers, and replace if necessary.
(2)Use paragraphs 1., 1.C, and 4. through 4.B.(2)(g)2 of Accomplishment Instructions of PW ASB JT8D A6430, Revision 2, dated December 23, 2004, for all applicable hubs with any type of coating. Table 5.—HPC Front Hub Inspection Schedule—Hubs Coated With Nickel-Cadmium HPC front hub CSN on the effective date of this AD Inspect before additional CIS or CSN, whichever occurs first Also inspect 7th stage HPC disks and 9th stage-through-12th stage HPC disks using:
(i)19,000 or more 500 CIS or 20,000 CSN Paragraph
(j)of this AD.
(ii)17,000 or more, but fewer than 19,000 1,000 CIS or 19,500 CSN Paragraph
(j)of this AD.
(iii)9,000 or more, but fewer than 17,000 18,000 CSN Paragraph
(j)of this AD.
(iv)Fewer than 9,000 that are accessible If the parts have been inspected and are acceptable, parts may be reinstalled. Inspect again using the criteria in
(iii)of this Table Paragraph
(j)of this AD.
(j)When the HPC front hub is inspected, visually inspect for fretting wear and FMPI for cracks on 7th stage HPC disks and 9th stage-through-12th stage HPC disks coated with PWA 110-21. Inspection information can be found in the applicable sections of JT8D-200 Engine Manual P/N 773128, listed in Table 3 of this AD. JT8D-209, -217, -217A, -217C, and -219 Turbofan Engines—Cycle Adjustment for HPC Front Hubs That Entered Service With Nickel-Cadmium Plating and PWA 110-21 Coating
(k)For JT8D-209, -217, -217A, -217C, and -219 turbofan engines with HPC front hubs that entered service with Nickel-Cadmium plating, but have also operated during the life of the hub with PWA 110-21 coating:
(1)You are allowed to make a cycle adjustment.
(2)Use the information under “CONDITION A” of PW ASB JT8D A6430, Revision 2, dated December 23, 2004, to determine the adjustment. Replacement of HPC Front Hubs and Stage 8-9 Spacers That Have Operated With PWA 110-21 Coating, As Optional Action—All Engines
(l)For all applicable engines, as an optional action for the visual inspections in this AD, replace HPC front hubs and stage 8-9 spacers that have operated with PWA 110-21 coating in the interface between the hub and the stage 8-9 spacer and HPC disks currently coated with PWA 110-21, as follows:
(1)Install a Nickel-Cadmium plated HPC front hub that has never operated with PWA 110-21 coating in the interface between the HPC front hub and the stage 8-9 spacer.
(2)Install a Nickel-Cadmium plated or Electroless Nickel-plated stage 8-9 spacer.
(3)Install HPC disks that have never operated with PWA 110-21 coating. Prohibition Against Recoating the HPC Front Hub, Stage 7 HPC Disk, and Stage 8-9 Spacer With PWA 110-21—All Engines
(m)Do not recoat the HPC front hub with PWA 110-21 (Repair-23 of Chapter/Section 72-36-42 of JT8D-200 Engine Manual, P/N 773128, and Repair-27 and Repair-28 of Chapter/Section 72-36-42 of JT8D Engine Manual, P/N 481672).
(n)Do not recoat the 7th stage disk with PWA 110-21 (Repair-15 of Chapter/Section 72-36-41 of JT8D-200 Engine Manual, P/N 773128, and Repair-15 of Chapter/Section 72-36-41 of JT8D Engine Manual, P/N 481672).
