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Code · REGISTER · 2006-12-08 · Food and Nutrition Service, USDA · Rules and Regulations

Rules and Regulations. Proposed rule

36,891 words·~168 min read·/register/2006/12/08/06-9603

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 3510-22-P 71 236 Friday, December 8, 2006 Proposed Rules DEPARTMENT OF AGRICULTURE Food and Nutrition Service 7 CFR Parts 272 and 273 [Amendment No. 399] RIN 0584-AB51 Food Stamp Program: Disqualified Recipient Reporting and Computer Matching Requirements That Affect the Food Stamp Program AGENCY: Food and Nutrition Service, USDA. ACTION: Proposed rule. SUMMARY: In this rule the Food and Nutrition Service proposes to codify prisoner verification and death matching procedures mandated by legislation and previously implemented through agency directive.
The proposed rule will require that State food stamp agencies use disqualified recipient data to screen all program applicants prior to certification to assure that they are not currently disqualified from the program and thus ineligible to participate. The proposed rule also addresses requirements that State food stamp agencies participate in a computer matching program using a system of records that adhere to provisions of the Computer Matching and Privacy Protection Act of 1988, as amended.
Finally, publication of this proposed rule responds to findings of General Accounting Office and USDA Office of Inspector General audits that found, among other things, that the disqualified reporting subsystem process could be improved to enhance State agency ability to identify currently disqualified food stamp recipients. DATES: Comments must be received on or before February 6, 2007. ADDRESSES: The Food and Nutrition Service
(FNS)invites interested persons to submit comments on this proposed rule by any of the following methods: • Federal eRulemaking Portal: *http://www.regulations.gov.* Follow the instructions for submitting comments. • E-mail: Comments may be e-mailed to *Ed.Speshock@fns.usda.gov.* Include “DRS Proposed Rule” in the subject line of the message. • Fax: Comments may be faxed to the attention of Edward Speshock at
(703)605-0795. • Mail: Comments may be submitted to the Food and Nutrition Service, Food Stamp Program, Program Accountability Division, State Administration Branch, USDA, 3101 Park Center Drive, Alexandria, Virginia 22302. All comments will be available for public inspection at the above address between the hours of 9:30 a.m. and 3:30 p.m. Monday through Friday. You may also download an electronic version of this proposed rule at *http://www.fns.usda.gov/fsp/rules/Regulations/default.htm.* FOR FURTHER INFORMATION CONTACT: For questions about this proposed rule, contact Mr. Edward Speshock at
(703)305-2383. SUPPLEMENTARY INFORMATION: Executive Order 12866 This proposed rule has been determined to be significant and was reviewed by the Office of Management and Budget under Executive Order 12866. Regulatory Impact Analysis Need for Action This action is proposed to codify changes in procedures regarding prisoner verification mandated by the Balanced Budget Act of 1997 (Pub. L. 105-33) and amendments to the Food Stamp Act enacted in Public Law 105-379 (Food Stamp Fraud Prevention) regarding death matching. The Balanced Budget Act amendment requires each State to establish a system to ensure that persons under court ordered detention are not counted as members of food stamp households. The Public Law 105-379 amendment requires State agencies to ensure deceased individuals are not counted as household members. The proposed rule also includes requirements that State food stamp agencies participating in computer matching programs using a system of records adhere to provisions of the Computer Matching and Privacy Protection Act of 1988 (Pub. L. 100-503), as amended. In addition, this action proposes to revise Food Stamp Program (Program) regulations to enforce penalties for intentional Program violations
(IPV)on disqualified food stamp recipients identified by the disqualified reporting system process. Costs/Benefits Prisoner verification and death match procedures were mandated by legislation and implemented by agency directive some years ago. Currently all States perform data matches of prisoner and death records at certification. However, with regard to matches with client disqualification information, currently States are only required to do periodic matches and only a few States perform routine matches at initial certification. The resultant annual Program savings from these ongoing matches at certification are estimated to be $100 million for the five-year period 2006-2010. Further, no State performs routine matches at recertification against prisoner records, death records, or records of client disqualification. Requiring all States to match against disqualification records at initial certification and to match against prisoner, death, and disqualification records at recertification will yield an estimated $51 million in Program savings during the five-year period 2006-2010, including $15 million in one-time savings from performing matches on long-term participants who never were matched at initial certification. Total Program savings for initial certification and recertification will total an estimated $30 million the first full year of implementation and $151 million for the period 2006-2010. Regulatory Flexibility Act This rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). Nancy Montanez Johner, Under Secretary for Food, Nutrition, and Consumer Services, has certified that this rule will not have a significant economic impact on a substantial number of small entities. State and local welfare agencies will be the most affected to the extent that they administer the Program. Applicants and participants may be affected to the extent that matching client information with Disqualified Recipient Subsystem
(DRS)records may identify a current finding of an IPV and therefore prevent Program participation. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local and tribal governments and the private sector. Under Section 202 of the UMRA, FNS generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, or tribal governments in the aggregate, or to the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, Section 202 of the UMRA generally requires FNS to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objectives of the rule. This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local, and tribal governments or the private sector of $100 million or more in any one year. This rule, therefore, is not subject to the requirements of Sections 202 and 205 of the UMRA. Executive Order 12372 The Food Stamp Program is listed in the Catalog of Federal Domestic Assistance under No. 10.551. For the reasons set forth in the Final Rule codified in 7 CFR part 3015, Subpart V and related Notice (48 FR 29115), this Program is excluded from the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials. Federalism Summary Impact Statement Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement for inclusion in the preamble to the regulations describing the agency's consideration in terms of the three categories called for under section (6)(b)(2)(B) of Executive Order 13132. Prior Consultation with State Officials Prior to drafting this proposed rule, FNS consulted with State and local agencies at various times. Because the Food Stamp Program is a State administered, Federally funded program, FNS regional offices have formal and informal discussions with State and local officials on an ongoing basis regarding program implementation and policy issues. This arrangement allows State and local agencies to provide comments that form the basis for many discretionary decisions in this and other food stamp rules. FNS has responded to numerous written requests for policy guidance on IPV disqualification data reporting. Also, guidance for the prisoner verification and deceased data matching programs were implemented by agency directive with the consultation and input from State and local food stamp agencies. Nature of Concerns and the Need to Issue This Rule State and local food stamp agencies generally want greater flexibility in the implementation of Program administrative responsibilities. This proposed rule, in our opinion, will provide flexibility in this area and also address another major State concern, which is the need to conform FSP rules to the rules of other means-tested Federal programs. Specific policy questions submitted by State agencies helped FNS identify issues that needed to be addressed in the proposed rule. Extent to Which We Meet Those Concerns FNS has considered the impact of this proposed rule on State and local agencies. This rule proposes changes that are required by law, such as the prisoner verification and deceased person data match programs. These changes were implemented by agency directives in response to implementation time frames required in legislation. The proposed changes to Food Stamp Program rules describing State agency responsibility for reporting IPV disqualification information will clarify information access and follow-up procedures, and provide greater flexibility to State agencies for processing, retaining and sharing disqualification information. FNS is not aware of any case where the discretionary provisions of the rule would preempt State law. In addition, FNS invites State agencies to submit requests for waiver consideration of any discretionary provisions of this rule where a State agency can demonstrate that its own procedures would be more effective and efficient; such a waiver would not result in a material impairment of any statutory or regulatory rights of participants; and, such a waiver would otherwise be consistent with the waiver authority set out at §§ 272.3(c). Executive Order 12988 This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State and local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect unless so specified in the Effective Dates paragraph of the final rule. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted. In the Food Stamp Program, the State administrative procedures for Program benefit recipients are issued pursuant to 7 U.S.C. 2020(e)(1) and set forth at § 273.15; the administrative procedures for State agencies are issued pursuant to 7 U.S.C. 2023 and are set out at § 276.7 (for rules related to non-QC liabilities) or 7 CFR Part 283 (for rules related to QC liabilities); and the administrative procedures for retailers and wholesalers are issued pursuant to 7 U.S.C. 2023 and set out at § 278.8 and 7 CFR Part 279. Civil Rights Impact Analysis FNS has reviewed this rule in accordance with the Department Regulation 4300-4, “Civil Rights Impact Analysis,” to identify and address any major civil rights impact the rule might have on protected classes, including minorities, women, and persons with disabilities. After a careful review of the rule's intent and provisions, and the characteristics of food stamp households and individual participants, FNS has determined that there is no way to soften the effect on any of the protected classes. All data available to FNS indicate that protected individuals have the same opportunity to participate in the Food Stamp Program as non-protected individuals. FNS specifically prohibits State and local government agencies that administer the Program from engaging in actions that discriminate based on race, color, gender, age, disability, marital status or family status. (FSP nondiscrimination policy can be found at § 272.6(a)). Where State agencies have options, and they chose to implement a certain provision, they must implement it in such a way that it complies with the regulations at § 272.6. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35; see 5 CFR 1320), requires that the Office of Management and Budget
(OMB)approve all collections of information by a Federal agency from the public before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current valid OMB control number. This proposed rule contains information collections that are subject to review and approval by OMB; therefore, FNS is submitting for public comment the changes in the information collection burden that would result from the adoption of the proposals in this rule. Comments on the collection of information in this proposed rule must be received by February 6, 2007. Send comments to Office of Information and Regulatory Affairs, OMB, Attention: Desk Officer for FNS, Washington, DC, 20503. Please also send a copy of your comments to Edward Speshock, State Administration Branch, Program Accountability Division, Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park Center Drive, Alexandria, VA, 22302. For further information, or for copies of the information collection, please contact Mr. Speshock at the above address. Comments are invited on:
(a)Whether the proposed collection of information is necessary for the performance of the functions of the agency, including whether the information will have practical utility;
(b)the accuracy of the agency's estimates of the burden of the proposed collection of information including the validity of the methodology and the assumptions used;
(c)ways to enhance the equality, utility and clarity of the information to be collected; and
(d)ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate collection techniques or other forms of information technology. All responses to this notice will be summarized and included in the request for OMB approval. All comments will also become a matter of public record. *Title:* Repayment Demand and Program Disqualification. *OMB Number:* 0584-0492. *Expiration Date:* April 30, 2008. *Type of Request:* Revision of a currently approved collection. *Abstract:* Under §§ 273.2(f)(11) and 273.16 State agencies are required to report and verify information on disqualified individuals to FNS. This is not a new requirement. Previously, State agencies have been required to report such information via paper report form to FNS regional offices to be entered into a disqualified recipient database. Printouts or computer tapes were then provided to the States for their use in meeting intentional Program violation requirements. This reporting is now handled electronically from the States to the FNS disqualified recipient database. With the provisions in this rule, we are proposing to amend the data requirements and the frequency with which state agencies access the disqualified reporting subsystem. Other burden requirements remain unchanged. *Respondents:* State Agencies. *Estimated Number of Respondents:* 53. *Estimated Burden:* Disqualification Reporting * Component Number of respondents Total annual responses Time per response in hours Annual burden hours Applicant/Recipient Screening 53 10.1 million .041667 423,333 Disqualified Penalty Screening 53 60,000 .041667 2,500 * Note: The burden for DRS applicant/recipient screening and penalty screening is in addition to the total currently approved of 166,329 hours. The revised total annual Burden is therefore 589,662 (166,329 plus 423,333). Repayment Demand and Program Disqualification Component Number of respondents Total annual responses Time per response in hours Annual burden hours Estimated Burden for Repayment Demand and Program Disqualification 53 1,600,981 0.10389 166,326 *Total Annual Burden:* Currently approved burden is 166,329 hours. This submission would increase total burden by 423,333 hours. E-Government Act Compliance The Food and Nutrition Service is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. As described above, the information collection associated with this regulation is available for electronic submission. Background Prisoner Verification System
(PVS)Matching Program Section 1003 of the Balanced Budget Act of 1997 (Pub. L. 105-33) amended Section 11(e) of the Food Stamp Act of 1977 (7 U.S.C. 2020(e)) to require States to establish systems and take periodic action to ensure that an individual who is detained in a Federal, State, or local penal, correctional, or other detention facility for more than 30 days shall not be eligible to be counted as household members participating in the Food Stamp Program. The mandated requirements of the Balanced Budget Act of 1997 became effective on August 5, 1998. For the purpose of this rule the term “Federal, State, or local penal, correctional or other detention facility” includes, but is not limited to, city, county and multi-jurisdictional jails, work and boot camps, residential halfway houses (e.g., in conjunction with work release or community service programs), detention centers (including juvenile detention centers), and mental health and medical facilities housing prisoners on behalf of correctional institutions. Individuals who are detained in residential halfway houses or who are detained under house detention, should not be denied eligibility unless the State agency has determined that the individual's meals are provided by the institution. This requirement strengthens current regulations at § 273.1(a), which prohibit the inclusion of an individual who is currently in an institution described above as a member of a food stamp household. States should continue to follow the procedures at § 273.1(a) in establishing household composition at certification and periodically thereafter. The required verification system should be used to verify that no household member is under detention in a prison facility, in conjunction with established verification rules at § 273.2(f). The law further provides that a State opting to obtain and use prisoner information collected by the Social Security Administration
(SSA)under Section 1611(e)(1)(I)(i)(I) of the Social Security Act (42 U.S.C. 1382(e)(1)(I)(i)(I)) pursuant to Section 1611(e)(1)(I)(ii)(II) (42 U.S.C. 1382(e)(1)(I)(ii)(II)) of that Act, shall be considered in compliance with this provision. Finally, the law provides that such verification be performed “periodically.” However, it does not specify when verification must take place. FNS believes it is good administrative practice to prevent errors before they happen. Therefore, we are proposing to amend current regulations by adding a new § 272.13(c) to require States to conduct PVS checks at application and re-certification. Matching Death Records This proposed rule implements requirements to match death records enacted by Public Law 105-379 on November 12, 1998. Public Law 105-379, which amended Section 11 of the Food Stamp Act (7 U.S.C 2020), requires all State agencies to enter into a cooperative arrangement with the Social Security Administration
(SSA)to obtain information on individuals who are deceased and use the information to verify and otherwise ensure that benefits are not issued to such individuals. The law was effective on June 1, 2000. The mandated requirements were implemented by FNS directive to all food stamp State agencies on February 14, 2000. State agencies are responsible for entering into a matching agreement with the SSA in order to access information on deceased individuals. This rule proposes to add a new § 272.14 to codify this requirement in regulation and to describe requirements for accessing the SSA death master file. Under current rules at § 273.12(a) and § 273.21, it is the food stamp household's responsibility to report changes in household composition, such as the addition or loss of a household member. Households must report household composition changes within 10 days of becoming aware of the change or, if subject to periodic reporting, by the appropriate date. Thus, the accuracy of program benefits issued to a household relies on the accuracy of reported and verified information. The SSA death master file database contains over 60 million records. SSA receives death reports from numerous sources, including the Centers for Medicare and Medicaid Services, Department of Veterans Affairs, postal authorities, and other internal and external sources. A small percentage of deaths reported to SSA are from family members and funeral homes. FNS proposes in new § 272.14 that State agencies independently verify the records before taking adverse action against a household with an unreported deceased household member. This is consistent with amendments to the Computer Matching Act requiring that computer match information be verified before it can be used to take action against an individual. State food stamp agencies are encouraged to use the SSA State Verification and Exchange System
(SVES)for accessing deceased information. Use of SVES would be the most cost-effective method since State agencies already have agreements with SSA to access information through SVES. In this rule, FNS is proposing standards for how often State agencies must conduct matches to be reasonably certain that food stamp benefits are not being issued to deceased individuals. Thus, consistent with other matches described in this rule, we are proposing that State agencies conduct a match for deceased household members at certification and recertification. This minimum standard for how often a match must be conducted is specified in the rule under newly proposed § 272.14. Disqualified Recipient Matching FNS participates in a computer matching program in which it serves as both a source and a recipient agency. This required Federal matching program known as the Disqualified Recipient Subsystem
(DRS)uses a Computer Matching and Privacy Protection Act system of records and contains information about individuals who have been disqualified from the Food Stamp Program for an IPV (See 5 U.S.C. 552a (o),
(p)and (q)). The database can be accessed by State agencies to assign the legally required penalty period for intentional Program violations. State agencies also use information from the system to screen new applicants and current food stamp recipients to determine if they should be serving a disqualification penalty imposed by another State. The Computer Matching and Privacy Protection Act provides that the Office of Management and Budget shall be responsible for computer matching guidance. Final guidance was published in the **Federal Register** on June 19, 1989, at 54 FR 25818, and is incorporated by reference in this proposed rule. FNS proposes to amend § 273.2(f) to address the verification requirements for the disqualified recipient matching program. Current regulations at § 273.16(i)(4) provide that, at a minimum, the disqualification data submitted to FNS by State agencies shall be used to determine the appropriate disqualification penalty to impose, based on past disqualifications, and the eligibility of individual Program applicants prior to certification in cases where the State agency has reason to believe a household member is subject to disqualification in another State. Under this proposed rule State food stamp agencies must also begin to use disqualified recipient data to screen all program applicants prior to certification. State agencies may also periodically match the entire database of disqualified individuals against their current recipient caseload to determine if the applicant or recipient should be serving a disqualification. FNS proposes in new § 273.2(f)(11)(iii), that a State agency may not take any adverse action to terminate, deny, suspend, or reduce benefits to an applicant or food stamp recipient based on information produced by a disqualified recipient match unless the match information has been independently verified. This is consistent with the Computer Matching Act that ensures client due process protection by requiring the matching agency to provide applicants and/or recipients a notice and opportunity to contest when a specific match result may lead to an adverse action. FNS also proposes in new § 273.2(f)(11)(iv) that the State agency initiating the disqualified recipient search contact the State agency locality contact that originated the disqualification or the applicant or recipient household for verification prior to taking an adverse action. The disqualified recipient match information would be verified by obtaining a copy of the original document, or copies of documentation of an individual's disqualification history (past and current disqualifications) or confirmation of the existence of specific relevant documents that substantiate the disqualification record. Under the proposal, documentation would include, but not be limited to, court determinations, signed declarations by individuals waiving the right to an administrative disqualification hearing, signed disqualification consent agreements by individuals, a hearing authority's decision, and the notification of disqualification. Any confirmation as to the existence of the above documentation shall be made by the originating State's locality contact or another designated State official. Written confirmation shall be documented in the case record with a copy of one of the documents described above. This is consistent with current verification procedures at § 273.2(f)(4) that documentary evidence shall be the primary source of verification. To ensure interstate cooperation, FNS further proposes to require that disqualification documentation be transmitted to a requesting State agency in a timely fashion. To encourage cooperation in the exchange of documentation, FNS proposes to provide State agencies the flexibility to decide how the information can be exchanged. FNS will permit alternatives including, but not limited to, reviewing original documents related to prior disqualifications; written confirmation of having seen the documents; obtaining copies of original documents from each State that played a role in the determination and implementation of the prior disqualifications; and, obtaining copies of supporting documentation for all disqualifications from the last State agency to take a disqualification action against an individual. FNS intends by this proposed rule that requests and responses to requests for verification must be transmitted in a manner that protects the privacy of the individual household. FNS does not intend to require a specific timeframe for State agencies to respond to various types of requests for verification. Prompt responses to verification requests, however, can help to expedite the delivery of benefits and avoid or reduce any overissuance to the household containing the individual in question. FNS believes it is in each State agency's interest to expedite requests for verification since all State agencies may find themselves in the position of a requesting agency at some point. Prudent management would suggest that a State agency that receives a request for documentation supporting disqualification information must be able to respond to the request within a reasonable amount of time from the date it receives the request. For this purpose the proposed rule will define a “reasonable amount of time” to be 20 working days or less from the postmarked date of request. FNS requests comments that support this definition or provide reasoned arguments suggesting a more workable definition of a “reasonable amount of time”. State agencies must act promptly to request verification to ensure that documentation can be made available to them in sufficient time to avoid the possibility of delays in the processing of applications pursuant to § 273.2(h). The State agency making the request should document in the case record the period of elapsed time taken by the State agency locality contact for verification to be provided. In the event a State agency is not able to provide independent verification of a disqualified recipient match because of a lack of supporting documentation, the State agency would be required to advise the requesting State agency, or FNS (in the case of resolving a dispute about the accuracy of a disqualification record), as appropriate, and take immediate action to remove the unsupported disqualified record from the disqualification database. Procedures for reporting such disqualification records are proposed in § 273.16(i) of this rule. In such instances, the requesting State agency would be prohibited from taking any adverse action against the household based on the unverified disqualification information. FNS proposes, in new § 273.2(f)(11)(vi), that the requesting State agency would enter the received information into the household's case record immediately upon receipt. The documentation should be reviewed to insure that the information pertains to the individual and disqualification in question. Once satisfied about the validity of the information, the requesting State shall provide the household notice of the IPV match result (along with the intended action to be taken based on the computer match) and an opportunity to contest by sending the appropriate notice to the household. States are prohibited from denying benefits to an applicant household without first verifying the accuracy of the disqualification information. State agencies shall not deny an application if the independent verification is not available in time to satisfy the application processing standard. This policy is consistent