Rules and Regulations. Final rule

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BILLING CODE 4910-13-M DEPARTMENT OF COMMERCE Bureau of Industry and Security 15 CFR Parts 730, 764 and 766 [Docket No. 0612242577-7145-01] RIN 0694-AD63 Antiboycott Penalty Guidelines AGENCY: Bureau of Industry and Security, Commerce. ACTION: Final rule. SUMMARY: This rule sets forth BIS policy concerning voluntary self-disclosures of violations of part 760 (Restrictive Trade Practices or Boycotts) of the Export Administration Regulations

(EAR)and violations of part 762 (Recordkeeping) of the EAR that relate to part 760. This rule also sets forth the factors that the Bureau of Industry and Security

(BIS)considers when deciding whether to pursue administrative charges or settle allegations of such violations as well as the factors that BIS considers when deciding what level of penalty to seek in administrative antiboycott cases. DATES: This rule is effective August 16, 2007. FOR FURTHER INFORMATION CONTACT: Edward O. Weant III, Director, Office of Antiboycott Compliance, Bureau of Industry and Security, United States Department of Commerce, at

(202)482-2381. SUPPLEMENTARY INFORMATION: Background Part 760 of the EAR—Restrictive Trade Practices or Boycotts—prohibits U.S. persons from taking or knowingly agreeing to take certain actions with intent to comply with, further, or support an unsanctioned foreign boycott. Part 760 of the EAR also requires U.S. persons who are recipients of requests “* * * to take any action which has the effect of furthering or supporting a restrictive trade practice or boycott fostered or imposed by a foreign country against a country friendly to the United States or against any United States person * * *” to report receipt of those requests to BIS and whether they took the requested action. Part 762 of the EAR—Recordkeeping—requires, *inter alia,* retention of certain documents that contain information related to the prohibitions or reporting requirements of part 760. Collectively, these provisions of the EAR are referred to in this notice as the “antiboycott provisions.” BIS administers and enforces the antiboycott provisions through its Office of Antiboycott Compliance (OAC). On June 30, 2006, BIS published a proposed rule regarding specific procedures for voluntary self-disclosures of violations to OAC, guidance about how BIS responds to violations of the antiboycott provisions, and a description of how BIS makes penalty determinations in the settlement of administrative enforcement cases related to the antiboycott provisions. After reviewing the public comments on the proposed rule, BIS is publishing this final rule. This rule does not address disclosure provisions or penalty determination factors in any other matters such as criminal prosecutions for violations of the antiboycott provisions or tax penalties that the Department of Treasury may impose for antiboycott violations that arise pursuant to the Ribicoff Amendment to the Tax Reform Act of 1976, as implemented by Section 999 of the Internal Revenue Code. Voluntary self-disclosure provisions and guidance on charging and penalty determinations in settlement of administrative enforcement cases that are not related to the antiboycott provisions are stated elsewhere in the EAR. BIS received comments from two organizations regarding the proposed rule. Collectively, the two organizations raised seven issues. Three of the issues were general in nature and four addressed specific provisions of the proposed rule. General Issues Raised by the Comments One commenter suggested that BIS consult with industry and provide guidance on what a company's reporting structure should be. BIS concludes that this proposal is outside the scope of the issues raised by the proposed rule. BIS recognizes that among the entities that have reporting obligations, one could find myriad organizational structures. BIS believes that any tailoring of the manner of reporting to accommodate both an organization's structure and BIS's need to properly identify the source of reports can best be done through consultations between the organization and BIS rather than through an amendment to the regulations. BIS encourages organizations that have questions about how to submit reports to contact BIS for such consultations. One commenter suggested that BIS develop a system to allow the public to submit boycott reports electronically. This suggestion is outside the scope of the proposed rule. One commenter suggested that BIS update and publish its telephone advice guidance and look for other opportunities to provide practical written guidance for companies to use in complying with boycott requests. This comment is outside the scope of the proposed rule. Comments Relating to Specific Features of the Proposed Rule The comments address four specific issues in connection with the proposed rule. Those four issues are: The burden that would be imposed by new § 764.8 regarding voluntary self-disclosures; whether the provision of new § 764.8(f) regarding requests to take action that would otherwise violate § 764.2(e) is contrary to prior agency practice; whether new § 764.8 should allow verbal voluntary self-disclosures with written follow-up; and whether the rule should provide more concrete incentives to disclose by making a warning letter the maximum sanction for most voluntary self-disclosure cases. Comment on Paperwork Burden One commenter stated that BIS had underestimated the costs large global companies would incur in complying with the voluntary disclosure provisions. In particular, the commenter noted that a company with decentralized operations would incur costs measured in tens of thousands of dollars if it conducted the five-year review of all its operations recommended by BIS. Upon review, BIS acknowledges that the burden on large companies with decentralized operations would be greater than estimated in the proposed rule. However, BIS believes that such burden will be justified in many instances because of the risks to the firm involved if it performs a less comprehensive review. The risk of conducting a review covering a period shorter than five years or that does not include all business units is that some violations will be made known to OAC through other sources or during the course of an OAC investigation initiated in response to the voluntary self-disclosure. Such undisclosed violations would not receive the “great weight” mitigating factor that BIS would apply in settlement negotiations to voluntarily self-disclosed violations under this rule. The larger penalties imposed for such undisclosed violations might exceed the cost of doing a business-wide five-year search. Hence, BIS believes that it is appropriate to recommend a five-year period for this kind of review. BIS notes that the proposed rule and this final rule recommend but do not require a review extending back for a period of five years prior to the initial notification. In the proposed rule, BIS stated that it intended to treat the collection of information related to the voluntary self-disclosure procedures in this rule as an extension of the scope of the collection approved under OMB control number 0694-AD58. Based on this comment, BIS re-evaluated the burden hours associated with this information collection and concluded that the burden is large enough to justify a separate collection authorization. Therefore, BIS sought and obtained separate OMB authorization for the collection related to the voluntary self-disclosure procedure in this rule. The collection related to the voluntary self-disclosure procedure in this rule explicitly accounts for the larger burden that would be imposed on large companies with decentralized locations and is authorized under OMB control number 0694-0132 for which the estimated annual burden hours and costs are 1,280 and $51,200, respectively. Comment on § 764.8(f) and Prior Agency Practice One commenter raised an issue concerning the implication of proposed § 764.8(f). Proposed § 764.8(f) would have provided a procedure by which a person making a voluntary self-disclosure of a violation of the antiboycott provision may request authorization to take certain actions with respect to the transaction. The commenter expressed a belief that “the current OAC practice is not to require companies to seek BIS authorization to continue with a transaction after filing a voluntary disclosure.” The commenter went on to state that “[t]he proposed rule, however, would impose such a requirement * * * if a company were to commit a Category B or C violation it seems unreasonable that the company would have to file a voluntary disclosure and then seek BIS authorization to continue with the transaction. A more reasonable approach would be to require BIS authorization only in those instances where the company voluntarily discloses a Category A violation.” BIS agrees that, in the past, OAC has advised members of the public who contacted OAC via its telephone advice line a violation of part 760 does not preclude exporting in connection with the same commercial transaction. Upon review, BIS has decided to remove paragraph