(o)Do not recoat the stage 8-9 spacer with PWA 110-21 (Repair-03, Task 72-36-12-30-003-002, of Chapter/Section 72-36-12 of JT8D-200 Engine Manual, P/N 773128, and Repair-01, Task 72-36-12-30-001-002, of Chapter/Section 72-36-12 of JT8D Engine Manual, P/N 481672). Prohibition Against Reinstalling HPC Front Hubs and Stage 8-9 Spacers Coated With PWA 110-21
(p)After the effective date of this AD, do not reinstall HPC front hubs and stage 8-9 spacers coated with PWA 110-21. Definition
(q)For the purpose of this AD, “accessible” is defined as when the HPC front hub is removed from the engine and the hub is debladed. Alternative Methods of Compliance
(r)The Manager, Engine Certification Office, has the authority to approve alternative methods of compliance for this AD if requested using the procedures found in 14 CFR 39.19. Related Information
(s)None. Material Incorporated by Reference
(t)You must use the service information specified in Table 6 of this AD to perform the actions required by this AD. The Director of the Federal Register previously approved the incorporation by reference of these alert service bulletins in accordance with 5 U.S.C. 552(a) and 1 CFR part 51, as of October 4, 2006 (71 FR 51459, August 30, 2006). Contact Pratt & Whitney, 400 Main St., East Hartford, CT 06108, telephone
(860)565-7700; fax
(860)565-1605 for a copy of this service information. You may review copies at the FAA, New England Region, Office of the Regional Counsel, 12 New England Executive Park, Burlington, MA; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal-register/cfr/ibr-locations.html.* Table 6.—Incorporation by Reference Pratt & Whitney Alert Service Bulletin No. Page Revision Date JT8D A6430, Total Pages: 35 ALL 2 December 23, 2004. JT8D A6468, Total Pages: 20 ALL Original December 23, 2004. Issued in Burlington, Massachusetts, on October 11, 2006. Thomas A. Boudreau, Acting Manager, Engine and Propeller Directorate, Aircraft Certification Service. [FR Doc. E6-17327 Filed 10-17-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF HOMELAND SECURITY Bureau of Customs and Border Protection DEPARTMENT OF THE TREASURY 19 CFR Parts 12 and 163 [USCBP-2006-0108; CBP Dec. 06-25] RIN 1505-AB73 Entry of Softwood Lumber Products From Canada AGENCIES: Customs and Border Protection, Department of Homeland Security; Department of the Treasury. ACTION: Interim rule. SUMMARY: This document sets forth interim amendments to title 19 of the Code of Federal Regulations
(CFR)establishing special entry requirements applicable to shipments of softwood lumber products from Canada. The interim amendments involve the collection of additional entry summary information for purposes of monitoring and enforcing the Softwood Lumber Agreement between the Governments of Canada and the United States, entered into on September 12, 2006. DATES: Interim rule effective October 16, 2006. Comments must be received on or before December 18, 2006. ADDRESSES: You may submit comments, identified by *docket number* , by *one* of the following methods: • Federal eRulemaking Portal: *http://www.regulations.gov.* Follow the instructions for submitting comments via docket number USCBP-2006-0108. • Mail: Trade and Commercial Regulations Branch, Office of Regulations and Rulings, Bureau of Customs and Border Protection, 1300 Pennsylvania Avenue, NW. (Mint Annex), Washington, DC 20229. *Instructions:* All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to *http://www.regulations.gov* , including any personal information provided. For detailed instructions on submitting comments and additional information on the rulemaking process, see the “Public Participation” heading of the SUPPLEMENTARY INFORMATION section of this document. *Docket:* For access to the docket to read background documents or comments received, go to *http://www.regulations.gov* . Submitted comments may also be inspected during regular business days between the hours of 9 a.m. and 4:30 p.m. at the Office of Regulations and Rulings, Bureau of Customs and Border Protection, 799 9th Street, NW., 5th Floor, Washington, DC. Arrangements to inspect submitted comments should be made in advance by calling Joseph Clark at
(202)572-8768. FOR FURTHER INFORMATION CONTACT: Millie Gleason, Office of Field Operations, Tel:
(202)344-1131. SUPPLEMENTARY INFORMATION: Public Participation Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of the interim rule. The Bureau of Customs and Border Protection
(CBP)also invites comments that relate to the economic, environmental, or federalism effects that might result from this interim rule. Comments that will provide the most assistance to CBP in developing these procedures will reference a specific portion of the interim rule, explain the reason for any recommended change, and include data, information, or authority that supports such recommended change. Background Softwood Lumber Agreement On September 12, 2006, the Governments of the United States and Canada (the “Parties”) signed a bilateral Softwood Lumber Agreement (“SLA 2006”) concerning trade in softwood lumber products. The scope of the SLA 2006 is limited to the softwood lumber products listed as covered by the Agreement in Annex 1A of that document. A copy of the SLA 2006 is available for public viewing on the website of the Office of the United States Trade Representative located at *http://www.ustr.gov.* The SLA 2006 entered into force on October 12, 2006, (effective date), as designated by the Parties in an exchange of letters certifying that certain conditions have been met pursuant to Article II.1 of the Agreement. Unless terminated according to the terms set forth in Article XX, the SLA 2006 will remain in force until October 12, 2013, and may be extended by agreement of the Parties for an additional 2 years. The SLA 2006, in pertinent part requires: • The United States to retroactively revoke, in their entirety, any antidumping