with procedures at § 273.2(f). Also, the 30-day application processing standard at § 273.2(f) applies if a State agency is matching applicant information using the optional IVES and SAVE verification systems. FNS believes the policy pertaining to IPV matches should be consistent in order to provide the State agency a uniform procedure for reviewing and verifying all independently verified information. If the information under verification indicates that an individual is currently disqualified, then the individual would not be eligible to receive benefits and certifying eligibility would result in an overissuance. A State certifying the ineligible individual would, once corroboration is received, issue a notice of adverse action to remove the individual from the program, adjust the household's allotment, and possibly establish a recipient claim against the household for the overissued benefits. The proposed rule is intended to reduce the incidence of ineligibility determination and unnecessary administrative burden. Application Screening To Determine Status of Eligibility Current regulations at § 273.11(c) are silent regarding a disqualified individual who moves from one jurisdiction or State to another while disqualified and, either as a single household or as a member of another food stamp household, applies for benefits. Accordingly, FNS proposes to amend § 273.11(c)(4)(i) to require that the disqualified individual and, if applicable, the household, be informed of their eligibility status and the effect of the disqualification on the eligibility and benefits of the remaining household members. FNS intends that the State agency follow the procedures in § 273.11(c) for determining if the household is still eligible for benefits and what the new benefit amount will be. Disqualified Recipient Data Requirements Current food stamp regulations at § 273.16(i) provide that State agencies shall report individuals to FNS who have been disqualified due to an intentional Program violation. FNS proposes to amend § 273.16(i) to update the format used by State agencies to report and access intentional Program violation disqualification information. The new data elements to be included in the revised format are Decision Date; Gender; Type of Offense; and, Locality Contact Information. In addition, FNS proposes to include new language in § 273.16(i) that describes the “electronic transmittal from the State agency” to FNS of IPV information. State agencies have been provided extensive information and consultation by FNS to evaluate the options for submitting data including documentation, training and user manuals. FNS has worked with States to ensure the options are varied and flexible enough to make it technically feasible for all State agencies to electronically submit the information required under this proposed rule. FNS therefore proposes to amend § 273.16 to include these four new elements to provide data clarification and to promote conformity with other Federal databases, such as those from the Social Security Administration, which includes this information as data fields in computer matches. This proposed rule would also define “disqualification decision date” as the date a disqualification decision was rendered as a result of either an administrative or judicial hearing, or the date an individual signs either a waiver of his/her right to an administrative disqualification hearing or a disqualification consent agreement waiving his/her right to a court hearing. By signing a waiver or disqualification consent agreement, an individual agrees to accept a disqualification penalty in lieu of a hearing. Addition of the disqualification decision date makes it easier for State agencies to track and verify information about individual disqualifications. The above definition is included in § 273.16(i)(3)(i) of this proposed rule. In addition, proposed section § 273.16 (i)(3)(iii) defines a “locality contact” as a person, position or entity designated by the State agency as the point of contact for other State agencies to verify information in a disqualification record supplied by the locality contact's State. FNS is proposing to include a field to record the type of offense—the action an individual took or failed to take which resulted in an intentional Program violation as defined in § 273.16(c)—in order to identify violations applicable to the increased penalties for illegally exchanging coupons for firearms, ammunition, explosives or controlled substances. In addition to providing statistical data on the number of violations affected by the new penalties, this field would make it easier for State agencies to track and assign the appropriate penalty. FNS also believes that valuable information can be obtained from the reporting of various types of violations that will be made available to States. Reporting of these violations could assist FNS in determining, for example, where stiffer penalties could be enforced for certain violations. FNS intends to produce a list of offenses by category for reporting purposes. Each category will be assigned its own code. State agencies would be required to report the type of offense by recording the appropriate code. Current regulations at § 273.16(i)(4) describe the uses of the data. FNS intends to retain present mandatory uses of the data. FNS is proposing to amend this Section to require that State food stamp agencies use disqualification data in the determination of the eligibility of all applicants or current recipients of program benefits. FNS believes Congressional intent in requiring a database of disqualified recipient information is to give State agencies the ability to determine and assign the appropriate period of disqualification for persons who commit intentional Program violations and to ensure that the appropriate penalty is enforced. In order to ensure that individuals who are not entitled to benefits due to a disqualified recipient disqualification are prevented from participating, FNS believes States must screen applicants at certification and current recipient caseload periodically. FNS believes this requirement will strengthen the effectiveness of State agencies in reducing the potential for overissuance of program benefits. Accordingly, the requirements at § 273.16(i)(4) are being expanded to describe the need to screen disqualified recipient data at certification and included under the proposed new § 273.2(f)(11) as paragraphs (f)(11)(i)(A), (f)(11)(i)(B), (f)(11)(iii)(A), and (f)(11)(iii)(B). Disqualification Record Retention The current regulations at § 272.1(f) require that program records be retained for a period of 3 years from the month of origin and that fiscal records such as those relating to claims and restored benefits and accountable documents be retained for 3 years from the date of fiscal or administrative closure. The current regulations at § 273.16(b) provide that an individual can be disqualified from participating in the program permanently. “Permanent” in this rule is defined as the remainder of the individual's lifetime or another shorter period established by FNS as administratively appropriate. Due to the nature of the disqualification penalties, FNS believes it is appropriate that case records relating to intentional Program violation disqualifications, associated client notices, and records generated as a result of using disqualification information be retained indefinitely, until the State agency receives reliable information that the person has died, or until advised by FNS that the individual is 80 years old and the State should remove the record from the database. Retaining such records indefinitely or until the disqualified individual reaches his/her 80th birthday will assure that accurate information is retained and available consistent with Congressional intent. Accordingly, in addition to proposed requirements in § 273.16(i) of this proposed rule to update or delete disqualification records under certain circumstances, FNS proposes, in § 272.1(f)(3), that disqualification records provided to State agencies be maintained by the State agencies for as long as such records are accurate, timely, relevant, and complete. Each State shall be responsible for the destruction of disqualified recipient records in their possession when they are no longer accurate, timely, relevant, and complete. FNS expects that this records destruction will take place automatically each time a State food stamp agency receives a new or updated database from FNS or in accordance with a formal process of periodic review and purging of these records. State food stamp agencies would be permitted to follow prescribed records management programs to meet this requirement. Information about the State's records management program is included with the State agency plan as described in § 272.10(b)(3) of Program regulations. Computer Match Benefit Adjustments Food stamp households receiving benefits under Federal benefit programs may periodically receive cost-of-living adjustments (COLAs). State agencies are required under § 273.12(e)(3) to establish procedures for making changes to food stamp benefits to reflect these COLAs and to provide a notice of change to affected households. Current COLA adjustment procedures take two forms. Under the first method, a State agency may calculate the expected increase by applying the appropriate percentage adjustment to the household's current income. Under the second method, a State agency may use results of a computer match of the updated income information to adjust household income. The recalculated, or updated, income information then provides the basis for recalculating the household's food stamp benefit. The second method for making benefit adjustments constitute a computer match covered by the Computer Matching Act. It compares information provided by a Federal source to a State record, using a computer to perform the comparison; and it affects eligibility or the amount of benefits for a Federal benefit program. Therefore, the information must be independently verified and the food stamp household must be provided notice and an opportunity to contest the adverse action if the adjustment would change the level of benefits or eligibility status of the household. Accordingly, the Department is proposing to amend § 273.12(e)(3) to specify that there will be two procedures for states to apply in determining COLA adjustments. A new § 273.12(e)(3)(i) is proposed to allow the use of calculated percentage increases to present COLAs. A new § 273.12(e)(3)(ii) would allow the use of computer information from a Federal agency database to make the adjustment and require independent verification and notice in accordance with § 273.2(f)(9). The Department is also proposing to amend § 273.13(b)(1) to require that a notice of adverse action be sent when computer generated adjustments result in increased income and a change of food stamp benefits. Implementation State agencies have been instructed through FNS directive to implement the provisions of the prisoner verification (Pub. L. 105-33) and Death File matches (Pub. L. 105-379) as required in the applicable legislation and without waiting for formal regulations. Implementing requirements of the Computer Matching and Privacy Act (Pub. L. 100-503) as they may pertain to IPV matching agreements and procedures for denial of benefits resulting from these computer matches are incorporated by reference in this proposed rule. FNS proposes that the changes in this rule be effective and must be implemented the first day of the month 60 days from date of publication of the final rule. FNS intends to require that the provisions of the final rule which reformat database information elements would be implemented by requiring State food stamp agencies to begin identifying the new data elements for IPV reporting purposes described in § 273.16—locality contact, disqualification decision date, type of offense and gender—not later than 90 days from the effective date of the final rulemaking. State food stamp agencies shall have up to 180 days after the effective date of the final rule to implement one of the optional uses of disqualified reporting system identified at § 273.16(i). Finally, FNS proposes that State food stamp agencies would be required to comply with all remaining provisions of the final rulemaking not later than 180 days from the publication date of the final rulemaking. List of Subjects 7 CFR Part 272 Civil rights, Food stamps, Grant programs-social programs, Reporting and recordkeeping requirements. 7 CFR Part 273 Administrative practice and procedure, Claims, Food stamps, Fraud, Grant programs-social programs, Penalties, Reporting and recordkeeping requirements, Social Security. For the reasons set out in the preamble, 7 CFR Parts 272 and 273 are proposed to be amended as follows: 1. The authority citation for Parts 272 and 273 continues to read as follows: Authority: 7 U.S.C. 2011-2036. PART 272—REQUIREMENTS FOR PARTICIPATING STATE AGENCIES 2. In § 272.1, paragraph
(f)is revised to read as follows: § 272.1 General terms and conditions.
(f)*Retention of records.* Each State agency shall retain all program records in an orderly fashion, for audit and review purposes, for a period not less than 3 years from the month of origin of each record. In addition:
(1)The State agency shall retain fiscal records and accountable documents for 3 years from the date of fiscal or administrative closure. Fiscal closure means that obligations for or against the Federal Government have been liquidated. Administrative closure means that the State agency has determined and documented that no further action to liquidate the obligation is appropriate. Fiscal records and accountable documents include but are not limited to claims and documentation of lost benefits.
(2)Case records relating to intentional Program violation disqualifications and related notices to the household shall be retained indefinitely, until the State agency obtains reliable information that the record subject has died, or until FNS advises via the edit report that records for a particular individual should be permanently removed from the database because of the individual's 80th birthday.
(3)Disqualification records in a State agency's possession must be periodically purged when they are no longer accurate, relevant, timely, or complete. The State agency shall follow a prescribed records management program to meet this requirement. Information about this program shall be available for FNS review.
(4)Retention methods for Authorization to Participate cards are provided in Part 274 of this chapter. 3. New §§ 272.12, 272.13, and 272.14 are added to read as follows: § 272.12 Computer matching requirements.
(a)*General purpose.* The Computer Matching and Privacy Protection Act (CMA), as amended, addresses the use of information from computer matching programs that involve a Federal System of Records subject to the Privacy Act of 1974, as amended. Each State agency participating in a computer matching program shall adhere to the provisions of the CMA if it uses an FNS system of records for the following purposes:
(1)Establishing or verifying initial or continuing eligibility for Federal benefit programs;
(2)Verifying compliance with either statutory or regulatory requirements of the Federal benefit programs; or
(3)Recouping payments or delinquent debts under such Federal benefit programs.
(b)*Matching agreements.* State agencies must enter into written agreements with USDA/FNS, consistent with 5 U.S.C. 552a(o) of the CMA, in order to participate in a matching program involving a USDA/FNS Federal system of records.
(c)*Use of computer matching information.*
(1)A State agency shall not take any adverse action to terminate, deny, suspend, or reduce benefits to an applicant or recipient based on information produced by a Federal computer matching program that is subject to the requirements of the CMA, unless:
(i)The information has been independently verified by the State agency (in accordance with the independent verification requirements set out in the State agency's written agreement as required by paragraph
(b)of this section) and a Notice of Adverse Action or Notice of Denial has been sent to the household, in accordance with § 273.2(f); or
(ii)The Federal agency's Data Integrity Board has waived the two-step independent verification and notice requirement and notice of adverse action has been sent to the household, in accordance with § 273.2(f).
(2)A State agency which receives a request for verification from another State agency, or from FNS pursuant to the provisions of § 273.16(i) shall, within 20 working days of receipt, respond to the request by providing necessary verification (including copies of appropriate documentation and any statement that an individual has asked to be included in their file), as provided in § 273.16(i)(4). § 272.13 Prisoner verification system (PVS).
(a)*General.* Each State agency shall establish a system to monitor and prevent individuals who are under detention in any Federal, State, and/or local detention or correctional institutions for more than 30 days from being included in a food stamp household.
(b)*Use of match data.* State prisoner verification systems shall provide for:
(1)The comparison of identifying information about each household member against identifying information about inmates of institutions at Federal, State and local levels;
(2)The reporting of instances where there is a match;
(3)The independent verification of match hits to determine their accuracy;
(4)Notice to the household of match results;
(5)An opportunity for the household to respond to the match prior to an adverse action to deny, reduce, or terminate benefits; and,
(6)The establishment and collections of claims as appropriate.
(c)*Match agreement.* States shall make a comparison of match data (at a minimum) at the time of application, at each recertification, and whenever a new member is added to a household. However, States that opt to obtain and use prisoner information collected under Section 1611(e)(1)(I)(i)(I) of the Social Security Act (42 U.S.C. 1382(e)(1)(I)(i)(I)) shall be considered in compliance with this section. Such States shall enter into a computer matching agreement with the SSA under authority contained in 42 U.S.C. 405(r)(3). § 272.14 Deceased matching system.
(a)*General.* Each State agency shall establish a system to verify and ensure that benefits are not issued to individuals who are deceased.
(b)*Data source.* States shall use the death master file data provided by the Social Security Administration (SSA). State agencies electing to obtain the data through the SSA State Verification and Exchange System
(SVES)shall enter into a computer matching agreement with SSA pursuant to authority to share data contained in 42 U.S.C. 405(r)(3).
(c)*Use of match data.* States shall provide a system for:
(1)The comparison of identifying information about each household member against identifying information about deceased individuals. States shall make the comparison of match data at the time of application and periodically thereafter;
(2)The reporting of instances where there is a match;
(3)The independent verification of match hits to determine their accuracy;
(4)Notice to the household of match results;
(5)An opportunity for the household to respond to the match prior to an adverse action to deny, reduce, or terminate benefits; and,
(6)The establishment and collection of claims as appropriate. PART 273—CERTIFICATION OF ELIGIBLE HOUSEHOLDS 4. In § 273.2, a new paragraph (f)(11) is added to read as follows: § 273.2 Application processing.
(f)* * *
(11)*Use of disqualification data.*
(i)Pursuant to § 273.16(i), information in the disqualified recipient database will be available for use by any State agency that executes a computer matching agreement with FNS. The State agency shall use the disqualified recipient database for the following purposes:
(A)Ascertain the appropriate penalty to impose based on past disqualifications in a case under consideration;
(B)Conduct matches on:
(1)Program application information prior to certification; and
(2)The current active and inactive disqualified individuals database against the current recipient caseload periodically but no less than a bi-monthly schedule.
(ii)State agencies shall not take any adverse action to terminate, deny, suspend, or reduce benefits to an applicant or food stamp recipient based on disqualified recipient match results unless the match information has been independently verified. The State agency shall provide to an applicant or recipient an opportunity to contest any adverse disqualified recipient match result pursuant to the provisions of § 273.13.
(iii)Independent verification shall take place separate from and prior to issuing a notice of adverse action—a two-step process. Independent verification for disqualification purposes means contacting the applicant or recipient household or the State agency that originated the disqualification record immediately to obtain corroborating information or documentation to support the reported disqualification information in the IPV database.
(A)Documentation may be in any form deemed appropriate and legally sufficient by the State agency. Such documentation may include but shall not be limited to, electronic or hard copies of court determinations, signed declarations by individuals waiving the right to an administrative disqualification hearing or consenting to a disqualification, a hearing authority's decision, and the notification of disqualification.
(B)A State may accept a verbal or written statement from another State agency attesting to the existence of the documentation listed in paragraph (f)(11)(iii)(A) of this section.
(C)A State may accept a verbal or written statement from the household affirming the accuracy of the disqualification information, provided such statement is properly documented and included in the case record.
(D)If a State agency is not able to provide independent verification because of a lack of supporting documentation, the State agency shall so advise the requesting State agency or FNS, as appropriate, and shall take immediate action to remove the unsupported information from the disqualified recipient database in accordance with § 273.16(i)(6).
(iv)Once received, the requesting State agency shall review and immediately enter the information into the case record and send the appropriate notice(s) to the record subject and any remaining members of the record subject's food stamp household.
(v)Information from the disqualified recipient database is subject to the disclosure provisions in § 272.1(c) and the routine uses described in the most recent “Notice of Revision of Privacy Act System of Records” published in the **Federal Register** . 5. In § 273.11, paragraph (c)(4)(i) is amended by adding a new sentence to the end of the paragraph to read as follows: § 273.11 Action on households with special circumstances.
(c)* * *
(4)* * *
(i)* * * However, a participating household is entitled to a notice of adverse action prior to any action to reduce, suspend or terminate its benefits, if a State agency determines that it contains an individual who was disqualified in another State and is still within the period of disqualification. 6. In § 273.12: a. paragraph (e)(3) is amended by removing the last six sentences and adding four new sentences in their place and by adding new paragraphs (e)(3)(i) and (e)(3)(ii); and b. the introductory text of paragraph (e)(4) is revised. The additions and revision read as follows: § 273.12 Reporting changes.
(e)* * *
(3)* * * A State agency may require monthly reporting households to report the change on the appropriate monthly report or may handle the change using the mass change procedures in this section. If the State agency requires the household to report the information on the monthly report, the State agency shall handle such information in accordance with its normal procedures. Households not required to report the change on the monthly report and households not subject to monthly reporting shall not be responsible for reporting these changes. The State agency shall be responsible for automatically adjusting these households' food stamp benefit levels in accordance with either paragraph (e)(3)(i) or (e)(3)(ii) of this section.
(i)The State agency may make mass changes by applying percentage increases communicated by the source agency to represent cost-of-living increases provided in other benefit programs. These changes shall be reflected no later than the second allotment issued after the month in which the change becomes effective.
(ii)The State agency may update household income information based on cost-of-living increase information supplied by a data source covered under the Computer Matching and Privacy Protection Act of 1988
(CMA)in accordance with § 272.13. The State agency shall take action, including proper notices to households, to terminate, deny or reduce benefits based on this information if it is considered verified upon receipt under § 273.2(f)(9). If the information is not considered verified upon receipt, the State agency shall initiate appropriate action and notice in accordance with § 273.2(f)(9).
(4)Notice for mass change. When the State agency makes a mass change in food stamp eligibility or benefits by simultaneously converting the caseload or that portion of the caseload that is affected using the percentage increase calculation provided for in § 273.12(e)(3)(i), or by conducting individual desk reviews using information not covered under the Computer Matching and Privacy Protection Act
(CMA)in place of a mass change, it shall notify all households whose benefits are reduced or terminated in accordance with the requirements of this paragraph, except for mass changes made under § 273.12(e)(1); and 7. In § 273.13: a. paragraph (a)(2) is amended by adding two new sentences to the end of the paragraph; b. paragraph (b)(1) is revised; and c. paragraph (b)(7) is amended by removing the first sentence of the paragraph and replacing it with three new sentences. The additions and revision read as follows: § 273.13 Notice of adverse action.
(a)* * *
(2)* * * A notice of adverse action that combines the request for verification of information received through an IEVS computer match shall meet the requirements in § 273.2(f)(9). A notice of adverse action that combines the request for verification of information received through a SAVE computer match shall meet the requirements in § 273.2(f)(10).
(b)* * *
(1)The State initiates a mass change through means other than computer matches as described in § 273.12(e)(1), (e)(2), or (e)(3)(ii).
(7)A household member is disqualified for an intentional Program violation, in accordance with § 273.16, or the benefits of the remaining household members are reduced or terminated to reflect the disqualification of that household member, except as provided in § 273.11(c)(3)(i). A notice of adverse action must be sent to a currently participating household prior to the reduction or termination of benefits if a household member is found, through a disqualified recipient match, to be within the period of disqualification for an intentional Program violation penalty determined in another State. In the case of applicant households, State agencies shall follow the procedures in § 273.2(f)(11) for issuing notices to the disqualified individual and the remaining household members. * * * 8. In § 273.16, paragraph
(i)is revised to read as follows: § 273.16 Disqualification for intentional program violation.
(i)*Reporting requirements.*
(1)Each State agency shall report to FNS information concerning individuals disqualified for an intentional Program violation, including those individuals disqualified based on the determination of an administrative disqualification hearing official or a court of appropriate jurisdiction and those individuals disqualified as a result of signing either a waiver of right to a disqualification hearing or a disqualification consent agreement in cases referred for prosecution. This information shall be submitted to FNS so that it is received in the month which is no more than 30 days after the date the disqualification took effect.
(2)State agencies shall report information concerning each individual disqualified for an intentional Program violation to FNS. FNS will maintain this information and establish the format for its use.
(i)State agencies shall report information to the disqualified recipient database in accordance with procedures specified by FNS.
(ii)State agencies shall access disqualified recipient information from the database that allows users to check for prior disqualifications.
(3)The elements to be reported to FNS are name, social security number, date of birth, gender, disqualification number, disqualification decision date, disqualification start date, length of disqualification period (in months), type of offense, locality code, and the title, location and telephone number of the locality contact. These elements shall be reported in accordance with procedures prescribed by FNS.