(f)from § 764.8 because it is not consistent with prior agency practice. Comment Proposing Allowing Verbal Voluntary Self-Disclosures BIS received one comment expressing the opinion that the Bureau of Customs and Border Protection self-disclosure procedure set forth in 19 CFR 162.74(a) is better than the procedure in the proposed rule. The procedure in 19 CFR 162.74(a) allows an importer to make a verbal disclosure to a Customs officer of a violation with the requirement that the disclosure be followed up in writing within 10 days. The commenter suggested that this Customs procedure encourages more disclosures by allowing the importer to disclose the violation at the earliest possible moment. The ten day written follow-up deadline encourages accurate and complete disclosures. BIS has reviewed 19 CFR 162.74(a) and the commenter's rationale. BIS notes that 19 CFR 162.74(a) applies to penalties for certain violations related to tariffs on imports into the United States. Compliance with the disclosure requirements in § 162.74 can allow the importer to pay a reduced penalty as compared with violations for which no such disclosure takes place. The penalties are set forth in 19 CFR 162.73 and 19 CFR 162.73a. Generally, the penalties are expressed as a percentage of value of the merchandise that was the subject of the violation. BIS believes that violations of the antiboycott provisions are substantively different from the violations addressed by 19 CFR 162.74(a). As noted in the preamble to the proposed rule, BIS believes that written initial notifications reduce the possibility of confusion as to whether a particular communication was intended to be a voluntary self-disclosure and are likely to produce more complete disclosures than would oral disclosures. In addition, BIS believes that preparing and submitting a written submission of the information required in an initial notification, *i.e.* , the name of the person making the disclosure and a brief description of the suspected violations and their general nature and extent, is not an onerous task. Therefore, this final rule makes no changes to the provisions of the proposed rule that required initial notifications to be in writing. Comment Regarding Incentives to Self-Disclose Violations One commenter recommended that BIS provide more concrete incentives for making disclosures of violations of the antiboycott provisions. This commenter noted that although new Supplement No. 2 to part 764 provides that voluntary self-disclosures be given “GREAT WEIGHT” as a mitigating factor, other language in the supplement concerning the effect of other factors as well as language in new § 764.8(b) stating that “[t]he weight given to a voluntary self-disclosure is solely within discretion of BIS and the effect of voluntary self-disclosure may be outweighed by aggravating factors” makes the benefits of voluntary self-disclosure almost speculative and could affect decisions to disclose. That commenter stated that BIS's proposal “contrasts sharply with * * * customs law administration. [Where] * * * definite advantages always flow from disclosing violations * * *.” The commenter recommended that BIS at least adopt a position of resolving all voluntary self-disclosure cases with a warning letter unless the “violation involves serious anti-boycott concerns— *e.g.* , complying with boycott requests to discriminate on the basis of race, religion, sex, or national origin, or where there are significant aggravating factors.” BIS notes that as stated in § 764.8, the weight to be given to any factor is solely within the discretion of BIS. Supplement No. 2 to part 764 describes how BIS exercises that discretion. BIS's statement in the supplement that voluntary self-disclosure made in accordance with § 764.8 be given great weight and that factors of great weight ordinarily should be given considerably more weight than other factors reflects the policy that BIS has followed and intends to follow in settling administrative enforcement actions involving the antiboycott provisions. However, given the myriad possible combinations of facts that may be present in any given case, including a range of possible aggravating and mitigating factors, BIS believes that it cannot determine in advance the maximum sanction that would be appropriate for a particular violation or combination of violations. Moreover, attempting to do so could create incentives to violate the antiboycott provisions in cases where the potential economic benefit to the violator is large relative to the maximum monetary penalty. Such incentives could occur, for example, in a situation in which a single violation provides the violator with access to a very large market. Changes to the EAR in This Rule This rule creates a new § 764.8 setting forth the procedures for voluntary self-disclosure of violations of the antiboycott provisions. It also creates a new supplement No. 2 to part 764 that describes how BIS responds to violations of the antiboycott provisions and how BIS makes penalty determinations in the settlement of antiboycott administrative enforcement cases. The rule also makes technical and conforming changes to part 766. This rule provides specific criteria with respect to what constitutes a voluntary self-disclosure and how voluntary self-disclosures relate to other sources of information that OAC may have concerning violations of the antiboycott provisions. The rule also informs the public of the factors that BIS usually considers to be important when settling antiboycott administrative enforcement cases. BIS believes that publishing this information in the EAR will tend to place all potential respondents on a more equal footing because procedures for making voluntary self-disclosures, information about how BIS responds to violations and how BIS makes penalty determinations in the settlement of antiboycott administrative enforcement cases will all be matters of public record. BIS also believes such publication will make settlement of antiboycott administrative cases more efficient, as respondents and BIS will be able to focus on the important factors in antiboycott administrative enforcement cases and OAC generally expends fewer resources to obtain information received through voluntary self-disclosure than information obtained by other means. This rule also revises Supp. No. 1 to part 730 of the EAR to display the OMB control number of the newly approved collection of information that relates to § 764.8 of the EAR, which is created by this rule. Creation of § 764.8—Voluntary Self-Disclosure of Boycott Violations The new § 764.8 both defines what constitutes a voluntary self-disclosure and