(AD)and countervailing duty
(CVD)orders that relate to softwood lumber products beginning May 22, 2002 (the initiation date of the order) to the effective date of the Agreement, without the possibility of their reinstatement, and terminates all U.S. Department of Commerce proceedings related to the orders. The United States is also required to liquidate unliquidated entries subject to AD/CVD orders made on or after May 22, 2002, without regard to antidumping or countervailing duties, and with interest, pursuant to 19 U.S.C. 1677g(b). • The United States to not initiate and/or take action concerning trade remedy investigations. • Canada to apply export measures to exports of Softwood Lumber Products to the United States. For example, Canada will impose either an export charge or an export charge coupled with a volume restraint on exports of softwood lumber products to the United States from each Region described in 5 the Agreement and issue Export Permits on each entry of softwood lumber products exported from Canada to the United States. SLA 2006 Entry Requirements In addition to the entry and entry summary information otherwise required for importation into the United States, as per section 484 of the Tariff Act of 1930, as amended, (19 U.S.C. 1484), the SLA 2006 obligates the United States to require that a U.S. importer provide specific information in connection with each entry of covered softwood lumber products from Canada. The information required under the SLA 2006 includes the following data elements:
(1)The Region of Origin of the softwood lumber product. The identified Regions are: Alberta, British Columbia (B.C.) Coast, B.C. Interior, Manitoba, Ontario, Saskatchewan, and Quebec. The regions designated as B.C. Coast and B.C. Interior are defined in *Forest Regions and Districts Regulation* , B.C. Reg, 123/2003, which is available for public viewing at *http://www.qp.gov.bc.ca/statreg/reg/F/Forest/123_2003.htm.*
(2)The Export Permit Number issued by the Government of Canada for the shipment; and
(3)The original paper Certificate of Origin issued by the Maritime Lumber Bureau, where applicable. Exclusions From SLA 2006 Export Measures Article X of the SLA 2006 identifies lumber products that are first produced in certain Canadian provinces, or produced by specific companies, as excluded from the export measures set forth in the Agreement. Specifically, Article X provides that SLA 2006 export measures will not apply to the following products:
(1)Softwood lumber products first produced in the Maritimes from logs originating in the Maritimes or State of Maine, that are:
(i)Exported directly to the United States from a Maritime province or
(ii)Shipped to a province that is not a Maritime province, and reloaded or further processed and subsequently exported to the United States, provided that the products are accompanied by an original Certificate of Origin issued by the Maritime Lumber Bureau. An original Certificate of Origin issued by the Maritime Lumber Bureau is a required entry summary document by CBP. The Certificate must specifically state that the corresponding CBP entries are for softwood lumber products first produced in the Maritimes from logs originating in the Maritimes or State of Maine;
(2)Softwood lumber products first produced in the Yukon, Northwest Territories or Nunavut from logs originating therein; and
(3)Softwood lumber products produced by the companies listed in Annex 10 of the SLA 2006. Certificate of Origin From Maritime Lumber Bureau As the SLA 2006 requires softwood lumber products whose Region of Origin is the Maritimes to be accompanied by an original Certificate of Origin issued by the Maritime Lumber Bureau, and provides that the Certificate of Origin is a required entry summary document, CBP requires importers of this commodity to submit the original paper Certificate of Origin to CBP with the paper entry summary documentation (CBP Form 7501) for each entry. All other entries of softwood lumber products from Canada subject to the SLA 2006 may be filed electronically using the CBP Form e-7501. It is noted that the Certificate of Origin issued by the Maritime Lumber Bureau is distinct from the NAFTA Certificate of Origin required under § 181.22 of title 19 of the CFR. This interim regulation adds the Certificate of Origin to the “List of Records Required for the Entry of Merchandise” set forth in the Appendix to part 163. The list, commonly referred to as the “(a)(1)(A) list,” implements section 509(e) of the Trade Act of 1930, as amended (19 U.S.C. 1509(e)), whereby CBP is required to identify and publish a list of the records and entry information that is required to be maintained and produced under section 509(a)(1)(A) of the Tariff