(i)The disqualification decision date is the date that a disqualification decision was made at either an administrative or judicial hearing, or the date an individual signed a waiver to forego an administrative or judicial hearing and accept a disqualification penalty.
(ii)The disqualification start date is the date the disqualification penalty was imposed by any of the means identified in § 273.16(c).
(iii)The locality contact is a person, position or entity designated by a State agency as the point of contact for other State agencies to verify information in a DRS disqualification record supplied by the locality contact's State.
(4)All data submitted by State agencies will be available for use by any State agency that is currently under a valid signed Matching Agreement with FNS.
(i)State agencies shall, at a minimum, use the data to determine the eligibility of individual Program applicants prior to certification in cases where the State agency has reason to believe a household member is subject to disqualification in another jurisdiction; and
(ii)State agencies shall also use the disqualified recipient database for the following purposes:
(A)To screen all Program applicants prior to certification and at recertification; and
(B)To match the entire database of disqualified individuals against their current recipient caseload at application, and periodically thereafter.
(5)The disqualification of an individual for an intentional Program violation in one political jurisdiction shall be valid in another. However, one or more disqualifications for intentional Program violations which occurred prior to April 1, 1983 shall be considered as only one previous disqualification when determining the appropriate penalty to impose in a case under consideration, regardless of where the disqualification(s) took place. State agencies are encouraged to identify and report to FNS any individuals disqualified for an intentional Program violation prior to April 1, 1983. A State agency submitting such historical information should take steps to ensure the availability of appropriate documentation to support the disqualifications in the event it is contacted for independent verification.
(6)If a State determines that supporting documentation for a disqualification record that it has entered is inadequate or nonexistent, the State agency shall act to remove the record from the database.
(7)If a court of appropriate jurisdiction reverses a disqualification for an intentional Program violation, the State agency shall take action to delete the record in the database that contains information related to the disqualification that was reversed in accordance with instructions provided by FNS.
(8)If an individual disputes the accuracy of the disqualification record pertaining to him/her self, the State agency submitting such record(s) shall be responsible for providing FNS with prompt verification of the accuracy of the record.
(i)If a State agency is unable to demonstrate to the satisfaction of FNS that the information in question is correct, the State agency shall immediately, upon direction from FNS, take action to delete the information from the IPV database.
(ii)In those instances where the State agency is able to demonstrate to the satisfaction of FNS that the information in question is correct, the individual shall have an opportunity to submit a brief statement representing his or her position for the record. The State agency shall make the individual's statement a permanent part of the case record documentation on the disqualification record in question, and shall make the statement available to each State agency requesting an independent verification of that disqualification. Dated: December 1, 2006. Nancy Montanez Johner, Under Secretary, Food, Nutrition and Consumer Services. [FR Doc. E6-20765 Filed 12-7-06; 8:45 am] BILLING CODE 3410-30-P FEDERAL ELECTION COMMISSION 11 CFR Part 104 [Notice 2006-21] Proposed Statement of Policy Regarding Treasurer's Best Efforts To Obtain, Maintain, and Submit Information as Required by the Federal Election Campaign Act AGENCY: Federal Election Commission. ACTION: Proposed statement of policy. SUMMARY: The Federal Election Commission (the “Commission”) seeks comments on a proposal to clarify its enforcement policy with respect to the circumstances under which it intends to consider a political committee and its treasurer to be in compliance with the recordkeeping and reporting requirements of the Federal Election Campaign Act, as amended (“FECA”), based on the “best efforts” defense. Section 432(i) of Title 2 provides that when the treasurer of a political committee demonstrates that best efforts were used to obtain, maintain, and submit the information required by FECA, any report or any records of such committee shall be considered in compliance with FECA (and/or chapters 95 and 96 of Title 26). In the past, the Commission has interpreted this section to apply only to a treasurer's efforts to obtain required information from contributors to a political committee, and not to maintaining information or the submission of reports. However, in light of *Lovely* v. *Federal Election Commission* , 307 F. Supp. 2d 294 (D. Mass. 2004), the Commission intends to apply Section 432(i) to obtaining, maintaining, and submitting information and records to the Commission for the purpose of complying with FECA's disclosure and reporting requirements. Further information is provided in the supplementary information that follows. DATES: Comments must be received on or before January 8, 2007. The Commission intends to issue a final policy statement after the close of the comment period. ADDRESSES: All comments must be in writing, must be addressed to Mr. J. Duane Pugh, Jr., Acting Assistant General Counsel, and must be submitted in e-mail, facsimile, or paper copy form. Commenters are strongly encouraged to submit comments by e-mail or fax to ensure timely receipt and consideration. E-mail comments must be sent to * bepolicy@fec.gov.* If e-mail comments include an attachment, the attachment must be in either Adobe Acrobat (.pdf) or Microsoft Word (.doc) format. Faxed comments must be sent to
(202)219-3923, with paper copy follow-up. Mailed comments and paper copy follow-up of faced comments must be sent to the Federal Election Commission, 999 E Street, NW., Washington, DC 20463. All comments must include the full name and postal service address of the commenter or they will not be considered. The Commission will post comments on its Web site after the comment period ends. FURTHER INFORMATION CONTACT: Mr. J. Duane Pugh, Jr., Acting Assistant General Counsel, or Ms. Margaret G. Perl, Attorney, 999 E Street, NW., Washington, DC 20463,
(202)694-1650 or
(800)424-9530. SUPPLEMENTARY INFORMATION: The Commission's regulation implementing Section 432(i) is promulgated at 11 CFR 104.7. This proposed policy statement makes clear that the Commission's intent is to apply this regulation consistent with the holding of the Federal court in *Lovely.* A political committee and its treasurer, regardless of the type of enforcement action before the Commission (the administrative fines program excepted, see below), will be considered to be in compliance with FECA's requirements if the committee or its treasurer can show that best efforts were made to obtain, maintain, and submit all information required to be reported to the Commission. With respect to 11 CFR 104.7(a), the Commission intends to consider that best efforts were made when the treasurer of a political committee demonstrates that the failure to properly obtain, maintain or submit required information and reports was beyond the control of the committee. The Commission intends to generally consider the following:
(1)The actions taken, or systems implemented, by the committee to ensure that required information is obtained, maintained, and submitted;
(2)the cause of the failure to obtain, maintain, or submit the information or reports at issue; and
(3)the specific efforts of the committee to obtain, maintain, and submit the information or reports at issue. Where appropriate, the Commission may issue additional policy statements or implement regulations setting forth more specific requirements to govern the best efforts defense in particular contexts. This policy does not affect or modify the Commission's best efforts standards set forth at 11 CFR 104.7(b) that apply specifically with respect to obtaining the identification ( *see* 11 CFR 100.12) of each person whose contributions aggregate more than $200 in a calendar year. Additionally, this policy does not affect or modify the Commission's current administrative fines program. The Commission will consider the applicability of the best efforts defense in the context of the administrative fines program in a separate rulemaking. Current 11 CFR 111.35 sets forth the defenses available to a respondent in the administrative fines context. Any revisions to those available defenses will be addressed in a separate rulemaking, which will allow the Commission to give due consideration to the special issues raised by the administrative fines program not present in other portions of the Commission's enforcement docket. The Commission requests comments on all aspects of this proposed policy statement. I. Statutory and Regulatory Provision The Commission proposes clarifying its current enforcement practice with respect to consideration of the best efforts of the treasurer of a political committee to comply with the recordkeeping and reporting requirements of FECA, as interpreted by the *Lovely* court. Pursuant to 2 U.S.C. 432(i), FECA provides that: When the treasurer of a political committee shows that best efforts have been used to obtain, maintain, and submit the information required by this Act for the political committee, any report or any records of such committee shall be considered in compliance with this Act or chapter 95 or chapter 96 of title 26. This provision of FECA was implemented by the Commission at 11 CFR 104.7. Paragraph
(a)of this section is virtually identical to the statutory provision: When the treasurer of a political committee shows that best efforts have been used to obtain, maintain, and submit the information required by the Act for the political committee, any report of such committee shall be considered in compliance with the Act. Paragraph
(b)of section 104.7 provides standards for a treasurer of a political committee to satisfy in obtaining and reporting “the identification as defined at 11 CFR 100.12 of each person whose contribution(s) to the political committee and its affiliated political committees aggregate in excess of $200 in a calendar year (or in an election cycle in the case of an authorized committee).” 1 “Identification” includes the person's full name, mailing address, occupation, and name of employer. *See* 11 CFR 100.12. 1 The U.S. Court of Appeals for the District of Columbia Circuit referred to 11 CFR 104.7(b) as a “Commission regulation interpreting what political committees must do under [FECA] to demonstrate that they have exercised their 'best efforts' to encourage donors to disclose certain personally identifying information.” *Republican Nat'l Comm.* v. *FEC* , 76 F.3d 400, 403 (DC Cir. 1996). The language of FECA, and the Commission's regulation at section 104.7(a), applies the best efforts defense broadly to efforts by treasurers to “obtain, maintain and submit” the information required to be disclosed by FECA. However, the Commission has in past enforcement actions interpreted the statutory language to apply only to efforts to “obtain” contributor information. 2 This interpretation is based on an example contained in the provision's legislative history. *See* H.R. Rep. No. 96-422, at 14
(1979)(“One illustration of the application of this [best efforts] test is the current requirement for a committee to report the occupation and principal place of business of individual contributors who give in excess of $100). 2 In 1980, the Commission explained that “[i]n determining whether or not a committee has exercised ‘best efforts,' the Commission's primary focus will be on the system established by the committee for obtaining disclosure information” (emphasis added). 45 FR 15080, 15086 (Mar. 7, 1980). In 1993, the Commission referred to “the requirement of [FECA] that treasurers of political committees exercise best efforts to obtain, maintain and report the complete identification of each contributor whose contributions aggregate more than $200 per calendar year.” *Final Rule on Recordkeeping and Reporting by Political Committees: Best Efforts* , 58 FR 57725, 57725 (Oct. 27, 1993). And in 1997, the Commission stated that “[t]reasurers of political committees must be able to show they have exercised their best efforts to obtain, maintain and report [contributor identification information].” *Final Rule on Recordkeeping and Reporting by Political Committees: Best Efforts* , 62 FR 23335, 23335 (Apr. 30, 1997). In 2003, the Commission asserted in its Supplemental Brief in the *Lovely* litigation that “the Commission has long interpreted the best efforts provision as creating a limited safe harbor regarding committees' obligations to report substantive information that may be beyond their ability to obtain.” Commission's Supplemental Brief in *Lovely* v. *FEC* at 1. Furthermore, “when Congress originally enacted the 'best efforts” provision, it could not have been more clear that it was creating a limited defense regarding the inability to obtain specific information that was supposed to be disclosed, not the failure to file reports on time.” *Id.* at 12-13. The *Lovely* court summarized the Commission's argument: “The FEC in its briefing claims that it limits the reach of the best efforts statute to best efforts to 'obtain' contributor information.” *Lovely* , 307 F. Supp. 2d at 300. II. Administrative Fines Program Congress authorized the Commission's administrative fines program in 1999 to “create[] a simplified procedure for the FEC to administratively handle reporting violations.” 3 H.R. Rep. No. 106-295, at 11 (1999). As the Commission explained in its *Final Rule on Administrative Fines* , 65 FR 31787 (May 19, 2000), 3 *See* Treasury and General Government Appropriations Act, 2000, Public Law 106-58, section 640, 113 Stat. 430, 476-77 (1999). The program has been reauthorized twice, *see* Consolidated Appropriations Act, 2004, Public Law 108-199, section 639, 118 Stat. 3, 359
(2004)and Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006, Public Law 109-115, section 721, 119 Stat. 2396, 2493-94 (2005), and will sunset on December 31, 2008. *See also Final Rule on Extension of Administrative Fines Program* , 70 FR 75717 (Dec. 21, 2005). [p]rior to enactment of the [administrative fines program] amendment to the FECA, the Commission handled failures to file the reports in a timely manner under the enforcement procedures in 11 CFR part 111. The purpose of the administrative fines program is to institute streamlined 0procedures, while preserving the respondents' due process rights, to process violations of the reporting requirements of 2 U.S.C. 434(a) and assess a civil money penalty based on the schedules of penalties for such violations. 65 FR at 31787. However, “the Commission has discretion to apply either the administrative fines procedures or the current enforcement procedures set forth in §§ 111.9 through 111.19 to violations of the reporting requirements of 2 U.S.C. 434(a).” *Id.* at 31788; *see also* 11 CFR 111.31. Under current Commission regulations, a respondent may challenge a proposed civil penalty in the administrative fines program for three reasons: “(i) [t]he existence of factual errors; and/or
(ii)[t]he improper calculation of the civil money penalty; and/or
(iii)[t]he existence of extraordinary circumstances that were beyond the control of the respondent and that were for a duration of at least 48 hours and that prevented the respondent from filing the report in a timely manner.” 11 CFR 111.35(b)(1). The regulation limits the scope of circumstances that will be considered “extraordinary” to exclude negligence, problems with vendors or contractors, illness, inexperience, or unavailability of staff, computer failures (except failures of the Commission's computers), and other similar circumstances. 11 CFR 111.35(b)(4). The Commission deemed this limitation of defenses to be an appropriate component of the administrative fines program, and asserted that it had sound policy reasons for limiting the respondents' defenses beyond streamlining the administrative process. A key cornerstone of campaign finance law is the full and timely disclosure of the political committee's financial activity. Such disclosure is essential to providing the public with accurate and complete information regarding the financing of federal candidates and political campaigns. Thus, violations of the reporting requirements of 2 U.S.C. 434(a) are strict liability offenses * * *ensp . Absent extraordinary circumstances beyond the committees' control, the Commission sees no reason why committees cannot file their reports by the deadline. The rationale behind the ‘48-hour extraordinary circumstances' exception is that the Commission recognizes there may be instances such as natural disasters where a committee's office is located in the disaster area and the committee cannot timely file a report because of lack of electricity or flooding or destruction of committee records. 65 FR at 31789-90. In light of these considerations, this proposed policy statement shall not affect the Commission's current administrative fines program. Rather, the Commission's position will be re-evaluated in the context of a separate rulemaking concerning the application of the best efforts defense in the administrative fines program. III. The Lovely Decision In *Lovely* v. *FEC* , 307 F. Supp. 2d 294 (D. Mass. 2004), a congressional candidate's political committee and its treasurer brought an action against the Commission challenging the imposition of an administrative fine for allegedly late filing of a required report. On the day of the filing deadline, the committee's treasurer experienced difficulty electronically filing the committee's report via the Internet. Upon advice of Commission staff, the treasurer mailed a paper copy of the committee's report, along with a copy on computer diskette, to the Commission. The diskette was improperly formatted, and rejected by the Commission, but the paper copy was made public and posted to the Commission's Web site. The committee filed a properly formatted report 27 days after the filing deadline. Pursuant to the Commission's administrative fines program, the Commission's Office of Administrative Review recommended a $3,100 civil penalty, based on the number of days the report was late, the committee's lack of prior violations, and the fact that the treasurer had not raised any of the three defenses permitted by 11 CFR 111.35(b) to contest the imposition of a civil penalty. The Commission found reason to believe that the committee and the treasurer violated FECA with the late filing. Subsequently, the Commission made a final determination that plaintiff had violated 2 U.S.C. 434(a), but also voted to decrease the civil penalty to $1,800. *Lovely* at 296-97. In its lawsuit, the plaintiff argued that the Commission's imposition of a fine was contrary to FECA's best efforts provision. *Id.* at 296. The Commission argued that “it limits the reach of the best efforts statute to best efforts to ‘obtain' contributor information.” *Lovely* at 300. The Court concluded that “the FEC's argument that the phrase does not apply to the submission of reports conflicts with the plain statutory language. While the Commission can refine by regulation what best efforts means in the context of submitting a report, it cannot define it away by providing that submission of reports is governed by a ‘strict liability' standard.” *Id.* Thus, the court rejected the Commission's primary rationale for limiting respondents' potential defenses to late- or non-reporting in the administrative fines program, holding that the submission of reports is not governed by a strict liability standard. Rather, the fault-based standard of the best efforts defense must apply. The court also drew on the legislative history of the best efforts provision. As noted, the 1979 amendments to FECA specifically amended the best efforts provision to make it “applicable to the entirety of FECA, rather than merely to one subsection.” *Lovely* at 299. The court cited the provision's legislative history: The best efforts test is *specifically made applicable to recordkeeping and reporting requirements in both Title 2 and Title 26.* The test of whether a committee has complied with the statutory requirements is whether its treasurer has exercised his or her best efforts to obtain, maintain, and submit the information required by the Act. If the treasurer has exercised his or her best efforts, the committee is in compliance. Accordingly, *the application of the best efforts test is central to the enforcement of the recordkeeping and reporting provisions of the Act.* It is the opinion of the Committee that the Commission has not adequately incorporated the best efforts test into its administration procedures, such as the systematic review of reports. *Id.* (emphasis added) (quoting H.R. Rep. No. 96-422, at 14 (1979), *reprinted in* 1979 U.S.C.C.A.N. 2860, 2873). As the Commission stated in its Statement of Reasons after remand of the *Lovely* case, “the Court held that FECA's ‘best efforts’ provision * * * requires the Commission to consider whether a committee's treasurer exercised best efforts to submit timely disclosure reports.” *Commission's Statement of Reasons in Administrative Fines Case #549 on Remand From the United States District Court for the District of Massachusetts, at 1* (Oct. 4, 2005) (“ *Lovely Statement of Reasons* ”). On remand, the Commission indicated its intention to “pursue its view that 2 U.S.C. 432(i) does not require the Commission to recognize a ‘best efforts' defense as part of the administrative fines program,” and decided that the court had not “construe[d] Section 432(i) beyond requiring its application in this instance.” *Id.* at 1-2. The Commission determined that the committee's treasurer had not put forth best efforts in filing the report in question. *Id.* at 5. IV. Application of the Court's Holding Upon further consideration, the Commission has determined that despite the limited breadth of *Lovely* , implementation of the *Lovely* court's interpretation of the best efforts defense best reflects the language of FECA and the intent of Congress. While the Commission's enforcement practices formerly reflected the view that the best efforts defense was limited to obtaining certain contributor identification information, *see supra* footnote 2, the Commission recognizes that its application of the defense in previous enforcement matters derives from a single example of the defense's application in its 1979 legislative history. 4 In light of these considerations, the Commission hereby notifies the public and the regulated community through this proposed policy statement that henceforth it intends to apply the best efforts defense of 2 U.S.C. 432(i), as promulgated at 11 CFR 104.7, with respect to obtaining contributor information as currently set forth at 11 CFR 104.7(b), and also to obtaining other information, maintaining any and all information required by the statute, and submitting said information in the form of disclosure reports. 4 A respondent's assertion in an enforcement matter that best efforts were made to maintain and/or submit required information was formerly considered by the Commission to be a mitigating factor, but not an outright defense to an alleged violation of the recordkeeping and reporting requirements. The standards for determining whether the best efforts defense is applicable in the context of obtaining specific contributor information is set forth at current 11 CFR 104.7(b). This proposed policy statement does not affect or modify those standards. With respect to 11 CFR 104.7(a), which applies to obtaining, maintaining and submitting information and reports, the Commission intends to consider that best efforts were made when the treasurer of a political committee demonstrates that the failure to properly obtain, maintain or submit required information and reports to the Commission was beyond the control of the committee. The Commission intends to generally consider the following:
(1)The actions taken, or systems implemented, by the committee to ensure that required information is obtained, maintained, and submitted;
(2)the cause of the failure to obtain, maintain, or submit the information or reports at issue; and
(3)the specific efforts of the committee to obtain, maintain, and submit the information or reports at issue. Under this proposed policy, the following list sets forth possible reasons for a committee's failure to obtain, maintain or submit information or reports that the Commission may consider to be indicative that the best efforts defense is applicable: • A failure of Commission computers or Commission-provided software; • Severe weather or other disaster-related incidents; • Electronic filing problems caused by widespread and reported problems with the Internet; • Utilization of the Commission's three approved filing methods (via Internet, direct modem, and mailing an electronic copy); • Delivery failures caused by mail/courier services such as U.S. Postal Service, Federal Express, UPS, DHL, etc.; or • Unforeseen circumstances beyond the control of the respondent. The above-listed reasons, along with any other defenses presented, may be considered by the Commission in light of all the facts and circumstances relevant to the committee's obtaining and maintenance of information and efforts to submit reports (or other information) in a timely fashion in determining the applicability of the best efforts defense. If a failure to obtain, maintain, or submit information or reports is due to committee staff unavailability, inexperience, illness, negligence or error; the committee's computer or software failure; delays caused by committee vendors or contractors; a committee's failure to know filing dates; or a committee's failure to use Commission software properly; then the Commission intends to conclude that the best efforts standard has not been met. Under the proposed policy, if presented with information sufficient to form a best efforts defense, the Commission intends to consider the best efforts of a committee under Section 432(i) when reviewing all violations of the recordkeeping and reporting requirements of FECA, whether arising in its normal enforcement docket (Matters Under Review) or the Alternative Dispute Resolution Program. The “best efforts” standard is an affirmative defense and the burden rests with the political committee and its treasurer to present facts that demonstrate that “best efforts” were made. The Commission does not intend to consider the best efforts defense in any enforcement matter unless the facts that form the basis of that defense are asserted by a respondent. The Commission considers “best efforts” to be “a standard that has diligence as its essence.” E. Allan Farnsworth, *On Trying to Keep One's Promises: The Duty of Best Efforts in Contract Law* , 46 U. Pitt. L. Rev. 1, 8 (1984). As the Commission explained in its *Lovely Statement of Reasons* at 2, Section 432(i) creates a safe harbor for treasurers who “show[] that best efforts” have been made to report the information required to be reported by the Act. “Best” is an adjective of the superlative degree. “Best efforts” must therefore require more than “some” or “good” efforts. Congress's choice of a “best efforts” standard, rather than a “good faith” standard, suggests that a treasurer cannot rely upon his or her earnestness or state of mind to gain the shelter of Section 432(i)'s safe harbor. Rather, a treasurer has the burden of showing that the actions taken—the efforts he or she made to comply with applicable reporting deadlines—meet the statute's demanding benchmark. As explained above, the Commission does not intend to apply 11 CFR 104.7(b) as limiting the applicability of the best efforts defense of 2 U.S.C. 432(i) and 11 CFR 104.7(a) *only* to efforts made to obtain certain specific information from contributors. 11 CFR 104.7(b) does not in any way modify or limit the applicability of section 104.7(a) to the efforts of treasurers to obtain, maintain and submit information and reports. The above provides general guidance concerning the applicability of the Commission's proposed best efforts defense and announces the general course of action that the Commission intends to follow. This proposed policy statement sets forth the Commission's intentions concerning the exercise of its discretion in its enforcement program. However, the Commission retains that discretion and will exercise it as appropriate with respect to the facts and circumstances of each matter it considers. Consequently, this policy statement does not bind the Commission or any member of the general public. As such, it does not constitute an agency regulation requiring notice of proposed rulemaking, opportunities for public participation, prior publication, and delay in effective date under 5 U.S.C. 553 of the Administrative Procedure Act (“APA”). The provisions of the Regulatory Flexibility Act, which apply when notice and comment are required by the APA or another statute, are not applicable. Where appropriate, the Commission may issue additional policy statements or initiate rulemakings to set forth more specific requirements to govern the best efforts defense in particular contexts. V. Conclusion. Effective as of the date that a final Policy Statement is published in the **Federal Register** , the Commission intends to apply the best efforts standard to all matters currently before the Commission in which a respondent has asserted such a defense, and that come before the Commission in the future involving information and reports that must be obtained, maintained, and submitted by the treasurers of political committees, although the Commission will consider the application of the best efforts defense to the administrative fines program in a separate rulemaking. The Commission intends to consider that “best efforts” were made when the treasurer of a political committee demonstrates that the failure to properly obtain, maintain or submit required information and reports was beyond the control of the committee. When treasurers are able to show that a committee made best efforts to comply with the Act's requirements to obtain, maintain, and submit information, the Commission intends that the treasurers or committees shall be considered in compliance with FECA and no civil penalties or other remedial measures shall be imposed. Dated: November 30, 2006. Michael E. Toner, Chairman, Federal Election Commission. [FR Doc. E6-20752 Filed 12-7-06; 8:45 am] BILLING CODE 6715-01-P FEDERAL ELECTION COMMISSION 11 CFR Part 111 [Notice 2006-19] Proposed Policy Statement Establishing a Pilot Program for Probable Cause Hearings AGENCY: Federal Election Commission. ACTION: Draft Statement of Policy with Request for Comments. SUMMARY: The Commission is issuing a proposed policy statement to establish a pilot program offering probable cause hearings to respondents in enforcement actions pending before the Commission. The pilot program would allow respondents to request a hearing directly before the Commission prior to the Commission's consideration of the General Counsel's probable cause recommendation. The program would provide respondents with the opportunity to present directly arguments to the Commission and give the Commission an opportunity to ask relevant questions. The Commission requests comments on this proposed pilot program. DATES: Comments must be submitted on or before January 5, 2007. ADDRESSES: All comments should be addressed to Mark D. Shonkwiler, Assistant General Counsel, Enforcement Division, and must be submitted in either electronic or written form. Electronic mail comments should be sent to *probablecausehearings@fec.gov* and must include the full name, electronic mail address and postal service address of the commenter. Electronic mail comments that do not contain the full name, electronic mail address and postal service address of the commenter will not be considered. If the electronic mail comments include an attachment, the attachment must be in the Adobe Acrobat (.pdf) or Microsoft Word (.doc) format. Faxed comments should be sent to