provides the procedures for making such disclosures. Compliance with the provisions of § 764.8 is important because a voluntary self-disclosure “satisfying the requirements of § 764.8” is designated as a mitigating factor of “GREAT WEIGHT” in the settlement of administrative cases as set forth in the new Supplement No. 2 to part 764. Supplement No. 2 provides that such factors “will ordinarily be given considerably more weight than a factor that is not so designated.” In addition to providing such an incentive for the submission of voluntary self-disclosures, BIS anticipates that § 764.8 will promote more effective use of OAC resources, as the receipt of voluntary self-disclosures will reduce the time that OAC must spend identifying and investigating possible violations. The rule provides the benefit of a mitigating factor to those who self-disclose before OAC has invested resources to investigate violations based on information it might receive from another source. Section 764.8 requires, among other things, that voluntary self-disclosures be in writing and that they be received by OAC before OAC learns of the same or substantially similar information from “another source” and has commenced an investigation or inquiry in connection with that information. Section 764.8 provides that a person may make an initial written notification followed by submission of a more detailed narrative account and supporting documents. For purposes of determining whether a voluntary self-disclosure was received before OAC learned of the same or substantially similar information from another source, the date of the voluntary self-disclosure will be deemed to be the date that OAC received the initial notification if the person making the disclosure subsequently submits the required narrative account and supporting documentation. BIS recognizes that two features of its existing regulations and practices may impact the requirement that a voluntary self-disclosure be received before OAC learns of the same or substantially similar information from another source. The first such feature is the set of reporting requirements in § 760.5. The second such feature is OAC's practice of encouraging persons with questions about the EAR to contact OAC by telephone or e-mail for advice. Section 760.5 of the EAR requires any “U.S. person who receives a request to take any action that would have the effect of furthering or supporting a restrictive trade practice or boycott fostered or imposed by a foreign country against a country friendly to the United States or against any United States person” to report to OAC both receipt of the request and the action that the person took in response to that request. In some instances, taking the requested action would be a violation of § 760.2. BIS recognizes that, in such instances, the reporting requirements of § 760.5 would have the effect of requiring a person to disclose a violation that it had committed. Section 764.8(b)(3)(i) provides that reports filed pursuant to § 760.2 constitute “information received from another source.” Thus, a person who wishes to make a voluntary self-disclosure of a violation that is based on an action that § 760.5 requires that person to report would have to make sure that OAC receives the written initial notification portion of the voluntary self-disclosure before OAC began an investigation or inquiry based on the information received in the required report. The report itself would not serve as the initial notification. However, if OAC received the report and the initial notification simultaneously, it would be deemed to have received the initial notification before it had begun an investigation or inquiry based on the report. That person would then have to comply with the remaining requirements of § 764.8, but once that person complied with those requirements, the voluntary self-disclosure would be treated as having been received at the time that the initial notification was received. OAC has, for a number of years, provided advice about the antiboycott provisions to persons requesting such advice via telephone or e-mail. In some instances, the persons requesting such advice may disclose that they have committed a violation. OAC's practice has been to encourage such persons to make voluntary self-disclosures. OAC wants to continue to encourage persons with questions about the antiboycott provisions to disclose fully all relevant facts when making telephone or e-mail inquiries for advice concerning the antiboycott provisions. Therefore, § 764.8(b)(3)(ii) provides that violations revealed in telephone or e-mail requests for advice concerning the antiboycott provisions are not information received from another source for purposes of § 764.8. Section 764.8(b)(3)(ii) also states that the information provided over the telephone or via e-mail while seeking advice would not constitute a voluntary self-disclosure or even an initial notification of a voluntary self-disclosure. OAC's practice is to inform persons who reveal violations in the course of seeking such advice of their opportunity to make a voluntary self-disclosure. Section 764.8 also provides that for a firm to be deemed to have made a voluntary self-disclosure under that section, the individual making the disclosure must do so with the “full knowledge and authorization of the firm's senior management or of an officer or employee who is authorized to make such disclosures on behalf of the firm.” BIS believes that approval of a person with such authority is needed to make clear that a firm may not claim the benefits of a voluntary self-disclosure when a subordinate employee acting on his or her own initiative has disclosed wrongdoing. The proposed rule did not include the phrase “or of an officer or employee who is authorized to make such disclosures on behalf of the firm.” Upon review, BIS does not believe that knowledge and approval of “senior management” are needed so long as someone with authority to make such disclosures on behalf of the firm has approved the disclosure on behalf of the firm. Creation of Supplement No. 2 to Part 766 This rule creates a new supplement to part 766 of the EAR to set forth publicly BIS's practice with respect to violations of the antiboycott provisions. The supplement describes the ways that BIS responds to violations, the types of administrative sanctions that may be imposed for violations, the factors that BIS considers in determining what sanctions are appropriate, the factors that BIS considers in determining the appropriate scope of the denial or exclusion order sanctions, and the factors BIS considers when deciding whether to suspend a sanction. Paragraph