Act of 1930, as amended by title VI of Public Law 103-182 (19 U.S.C. 1509(a)(1)(A)). Section 509(a)(1)(A) requires the production of records, within a reasonable time after demand by CBP, “if such record is required by law or regulation for the entry of the merchandise (whether or not the Customs Service required its presentation at the time of entry).” SLA 2006 Exchange of Information and Monitoring In order to facilitate monitoring of the SLA 2006, and in order to ensure that Canadian exporters have obtained the required export permits, the SLA 2006 also sets forth various cooperative measures which include the periodic exchange of export and import information collected by the two countries. The SLA 2006 also requires the Parties to establish Technical Working Groups to ensure the effective implementation and application of the export charges and the administration of the customs-related aspects of the Agreement, including export permits, volume restraints, data collection, and exchange of information. CBP Entry Requirements Specific to Softwood Lumber Products From Canada in Revised 19 CFR 12.140 The purpose of this document is to provide an appropriate regulatory context for the new requirements resulting from the SLA 2006. As these requirements relate to a special class of imported products, CBP is of the view that a distinct provision pertaining to this commodity and its specific entry requirements is appropriate. As existing § 12.140 of title 19 of the Code of Federal Regulations
(CFR)contains obsolete provisions pertaining to a prior Softwood Lumber Agreement between the Governments of Canada and the United States that expired in March, 2001, this document amends, on an interim basis, § 12.140 to set forth the entry requirements mandated by the SLA 2006, as discussed below. Section 12.140(a) sets forth definitions pertinent to the administration of this provision. Section 12.140(b) specifies the information required to be collected pursuant to the SLA 2006. Importers are required to enter a letter code representing the softwood lumber product's Canadian Region of Origin in the data entry field entitled “Country of Origin” located on the CBP Form 7501. Importers must also enter a Canadian-issued 8-digit export permit number preceded by a letter code designating either:
(1)The date of shipment;
(2)a Canadian Region whose exports of softwood lumber products are exempt from the export measures contained in the SLA 2006; or
(3)a company listed in Annex 10 of the SLA 2006 as exempt from the Agreement's export measures. Section 12.140(c) states that where a softwood lumber product's Region of Origin is the Maritimes, the original paper Certificate of Origin issued by the Maritime Lumber Bureau must be submitted to CBP with the paper entry summary documentation. The letter codes described above are necessitated by the fact that the Canadian-issued Export Permit Number consists of eight digits, and the entry field for this data on the CBP Form 7501 holds nine digits. Accordingly, CBP uses an alpha-numeric code system whereby the first piece of data input into the Export Permit Number field on the CBP Form 7501 is a letter code designating either an exclusion from export measures based on a product's Region of Origin or a company's exempt-status, or the code is used to designate the date of shipment as defined in Article XXI.16 of the SLA 2006, in which the first twelve letters of the alphabet represent the twelve months of the year ( *e.g.* , “A” represents January, “B” represents February, etc.). These codes enable the United States to fulfill its information collection and exchange obligations under Article XV of the Agreement by being able to assess monthly volumes attributable to specific Regions and excluded companies. It is also noted that the SLA 2006 recognizes two separate and distinct Canadian Regions comprising the territory of the Canadian Province of British Columbia. Article XXI.45 of the Agreement designates B.C. Coast and B.C. Interior as separate Regions for purposes of the SLA 2006. As noted above, the geographic boundaries of B.C. Coast and B.C. Interior are set forth in *Forest Regions and Districts Regulation,* B.C. Reg, 123/2003. The code “XD” is to be used to designate B.C. Coast in the “Country of Origin” data field on the CBP Form 7501. The code “XE” is to be used to designate B.C. Interior. These new codes, as well as the existing codes applicable to the other Regions designated in the SLA 2006, are posted on the Administrative Message Board in the Automated Commercial System (ACS). In addition, this information will be provided to all Automated Broker Interface
(ABI)Administrative Message System filers. The requirement to submit these data elements to CBP goes into effect upon the date of filing of these interim amendments for public inspection in the **Federal Register** . As noted above, the “List of Records Required for the Entry of Merchandise” set forth in the Appendix to part 163 of title 19 of the CFR (19 CFR part 163) is amended by this document to reflect the entry document requirements mandated by the SLA 2006. Section IV of the Appendix currently lists 19 CFR 12.140 as the authority for the entry records requirements, “Province of first manufacture, export permit number and fee status of softwood lumber from Canada.” This document revises that requirement to state that § 12.140(c) requires a “Certificate of Origin issued by Canada's Maritime Lumber Bureau.” Comments Submitted comments will be available for public inspection in accordance with the Freedom of Information Act (5 U.S.C. 552) and § 103.11(b) of title 19 of the CFR (19 CFR 103.11(b)), on regular business days between the hours of 9 a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch, Office of Regulations and Rulings, Customs and Border Protection, 799 9th St., NW., Washington, DC. Arrangements to inspect submitted documents should be made in advance by calling Joseph Clark at