(202)219-3923, with printed copy follow-up to ensure legibility. Written comments and printed copies of faxed comments should be sent to the Federal Election Commission, 999 E Street, NW., Washington, DC 20463. Commenters are strongly encouraged to submit comments electronically to ensure timely receipt and consideration. The Commission will make every effort to post public comments on its Web site within ten business days of the close of the comment period. FOR FURTHER INFORMATION CONTACT: Mark D. Shonkwiler, Assistant General Counsel, 999 E Street, NW., Washington, DC 20463,
(202)694-1650 or
(800)424-9530. SUPPLEMENTARY INFORMATION: The Federal Election Commission is establishing a pilot program to afford respondents in pending enforcement matters the opportunity to participate in hearings before the Commission. During such a hearing, a respondent (generally through counsel) may present oral arguments directly to the Commissioners, prior to any Commission determination of whether to find probable cause to believe that respondents violated the Federal Election Campaign Act. On June 11, 2003, the Commission held a hearing concerning potential changes to its enforcement procedures. The Commission received comments from those in the regulated community, many of whom argued for increased transparency in Commission procedures and expanded opportunities to contest allegations. 1 The Commission designed this pilot program with those concerns in mind. Proposed procedures for probable cause hearings are outlined below. The Commission seeks comment on all aspects of this proposal. 1 These comments are available at *http://www.fec.gov/agenda/agendas2003/notice2003-09/comments.shtml.* Opportunity To Request a Hearing A hearing may take place before the Commission considers whether or not to make a finding of “probable cause to believe” that a respondent has violated the Act or Commission regulations. 2 A probable cause hearing may be requested by any respondent who reaches the probable cause determination stage (see 11 CFR 111.16-111.17) and submits a probable cause response brief to the Office of General Counsel. A cover letter attached to the probable cause brief will inform the respondent of the opportunity to request an oral hearing before the Commission. Hearings are voluntary and no adverse inference will be drawn by the Commission with respect to the request or waiver of such a hearing. 2 The Commission is appending to this statement a general description of its enforcement procedures (“Basic Commission Enforcement Procedure”). These procedures are prescribed by statute and regulation, and the Commission is not requesting comment on them at this time. The General Counsel must receive the written request for a hearing at the same time that a respondent submits his or her timely response brief. 11 CFR 111.16(c). Any request for a hearing must state with specificity why the hearing is being requested and what issues the respondent expects to address. Absent good cause, to be determined at the sole discretion of the Commission, late requests will not be accepted. Respondents may make their request for a hearing by mail (including private delivery services), hand delivery, facsimile or email. Respondents are responsible for ensuring that their request is timely received. The Commission will grant a request for an oral hearing when it concludes that a hearing would help resolve significant or novel legal issues, or significant questions about the application of the law to the facts. Within 30 days of receiving a request for a hearing, the Commission will grant a request for a probable cause hearing if any two commissioners agree to hold a hearing. Hearing Procedures The purpose of the oral hearing is to provide a respondent an opportunity to present his or her arguments in person to the Commissioners *before* the Commission makes a determination that there is “probable cause to believe” that the respondent violated the Act or Commission regulations. Consistent with current Commission regulations, any respondent may be represented by counsel, at the respondent's own expense, or may appear *pro se* at any probable cause hearing. See 11 CFR 111.23. Respondents will have the opportunity to present their arguments, and Commissioners, the General Counsel, and the Staff Director will have the opportunity to pose questions. Respondents may discuss any issues presented in the enforcement matter, including potential liability and calculation of a civil penalty. The Commission will determine the format and time allotted for each hearing at its discretion. Among the factors that the Commission may consider are agency time constraints, the complexity of the issues raised, the number of respondents involved, and Commission interest. The Commission will determine the amount of time allocated for each portion of the hearing, and these time limits may vary from hearing to hearing. The Commission anticipates that most hearings will begin with a brief opening statement by Respondent or Respondent's counsel, followed by questioning from the Commissioners, General Counsel, and Staff Director. Hearings will normally conclude with the respondent's closing remarks. The Commission will have transcripts made of the hearings. The transcripts will become a part of the record for the enforcement matter and may be relied upon for determinations made by the Commission. Respondent may be bound by any representations made by Respondent or Respondent's counsel at a hearing. The Commission will make the transcripts available to the respondent, who may, at his or her own expense, purchase copies of the transcript. Respondents will have access to the transcripts from their own hearing, but not transcripts of other co-respondents' separate hearings, unless co-respondents in the same matter specifically provide written consent to the Commission granting access to such transcript(s). Transcripts will be made public after the matter is closed in accordance with Commission policies on disclosure. 3 3 *Statement of Policy Regarding Disclosure of Closed Enforcement and Related Files* , 68 FR 70426 (Dec. 18, 2003) is hereby amended to include disclosure of transcripts from probable cause hearings. Third party witnesses or other co-respondents may not be called to testify at a respondent's oral hearing. However, the Commission may request that supplementary information be submitted after the probable cause hearing. The Commission discourages voluminous submissions. Supplementary information may not be submitted more than ten days after the oral hearing, unless submitted in response to a Commission request that imposes a different, Commission-approved deadline. Materials requested by the Commission, and materials considered by the Commission in making its “probable cause to believe” determination, may be made part of the record pursuant to the Commission's *Statement of Policy Regarding Disclosure of Closed Enforcement and Related Files* , 68 FR 70426 (Dec. 18, 2003). Hearings are confidential and not open to the public; only Respondents and their counsel may attend. Attendance by any other parties must be approved by the Commission in advance. Cases Involving Multiple Respondents In cases involving multiple respondents, the Commission will decide on a case-by-case basis how to structure any hearing(s). Respondents are encouraged to advise the Commission of their preferences. Such respondents may request joint hearings if each participating respondent provides an unconditional waiver of confidentiality with respect to other participating co-respondents and their counsel and a nondisclosure agreement. Scheduling of Hearings The Commission will seek to hold the hearing in a timely manner after receiving Respondents' request for a hearing. The Commission will attempt to schedule the hearings on a mutually acceptable date and time. However, if a respondent is unable to accommodate the Commission's schedule, the Commission may decline to hold a hearing. The Commission reserves the right to reschedule any hearing. Where necessary, the Commission reserves the right to request from a respondent an agreement tolling any upcoming deadline, including any statutory deadline or other deadline found in 11 CFR part 111. Pilot Program The pilot program will last eight months from the time that this policy is approved. After eight months, a vote will be scheduled on whether the program should continue. The program will remain in effect until that vote is taken. Four votes will be required to extend or make permanent the program. The program will be terminated after that vote if there are not four affirmative votes to make the program permanent or to extend it for some time period. The Commission may modify or terminate this pilot program prior to the eighth month of the program if there are four affirmative votes for modification or early termination. If the pilot program is terminated, any previously requested hearings will still be held. Conclusion The Commission urges Respondents to consider carefully the costs and benefits of proceeding to probable cause briefings and/or hearings. The hearings are optional and no negative inference will be drawn if Respondents do not request a hearing. The majority of the agency's cases are settled through pre-probable cause conciliation. Proceeding to probable cause briefing requires a substantial investment of the Commission's limited resources. Consistent with the goal of expeditious resolution of enforcement matters, the Commission seeks to promote pre-probable cause conciliation. To encourage this, the Commission has a practice in many cases of reducing the civil penalty it seeks through its opening settlement offer. However, once the Office of General Counsel has terminated pre-probable cause conciliation negotiations, this reduction (normally 25%) is no longer available and the civil penalty will generally increase. All requests for hearings, scheduling and format inquiries, document submissions, and anything else related to the probable cause hearings should be directed to the Office of General Counsel. This notice represents a general statement of policy announcing the general course of action that the Commission intends to follow. This policy statement does not constitute an agency regulation requiring notice of proposed rulemaking, opportunities for public participation, prior publication, and delay effective under 5 U.S.C. 553 of the Administrative Procedures Act (“APA”). As such, it does not bind the Commission or any member of the general public. The provisions of the Regulatory Flexibility Act, 5 U.S.C. 605(b), which apply when notice and comment are required by the APA or another statute, are not applicable. Dated: December 1, 2006. Michael E. Toner, Chairman, Federal Election Commission. Appendix Basic Commission Enforcement Procedure 4 The Commission's enforcement procedures are set forth at 11 CFR part 111. An enforcement matter may be initiated by a complaint or on the basis of information ascertained by the Commission in the normal course of carrying out its supervisory responsibilities. 11 CFR 111.3. If a complaint substantially complies with certain requirements set forth in 11 CFR 111.4, within five days of receipt the Office of General Counsel notifies each party determined to be a respondent that a complaint has been filed, provides a copy of the complaint, and advises each respondent of Commission compliance procedures. 11 CFR 111.5. A respondent then has 15 days from receipt of the notification from the Office of General Counsel to submit a letter or memorandum to the Commission setting forth reasons why the Commission should take no action on the basis of the complaint. 11 CFR 111.6. 4 The Commission provides this overview of enforcement procedures for informational purposes only. The Commission is not seeking comment on this section. Following receipt of such letter or memorandum, or expiration of the 15-day period, the Office of General Counsel may recommend to the Commission whether or not it should find “reason to believe” that a respondent has committed or is about to commit a violation of the Act or Commission regulations. 11 CFR 111.7(a). 5 With respect to internally-generated matters ( *e.g.* , referrals from the Commission's Audit or Reports Analysis Divisions), the Office of General Counsel may recommend that the Commission find “reason to believe” that a respondent has committed or is about to commit a violation of the Act or Commission regulations on the basis of information ascertained by the Commission in the normal course of carrying out its supervisory responsibilities, or on the basis of a referral from an agency of the United States or any State. If the Commission determines by an affirmative vote of four members that it has “reason to believe” that a respondent violated the Act or Commission regulations, the respondent must be notified by letter of the Commission's finding(s). 11 CFR 111.9(a). 6 The Office of General Counsel will also provide the respondent with a Factual and Legal Analysis, which will set forth the bases for the Commission's finding of reason to believe. 5 The Office of General Counsel may also recommend that the Commission find no “reason to believe” that a violation has been committed to is about to be committed, or that the Commission otherwise dismiss a complaint without regard to the provisions of 11 CFR 111.6(a). 11 CFR 111.7(b). 6 If the Commission finds no “reason to believe,” or otherwise terminates its proceedings, the Office of General Counsel shall advise the complainant and respondent(s) by letter. 11 CFR 111.9(b). After the Commission makes a “reason to believe” finding, an investigation is conducted by the Office of General Counsel., in which the Commission may undertake field investigations, audits, and other methods of information-gathering. 11 CFR 111.10. Additionally, the Commission may issue subpoenas to order any person to submit sworn written answers to written questions, to provide documents, or to appear for a deposition. 11 CFR 111.11-111.12. Any person who is subpoenaed may motion the Commission for it to be quashed or modified. 11 CFR 111.15. Following a “reason to believe” finding, the Commission may attempt to reach a conciliation agreement with the respondent(s) prior to reaching the “probable cause” stage of enforcement ( *i.e.* , a pre-probable cause conciliation agreement). See 11 CFR 111.18(d). If the Commission is unable to reach a pre-probable cause conciliation agreement with the respondent, or determines that such a conciliation agreement would not be appropriate, upon completion of the investigation referenced in the preceding paragraph, the Office of General Counsel prepares a brief setting forth its position on the factual and legal issues of the matter and containing a recommendation on whether or not the Commission should find “probable cause to believe” that a violation has occurred or is about to occur. 11 CFR 111.16(a). The Office of General Counsel notifies the respondent(s) of this recommendation and provides a copy of the probable cause brief. 11 CFR 111.16(b). The respondent(s) may file a written response to the probable cause brief within fifteen days of receiving said brief. 11 CFR 111.16(c). After reviewing this response, the Office of General Counsel shall advise the Commission in writing whether it intends to proceed with the recommendation or to withdraw the recommendation from Commission consideration. 11 CFR 111.16(d). If the Commission determines by an affirmative vote of four members that there is “probable cause to believe” that a respondent has violated the Act or Commission regulations, the Commission authorizes the Office of General Counsel to notify the respondent by letter of this determination. 11 CFR 111.17(a). Upon a Commission finding of “probable cause to believe,” the Commission must attempt to reach a conciliation agreement with the respondent. 11 CFR 111.18(a). If no conciliation agreement is finalized within the time period specified in 11 CFR 111.18(c), the Office of General Counsel may recommend to the Commission that it authorize a civil action for relief in the appropriate court. 11 CFR 111.19(a). Commencement of such civil action requires an affirmative vote of four members of the Commission. 11 CFR 111.19(b). The Commission may enter into a conciliation agreement with respondent after authorizing a civil action. 11 CFR 111.19(c). [FR Doc. E6-20844 Filed 12-7-06; 8:45 am] BILLING CODE 6715-01-P FEDERAL ELECTION COMMISSION 11 CFR Part 111 [Notice 2006-20] Proposed Policy Regarding Self-Reporting of Campaign Finance Violations; (Sua Sponte Submissions) AGENCY: Federal Election Commission. ACTION: Draft statement of policy with request for comments. SUMMARY: The Commission is seeking comments on a proposed policy statement to clarify and memorialize its approach to enforcement actions arising from self-reported violations (also known as *sua sponte* submissions). In order to encourage the self-reporting of violations about which the Commission would not otherwise have learned, the Commission proposes, in appropriate cases warranting such mitigation, to offer significantly lower penalties than the Commission would otherwise have sought in complaint-generated matters involving similar circumstances. The Commission is also outlining a new expedited procedure that it intends to use in a limited number of situations through which the Commission may allow individuals and organizations that self-report violations and that make a complete report of their internal investigation to proceed directly into conciliation prior to the Commission determining whether their conduct may have violated statutes or regulations within its jurisdiction. The proposed policy also addresses various issues that can arise in connection with parallel criminal, administrative or civil proceedings. The Commission requests comments on this proposed policy. DATES: All comments must be submitted on or before January 29, 2007. ADDRESSES: All comments should be addressed to Mark Shonkwiler, Assistant General Counsel, or April Sands, Attorney, and must be submitted in either electronic or written form. Electronic mail comments should be sent to *selfreportpolicy@fec.gov* and must include the full name, electronic mail address and postal service address of the commenter. Electronic mail comments that do not contain the full name, electronic mail address and postal service address of the commenter will not be considered. If the electronic mail comments include an attachment, the attachment must be in the Adobe Acrobat (.pdf) or Microsoft Word (.doc) format. Faxed comments should be sent to
(202)219-3923, with printed copy follow-up to ensure legibility. Written comments and printed copies of faxed comments should be sent to the Federal Election Commission, 999 E Street, NW., Washington, DC 20463. Commenters are strongly encouraged to submit comments electronically to ensure timely receipt and consideration. The Commission will make every effort to post public comments on its Web site within ten business days of the close of the comment period. FOR FURTHER INFORMATION CONTACT: Mark D. Shonkwiler, Assistant General Counsel, or April J. Sands, Attorney, Enforcement Division, Federal Election Commission, 999 E Street, NW., Washington, DC 20463,
(202)694-1650 or
(800)424-9530. SUPPLEMENTARY INFORMATION: I. Goals and Scope of the Policy The Commission periodically receives submissions from persons who self-report statutory or regulatory violations of which the Commission had no prior knowledge. The Commission considers such self-reports (which also are referred to as *sua sponte* submissions) as information ascertained in the normal course of carrying out its supervisory responsibilities pursuant to 2 U.S.C. 437g(a)(2), and may investigate if it determines there is reason to believe a violation has occurred. The Commission also investigates complaints reporting the potentially illegal conduct of another, submitted pursuant to 2 U.S.C. 437g(a)(1), but which also, by implication, provide a basis for investigating the complainant itself. 1 As a general proposition, self-reported matters, when accompanied by full cooperation, may be resolved more quickly and on more favorable terms than matters arising by other means ( *e.g.* , those arising via external complaints, referrals from other government agencies, or referrals from the Commission's Audit or Reports Analysis Divisions). 2 1 If a person who self-reports a violation of the FECA also makes specific allegations as to other persons not joining in the submission, and particularly where the person making the submission seeks to assign primary responsibility for the violations to another person (including an organization's former officers or employees), the Commission, acting through its Office of General Counsel, may advise the self-reporting person that a portion of the relevant materials should be re-submitted as a complaint to which other persons would be allowed to respond prior to any findings by the Commission. 2 When violations are found, FECA requires the Commission to attempt to correct or prevent violations through conciliation agreements before suit may be filed in Federal district court. The Commission recently has seen an increase in self-reported violations, which may be attributable, at least in part, to greater attention being placed on compliance programs for areas of potential organizational liability, and recognition that addressing a problem through self-auditing and self-reporting may help minimize reputational harm. The increase in the number of self-reported matters has highlighted the need to increase the transparency of Commission policies and procedures. Moreover, the Commission seeks to provide appropriate incentives for this demonstration of cooperation and responsibility. This policy provides an overview of the factors that influence the Commission's handling and disposition of certain kinds of matters. It should be noted that while cooperation in general, and self-reporting in particular, will be considered by the Commission as mitigating factors, they do not excuse a violation of the Act or end the enforcement process. Also, this policy does not confer any rights on any person and does not in any way limit the right of the Commission to evaluate every case individually on its own facts and circumstances. 3 Nevertheless, as explained below, the Commission may provide appropriate consideration to respondents who voluntarily disclose and who fully cooperate with the Commission's disposition of the matter. 3 Some violations, for instance, are subject to a mandatory minimum penalty prescribed by statute. *See* 2 U.S.C. 437g(a)(6)(C). II. Self-Reporting of FECA Violations Self-reporting of violations typically allows respondents to resolve their civil liability in a manner which has the potential to:
(1)Reduce the investigative burden on both the Commission and themselves;
(2)demonstrate their acceptance of organizational or personal responsibility and commitment to internal compliance; and
(3)conclude their involvement in the Commission's enforcement process on an expedited basis. A person who brings to the Commission's attention violations of the FECA and Commission regulations and who cooperates with the resulting investigation may also receive appropriate consideration in the terms of an eventual conciliation agreement. For example, the Commission may do one or more of the following: • Take no action against particular respondents; • Offer a significantly lower penalty than what the Commission otherwise would have sought in a complaint-generated matter involving similar circumstances or, where appropriate, no civil penalty; • Offer conciliation before a finding of probable cause to believe a violation occurred, and in certain cases proceed directly to conciliation without the Commission first finding reason to believe that a violation occurred (see discussion below); • Refrain from making a formal finding that a violation was knowing and willful, even where the available information would otherwise support such a finding; • Proceed only as to an organization, rather than as to various individual agents or, where appropriate, proceed only as to individuals rather than organizational respondents; • Include language in the conciliation agreement that indicates the level of cooperation provided by respondents and the remedial action taken by the persons. III. Factors Considered in Self-Reported Matters The Commission may take into account various factors in considering how to proceed regarding self-reported violations. In general, more expedited processing and a more favorable outcome will be possible when the self-reporting party can show that upon discovery of the potential violations, there was an immediate end to the activity giving rise to the violation(s); the Respondent made a timely and complete disclosure to the Commission and fully cooperated in the disposition of the matter; and the Respondent implemented appropriate and timely corrective measures, including internal safeguards necessary to prevent any recurrence. Further detail as to these factors is supplied below. Nature of the Violation
(1)*The type of violation:* Whether the violation was
(a)Knowing and willful, or resulted from reckless disregard for legal requirements or deliberate indifference to indicia of wrongful conduct;
(b)negligent;
(c)an inadvertent mistake; or
(d)based on the advice of counsel; 4 4 A respondent seeking to defend conduct based on advice of counsel may not simultaneously withhold documentary or other evidence supporting that assertion based on the attorney-client privilege.