(a)of the supplement contains introductory material that defines the scope and limitations of the supplement as well as sets forth BIS's policy of encouraging any party in settlement negotiations with BIS to provide all information that the party believes is relevant to the application of the guidance in the supplement as well as information that is relevant to determining whether a violation has, in fact, occurred and whether the party has a defense to any potential charges. Paragraph

(b)of the supplement sets forth the three actions that BIS may take in response to a violation, namely, issuing a warning letter, pursuing an administrative case, and referring a case to the Department of Justice for criminal prosecution. This paragraph also lists the factors that often cause BIS to issue a warning letter. Additionally, it notes BIS's ability to issue *proposed* administrative charging letters rather than actual administrative charging letters. Proposed charging letters are issued informally to provide an opportunity for settlement before initiation of a formal administrative proceeding. As noted in paragraph (b), BIS is not required to issue a proposed charging letter. Finally, paragraph

(b)notes that BIS may refer a case to the Department of Justice for criminal prosecution in addition to pursuing an administrative enforcement action. Paragraph

(c)of the supplement lists the types of administrative sanctions that may be imposed in antiboycott administrative enforcement cases. Those sanctions are: A monetary penalty, a denial of export privileges and an order excluding the party from practice before BIS. Paragraph

(d)provides information about how BIS determines what sanctions are appropriate in settlement of antiboycott administrative enforcement cases. The paragraph describes the general factors that BIS believes are important in cases concerning violations of the antiboycott provisions. The paragraph then describes specific mitigating and aggravating factors. BIS typically looks to the presence or absence of the specific factors, alongside the general factors, in determining what sanctions should apply in a given settlement. Paragraph