(202)572-8768. Inapplicability of Notice and Delayed Effective Date Requirements Pursuant to 5 U.S.C. 553(a)(1), public notice and a delayed effective date are inapplicable to this interim regulation because it involves a foreign affairs function of the United States. The collection of information provided for in this interim regulation is required under the terms of the 2006 Softwood Lumber Agreement with Canada and is necessary to ensure effective monitoring of the operation of that Agreement. Executive Order 12866 Because this rule involves a foreign affairs function of the United States, it is not subject to Executive Order 12866 and has not been reviewed by the Office of Management and Budget. Regulatory Flexibility Act Because no notice of proposed rulemaking is required for this interim rule, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) do not apply. Paperwork Reduction Act The collection of information referenced in this regulation, CBP Form 7501, has been previously reviewed and approved by the Office of Management and Budget in accordance with the requirements of the Paperwork Reduction Act (44 U.S.C. 3507) under OMB-assigned control number 1651-0022. Signing Authority This document is being issued in accordance with 19 CFR 0.1(a)(1). List of Subjects 19 CFR Part 12 Bonds, Customs duties and inspection, Entry of merchandise, Imports, Prohibited merchandise, Reporting and recordkeeping requirements, Restricted merchandise. *19 CFR Part 163* Customs duties and inspection, Reporting and recordkeeping requirements. Amendment to the Regulations For the reasons stated above, parts 12 and 163 of title 19 of the Code of Federal Regulations are amended as set forth below. PART 12—SPECIAL CLASSES OF MERCHANDISE 1. The authority citation for part 12 continues to read in part as follows: Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States (HTSUS)), 1624. 2. Section 12.140 is revised to read as follows: § 12.140 Entry of softwood lumber products from Canada. The requirements set forth in this section are applicable for as long as the Softwood Lumber Agreement (SLA 2006), entered into on September 12, 2006, by the Governments of the United States and Canada, remains in effect.
(a)*Definitions* . The following definitions apply for purposes of this section:
(1)*British Columbia Coast.* “British Columbia Coast” means the Coastal Forest Regions as defined by the existing *Forest Regions and Districts Regulation,* B.C. Reg. 123/2003.
(2)*British Columbia Interior.* “British Columbia Interior” means the Northern Interior Forest Region and the Southern Interior Forest Region as defined by the existing *Forest Regions and Districts Regulation,* B.C. Reg. 123/2003.
(3)*Date of shipment.* “Date of shipment” means, in the case of products exported by rail, the date when the railcar that contains the products is assembled to form part of a train for export; otherwise, the date when the products are loaded aboard a conveyance for export. If a shipment is transshipped through a Canadian reload center or other inventory location, the date of shipment is the date the merchandise leaves the reload center or other inventory location for final shipment to the United States.
(4)*Maritimes.* “Maritimes” means New Brunswick, Canada; Nova Scotia, Canada; Prince Edward Island, Canada; and Newfoundland and Labrador, Canada.
(5)*Region.* “Region” means British Columbia Coast or British Columbia Interior as defined in paragraphs (a)(1) and
(2)of this section; Alberta, Canada; Manitoba, Canada; Maritimes, Canada; Northwest Territories, Canada; Nunavut Territory, Canada; Ontario, Canada; Saskatchewan, Canada; Quebec, Canada; or Yukon Territory, Canada.
(6)*Region of Origin.* “Region of Origin” means the Region where the facility at which the softwood lumber product was first produced into such a product is located, regardless of whether that product was further processed (for example, by planing or kiln drying) or was transformed from one softwood lumber product into another such product (for example, a remanufactured product) in another Region, with the following exceptions:
(i)The Region of Origin of softwood lumber products first produced in the Maritime Provinces from logs originating in a non-Maritime Region will be the Region where the logs originated; and
(ii)The Region of Origin of softwood lumber products first produced in the Yukon, Northwest Territories or Nunavut (the ‘Territories’) from logs originating outside the Territories will be the Region where the logs originated.
(7)*SLA 2006.* “SLA 2006” or “SLA” means the Softwood Lumber Agreement entered into between the Governments of Canada and the United States on September 12, 2006.