(2)*The magnitude of the violation:* Whether the violation resulted from a one-time event or an ongoing pattern of conduct repeated over an extended period of time (and whether there was a history of similar conduct); how many people were involved in or were aware of the violation and the relative level of authority of these people within the organization; whether individuals were coerced into participating in the violation; the amount of money involved either in terms of absolute dollar amount or in terms of the percentage of an entity's activity; and the impact the violation may have had on any Federal election;
(3)*How the violation arose:* Whether the conduct was intended to advance the organization's interests or to defraud the organization for the personal gain of a particular individual; whether there were compliance procedures in place to prevent the type of violation now uncovered and, if so, why those procedures failed to stop or deter the wrongful conduct; and whether the persons with knowledge of the violation were high-level officials in the organization. Extent of Corrective Action and New Self-Governance Measures
(4)*Have all needed investigative and corrective actions been taken:* Whether the violation immediately ceased upon its discovery; how long it took after discovery of the violation to take appropriate corrective measures, including disciplinary action against persons responsible for any misconduct; whether there was a thorough review of the nature, extent, origins, and consequences of the conduct and related behavior; whether the respondent expeditiously corrected and clarified the public record by making appropriate and timely disclosures as to the source and recipients of any funds involved in a violation; whether a Federal political committee promptly made any necessary refunds of excessive or prohibited contributions; and whether an organization or individual respondent waived its claim to refunds of excessive or prohibited contributions and instructed recipients to disgorge such funds to the U.S. Treasury.
(5)*Have more effective compliance measures been implemented:* Whether there are assurances that the conduct is unlikely to recur; whether the respondent has adopted and ensured enforcement of more effective internal controls and procedures designed to prevent a recurrence of the violation; and whether the respondent provided the Commission with sufficient information for it to evaluate the measures taken to correct the situation and ensure that the conduct does not recur. Disclosure and Cooperation
(6)*Was the violation fully disclosed to the Commission:* Whether steps were taken upon learning of the violation; whether the disclosure was voluntary or made in recognition that the violation had been or was about to be discovered, or in recognition that a complaint was filed, or was about to be filed, by someone else; and whether a comprehensive and detailed disclosure of the results of its internal review was provided to the Commission in a timely fashion;
(7)*Was there full cooperation with the Commission:* Whether the respondent promptly made relevant records and witnesses available to the Commission, and made all reasonable efforts to secure the cooperation of relevant employees, volunteers, vendors, donors and other staff without requiring compulsory process; whether the respondent agreed to waive or toll the statute of limitations for activity that previously had been concealed or not disclosed in a timely fashion. The Commission recognizes that all of the above-listed factors will not be relevant in every instance of self-reporting of potential FECA violations, nor is the Commission required to take all such factors into account. In addition, these factors should not be viewed as an exhaustive list. The Commission will continue to resolve matters based on the facts and circumstances of each case. The Commission seeks to encourage the self-reporting of violations. To that end, the Commission will consider reducing opening civil penalty offers 5 by up to 75%. The amount of the reduction depends on the facts and circumstances of a particular case. The Commission will consider the factors set forth above. In order to provide more concrete guidance, the Commission may establish a policy setting forth the weight it will give to some of the facts and circumstances. 5 The Commission normally applies standard civil penalty calculations and then adjusts the figure for aggravating or mitigating circumstances. For example, if the standard civil penalty calculation were $20,000 it might be raised for an aggravating factor, such as failure to timely file an election sensitive report. Once the initial calculation is reached, respondents normally receive a 25% discount off of this penalty for settling during the pre-probable cause conciliation stage. Any discounts pursuant to this policy will be applied after this reduction. The Commission is considering adopting a policy of granting a civil penalty reduction of up to 50% to respondents who meet the following criteria: • Respondents alert the Commission to potential violations before the violation had been or was about to be discovered by any outside party, including the FEC; • Respondents amend reports or disclosures to correct past errors, if applicable; • Any appropriate refunds, transfers, and disgorgements are made and/or waived; • The violation immediately ceased upon discovery; and • Respondents fully cooperate with the Commission in ensuring that the sua sponte submission is complete and accurate and in taking corrective measures. The Commission is considering adopting a policy of granting a civil penalty reduction of up to 75% to respondents who meet the above criteria plus the following criteria: • Respondents hired independent experts to conduct a thorough review, investigation, or audit; • Respondents provide the Commission with all documentation of the experts' review, investigation, or audit; and • Respondents took appropriate corrective action(s) such as disciplinary action against any persons responsible for misconduct and made changes to internal procedures to prevent a recurrence of the violation. Alternatively, the Commission is considering adopting a policy of generally granting a civil penalty reduction of 50% to respondents that voluntarily self-report violations to the Commission, and of raising or lowering that discount depending on the aggravating and mitigating factors outlined above. The discount could be as high as 75% or as low as 25%, depending on the facts of the case in question. The Commission will be the sole arbiter of whether the facts of each case warrant a particular reduction in the penalty. The Commission will generally not give a respondent the benefit of this policy if the respondent is the subject of a criminal or other government investigation. In considering appropriate penalties, the Commission will also consider the presence of aggravating factors, such as knowing and willful conduct or involvement by senior officials of an entity. The Commission may also consider other factors not enumerated in this policy for the purposes of applying or withholding a possible discount. IV. Fast-Track Resolution The Commission will generally not make a reason-to-believe finding or open a formal investigation for respondents that self-report violations, if:
(1)All potential respondents in a matter have joined in a self-reporting submission that acknowledges their respective violations of the FECA;
(2)those violations do not appear to be knowing and willful; and
(3)the disclosure is substantially complete and the submission reasonably addresses the significant questions or issues related to the violation. Accordingly, the Commission is modifying its current practice to allow for an expedited Fast-Track Resolution (“FTR”) for a limited number of matters involving self-reported violations. This procedure would be available at the Commission's discretion, but may be requested by respondents. Respondents eligible for the FTR process will meet with the Office of General Counsel to negotiate a proposed conciliation agreement before the Commission makes any formal findings in the matter. Although the Commission is always free to reject or seek modifications to a proposed conciliation agreement, it is expected that this process will allow for more expedited processing of certain types of violations where factual and legal issues are reasonably clear. It also will allow respondents to resolve certain matters short of the Commission finding that there is reason to believe that a violation has occurred. Examples of matters that might be eligible for such treatment include: • Matters in which an individual contributor discovers that he or she inadvertently violated the individual aggregate election cycle contribution limit contained in 2 U.S.C. 441a(a)(3); • Matters in which a political committee seeks to disclose and correct relatively straightforward reporting violations; • Matters in which a contributor and a political committee jointly seek to resolve their liability for a simple and clearly inadvertent excessive or prohibited contribution; and • Matters in which the initial self-reporting submission by the respondents is so thorough that only very limited follow-up by the Office of the General Counsel is necessary to complete the factual record. V. Parallel Proceedings The Commission recognizes that persons self-reporting to the Commission may face special concerns in connection with parallel criminal investigations, State administrative proceedings, and/or civil litigation. The Commission expects that persons who self-report to the Commission will inform the Commission of any existing parallel proceedings. The Commission encourages persons who self-report to the Commission also to self-report related violations to any law enforcement agency with jurisdiction over the activity. This will assist the Commission, where appropriate and possible, in working with other Federal, State, and local agencies to facilitate a global and/or contemporaneous resolution of related violations by a self-reporting person. The possibility of such a resolution is enhanced when the self-reporting person expresses a willingness to engage other government agencies that may have jurisdiction over the conduct and to cooperate with joint discovery and disclosure of facts and settlement positions with respect to the different agencies. In situations where contemporaneous resolution of parallel matters is not feasible, the Commission will consider whether terms contained in a conciliation agreement with the Commission may affect potential liability the same respondent realistically faces from another agency. In appropriate cases, where there has been self-reporting and full cooperation, the Commission may agree to enter into conciliation without requiring respondents to admit that their conduct was “knowing and willful,” even where there is evidence that may be viewed as supporting this conclusion. (The civil penalty, however, may be based on “knowing and willful” conduct.) The Commission has followed this practice in several self-reported matters where the organizational respondents promptly self-reported and took comprehensive and immediate corrective action that included the dismissal of all individual corporate officers whose actions formed the basis for the organization's potential “knowing and willful” violation. The Commission, which has the statutory authority to refer “knowing and willful” violations of the FECA to the Department of Justice for potential criminal prosecution, 2 U.S.C. 437g(a)(5)(C), and to report information regarding violations of law not within its jurisdiction to appropriate law enforcement authorities, 2 U.S.C. 437d(a)(9), will not negotiate whether it refers, reports, or otherwise discusses information with other law enforcement agencies. Although the Commission cannot disclose information regarding an investigation to the public, it can and does share information on a confidential basis with other law enforcement agencies. VI. Conclusion In light of the considerations explained above, the Commission is considering issuing a policy statement to clarify how it exercises its discretion in enforcement matters involving self-reported violations of the FECA. The Commission invites comments on any aspect of the proposed policy statement, including:
(A)Whether and to what extent the Commission should consider the various factors described above, and/or other factors, in resolving self-reported violations of the FEC; and
(B)Whether and how to apply the new proposed Fast Track Resolution process in resolving self-reported violations of the FECA. Dated: December 1, 2006. Michael E. Toner, Chairman, Federal Election Commission. [FR Doc. E6-20845 Filed 12-7-06; 8:45 am] BILLING CODE 6715-01-P FEDERAL ELECTION COMMISSION 11 CFR Part 111 [Notice 2006-22] Best Efforts in Administrative Fines Challenges AGENCY: Federal Election Commission. ACTION: Notice of proposed rulemaking. SUMMARY: The Federal Election Commission seeks public comment on proposed revisions to its regulations regarding the Commission's administrative fines program. The administrative fines program is a streamlined process through which the Commission finds and penalizes violations of 2 U.S.C. 434(a), which requires committees registered with the Commission to file periodic reports. Current Commission regulations set forth several grounds upon which a respondent may base a challenge to an administrative fine. The proposed regulations replace the current “extraordinary circumstances” defense with a “best efforts” defense. The proposed regulations would also provide for Commission statements of reasons on administrative fines final determinations. The Commission has made no final decision on the issues presented in this rulemaking. Further information is provided in the supplementary information that follows. DATES: Comments must be received on or before January 8, 2007. ADDRESSES: All comments must be in writing, must be addressed to Mr. J. Duane Pugh Jr., Acting Assistant General Counsel, and must be submitted in either e-mail, facsimile, or paper copy form. Commenters are strongly encouraged to submit comments by e-mail to ensure timely receipt and consideration. E-mail comments must be sent to either *afbestefforts@fec.gov* or submitted through the Federal eRegulations Portal at *http://www.regulations.gov* . If e-mail comments include an attachment, the attachment must be in either Adobe Acrobat (.pdf) or Microsoft Word (.doc) format. Faxed comments must be sent to
(202)219-3923, with paper copy follow-up. Paper comments and paper copy follow-up of faxed comments must be sent to the Federal Election Commission, 999 E Street, NW., Washington, DC 20463. All comments must include the full name and postal service address of the commenter or they will not be considered. The Commission will post comments on its Web site after the comment period ends. FOR FURTHER INFORMATION CONTACT: Mr. J. Duane Pugh Jr., Acting Assistant General Counsel, or Ms. Margaret G. Perl, Attorney, 999 E Street, NW., Washington, DC 20463,
(202)694-1650 or
(800)424-9530. SUPPLEMENTARY INFORMATION: Under the administrative fines program, the Commission may assess a civil money penalty for a violation of the reporting requirements of 2 U.S.C. 434(a) (such as not filing or filing late) without using the traditional enforcement procedures. 2 U.S.C. 437g(a)(4)(C). Congress intended the Commission to process these straightforward violations through a “simplified procedure” that would ease the enforcement burden on the Commission. H.R. Rep. No. 106-295 at 11 (1999). In the final rules establishing and governing the administrative fines program, the Commission created a streamlined procedure that balances the respondent's rights to notice and opportunity to be heard with the Congressional intent that the administrative fines program work in an expeditious manner to resolve these reporting violations without additional administrative burden. *Final Rule on Administrative Fines,* 65 FR 31787-88 (May 19, 2000). The Federal Election Campaign Act (“FECA”) provides that “[w]hen the treasurer of a political committee shows that best efforts have been used to obtain, maintain, and submit the information required by this Act for the political committee, any report or any records of such committee shall be considered in compliance with [FECA].” 2 U.S.C. 432(i). 1 The current administrative fines regulations enumerate grounds upon which a respondent may challenge a Commission determination that an administrative fine should be imposed, but a best efforts defense is not explicitly listed among these grounds. 1 The Commission has long interpreted the “best efforts” provision as a statutory safe harbor limited to political committees' obligation to report certain substantive information that may be beyond the control of the committees to obtain. 11 CFR 104.7 (defining “best efforts” for purposes of obtaining and submitting contributor information). In *Lovely* v. *FEC* , 307 F. Supp. 2d 294 (D. Mass. 2004), the court addressed a political committee's challenge to an administrative fine assessed by the Commission for the committee's failure to timely file a report. The committee argued that it had made best efforts to file the report and that this constituted a valid and complete defense to the fine. The court concluded that the plain language of the Act requires the Commission to entertain a best efforts defense in the administrative fines context, and that it was unclear from the record in the *Lovely* case whether the Commission had considered the best efforts defense raised by the committee. The court remanded the case to the Commission for further proceedings. 2 On remand, the Commission determined that the committee had failed to show best efforts and left the administrative fine in place. *Commission's Statement of Reasons in Administrative Fines Case #549 on Remand From the United States District Court for the District of Massachusetts,* Oct. 4, 2005, *available at http://www.fec.gov/members/toner/sor/soraf549.pdf* . 2 The *Lovely* case did not involve a challenge to the validity of the administrative fines program rules, and those rules have continued in full force and effect since the district court order. However, the court stated that the Commission could “refine by regulation what best efforts means in the context of submitting a report.” *Lovely* , 307 F. Supp. 2d at 300. The proposed regulations would explicitly incorporate a best efforts defense into the process for challenging an administrative fine, would clarify the scope of the “factual errors” defense, and would provide for statements of reasons for administrative fines final determinations. These proposed changes are intended to address the concerns raised by the *Lovely* court as well as to provide greater clarity regarding permissible grounds for challenging administrative fines. I. 11 CFR 111.35—Grounds for Challenging an Administrative Fines Reason To Believe Finding Under the administrative fines regulations, if the Commission determines that it has reason to believe (“RTB”) that a committee has failed to timely file a required report, it notifies the respondent of this finding and of the proposed civil penalty. 11 CFR 111.32. The Commission makes RTB findings based on an internal process that identifies late filers. The amount of the penalty is determined using the schedules at 11 CFR 111.43. Following an RTB finding, a respondent has forty days to challenge the alleged violation. 11 CFR 111.35. Challenges are reviewed by Commission staff and ultimately decided by the Commission. 11 CFR 111.36, 111.37. The current regulations set forth three permissible grounds upon which to challenge an administrative fines RTB finding. Respondents are permitted to challenge administrative fines on the basis of “factual errors,” the improper calculation of a penalty, or “extraordinary circumstances that were beyond the control of the respondent and that were for a duration of at least 48 hours and that prevented the respondent from filing the report in a timely manner.” 11 CFR 111.35(b)(1). The regulations also provide examples of situations that will not be considered “extraordinary circumstances,” including negligence, problems with vendors or contractors, illness, inexperience, or unavailability of staff, and computer failures (except failures of the Commission's computers). 11 CFR 111.35(b)(4). This NPRM proposes a revision of 11 CFR 111.35 that clarifies the scope of the regulation's “factual errors” defense and also replaces the “extraordinary circumstances” defense with a best efforts defense. A. 11 CFR 111.35(b)(1)(i)—Changes to the “Factual Errors” Defense The proposed regulation retains a “factual errors” defense, currently at 11 CFR 111.35(b)(1)(i), but clarifies the boundaries of this defense by stating that the facts alleged to be in error must be facts upon which the Commission relied in its RTB finding. *Proposed* 11 CFR 111.35(b)(1). The proposed regulation also provides two examples of such factual errors: that the respondent was not required to file the report in question, and that the respondent did in fact timely file as described in 11 CFR 100.19. *Id.* For instance, a paper filer that has “timely filed” a report under the definition in 11 CFR 100.19 would be considered to have timely filed for purposes of the administrative fines program. This would be true even if the Commission does not ultimately receive the filing, due, for instance, to errors by the overnight delivery service or in the handling of the mail. The Commission seeks comment on this approach. Should other types of factual errors be allowed as grounds for challenge to the finding of a violation? Should the regulation include additional examples of qualifying factual errors? B. 11 CFR 111.35(b)(1)(iii)—Replacing the “Extraordinary Circumstances” Defense With a Best Efforts Defense The proposed regulation replaces the “extraordinary circumstances” defense currently at 11 CFR 111.35(b)(1)(iii) with a best efforts defense. The proposed regulation makes clear that a respondent may base a challenge to an administrative fine on a showing that respondent made best efforts to timely file the report in question. To show that it made best efforts to timely file, a respondent would be required to demonstrate that both
(i)Respondent was prevented from filing in a timely manner because of unforeseen circumstances that were beyond the control of the respondent, and
(ii)respondent filed the report in question within 24 hours of the respondent's no longer being prevented from filing. *Proposed* 11 CFR 111.35(b)(3). The proposed regulation gives two examples of unforeseen circumstances that were beyond the control of the respondent: a failure of Commission computers, Commission software, or the internet; and severe weather or other disaster-related incident. *Proposed* 11 CFR 111.35(c). The proposed regulation also gives examples of circumstances that will not be considered unforeseen and beyond the control of the respondent, including negligence; delays caused by committee vendors or contractors; illness, inexperience, or unavailability of the treasurer or other staff; committee computer or software failures; a committee's failure to know filing dates; or a committee's failure to use FEC filing software properly. *Proposed* 11 CFR 111.35(d). Like the current regulations, the proposed regulations would require a respondent to explain the factual basis supporting the respondent's challenge. *Proposed* 11 CFR 111.35(e). The best efforts defense set forth in the proposed regulation would serve as a proxy for a full factual investigation of a respondent committee's internal practices regarding filing of reports and an analysis of whether such practices were sufficient to constitute best efforts. Such an investigation would be particularly burdensome in the context of the administrative fines program, which is meant to be a “streamlined procedure.” *Final Rule on Administrative Fines* , 65 FR at 31787. The Commission seeks comment on the proposed best efforts defense. Will the proposed test serve as a sufficient proxy for a full best efforts investigation? Are there other circumstances not contemplated by the proposed regulations that could prevent a respondent from timely filing, notwithstanding the respondent having taken best efforts to ensure that the report would be timely filed? Should the Commission apply a “but for” test, a “contributing factor” test, or some other test for determining whether a respondent was prevented from timely filing by particular circumstances? Should the Commission retain an extraordinary circumstances defense? Should the Commission entertain defenses based on extreme financial hardship? Should the regulations be more specific as to what constitutes computer or Internet failures, or severe weather or disaster? Should the list of circumstances that will not be considered unforeseen and beyond the control of the respondent be expanded or contracted, and if so by which elements? Should the 24 hour period be longer or shorter, or should committees be required to file as soon as would be practicable? What sort of supporting evidence should a respondent be required to provide? Are there other important factors that the Commission should incorporate into a best efforts defense? Alternatively, should the Commission refrain from adding a specific best efforts defense to the administrative fines regulation? Does Lovely preclude this approach? II. 11 CFR 111.37—Commission Action on Administrative Fines Challenges Section 111.37 of the Commission's rules guides Commission decisions regarding the final determination of administrative fines challenges. The proposed regulations direct the Commission to conclude that no violation has occurred if the Commission based its RTB finding on a factual error or if the respondent made best efforts to timely file. *Proposed* 11 CFR 111.37(b). The proposed regulations also include a new section 111.37(d), which makes clear that the staff recommendation regarding the challenge, including any changes made by the Commission, will serve as the Commission's statement of reasons regarding the administrative fine at issue. This change is intended to satisfy the *Lovely* court's concern that, in that case, the Commission had issued no opinion or statement of reasons along with its final determination. *Lovely* , 307 F. Supp. 2d at 301. Finally, the proposed regulations amend section 111.37(d) to eliminate reference to the “extraordinary circumstances” defense, which would no longer be applicable. The Commission seeks comment on these changes. Are there additional conforming amendments required to implement the proposed best efforts defense? Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory Flexibility Act) The Commission certifies that the attached proposed rules would not, if promulgated, have a significant economic impact on a substantial number of small entities. The basis for this certification is that any individuals and not-for-profit entities that would be affected by these proposed rules are not “small entities” under 5 U.S.C. 601. The definition of “small entity” does not include individuals, but classifies a not-for-profit enterprise as a “small organization” if it is independently owned and operated and not dominant in its field. 5 U.S.C. 601(4). State political party committees are not independently owned and operated because they are not financed and controlled by a small identifiable group of individuals, and they are affiliated with the larger national political party organizations. In addition, the State political party committees representing the Democratic and Republican parties have a major controlling influence within the political arena of their State and are thus dominant in their field. District and local party committees are generally considered affiliated with the State committees and need not be considered separately. To the extent that any State party committees representing minor political parties or any other political committees might be considered “small organizations,” the number that would be affected by this proposed rule is not substantial. Furthermore, any separate segregated funds that would be affected by these proposed rules are not-for-profit political committees that do not meet the definition of “small organization” because they are financed by a combination of individual contributions and financial support for certain expenses from corporations, labor organizations, membership organizations, or trade associations, and therefore are not independently owned and operated. Most of the other political committees that would be affected by these proposed rules are not-for-profit committees that do not meet the definition of “small organization.” Most political committees are not independently owned and operated because they are not financed by a small identifiable group of individuals. In addition, most political committees rely on contributions from a large number of individuals to fund the committees' operations and activities. The proposed rules also would not impose any additional restrictions or increase the costs of compliance for respondents within the administrative fines program. Instead, the proposed rules would provide additional defenses available to respondents in the administrative fines program, thereby and potentially increasing the situations in which the Commission imposes no civil money penalty. Moreover, the proposed rules would apply only in the administrative fines program, where penalties are proportionate to the amount of a political committee's financial activity. Any political committee meeting the definition of “small entity” would be subject to lower fines than larger committees with more financial activity. Therefore, the attached proposed rules, if promulgated, would not have a significant economic impact on a substantial number of small entities. List of Subjects in 11 CFR Part 111 Administrative practice and procedures, Elections, Law enforcement. For the reasons set out in the preamble, the Federal Election Commission proposes to amend Subchapter A of Chapter I of Title 11 of the *Code of Federal Regulations* as follows: PART 111—COMPLIANCE PROCEDURE (2 U.S.C. 437g, 437d(a)) 1. The authority citation for part 111 is revised to read as follows: Authority: 2 U.S.C. 432(i), 437g, 437d(a), 438(a)(8); 28 U.S.C. 2461 nt. 2. Section 111.35 is revised to read as follows: § 111.35 If the respondent decides to challenge the alleged violation or proposed civil money penalty, what should the respondent do?