(d)begins by listing seven general factors to which BIS looks in determining what administrative sanctions are appropriate in each settlement. Those seven general factors are: Degree of seriousness, category of violation, whether multiple violations arise from related transactions, whether multiple violations arise from unrelated transactions, the timing of a settlement, whether there are related civil or criminal violations, and the party's familiarity with the antiboycott provisions. The supplement provides general guidance on how BIS applies each of these seven general factors. Paragraph

(d)then addresses the role of eight specific mitigating and nine specific aggravating factors whose presence or absence BIS generally considers when determining what sanctions should apply. The listed factors are not exhaustive and BIS may consider other factors as well in a particular case. However, the listed factors are those that BIS's experience indicates are commonly relevant to penalty determinations in cases that are settled. Factors identified by the term “GREAT WEIGHT” will ordinarily be given considerably more weight than other factors. The eight specific mitigating factors in paragraph

(d)are: Voluntary self-disclosure, effective compliance program, limited business with or in boycotted or boycotting countries, history of compliance with the antiboycott provisions, exceptional cooperation with the investigation, (lack of) clarity of request to furnish prohibited information or take prohibited action, violations arising out of a party's “passive” refusal to do business in connection with an agreement, and isolated occurrence. The proposed rule contained a statement in paragraph (d)(2)(i)(B)( *2* ), to the effect that deliberate or intentional destruction of records may be an issue in settlement. Paragraph (d)(2)(i)(B)( *2* ) is part of a discussion of mitigating factors of great weight. Upon review BIS removed the sentence about intentional or deliberate destruction of records because it pertains to aggravating factors and would be subsumed in the serious disregard for compliance issues provision in paragraph (d)(2)(ii)(B). The nine specific aggravating factors in paragraph

(d)are: Concealment or obstruction, serious disregard for compliance responsibilities, history of (lack of) compliance with the antiboycott provisions, familiarity with the type of transaction at issue in the violation, prior history of business with or in boycotted countries or boycotting countries, long duration or high frequency of violations, clarity of request to furnish prohibited information or take prohibited action, violation relating to information concerning a specific individual or entity, and violations relating to “active” conduct concerning an agreement to refuse to do business. The specific mitigating and aggravating factors are set forth in more detail in the supplement. BIS believes that in most cases evaluating these factors provides a fair basis for determining the penalty that is appropriate when settling an antiboycott administrative enforcement case. However, these mitigating and aggravating factors are not exclusive. BIS may consider other factors that are relevant in a particular case and respondents in settlement negotiations may submit other relevant factors for BIS's consideration. Paragraph

(e)sets forth the factors that BIS considers to be particularly relevant when deciding whether to impose a denial or exclusion order in the settlement of antiboycott administrative enforcement cases. Certain factors in paragraph (d)—the four factors that are given great weight, degree of seriousness, and history of prior violations and their seriousness—are included in paragraph (e). In addition, BIS considers the extent to which a firm's senior management participated in or was aware of the conduct that gave rise to the violation, the likelihood of future violations, and whether a monetary penalty could be expected to have a sufficient deterrent effect to be particularly relevant in determining whether a monetary penalty is appropriate. Paragraph

(f)provides examples of factors that BIS may consider in deciding whether to suspend or defer a monetary penalty or suspend an order denying export privileges or an order providing for exclusion from practice. With respect to suspension or deferral of monetary penalties, BIS may consider whether the party has demonstrated a limited ability to pay a penalty that would be appropriate for such violation so that suspended or deferred payment can be expected to have sufficient deterrent value, and whether the impact of the penalty would be consistent with the impact of penalties on other parties who commit similar violations. When deciding whether to suspend denial or exclusion orders, BIS may consider the adverse economic consequences of the order on the party, its employees, and other persons, as well as on the national interest in the competitiveness of U.S. businesses. However, such orders will be suspended for adverse economic consequences only if future violations are unlikely and if there are adequate measures (usually a substantial civil penalty) to achieve the necessary deterrent effect. Rulemaking Requirements 1. This rule has been determined to be not significant for purposes of Executive Order 12866. 2. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act, unless that collection of information displays a currently valid Office of Management and Budget Control Number. This rule contains a new collection of information subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 *et seq.* ) that has been approved by the Office of Management and Budget under control number 0694-0132 which carries a burden hour estimate of 1,280 and a cost estimate of $51,200. Send comments about this collection, including suggestions for reducing the burden, to David Rostker, Office of Management and Budget, by e-mail to *David_Rostker@omb.eop.gov* , or by fax to