(8)*Softwood lumber products.* “Softwood lumber products” mean those products described as covered by the SLA 2006 in Annex 1A of the Agreement.
(b)*Reporting requirements.* In the case of softwood lumber products from Canada listed in Annex 1A of the SLA 2006, the following information must be included on the electronic entry summary documentation (CBP Form 7501) for each entry:
(1)*Region of Origin.* The letter code representing a softwood lumber product's Canadian Region of Origin, as posted on the Administrative Message Board in the Automated Commercial System. (For example, the letter code “XD” designates softwood lumber products whose Region of Origin is British Columbia Coast. The letter code “XE” designates softwood lumber products whose Region of Origin is British Columbia Interior.)
(2)*Export Permit Number.* The 8-digit Canadian-issued Export Permit Number, preceded by one of the following letter codes:
(i)The letter code assigned to represent the date of shipment ( *i.e.* , “A” represents January, “B” represents February, “C” represents March, *etc* .), except for those softwood lumber products produced by a company listed in Annex 10 of the SLA 2006 or whose Region of Origin is the Maritimes, Yukon, Northwest Territories or Nunavut;
(ii)The letter code “X”, which designates a company listed in Annex 10 of the SLA 2006; or
(iii)The letter code assigned to represent the Maritimes (code M); Yukon (code Y); Northwest Territories (code W); or Nunavut (code N), for softwood lumber products originating in these regions.
(c)*Original Maritime Certificate of Origin.* Where a softwood lumber product's Region of Origin is the Maritimes, the original paper copy of the Certificate of Origin issued by the Maritime Lumber Bureau must be submitted to CBP with the paper entry summary documentation for each entry. The Certificate of Origin must specifically state that the corresponding CBP entries are for softwood lumber products first produced in the Maritimes from logs originating in the Maritimes or State of Maine.
(d)*Recordkeeping.* Importers must retain copies of export permits, certificates of origin, and any other substantiating documentation issued by the Canadian Government pursuant to the recordkeeping requirements set forth in part 163 of title 19 to the CFR. PART 163—RECORDKEEPING 3. The authority citation for part 163 continues to read as follows: Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1484, 1508, 1509, 1510, 1624. 4. The Appendix to part 163 is amended by removing the listing for § 12.140 and adding in its place § 12.140(c) under section IV to read as follows: Appendix to Part 163—Interim (a)(1)(A) List IV. * * * § 12.140(c) Certificate of Origin issued by Canada's Maritime Lumber Bureau. Chris J. Clark, Acting Commissioner, Bureau of Customs and Border Protection. Approved: October 13, 2006. Timothy E. Skud, Deputy Assistant Secretary of the Treasury. [FR Doc. 06-8761 Filed 10-16-06; 9:39 am]
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U.S. Code
- Transferred§ 450
- Additional inspection services§ 136
- Assessments§ 1817
- Financing Corporation§ 1441
- Protection of nonpublic personal information§ 6801
- Definitions§ 601
- Avoidance of duplicative or unnecessary analyses§ 605
- Purposes§ 3501
- Federal agency responsibilities§ 3506
- Public information collection activities; submission to Director; approval and delegation§ 3507
- SHORT TITLE.§ 801
- Federal Aviation Administration§ 106
- Public information; agency rules, opinions, orders, records, and proceedings§ 552
- Interest on certain overpayments and underpayments§ 1677g
- Entry of merchandise§ 1484
- Examination of books and witnesses§ 1509
- Rule making§ 553
- Departmental regulations§ 301
- Rules and forms prescribed by Secretary§ 66
statutes-at-large
public-private-law
22 references not yet in our index
- 7 CFR 301
- 7 CFR 301.81
- 7 CFR 319
- 7 CFR 319.56-2
- 7 CFR 2.22
- 12 CFR 327
- Pub. L. 109-171
- 120 Stat. 9
- Pub. L. 101-73
- Pub. L. 104-208
- Pub. L. 105-277
- Pub. L. 109-173
- 119 Stat. 3601
- 5 CFR 1320
- Pub. L. 106-102
- 113 Stat. 1338
- 14 CFR 39
- 1 CFR 51
- Pub. L. 103-182
- 19 CFR 163
- 19 CFR 103.11(b)
- 19 CFR 12
Citation graph
cites case law
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Affirmation of interim rule as final rule
Cite7 CFR 301
Cite7 CFR 301.81
Cite7 CFR 319
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