(a)To challenge a reason to believe finding or proposed civil money penalty, the respondent must submit a written response to the Commission within forty days of the Commission's reason to believe finding.
(b)The respondent's written response must establish at least one of the following grounds for challenging the reason to believe finding and/or civil money penalty:
(1)The Commission's reason to believe finding is based on a factual error. Examples of a factual error include, but are not limited to, that the committee was not required to file or that the committee timely filed as described in 11 CFR 100.19 (such as by timely depositing a paper filing with an overnight delivery service);
(2)The Commission improperly calculated the civil money penalty; or
(3)The respondent made best efforts to file in a timely manner in that:
(i)The respondent was prevented from filing in a timely manner because of unforeseen circumstances that were beyond the control of the respondent; and
(ii)The respondent filed within 24 hours thereafter.
(c)Circumstances that will be considered unforeseen and beyond the control of respondent include, but are not limited to, a failure of Commission computers, Commission-provided software, or the Internet, and severe weather or other disaster-related incident.
(d)Circumstances that will not be considered unforeseen and beyond the control of respondent include, but are not limited to, negligence; delays caused by committee vendors or contractors; illness, inexperience, or unavailability of the treasurer or other staff; committee computer or software failures; a committee's failure to know filing dates; or a committee's failure to use filing software properly.
(e)Respondent's written response must detail the factual basis supporting the grounds and include any supporting documentation. 3. In § 111.37, paragraphs
(b)and
(d)are revised to read as follows: § 111.37 What will the Commission do once it receives the respondent's written response and the reviewing officer's recommendation?
(b)If the Commission, after reviewing the reason to believe finding, the respondent's written response, and the reviewing officer's written recommendation, determines by an affirmative vote of at least four
(4)of its members, that no violation has occurred (either because the Commission had based its reason to believe finding on a factual error or because the respondent made best efforts to file in a timely manner) or otherwise terminates its proceedings, the Commission shall authorize the reviewing officer to notify the respondent by letter of its final determination.
(d)When the Commission makes a final determination under this section, the statement of reasons for the Commission action consists of the reasons provided in the reviewing officer's recommendation, if adopted by the Commission, subject to any Commission amendments, additions, substitutions, or statements of reasons. Dated: November 30, 2006. Michael E. Toner, Chairman, Federal Election Commission. [FR Doc. E6-20735 Filed 12-7-06; 8:45 am] BILLING CODE 6715-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26462; Directorate Identifier 2006-NM-221-AD] RIN 2120-AA64 Airworthiness Directives; Empresa Brasileira de Aeronautica S.A. (EMBRAER) Model ERJ 170-100 LR, -100 STD, -100 SE, -100 SU, -200 LR, -200 STD, and -200 SU Airplanes and Model ERJ 190 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to adopt a new airworthiness directive
(AD)for certain EMBRAER Model ERJ 170-100 LR, -100 STD, -100 SE, -100 SU, -200 LR, -200 STD, and -200 SU airplanes and Model ERJ 190 airplanes. This proposed AD would require inspecting to determine the part number and serial number of the deployment actuator of the ram air turbine
(RAT)and related investigative and corrective actions if necessary. This proposed AD results from reports that the RAT may not fully deploy due to galling between the piston rod and gland housing of the deployment actuator. We are proposing this AD to prevent the RAT from failing to deploy, which could result in loss of control of the airplane during in-flight emergencies. DATES: We must receive comments on this proposed AD by January 8, 2007. ADDRESSES: Use one of the following addresses to submit comments on this proposed AD. • DOT Docket Web site: Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • Government-wide rulemaking Web site: Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • Mail: Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590. • Fax:
(202)493-2251. • Hand Delivery: Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Contact Empresa Brasileira de Aeronautica S.A. (EMBRAER), P.O. Box 343-CEP 12.225, Sao Jose dos Campos-SP, Brazil, for service information identified in this proposed AD. FOR FURTHER INFORMATION CONTACT: Todd Thompson, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone
(425)227-1175; fax
(425)227-1149. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed in the ADDRESSES section. Include the docket number “FAA-2006-26462; Directorate Identifier 2006-NM-221-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov,* including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78), or you may visit *http://dms.dot.gov.* Examining the Docket You may examine the AD docket on the Internet at *http://dms.dot.gov,* or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone
(800)647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them. Discussion The Agência Nacional de Aviação Civil (ANAC), which is the airworthiness authority for Brazil, notified us that an unsafe condition may exist on all EMBRAER Model ERJ 170 and ERJ 190 airplanes. The ANAC advises that it has received reports that the ram air turbine
(RAT)may not fully deploy due to galling between the piston rod and gland housing of the deployment actuator. The galling resulted in material becoming wedged between the piston rod and the gland housing. This condition, if not corrected, could lead to the RAT failing to deploy, which could result in loss of control of the airplane during in-flight emergencies. Relevant Service Information EMBRAER has issued Service Bulletins 170-24-0026 and 190-24-0003, both dated December 22, 2005. The service bulletins describe procedures for inspecting to determine the part number (P/N) and serial number (S/N) of the RAT deployment actuator. For deployment actuators having P/N 1703785 and S/N 0004, 0005, or 0101 through 0190 inclusive, the service bulletins describe procedures for investigative and corrective actions, including: • Deploying the RAT and inspecting for evidence of galling between the piston rod and gland housing of the deployment actuator; • Repeating the inspection of the actuator of any RAT that fully deploys and displays no evidence of galling as specified above, until that actuator is replaced with a modified and reidentified or new, improved actuator, which eliminates the need for the repetitive inspections only for that actuator; • Replacing the deployment actuator of any RAT that fails to fully deploy or that displays any evidence of galling, as specified above, with a modified and reidentified or new, improved actuator; and • Eventually replacing all subject actuators with modified and reidentified or new, improved actuators, which eliminates the need for the repetitive inspections for all subject actuators. For actuators having P/N 1703785 and S/Ns 0191 through 0242 inclusive, the service bulletins describe procedures for re-identifying the actuators. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. The ANAC mandated the service information and issued Brazilian airworthiness directives 2006-05-06, effective June 14, 2006, and 2006-05-09, effective June 19, 2006, to ensure the continued airworthiness of these airplanes in Brazil. The EMBRAER service bulletins refer to Hamilton Sundstrand Service Bulletin ERPS37A-24-1, dated December 6, 2005, as an additional source of service information for inspecting for galling of the piston rod of the RAT deployment actuator and re-identifying the actuator. The Hamilton Sundstrand service bulletin is included as Appendix 1 of the EMBRAER service bulletins. FAA's Determination and Requirements of the Proposed AD These airplane models are manufactured in Brazil and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the ANAC has kept the FAA informed of the situation described above. We have examined the ANAC's findings, evaluated all pertinent information, and determined that we need to issue an AD for airplanes of this type design that are certificated for operation in the United States. Therefore, we are proposing this AD, which would require doing the actions described previously, except as discussed under “Differences Among the Proposed AD, the Brazilian Airworthiness Directives, and the Service Information.” Differences Among the Proposed AD, the Brazilian Airworthiness Directives, and the Service Information The EMBRAER service bulletins specify to inspect for galling between the piston rod and gland housing in the deployment actuator; however, this proposed AD would require a “general visual inspection” for such galling. We have included a definition of this type of inspection in Note 2 of this proposed AD. Costs of Compliance The following table provides the estimated costs for U.S. operators to comply with this proposed AD, at an average labor rate of $80 per hour. Estimated Costs Action Work hours Cost per airplane Number of U.S.-registered airplanes Fleet cost Inspection to determine part and serial numbers 1 $80 76 $6,080. Inspection of piston rod 1 $80, per inspection cycle Up to 76 Up to $6,080, per inspection cycle. Replacement of RAT deployment actuator 4 $320 Up to 76 Up to $24,320. 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 proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); 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 regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 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 Federal Aviation Administration
(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **Empresa Brasileira de Aeronautica S.A. (EMBRAER):** Docket No. FAA-2006-26462; Directorate Identifier 2006-NM-221-AD. Comments Due Date
(a)The FAA must receive comments on this AD action by January 8, 2007. Affected ADs
(b)None. Applicability
(c)This AD applies to all EMBRAER Model ERJ 170-100 LR, -100 STD, -100 SE, -100 SU, -200 LR, -200 STD, and -200 SU airplanes, as identified in EMBRAER Service Bulletin 170-24-0026, dated December 22, 2005; and Model ERJ 190-100 STD, -100 LR, and -100 IGW airplanes, as identified in EMBRAER Service Bulletin 190-24-0003, dated December 22, 2005; certificated in any category. Unsafe Condition
(d)This AD results from reports that the ram air turbine
(RAT)may not fully deploy due to galling between the piston rod and gland housing of the RAT deployment actuator. We are issuing this AD to prevent the RAT from failing to deploy, which could result in loss of control of the airplane during in-flight emergencies. Compliance
(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Service Bulletin Reference
(f)The term “service bulletin,” as used in this AD, means the Accomplishment Instructions of the service bulletins identified in paragraphs (f)(1) and (f)(2) of this AD. Where these service bulletins specify returning affected parts to Hamilton Sundstrand, this AD does not require that action.
(1)For Model ERJ 170-100 LR, -100 STD, -100 SE, and -100 SU airplanes: EMBRAER Service Bulletin 170-24-0026, dated December 22, 2005.
(2)For Model ERJ 190-100 STD, -100 LR, and -100 IGW airplanes: EMBRAER Service Bulletin 190-24-0003, dated December 22, 2005. Note 1: The EMBRAER service bulletins refer to Hamilton Sundstrand Service Bulletin ERPS37A-24-1, dated December 6, 2005, as an additional source of service information for inspecting for galling of the piston rod of the RAT deployment actuator and re-identifying the actuator. The Hamilton Sundstrand service bulletin is included as Appendix 1 of the EMBRAER service bulletins. Inspection To Determine Part Number (P/N) and Serial Number (S/N)
(g)Within 600 flight hours or 3 months after the effective date of this AD, whichever occurs first: Inspect to determine the part number and serial number of the RAT deployment actuator, in accordance with the applicable service bulletin. A review of airplane maintenance records is acceptable in lieu of this inspection if the part number and serial number of the RAT deployment actuator can be conclusively determined from that review.
(1)If the part number of the actuator is not P/N 1703785: No further action is required by this AD, except as provided by paragraph
(i)of this AD.
(2)If the part number of the actuator is P/N 1703785 and the serial number is S/N 0004, 0005, or 0101 through 0190 inclusive, or the part number or serial number cannot be conclusively determined: Within 600 flight hours or 3 months after the effective date of this AD, whichever occurs first, deploy the RAT, and do the actions specified in paragraph (g)(2)(i) or (g)(2)(ii) of this AD, as applicable, in accordance with the applicable service bulletin.
(i)If the RAT does not fully deploy or if it deploys with hesitation: Before further flight, replace the RAT deployment actuator with a modified and reidentified or new, improved actuator, having P/N 1703785A.
(ii)If the RAT fully deploys without hesitation: Before further flight, perform a general visual inspection for galling of the piston rod of the RAT deployment actuator. If no evidence of galling is detected, repeat the inspection for galling at intervals not to exceed 1,200 flight hours or 5 months, whichever occurs first, and before further flight after each deployment of the RAT. If any evidence of galling is found, before further flight, replace the RAT deployment actuator with a modified and reidentified or new, improved RAT deployment actuator having P/N 1703785A. Replacing the RAT deployment actuator terminates the repetitive inspections required by this paragraph for that RAT deployment actuator only. Note 2: For the purposes of this AD, a general visual inspection is: “A visual examination of an interior or exterior area, installation, or assembly to detect obvious damage, failure, or irregularity. This level of inspection is made from within touching distance unless otherwise specified. A mirror may be necessary to ensure visual access to all surfaces in the inspection area. This level of inspection is made under normally available lighting conditions such as daylight, hangar lighting, flashlight, or droplight and may require removal or opening of access panels or doors. Stands, ladders, or platforms may be required to gain proximity to the area being checked.”
(3)If the part number of the RAT deployment actuator is P/N 1703785, and the serial number is S/N 0191 through 0242 inclusive: Within 3,000 flight hours or 12 months after the effective date of this AD, whichever occurs first, reidentify the RAT deployment actuator with new P/N 1703785A in accordance with the applicable service bulletin. Terminating Action for Repetitive Inspections
(h)Within 3,000 flight hours or 12 months after the effective date of this AD, whichever occurs first: Replace all RAT deployment actuators having P/N 1703785 and having S/N 0004, 0005, or 0101 through 190 inclusive, with modified and reidentified or new, improved actuators having P/N 1703785A, in accordance with the applicable service bulletin. Replacing all of the RAT deployment actuators terminates the repetitive inspections required by paragraph (g)(2)(ii) of this AD. Parts Installation
(i)As of the effective date of this AD, no person may install a RAT deployment actuator having P/N 1703785 on any airplane. Alternative Methods of Compliance (AMOCs) (j)(1) The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.