(202)395-7285; and to the Office of Administration, Bureau of Industry and Security, Department of Commerce, 14th and Pennsylvania Avenue, NW., Room 6883, Washington, DC 20230. 3. This rule does not contain policies with Federalism implications as that term is defined in Executive Order 13132. 4. The Chief Counsel for Regulation at the Department of Commerce certified to the Chief Counsel for Advocacy at the Small Business Administration that this rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The factual basis was published in the proposed rule and is not repeated here. BIS received only one comment that addressed the economic impact of this rule. That comment addressed the rule's economic impact on large businesses with multiple operating units in many countries and did not address the rule's impact on small entities. BIS has included that comment in its Paperwork Reduction Act submission to OMB and addressed it under the heading “Comment on Paperwork Burden” earlier in this preamble. Therefore, BIS has not prepared a final regulatory flexibility analysis for this rule. List of Subjects *15 CFR Part 730* Administrative practice and procedure, Advisory committees, Exports, Reporting and recordkeeping requirements, Strategic and critical materials. *15 CFR Part 764* Administrative practice and procedure, Exports, Law enforcement, Penalties. *15 CFR Part 766* Administrative practice and procedure, Confidential business information, Exports, Law enforcement, Penalties. For the reasons set forth above, the Export Administration Regulations (15 CFR 730-774) are amended as follows: PART 730—[AMENDED] 1. The authority citation for part 730 continues to read as follows: Authority: 50 U.S.C. app. 2401 *et seq.* ; 50 U.S.C. 1701 *et seq.* ; 10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c; 22 U.S.C. 2151 note, Pub. L. 108-175; 22 U.S.C. 3201 *et seq.* ; 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; Sec. 901-911, Pub. L. 106-387; Sec. 221, Pub. L. 107-56; E.O. 11912, 41 FR 15825, 3 CFR, 1976 Comp., p. 114; E.O. 12002, 42 FR 35623, 3 CFR, 1977 Comp., p.133; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 12214, 45 FR 29783, 3 CFR, 1980 Comp., p. 256; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; E.O. 12854, 58 FR 36587, 3 CFR, 1993 Comp., p. 179; E.O. 12918, 59 FR 28205, 3 CFR, 1994 Comp., p. 899; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 12947, 60 FR 5079, 3 CFR, 1995 Comp., p. 356; E.O. 12981, 60 FR 62981, 3 CFR, 1995 Comp., p. 419; E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp. p. 219; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. 786; E.O. 13338, 69 FR 26751, May 13, 2004; Notice of August 3, 2006, 71 FR 44551 (August 7, 2006); Notice of October 27, 2006, 71 FR 64109 (October 31, 2006). 2. In Supp. No. 1 to part 730, add a new row to the table of approved information collections immediately following the row that begins with “0694-0129” and immediately preceding the row that begins with “0607-0152” to read as follows: Supplement No. 1 to Part 730—Information Collection Requirements Under the Paperwork Reduction Act: OMB Control Numbers Collection No. Title Reference in the EAR * * * * * * * 0694-0132 Voluntary Self-Disclosure of Antiboycott Violations § 764.8. * * * * * * * PART 764—[AMENDED] 3. The authority citation for part 764 continues to read as follows: Authority: 50 U.S.C. app. 2401 *et seq.* ; 50 U.S.C. 1701 *et seq.* ; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 3, 2006, 71 FR 44551 (August 7, 2006). 4. Add a new § 764.8 to read as follows: § 764.8 Voluntary self-disclosures for boycott violations. This section sets forth procedures for disclosing violations of part 760 of the EAR—Restrictive Trade Practices or Boycotts and violations of part 762—Recordkeeping—with respect to records related to part 760. In this section, these provisions are referred to collectively as the “antiboycott provisions.” This section also describes BIS's policy regarding such disclosures.

(a)*General policy.* BIS strongly encourages disclosure to the Office of Antiboycott Compliance

(OAC)if you believe that you may have violated the antiboycott provisions. Voluntary self-disclosures are a mitigating factor with respect to any enforcement action that OAC might take.

(b)*Limitations.*

(1)This section does not apply to disclosures of violations relating to provisions of the EAR other than the antiboycott provisions. Section 764.5 of this part describes how to prepare disclosures of violations of the EAR other than the antiboycott provisions.

(2)The provisions of this section apply only when information is provided to OAC for its review in determining whether to take administrative action under parts 764 and 766 of the EAR for violations of the antiboycott provisions.

(3)*Timing.* The provisions of this section apply only if OAC receives the voluntary self-disclosure as described in paragraph (c)(2) of this section before it commences an investigation or inquiry in connection with the same or substantially similar information it received from another source.

(i)*Mandatory Reports.* For purposes of this section, OAC's receipt of a report required to be filed under § 760.5 of the EAR that discloses that a person took an action prohibited by part 760 of the EAR constitutes the receipt of information from another source.

(ii)*Requests for Advice.* For purposes of this section, a violation that is revealed to OAC by a person who is seeking advice, either by telephone or e-mail, about the antiboycott provisions does not constitute the receipt of information from another source. Such revelation also does not constitute a voluntary self-disclosure or initial notification of a voluntary self-disclosure for purposes of this section.