(2)Before using any AMOC approved in accordance with § 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Related Information
(k)Brazilian airworthiness directives 2006-05-06, effective June 14, 2006, and 2006-05-09, effective June 19, 2006, also address the subject of this AD. Issued in Renton, Washington, on November 24, 2006. Kalene C. Yanamura, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-20856 Filed 12-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26441; Directorate Identifier 2006-NM-204-AD] RIN 2120-AA64 Airworthiness Directives; Boeing Model 747 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to adopt a new airworthiness directive
(AD)for all Boeing Model 747 airplanes. This proposed AD would require an inspection of the number (No.) 2 and No. 3 windows on the left and right sides of the airplane to determine their part numbers, and related investigative and corrective actions if necessary. This proposed AD results from loss of a No. 3 window in-flight. We are proposing this AD to detect and correct cracking in the fail-safe interlayer of certain No. 2 and No. 3 glass windows, which could result in loss of the window and consequent rapid loss of cabin pressure. Loss of the window could also result in crew communication difficulties or incapacitation of the crew. DATES: We must receive comments on this proposed AD by January 22, 2007. ADDRESSES: Use one of the following addresses to submit comments on this proposed AD. • DOT Docket Web site: Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • Government-wide rulemaking Web site: Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • Mail: Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, room PL-401, Washington, DC 20590. • Fax:
(202)493-2251. • Hand Delivery: Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Contact Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-2207, for the service information identified in this proposed AD. FOR FURTHER INFORMATION CONTACT: Gary Oltman, Aerospace Engineer, Airframe Branch, ANM-120S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone
(425)917-6443; fax
(425)917-6590. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed in the ADDRESSES section. Include the docket number “FAA-2006-26441; Directorate Identifier 2006-NM-204-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov,* including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78), or you may visit *http://dms.dot.gov.* Examining the Docket You may examine the AD docket on the Internet at *http://dms.dot.gov,* or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone
(800)647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them. Discussion We have received a report indicating that a number (No.) 3 window departed in-flight from a Boeing Model 747 airplane. Loss of the window resulted in rapid loss of cabin pressure, and the flightcrew made an emergency landing. The airplane had accumulated 36,131 total flight hours and 5,607 total flight cycles. Investigation revealed that a crack was present in the fail-safe interlayer of the No. 3 window, along the inner edge of the window's aluminum edge insert. When the structural inner glass pane cracked due to an electrical arcing event unassociated with the interlayer cracking, the interlayer was not able to support the cabin pressurization load and the window departed from the airplane. Subsequently, Boeing and some operators have also found cracks in the fail-safe interlayer of certain No. 2 and No. 3 glass windows, on many Model 747 airplanes. This condition, if not corrected, could result in loss of the window and consequent rapid loss of cabin pressure. Loss of the window could also result in crew communication difficulties or incapacitation of the crew. Relevant Service Information We have reviewed Boeing Alert Service Bulletin 747-56A2012, dated August 24, 2006. The service bulletin describes procedures for doing a one-time inspection of the No. 2 and No. 3 windows on the left and right sides of the airplane to determine their part numbers (P/Ns) and doing related investigative and corrective actions if necessary. The service bulletin states that, instead of an inspection to determine the part number of a window, a review of maintenance records is acceptable if the part number of the window can be positively determined from that review. The service bulletin also states that if acrylic windows having P/N 65B07639-( ) or 65B07640-( ) are installed, no further inspections are necessary. The service bulletin also states that if the part number of the left No. 2 window, left No. 3 window, right No. 2 window, or right No. 3 window cannot be identified, you must assume that it is P/N 65B27042-1, 65B27043-1, 65B27042-2, or 65B27043-2, respectively. If glass windows having P/N 65B27042-( ), 65B27043-( ), 65B27046-( ), or 65B27047-( ) are installed, the service bulletin specifies doing the related investigative actions, which are repetitive detailed inspections for cracking or damage to the window. The corrective action is replacement of the affected window with a new window, if any of the following conditions are found during a detailed inspection: cracks in any fail-safe interlayer, cracks in a glass pane, chips in a structural glass pane, evidence of electrical arcing, or any non-clear damage to the window. For the one-time inspection to determine the part numbers of the No. 2 and No. 3 windows, Table 1 of the service bulletin specifies doing the inspection at the earlier of the following compliance times:
(1)Within 5,500 flight hours after the window was installed or 1,000 flight hours after the date of the service bulletin, whichever occurs last, or
(2)within 2 years after the date of the service bulletin. Table 1 states that if the number of flight hours since the window was installed is not known, you must assume that the window is beyond the 5,500 flight-hour limit. For a window having P/N 65B27042-( ) or 65B27043-( ), Table 2 of the service bulletin specifies doing the related investigative action (detailed inspection) at the earlier of the following compliance times:
(1)Within 5,500 flight hours after the window was installed or 1,000 flight hours after the date of the service bulletin, whichever occurs last, or
(2)within 2 years after the date of the service bulletin. Table 2 states that if the number of flight hours since the window was installed is not known, you must assume that the window is beyond the 5,500 flight-hour limit. Table 2 specifies repeating the detailed inspection at intervals not to exceed 3,000 flight hours or 3 years, whichever occurs first. Table 2 also specifies replacing the window before further flight after the inspection, if necessary. For a window having P/N 65B27046-( ) or 65B27047-( ), Table 3 of the service bulletin specifies doing the related investigative action (detailed inspection) at the earlier of the following compliance times:
(1)Within 22,000 flight hours after the window was installed or 1,000 flight hours after the date of the service bulletin, whichever occurs last, or
(2)within 3 years after the date of the service bulletin. Table 3 states that if the number of flight hours since the window was installed is not known, you must assume that the window is beyond the 22,000 flight-hour limit. Table 3 specifies repeating the detailed inspection at intervals not to exceed 7,500 flight hours or 5 years, whichever occurs first. Table 3 also specifies replacing the window before further flight, if necessary. FAA's Determination and Requirements of the Proposed AD We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other airplanes of this same type design. For this reason, we are proposing this AD, which would require accomplishing the actions specified in the service information described previously. Interim Action This is considered to be interim action until final action is identified, at which time we may consider further rulemaking. Costs of Compliance There are about 949 airplanes of the affected design in the worldwide fleet. This proposed AD would affect about 153 airplanes of U.S. registry. The proposed inspection to determine the window part numbers would take about 4 work hours per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the proposed AD for U.S. operators is $48,960, or $320 per airplane. The proposed detailed inspection, if necessary, would take about 1 work hour per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the proposed detailed inspection for U.S. operators is $80 per airplane, per inspection cycle. 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 proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); 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 regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 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 Federal Aviation Administration
(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **Boeing:** Docket No. FAA-2006-26441; Directorate Identifier 2006-NM-204-AD. Comments Due Date
(a)The FAA must receive comments on this AD action by January 22, 2007. Affected ADs
(b)None. Applicability
(c)This AD applies to all Boeing Model 747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747-200F, 747-300, 747-400, 747-400D, 747-400F, 747SR, and 747SP series airplanes, certificated in any category. Unsafe Condition
(d)This AD results from loss of a number (No.) 3 window in-flight. We are issuing this AD to detect and correct cracking in the fail-safe interlayer of certain No. 2 and No. 3 glass windows, which could result in loss of the window and consequent rapid loss of cabin pressure. Loss of the window could also result in crew communication difficulties or incapacitation of the crew. Compliance
(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Inspection, Related Investigative Actions, and Corrective Action
(f)Inspect the No. 2 and No. 3 windows on the left and right sides of the airplane to determine their part numbers (P/Ns), and do all the applicable related investigative and corrective actions, by accomplishing all of the actions specified in Accomplishment Instructions of Boeing Alert Service Bulletin 747-56A2012, dated August 24, 2006, as applicable. Do all of these actions at the compliance times specified in Tables 1, 2, and 3 of paragraph 1.E. of the service bulletin, as applicable, except as provided by paragraph
(g)of this AD. A review of airplane maintenance records is acceptable in lieu of the inspection if the part numbers of the windows can be conclusively determined from that review. Repeat the related investigative and corrective actions thereafter at the interval specified in Table 2 or 3 of the service bulletin, as applicable. Exception to Compliance Times
(g)Where Tables 1, 2, and 3 of paragraph 1.E. of Boeing Alert Service Bulletin 747-56A2012, dated August 24, 2006, specify counting the compliance time from “* * * after the date on this service bulletin,” this AD requires counting the compliance time from the effective date of this AD. Alternative Methods of Compliance (AMOCs) (h)(1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.
(2)Before using any AMOC approved in accordance with § 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office.
(3)An AMOC that provides an acceptable level of safety may be used for any repair required by this AD, if it is approved by an Authorized Representative for the Boeing Commercial Airplanes Delegation Option Authorization Organization who has been authorized by the Manager, Seattle ACO, to make those findings. For a repair method to be approved, the repair must meet the certification basis of the airplane, and the approval must specifically refer to this AD. Issued in Renton, Washington, on November 20, 2006. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-20863 Filed 12-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26272; Directorate Identifier 2006-NM-153-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Model A318, A319, A320, and A321 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to adopt a new airworthiness directive
(AD)for all Airbus Model A318, A319, A320, and A321 airplanes. This proposed AD would require repetitive inspections of the operation of the main landing gear
(MLG)door opening sequence to determine if a defective actuator is installed, and replacing any defective actuator with a new actuator. This proposed AD results from reports of slow operation of the MLG door opening/closing sequence due to a defective actuator. We are proposing this AD to detect and correct defective actuators of the MLG door, which could result in slow operation of the MLG door and consequent non-extension of the MLG during an emergency freefall operation. DATES: We must receive comments on this proposed AD by January 8, 2007. ADDRESSES: Use one of the following addresses to submit comments on this proposed AD. • DOT Docket Web site: Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • Government-wide rulemaking Web site: Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • Mail: Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, room PL-401, Washington, DC 20590. • Fax:
(202)493-2251. • Hand Delivery: Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Contact Airbus, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France, for service information identified in this proposed AD. FOR FURTHER INFORMATION CONTACT: Tim Dulin, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, WA 98057-3356; telephone
(425)227-2141; fax
(425)227-1149. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed in the ADDRESSES section. Include the docket number “FAA-2006-26272; Directorate Identifier 2006-NM-153-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov* , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78), or you may visit *http://dms.dot.gov* . Examining the Docket You may examine the AD docket on the Internet at *http://dms.dot.gov* , or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone
(800)647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them. Discussion The European Aviation Safety Agency (EASA), which is the airworthiness authority for the European Union, notified us that an unsafe condition may exist on all Airbus Model A318, A319, A320, and A321 airplanes. The EASA advises that there have been several reports of slow operation of the MLG door opening/closing sequence due to a defective actuator. This could lead to the generation of electronic centralized aircraft monitor warnings during the landing gear retraction or extension sequence. Investigation revealed that the affected MLG doors were difficult to open manually (unusually high pressure was required to extend the actuator to open the door) due to a problem with the door actuator. The damping ring and associated retaining ring were found broken, with subsequent damage to the damping housing from resulting debris. The resulting high friction delays the MLG extension/retraction sequence. This condition, if not corrected, could result in slow operation of the MLG door and consequent non-extension of the MLG during an emergency freefall operation. Relevant Service Information Airbus has issued Service Bulletin A320-32-1309, dated March 7, 2006. The service bulletin describes procedures for repetitive inspections of the operation of the main landing gear door
(MLG)opening sequence to determine if a defective actuator is installed, and replacing any defective actuator with a new actuator. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. The EASA mandated the service information and issued airworthiness directive 2006-0112, dated May 15, 2006, to ensure the continued airworthiness of these airplanes in France. FAA's Determination and Requirements of the Proposed AD These airplane models are manufactured in France and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. As described in FAA Order 8100.14A, “Interim Procedures for Working with the European Community on Airworthiness Certification and Continued Airworthiness,” dated August 12, 2005, the EASA has kept the FAA informed of the situation described above. We have examined the EASA's findings, evaluated all pertinent information, and determined that we need to issue an AD for airplanes of this type design that are certificated for operation in the United States. Therefore, we are proposing this AD, which would require accomplishing the actions specified in the service information described previously, except as discussed under “Difference Between Proposed AD and the Service Information.” Difference Between Proposed AD and the Service Information Although the Accomplishment Instructions of the service bulletin describe procedures for submitting certain information to the manufacturer and sending defective actuators back to the component manufacturer for investigation, this AD does not include those requirements. Interim Action We consider this proposed AD interim action. If final action is later identified, we may consider further rulemaking then. Clarification of Inspection Terminology In this proposed AD, the “inspection” specified in the service bulletin is referred to as a “general visual inspection.” We have included the definition for a general visual inspection in a note in the proposed AD. Costs of Compliance This proposed AD would affect about 700 airplanes of U.S. registry. The proposed inspection would take about 1 work hour per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the proposed AD for U.S. operators is $56,000, or $80 per airplane, per inspection cycle. 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 proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); 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 regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 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 Federal Aviation Administration
(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **Airbus:** Docket No. FAA-2006-26272; Directorate Identifier 2006-NM-153-AD. Comments Due Date
(a)The FAA must receive comments on this AD action by January 8, 2007. Affected ADs
(b)None. Applicability
(c)This AD applies to all Airbus Model A318, A319, A320, and A321 airplanes, certificated in any category. Unsafe Condition
(d)This AD results from reports of slow operation of the main landing gear
(MLG)door opening/closing sequence due to a defective actuator. We are issuing this AD to detect and correct defective actuators of the MLG door, which could result in slow operation of the MLG door and consequent non-extension of the MLG during an emergency freefall operation. Compliance
(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Repetitive Inspections/Replacement
(f)At the time specified in paragraph (f)(1) or (f)(2) of this AD, as applicable: Do a general visual inspection of the operation of the MLG door opening sequence to determine if a defective actuator is installed by doing all the applicable actions, including replacing the door actuator, as applicable, specified in the Accomplishment Instructions of Airbus Service Bulletin A320-32-1309, dated March 7, 2006. Do all applicable replacements before further flight. Repeat the inspection thereafter at intervals not to exceed 900 flight cycles.
(1)For airplanes on which a record of the total number of flight cycles on the MLG door actuator is available: Before the accumulation of 3,000 total flight cycles on the MLG door actuator, or within 800 flight cycles after the effective date of this AD, whichever is later.
(2)For airplanes on which a record of the total number of flight cycles on the MLG door actuator is not available: With 800 flight cycles after the effective date of this AD. Note 1: For the purposes of this AD, a general visual inspection is: “A visual examination of an interior or exterior area, installation, or assembly to detect obvious damage, failure, or irregularity. This level of inspection is made from within touching distance unless otherwise specified. A mirror may be necessary to enhance visual access to all exposed surfaces in the inspection area. This level of inspection is made under normally available lighting conditions such as daylight, hangar lighting, flashlight, or droplight and may require removal or opening of access panels or doors. Stands, ladders, or platforms may be required to gain proximity to the area being checked.”
(g)Although the Accomplishment Instructions of Airbus Service Bulletin A320-32-1309, dated March 7, 2006, specifies submitting certain information to the manufacturer and sending defective actuators back to the component manufacturer for investigation; this AD does not include those requirements. Alternative Methods of Compliance (AMOCs) (h)(1) The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.
(2)Before using any AMOC approved in accordance with § 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Related Information
(i)EASA airworthiness directive 2006-0112, dated May 15, 2006, also addresses the subject of this AD. Issued in Renton, Washington, on November 21, 2006. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-20852 Filed 12-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26516; Directorate Identifier 2006-NM-173-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Model A318, A319, A320, and A321 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to supersede an existing airworthiness directive
(AD)that applies to all Airbus Model A318-100 and A319-100 series airplanes, Model A320-111 airplanes, and Model A320-200, A321-100, and A321-200 series airplanes. The existing AD currently requires repetitive inspections of the upper and lower attachments of the trimmable horizontal stabilizer actuator
(THSA)to measure for proper clearance and to detect cracks, damage, and metallic particles. The existing AD also requires corrective actions, if necessary, and reports of inspection findings. This proposed AD would shorten the repetitive interval for inspecting the upper THSA attachment. This proposed AD results from new test results on the secondary load path, which indicated the need to shorten the repetitive interval for inspecting the upper THSA attachment. We are proposing this AD to detect and correct failure of the THSA's primary load path, which could result in latent (undetected) loading and eventual failure of the THSA's secondary load path and consequent uncontrolled movement of the horizontal stabilizer and loss of control of the airplane. DATES: We must receive comments on this proposed AD by January 8, 2007. ADDRESSES: Use one of the following addresses to submit comments on this proposed AD. • DOT Docket Web site: Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • Government-wide rulemaking Web site: Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • Mail: Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590. • Fax:
(202)493-2251. • Hand Delivery: Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Contact Airbus, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France, for service information identified in this proposed AD. FOR FURTHER INFORMATION CONTACT: Tim Dulin, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone
(425)227-2141; fax
(425)227-1149. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed in the ADDRESSES section. Include the docket number “Docket No. FAA-2006-26516; Directorate Identifier 2006-NM-173-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov,* including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78), or you may visit *http://dms.dot.gov.* Examining the Docket You may examine the AD docket on the Internet at *http://dms.dot.gov,* or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone
(800)647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them. Discussion On March 22, 2006, we issued AD 2006-07-09, amendment 39-14536 (71 FR 16203, March 31, 2006), for all Airbus Model A318-100 and A319-100 series airplanes, Model A320-111 airplanes, and Model A320-200, A321-100, and A321-200 series airplanes. That AD requires repetitive inspections of the upper and lower attachments of the trimmable horizontal stabilizer actuator
(THSA)to measure for proper clearance and to detect cracks, damage, and metallic particles. That AD also requires corrective actions, if necessary, and reports of inspection findings. That AD resulted from a report indicating that, during lab testing to verify the performance of the THSA's secondary load path with a simulated failure of the THSA's primary load path, the secondary load path's nut did not jam (as it was supposed to do). We issued that AD to ensure the integrity of the THSA's primary load path, which, if failed, could result in latent (undetected) loading and eventual failure of the THSA's secondary load path and consequent uncontrolled movement of the horizontal stabilizer and loss of control of the airplane. Actions Since Existing AD Was Issued Since we issued AD 2006-07-09, the European Aviation Safety Agency (EASA), which is the airworthiness authority for the European Union, has advised us that further tests on the secondary load path have indicated the need to shorten the repetitive interval for inspecting the upper THSA attachment. Relevant Service Information AD 2006-07-09 cited Airbus Service Bulletin A320-27-1164, Revision 03, dated August 24, 2005, as the appropriate source of service information for required actions. Airbus has since issued Revision 04, including Appendix 01, of the service bulletin, dated July 17, 2006, which describes essentially the same actions as those in Revision 03. Revision 04 recommends a shorter repetitive interval for inspecting the upper THSA attachment. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. The EASA mandated the service information and issued airworthiness directive 2006-0223, dated July 21, 2006, to ensure the continued airworthiness of these airplanes in the European Union. FAA's Determination and Requirements of the Proposed AD These airplane models are manufactured in France and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. As described in FAA Order 8100.14A, “Interim Procedures for Working with the European Community on Airworthiness Certification and Continued Airworthiness,” dated August 12, 2005, the EASA has kept the FAA informed of the situation described above. We have examined the EASA's findings, evaluated all pertinent information, and determined that we need to issue an AD for airplanes of this type design that are certificated for operation in the United States. This proposed AD would supersede AD 2006-07-09. This proposed AD would retain the requirements of that AD but with a shorter repetitive interval for inspecting the upper THSA attachment. This proposed AD would also require that reports of positive findings of each inspection be sent to Airbus. Explanation of Change to Existing AD The existing AD requires that certain repairs be done using a method approved by either the FAA or the Direction Générale de l'Aviation Civile
(DGAC)(or its delegated agent). The EASA has assumed responsibility for the airplane models that would be subject to this proposed AD. Therefore, this proposed AD would require that those repairs be done using a method approved by the FAA, the DGAC (or its delegated agent), or the EASA (or its delegated agent). Explanation of Change to Applicability We have revised the applicability of the existing AD to identify model designations consistent with the parallel EASA airworthiness directive. Costs of Compliance The following table provides the estimated costs for U.S. operators to comply with this proposed AD, per inspection cycle. Estimated Costs Work hours Average labor rate per hour Parts Cost per airplane Number of U.S.- registered airplanes Fleet cost 1 $80 None $80 700 $56,000 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 proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); 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 regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 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 Federal Aviation Administration
(FAA)amends § 39.13 by removing amendment 39-14536 (71 FR 16203, March 31, 2006) and adding the following new airworthiness directive (AD): **Airbus:** Docket No. FAA-2006-26516; Directorate Identifier 2006-NM-173-AD. Comments Due Date
(a)The FAA must receive comments on this AD action by January 8, 2007. Affected ADs
(b)This AD supersedes AD 2006-07-09. Applicability
(c)This AD applies to all Airbus Model A318, A319, A320, and A321 airplanes, certificated in any category. Unsafe Condition
(d)This AD results from a report indicating that, during lab testing to verify the performance of the secondary load path of the trimmable horizontal stabilizer actuator
(THSA)with a simulated failure of the THSA's primary load path, the secondary load path's nut did not jam (as it was supposed to do). We are issuing this AD to detect and correct failure of the THSA's primary load path, which could result in latent (undetected) loading and eventual failure of the THSA's secondary load path and consequent uncontrolled movement of the horizontal stabilizer and loss of control of the airplane. Compliance
(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Note 1: For the purposes of this AD, a detailed inspection is: “An intensive examination of a specific item, installation, or assembly to detect damage, failure, or irregularity. Available lighting is normally supplemented with a direct source of good lighting at an intensity deemed appropriate. Inspection aids such as mirror, magnifying lenses, etc., may be necessary. Surface cleaning and elaborate procedures may be required.” Repetitive Inspections: Lower THSA Attachment
(f)Within 20 months since first flight, or within 600 flight hours after May 5, 2006 (the effective date of AD 2006-07-09), whichever occurs later: Do detailed inspections of the lower THSA attachments for proper clearances, and do related corrective actions as applicable, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-27-1164, Revision 03, including Appendix 01, dated August 24, 2005; or Revision 04, including Appendix 01, dated July 17, 2006. After the effective date of this AD, only Revision 04 of the service bulletin may be used. Do corrective actions before further flight. Repeat the inspection thereafter at intervals not to exceed 20 months. Repetitive Inspections: Upper THSA Attachment
(g)At the earlier of the times specified in paragraphs (g)(1) and (g)(2) of this AD: Do detailed inspections of the upper THSA attachment for cracks, damage, or metallic particles, and do related corrective actions as applicable, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-27-1164, Revision 04, including Appendix 01, dated July 17, 2006, except as required by paragraph
(h)of this AD. Do corrective actions before further flight. Repeat the inspections thereafter at intervals not to exceed 10 months.
(1)At the latest of the times specified in paragraphs (g)(1)(i), (g)(1)(ii), and (g)(1)(iii) of this AD.
(i)Within 10 months since the first flight of the airplane.
(ii)Within 10 months after the most recent inspection of the upper THSA attachment done in accordance with Airbus Service Bulletin A320-27-1164, Revision 02, including Appendix 01, dated March 30, 2005; Revision 03, including Appendix 01, dated August 24, 2005; or Revision 04, including Appendix 01, dated July 17, 2006.
(iii)Within 100 days after the effective date of this AD.
(2)Within 20 months after the most recent inspection of the upper THSA attachment done in accordance with Airbus Service Bulletin A320-27-1164, Revision 02, dated March 30, 2005; Revision 03, dated August 24, 2005; or Revision 04, dated July 17, 2006. Repair Exceptions
(h)If any metallic particles are detected during any inspection required by paragraph
(g)of this AD: Repair the damage before further flight in accordance with a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; the Direction Générale de l'Aviation Civile
(DGAC)(or its delegated agent); or the European Aviation Safety Agency
(EASA)(or its delegated agent). Acceptable Prior Actions
(i)Inspections of the lower THSA attachment done before May 5, 2006, in accordance with Airbus Alert Service Bulletin A320-27A1164, dated September 10, 2004; or Airbus Service Bulletin A320-27-1164, Revision 01, including Appendix 01, dated December 17, 2004; are acceptable for compliance with the inspection requirements of paragraph
(f)of this AD.
(j)Actions done before the effective date of this AD in accordance with Airbus Service Bulletin A320-27-1164, Revision 02, including Appendix 01, dated March 30, 2005; or Revision 03, including Appendix 01, dated August 24, 2005; are acceptable for compliance with the corresponding requirements of paragraphs
(f)and
(g)of this AD. Inspection Reports
(k)At the applicable time specified in paragraph (k)(1) or (k)(2) of this AD, send a report of the positive findings of all inspections required by paragraphs
(f)and
(g)of this AD to Airbus, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France. The report must include the inspection results, a description of any discrepancies found, the airplane serial number, and the number of landings and flight hours on the airplane. Using Appendix 01 of Airbus Service Bulletin A320-27-1164, Revision 02, dated March 30, 2005; Revision 03, dated August 24, 2005; or Revision 04, dated July 17, 2006; is an acceptable method to comply with this paragraph. Under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 *et seq.* ), the Office of Management and Budget
(OMB)has approved the information collection requirements contained in this AD and has assigned OMB Control Number 2120-0056.
(1)For any inspection done before the effective date of this AD: Send the report within 30 days after the effective date of this AD.
(2)For any inspection done after the effective date of this AD: Send the report within 30 days after the inspection. Alternative Methods of Compliance (AMOCs) (l)(1) The Manager, International Branch, ANM-116, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.
(2)Before using any AMOC approved in accordance with § 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Related Information
(m)EASA airworthiness directive 2006-0223, dated July 21, 2006, also addresses the subject of this AD. Issued in Renton, Washington, on November 24, 2006. Kalene C. Yanamura, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-20851 Filed 12-7-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Office of the Secretary 14 CFR Part 399 [Docket No. OST-2003-15759] RIN: 2105-AD25 Actual Control of U.S. Air Carriers AGENCY: Office of the Secretary, DOT. ACTION: Withdrawal of certain proposed amendments. SUMMARY: Current law requires that U.S. citizens actually control each U.S. air carrier, that U.S. citizens own or control at least 75 percent of the shareholders' voting interest, and that the president and two-thirds of the directors and the managing officers must be U.S. citizens. The Department interprets this law in conducting initial and continuing fitness reviews of U.S. air carriers. We are withdrawing a proposal to modify by regulation the standards we apply in those cases where “actual control” by U.S. citizens is at issue. The proposal being withdrawn would have narrowed the scope of our inquiry in such cases to those core matters affecting compliance with U.S. requirements affecting safety, security, national defense and corporate governance. These rationalized standards for deciding whether U.S. citizens maintained “actual control” of a carrier would have applied only to proposed transactions involving investors whose countries have an open-skies air services agreement with the United States and offer reciprocal investment opportunities to U.S. citizens. Our interpretation of other aspects of the statutory citizenship requirement would have been unchanged. Although we are withdrawing the current proposal, we will continue to consider other ways to rationalize and simplify our domestic investment regime. The need for greater certainty and transparency in our requirements and administrative process has become very apparent. Indeed, public comment in this docket has only served to confirm the Department's growing concern that the current regime is so unduly complex and burdensome that it needlessly inhibits the movement of capital that otherwise would flow into the U.S. airline industry and thus interferes with the legitimate needs of U.S. carriers to attract strategic investors from overseas markets. The Department notes that most of the American economy has progressed well beyond the antiquated notions that continue to apply to the airline industry because of our administrative interpretations of the current statute. In a modern, global industry such as aviation, we believe that the United States should not shut its doors to foreign investment by perpetuating archaic and time-consuming administrative practices that serve neither a statutory purpose nor an identifiable policy interest of the United States. The Department had also proposed amendments to 14 CFR Part 204, the rules governing the data used in fitness determinations, and invited comment on the procedures used in fitness cases. The Department will publish a separate decision on those matters. FOR FURTHER INFORMATION CONTACT: William M. Bertram, Chief, Air Carrier Fitness Division (X-56), Office of Aviation Analysis, U.S. Department of Transportation, 400 7th Street, SW., Washington, DC 20590;
(202)366-9721. SUPPLEMENTARY INFORMATION: Introduction Under Title 49 of the U.S. Code, only “citizens” of the United States may obtain certificate authority to provide air transportation within the United States or operate as a U.S. air carrier on international routes. (49 U.S.C. 41102 or 41103.) The Department proposed to modify its interpretation of “actual control,” an element in the statutory definition of a citizen of the United States, 49 U.S.C. 40102(a)(15), because it believes that modernizing its policies so as to allow more foreign investment in U.S. carriers would better reflect the realities of a global aviation industry, strengthen the U.S. air transportation system, and encourage other countries to open their own air services and investment markets. Our proposal would not have and could not have altered the statutory test for citizenship nor was it an attempt to do so. We stated our intention to continue vigorous enforcement of the statute's express requirements. We did propose, however, to eliminate certain *additional* citizenship restrictions that had been established administratively over the course of decades in individual fitness cases and that in our view are anachronistic, overly complex, and unduly burdensome. Accordingly, the net result of our proposal would have been to end a long-standing, extraneous administrative prohibition against foreign investors having even a “semblance” of control over airline commercial decisions; the revised approach would have applied only to investors whose home countries had open-skies agreements with the United States and provided reciprocal investment opportunities for U.S. citizens. The proposal would have maintained the prohibition against foreign citizen control of decisions on corporate governance, safety, security, and participation in the Civil Reserve Air Fleet program and other national defense airlift programs (for simplicity, referred to as “CRAF” hereafter). To ensure control by U.S. citizens, as an added measure we would have required that any delegation of authority by U.S. citizens to foreign investors be fully revocable by the shareholders or board of directors. We provided several opportunities for interested parties to comment on the proposal, including a supplemental notice of proposed rulemaking (SNPRM) that further clarified our proposed modified interpretation of “actual control.” 71 FR 26425 (May 5, 2006). In the supplemental notice, we made refinements to our proposal reflecting further consultations with our Federal Aviation Administration (FAA), the Department of Homeland Security (DHS), and the Department of Defense (DOD). We also acknowledged requests by members of Congress, who wanted us to provide time for more public comment on the proposal and for Congressional hearings on the topic. The additional comments that we received in response to the SNPRM confirmed our earlier determination that the Department's historic interpretation of the actual control requirement did not serve the public interest well. During the rulemaking we also proposed several technical changes to the rules governing the data for fitness determinations, 14 CFR Part 204. Those proposals were unopposed. We also requested public comment on the procedures used by us in resolving citizenship issues. We will publish our decision on those proposals in a separate rulemaking document. Background A firm may not be certificated as an air carrier to operate within the United States or as a U.S. carrier on international routes unless it is a citizen of the United States. 49 U.S.C. 40102(a). We examine carrier citizenship primarily in two situations. First, when a firm applies for authority to operate as a U.S. carrier, we conduct an initial fitness review, which necessarily includes a review of the carrier's citizenship. We conduct initial fitness reviews through adjudicatory proceedings for which a public record is maintained in our docket. Second, we conduct a continuing fitness review if a carrier undergoes a substantial change in ownership, operations, or management. We usually conduct continuing fitness investigations without a public proceeding and thus without a public record or an opportunity for public comment. In some continuing fitness cases, we may decide to use procedures that are more public so that there will be a public record and an opportunity for public comment. We may amend, modify, suspend, or revoke the carrier's license, or begin an enforcement action if a carrier no longer meets the citizenship test. See 71 FR 26426-26427. The statute defines the requirements for United States citizenship. 49 U.S.C. 40102(a)(15)(C). For many years that statute required only that the president and at least two-thirds of the board of directors and other managing officers be citizens of the United States, and that at least 75 percent of the voting interest be owned or controlled 1 by persons that are citizens of the United States. Our predecessor agency in administering this statute, the Civil Aeronautics Board (the Board), created an additional requirement not then required by the text of the statute: the requirement that U.S. citizens must “actually control” each U.S. carrier. *Willye Peter Daetwyler, d.b.a. Interamerican Air Freight Co., Foreign Permit,* 58 CAB 118, 120-121 (1971). 1 We and the Board have always interpreted this part of the statute as “owned and controlled.” In order to determine citizenship to verify compliance with the actual control requirement, both the Department and the Board have employed a fact-specific method of inquiry. *See* 71 FR 26437, citing 68 FR 44675, 44676 (July 30, 2003). Each decision considered the “totality of circumstances” of the airline's organization, including its capital structure, management, and contractual relationships, in determining whether U.S. citizens actually control a carrier. We developed our policies on interpreting the actual control requirement through our decisions in individual cases, based on the facts and circumstances of each case, and did not establish a specific definition of “actual control” through any rulemaking. We have continually modified our interpretation over time in light of changing conditions. *See* 71 FR 27437, citing *Northwest Airlines Acquisition by Wings Holdings,* Order 91-1-41 (January 23, 1991), and a more recent decision enabling Hawaiian Airlines to complete its reorganization with some foreign investment. Neither the Department nor the Board has administered the actual control requirement in a way that barred U.S. carriers from having substantial commercial relationships with foreign carriers and other foreign firms. For instance, we have held that a U.S. airline continued to satisfy the actual control requirement when it had an alliance relationship with a foreign airline that necessarily enabled the foreign partner airline to influence the U.S. airline's commercial decisions. *Acquisition of Northwest Airlines by Wings Holdings, Inc.,* Order 92-11-27 (November 16, 1992), at 16-17. Nonetheless, the Department's and the Board's interpretations of “actual control,” by effectively prohibiting foreign investors from enjoying any meaningful participation in the decision-making of U.S. airlines, has left foreign investors with a very limited ability to protect their interests as minority investors. We at times implemented the “actual control” requirement as barring foreign investors from having any “semblance” of control, which effectively relegated them to being passive investors, unable to participate in carrier commercial decisions that affected the value of their own investment. Three years ago Congress amended the citizenship definition by expressly adding an actual control requirement to the statute. As a result, the statute provides that a corporation can only be a citizen of the United States if it is “under the actual control of citizens of the United States.” Vision 100—Century of Aviation Reauthorization Act, P.L. 108-176, § 807, 117 Stat. 2490 (2004). Congress chose not to define “actual control.” Notice of Proposed Rulemaking We proposed our modified interpretation of “actual control” in order to facilitate efforts by U.S. airlines to remain competitive in the global airline industry. We grounded our proposal on three premises: *first,* that in view of the changes taking place in the global economy, U.S. air carriers should have the broadest access to the global capital markets permitted by law; *second,* that our historical interpretation of the term “actual control” has failed to keep pace with the changes in the global economy; and *third,* that in order to provide U.S. carriers with more flexibility to compete in the global economy, we should not maintain an interpretation of “actual control” that is more restrictive than necessary to meet statutory requirements. 71 FR 26427-26429; 70 FR 67393-67394. In sum, we acted on the policy that we should remove unnecessary restrictions on U.S. carriers seeking access to global capital markets. In 2003, we issued an Advance Notice of Proposed Rulemaking (ANPRM) that sought comment on our standards and procedures for determining whether U.S. citizens actually control a carrier. 68 FR 44675 (July 30, 2003). After considering the comments, we issued a Notice of Proposed Rulemaking
(NPRM)concerning our interpretation of “actual control” and use of informal procedures in most continuing fitness reviews. 70 FR 67389 (November 7, 2005). The Department proposed to update our interpretation of “actual control” so as to end restrictions on foreign involvement that, in our view, needlessly interfere with the ability of U.S. carriers to access international capital markets and thus to compete effectively in the global marketplace. Under our proposal, U.S. citizens would remain in control of the carrier through their authority over corporate governance and those areas of airline operations subject to significant government regulation: Safety, security, and CRAF participation. This modification would apply only if the foreign investors' home country had an open-skies air services agreement with the United States and, further, provided investment reciprocity for U.S. citizens wishing to invest in that country's airlines, or where the United States' international obligations otherwise required the same approach. Supplemental Notice of Proposed Rulemaking We issued a Supplemental Notice of Proposed Rulemaking (SNPRM) to address comments received on the NPRM, and to propose additional refinements to the proposal in order to definitively clarify that U.S. citizens would still retain actual control of U.S. carriers under the Department's proposal. 71 FR 26425 (May 5, 2006). The SNPRM retained our proposal to allow carriers to delegate decision-making responsibilities to foreign citizens (except for organizational documents, safety, security, and CRAF participation matters). However, we added language to make clear that such delegations would have to be revocable by the board of directors or shareholders—whose votes would be controlled by U.S. citizens. The right to revoke delegations of management authority, we felt, was intrinsic to the requirement that U.S. citizens maintain actual control of the carrier. We further proposed in the SNPRM to broaden the scope of decision-making in the areas of safety, security, and CRAF participation that must remain under the actual control of U.S. citizens. The proposed revisions would unequivocally ensure that safety and security decisions generally, not just those related to FAA and TSA safety and security requirements, as well as all decisions on national defense airlift commitments, not just CRAF commitments, remained firmly under the actual control of U.S. citizens. Our refinement of our proposals on safety, security, and CRAF participation reflected as well our discussions with the FAA, DHS, TSA, and DOD. We determined that we have the authority to interpret the statutory definition of “actual control,” because we are responsible for administering it; that authority enables us to modify our interpretations when changing industry conditions and policies require doing so; and our proposed modified interpretation would be consistent with the language and purpose of the statute. We further stated that we should change our interpretation when the past interpretation has become inconsistent with commercial developments and the public policy goals set by our statute, 49 U.S.C. 40101(a). Finally, we noted that neither the statute nor its legislative history indicated that Congress had intended to freeze our earlier interpretations of “actual control.” 71 FR 26436-26439. After we issued the SNPRM, the Aviation Subcommittee of the Senate Committee on Commerce, Science, and Transportation held a hearing on our proposal on May 9, 2006. The Aviation Subcommittee of the House Transportation and Infrastructure Committee had held a hearing on our proposal on February 8, 2006, based on the NPRM. Jeffrey N. Shane, the Department's Under Secretary for Policy, testified at both hearings. Several members of Congress have written letters to the Secretary that contend that our proposal is unwise and a significant departure from what they perceive as existing precedent. These concerns were also raised at hearings and in proposed legislation. Summary of Comments We invited comments on the proposal as refined by our SNPRM. We received 21 comments on the SNPRM from carriers, labor parties, and industry associations, and three comments from individuals. The majority of commenters supported the policy change as a way to strengthen the U.S. airline industry and encourage the liberalization of international aviation. The Department received general support for its proposed changes from Airports Council International— Europe (ACI), Airports Council International— North America (ACI-NA), Association of European Airlines (AEA), bmi, Delta Air Lines (Delta), DePaul University College of Law International Aviation Law Institute (DePaul), Federal Express (FedEx), Hawaiian Airlines (Hawaiian), International Air Transport Association (IATA), United Air Lines (United), United Parcel Service (UPS), United States Airports for Better International Air Service (USA-BIAS), U.S. Airways, and the Washington Airports Task Force (WATF). Other commenters—notably the Aircraft Mechanics Fraternal Association (AMFA), Air Line Pilots Association (ALPA), British Airways, Continental Airlines (Continental), Independent Pilots Association (IPA), Transportation Trades Department AFL-CIO (TTD), and Virgin Atlantic Airways (Virgin Atlantic)—opposed our proposal, claiming that the proposed rule would be unlawful, impracticable, ineffective in achieving the desired result, or harmful to the airline industry and its unionized employees. Both supporters and opponents of our proposal asserted that the rule, as proposed, provided inadequate guidance to carriers and potential foreign investors and that our final decision should provide examples of the kind of business relationships that would or would not be permitted by a final rule. *See, e.g.* , AEA Comments at 4; British Airways Comments at 3-4; IATA Comments at 6; Virgin Atlantic Comments at 5-6; ACI Comments at 2. Other commenters asserted that it was not clear whether our proposed revocability requirement—the requirement that a U.S. carrier have the practicable ability to revoke any delegation of decision-making authority to a foreign investor—would be consistent with standard commercial practices in other industries, which make a firm's ability to revoke a contract with its investors subject to conditions limiting the ability to revoke in order to protect the investors' legitimate interests. *See, e.g.* , FedEx Comments at 7-9; ACI-NA Comments at 4; DePaul Comments at 4; US-BIAS Comments. Some commenters contended that our proposals were too restrictive; Delta, for example, asserted that the revocation requirement was “flatly inconsistent” with our goal of encouraging foreign investment. Delta Comments at 6-7. Our Final Decision We have decided to withdraw the proposal on interpretation of “actual control.” We still believe there are significant benefits to be realized by liberalizing and rationalizing our domestic investment regime for U.S. air carriers. Nonetheless, our policy could gain from additional public insight into the practical advantages and drawbacks of particular administrative reforms. We maintain that our past administration of the “actual control” requirement is obsolete and the notion has needlessly precluded foreign investment in the U.S. airline industry to its detriment. In the Department's view, retention of the anachronistic administrative standard for determining actual control serves no discernible policy interest of the United States. Instead, it has prevented U.S. carriers from entering into sound and desirable business relationships with foreign allies “relationships that U.S. corporate management concluded would benefit their carrier, their employees and shareholders. *See, e.g.* , FedEx Comments at 2; Atlas & Polar Comments on NPRM at 3; United Comments at 3. We continue to believe we need a way to enable strategic investors “interested in long-term gain, not short-term arbitrage—to participate more meaningfully in the decision-making at U.S. carriers, as such investors would “more likely be concerned about a U.S. airline's product quality, market strategy, and its capital reinvestment plans than short-term investors who view airlines merely as trading vehicles.” 71 FR 26428. An up-to-date approach towards administering the “actual control” requirement that takes into account the realities of modern capital markets would permit our carriers to catch up with increasingly competitive and financially stronger foreign airlines in terms of integrating their operations and services with those of marketing partners. It would also enable investments abroad by U.S. air carriers and the formation of durable business relationships with foreign carriers, such as Continental, for example, enjoys with COPA, a leading Latin American airline. Continental Airlines, SEC Report on Form 10-Q (July 21, 2006) at 34. In our view, we should encourage additional foreign investment in the U.S. airline industry, give U.S. carriers freedom in developing beneficial business relationships across borders and eliminate outdated restrictions on business conduct. Our proposal has become controversial, as to both the questions of whether our interpretation of “actual control” should be changed and whether our specific proposal will effectively accomplish our objectives. In addition, as noted, letters sent by members of Congress have urged the Department not to adopt the proposal without further discussion. In this particular instance, we have concluded that the expressions of concern support the concept that more public discussion of the underlying issues is warranted. By withdrawing the proposal, we will be free to engage in broad-ranging dialogue without the constraints of a specific rulemaking proposal. Rulemaking Analyses and Notices Regulatory Flexibility Act The Regulatory Flexibility Act
(RFA)(5 U.S.C. 601-612), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, requires federal agencies, as part of each rule, to consider regulatory alternatives that minimize the impact on small entities while achieving the objectives of the rulemaking. Because we are withdrawing our proposal, we are not adopting any final rule requiring a regulatory flexibility analysis. Trade Impact Assessments The Trade Agreement Act of 1979 prohibits federal agencies from establishing any standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Legitimate domestic objectives, such as safety, are not considered unnecessary obstacles. The statute also requires consideration of international standards and, where appropriate, that U.S. standards be compatible. The Department has assessed the potential effect of this withdrawal of the proposed rule and has determined that it will have no effect on any trade-sensitive activity. International Compatibility In keeping with U.S. obligations under the Convention on International Civil Aviation, it is the Department's policy to comply with International Civil Aviation Organization
(ICAO)Standards and Recommended Practices to the maximum extent practicable. The Department has determined that there are no ICAO Standards and Recommended Practices that correspond to this withdrawal notice. Unfunded Mandates Reform Act of 1995 The Unfunded Mandates Reform Act of 1955 (the Act) is intended, among other things, to curb the practice of imposing unfunded Federal mandates on State, local, and tribal governments. Title II of the Act requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (adjusted annually for inflation) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” This withdrawal notice is not a final or proposed rule. The requirements of Title II of the Act, therefore, do not apply. Executive Order 13132, Federalism This action has been analyzed in accordance with the principles and criteria contained in Executive Order 13132, dated August 4, 1999 (64 FR 43255). This withdrawal notice does not have a substantial direct effect on, or significant federalism implications for the States, nor would it limit the policymaking discretion of the States. It will not directly preempt any State law or regulation, or impose burdens on the States. This action will have not a significant effect on the States' ability to execute traditional State governmental functions. The agency has therefore determined that this withdrawal notice does not have sufficient federalism implications to warrant either the preparation of a federalism summary impact statement or consultations with State and local governments. Paperwork Reduction Act The Paperwork Reduction Act of 1995
(PRA)(44 U.S.C. 3501 et seq.) requires federal agencies to obtain approval from the Office of Management and Budget
(OMB)for each collection of information they conduct, sponsor, or require through regulation. Because this is a withdrawal notice, it will not impose any additional requirements. Thus, there is no change in the paperwork collection, as it currently exists. Issued in Washington, DC on December 5, 2006. Andrew B. Steinberg, Assistant Secretary for Aviation and International Affairs. [FR Doc. 06-9603 Filed 12-5-06; 12:39 pm]
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  • Pub. L. 105-33
  • Pub. L. 105-379
  • Pub. L. 100-503
  • 5 USC 601-612
  • Pub. L. 104-4
  • 7 CFR 3015
  • 7 CFR 283
  • 7 CFR 279
  • 5 CFR 1320
  • 7 CFR 272
  • 7 CFR 273
  • 7 USC 2011-2036
  • 11 CFR 104
  • 307 F. Supp. 2d 294
  • 76 F.3d 400
  • 307 F. Supp. 2
  • Pub. L. 106-58
  • 113 Stat. 430
  • Pub. L. 108-199
  • 118 Stat. 3
  • Pub. L. 109-115
  • 119 Stat. 2396
  • 11 CFR 111
  • 11 CFR 111.16-111
  • 11 CFR 111.11-111
  • 14 CFR 39
  • 14 CFR 399
  • 14 CFR 204
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F. Supp.307 F. Supp. 2d 294
F. App'x76 F.3d 400
F. Supp.307 F. Supp. 2
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