(4)Although a voluntary self-disclosure is a mitigating factor in determining what administrative sanctions, if any, will be sought by BIS, it is a factor that is considered together with all other factors in a case. The weight given to voluntary self-disclosure is solely within the discretion of BIS, and the mitigating effect of voluntary self-disclosure may be outweighed by aggravating factors. Voluntary self-disclosure does not prevent transactions from being referred to the Department of Justice for criminal prosecution. In such a case, BIS would notify the Department of Justice of the voluntary self-disclosure, but the decision as to how to consider that factor is within the discretion of the Department of Justice.

(5)A firm will not be deemed to have made a disclosure under this section unless the individual making the disclosure did so with the full knowledge and authorization of the firm's senior management or of a person with authority to make such disclosures on behalf of the firm.

(6)The provisions of this section do not, nor should they be relied on to, create, confer, or grant any rights, benefits, privileges, or protection enforceable at law or in equity by any person, business, or entity in any civil, criminal, administrative, or other matter.

(c)*Information to be provided.*

(1)*General.* Any person wanting to disclose information that constitutes a voluntary self-disclosure should, in the manner outlined below, initially notify OAC as soon as possible after violations are discovered, and then conduct a thorough review of all transactions where violations of the antiboycott provisions are suspected.

(2)*Initial notification.* The initial notification must be in writing and be sent to the address in § 764.8(c)(7) of this part. The notification should include the name of the person making the disclosure and a brief description of the suspected violations. The notification should describe the general nature and extent of the violations. If the person making the disclosure subsequently completes the narrative account required by § 764.8(c)(3) of this part, the disclosure will be deemed to have been made on the date of the initial notification for purposes of § 764.8(b)(3) of this part.

(3)*Narrative account.* After the initial notification, a thorough review should be conducted of all business transactions where possible antiboycott provision violations are suspected. OAC recommends that the review cover a period of five years prior to the date of the initial notification. If your review goes back less than five years, you risk failing to discover violations that may later become the subject of an investigation. Any violations not voluntarily disclosed do not receive the same mitigation as the violations voluntarily self-disclosed under this section. However, the failure to make such disclosures will not be treated as a separate violation unless some other section of the EAR or other provision of law enforced by BIS requires disclosure. Upon completion of the review, OAC should be furnished with a narrative account that sufficiently describes the suspected violations so that their nature and gravity can be assessed. The narrative account should also describe the nature of the review conducted and measures that may have been taken to minimize the likelihood that violations will occur in the future. The narrative account should include:

(i)The kind of violation involved, for example, the furnishing of a certificate indicating that the goods supplied did not originate in a boycotted country;

(ii)An explanation of when and how the violations occurred, including a description of activities surrounding the violations ( *e.g.* , contract negotiations, sale of goods, implementation of letter of credit, bid solicitation);

(iii)The complete identities and addresses of all individuals and organizations, whether foreign or domestic, involved in the activities giving rise to the violations; and

(iv)A description of any mitigating factors.

(4)Supporting documentation.

(i)The narrative account should be accompanied by copies of documents that explain and support it, including:

(A)Copies of boycott certifications and declarations relating to the violation, or copies of documents containing prohibited language or prohibited requests for information;

(B)Other documents relating to the violation, such as letters, facsimiles, telexes and other evidence of written or oral communications, negotiations, internal memoranda, purchase orders, invoices, bid requests, letters of credit and brochures;

(ii)Any relevant documents not attached to the narrative account must be retained by the person making the disclosure until the latest of the following: the documents are supplied to OAC; BIS informs the disclosing party that it will take no action; BIS issues a warning letter for the violation; BIS issues an order that constitutes the final agency action in the matter and all avenues for appeal are exhausted; or the documents are no longer required to be kept under part 762 of the EAR.

(5)*Certification.* A certification must be submitted stating that all of the representations made in connection with the voluntary self-disclosure are true and correct to the best of that person's knowledge and belief. Certifications made by a corporation or other organization should be signed by an official of the corporation or other organization with the authority to do so. Section 764.2(g) of this part relating to false or misleading representations applies in connection with the disclosure of information under this section.

(6)*Oral presentations.* OAC believes that oral presentations are generally not necessary to augment the written narrative account and supporting documentation. If the person making the disclosure believes otherwise, a request for a meeting should be included with the disclosure.

(7)*Where to make voluntary self-disclosures.* The information constituting a voluntary self-disclosure or any other correspondence pertaining to a voluntary self-disclosure should be submitted to: Office of Antiboycott Compliance, 14th and Pennsylvania Ave., NW., Room 6098, Washington, DC 20230, tel:

(202)482-2381, facsimile:

(202)482-0913.

(d)*Action by the Office of Antiboycott Compliance.* After OAC has been provided with the required narrative and supporting documentation, it will acknowledge the disclosure by letter, provide the person making the disclosure with a point of contact, and take whatever additional action, including further investigation, it deems appropriate. As quickly as the facts and circumstances of a given case permit, BIS may take any of the following actions:

(1)Inform the person making the disclosure that, based on the facts disclosed, it plans to take no action;

(2)Issue a warning letter;

(3)Issue a proposed charging letter and attempt to settle the matter pursuant to § 766.18 of the EAR;

(4)Issue a charging letter pursuant to § 766.3 of the EAR if a settlement is not reached or BIS otherwise deems appropriate; and/or

(5)Refer the matter to the Department of Justice for criminal prosecution.

(e)*Criteria.* Supplement No. 2 to part 766 of the EAR describes how BIS typically exercises its discretion regarding whether to pursue an antiboycott administrative enforcement case under part 766 and what administrative sanctions to seek in settling such a case. PART 766—[AMENDED] 5. The authority citation for part 766 continues to read as follows: Authority: 50 U.S.C. app. 2401 *et seq.* ; 50 U.S.C. 1701 *et seq.* ; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 3, 2006, 71 FR 44551 (August 7, 2006). 6. In § 766.3, paragraph

(a)the second sentence is revised to read as follows: § 766.3 Institution of administrative enforcement proceedings.

(a)*Charging letters.* * * * Supplements Nos. 1 and 2 to this part describe how BIS typically exercises its discretion regarding the issuance of charging letters. * * * 5. In § 766.18 paragraph

(f)is revised to read as follows: § 766.18 Settlement.

(f)Supplements Nos. 1 and 2 to this part describe how BIS typically exercises its discretion regarding the terms under which it is willing to settle particular cases. 6. Add Supplement No. 2 to part 766 to read as follows: Supplement No. 2 to Part 766—Guidance on Charging and Penalty Determinations in Settlement of Administrative Enforcement Cases Involving Antiboycott Matters

(a)*Introduction.*

(1)*Scope.* This Supplement describes how the Office of Antiboycott Compliance

(OAC)responds to violations of part 760 of the EAR “Restrictive Trade Practices or Boycotts” and to violations of part 762 “Recordkeeping” when the recordkeeping requirement pertains to part 760 (together referred to in this supplement as the “antiboycott provisions”). It also describes how BIS makes penalty determinations in the settlement of administrative enforcement cases brought under parts 764 and 766 of the EAR involving violations of the antiboycott provisions. This supplement does not apply to enforcement cases for violations of other provisions of the EAR.

(2)*Policy Regarding Settlement.* Because many administrative enforcement cases are resolved through settlement, the process of settling such cases is integral to the enforcement program. BIS carefully considers each settlement offer in light of the facts and circumstances of the case, relevant precedent, and BIS's objective to achieve in each case an appropriate level of penalty and deterrent effect. In settlement negotiations, BIS encourages parties to provide, and will give serious consideration to, information and evidence that the parties believe is relevant to the application of this guidance to their cases, to whether a violation has in fact occurred, and to whether they have a defense to potential charges.

(3)*Limitation.* BIS's policy and practice is to treat similarly situated cases similarly, taking into consideration that the facts and combination of mitigating and aggravating factors are different in each case. However, this guidance does not confer any right or impose any obligation regarding what posture or penalties BIS may seek in settling or litigating a case. Parties do not have a right to a settlement offer or particular settlement terms from BIS, regardless of settlement postures BIS has taken in other cases.

(b)*Responding to Violations.* OAC within BIS investigates possible violations of Section 8 of the Export Administration Act of 1979, as amended (“Foreign Boycotts”), the antiboycott provisions of EAR, or any order or authorization related thereto. When BIS has reason to believe that such a violation has occurred, BIS may issue a warning letter or initiate an administrative enforcement proceeding. A violation may also be referred to the Department of Justice for criminal prosecution.

(1)*Issuing a warning letter.* Warning letters represent BIS's belief that a violation has occurred. In the exercise of its discretion, BIS may determine in certain instances that issuing a warning letter, instead of bringing an administrative enforcement proceeding, will fulfill the appropriate enforcement objective. A warning letter will fully explain the violation.

(i)BIS may issue warning letters where:

(A)The investigation commenced as a result of a voluntary self-disclosure satisfying the requirements of § 764.8 of the EAR; or

(B)The party has not previously committed violations of the antiboycott provisions.

(ii)BIS may also consider the category of violation as discussed in paragraph (d)(2) of this supplement in determining whether to issue a warning letter or initiate an enforcement proceeding. A violation covered by Category C (failure to report or late reporting of receipt of boycott requests) might warrant a warning letter rather than initiation of an enforcement proceeding.

(iii)BIS will not issue a warning letter if it concludes, based on available information, that a violation did not occur.

(iv)BIS may reopen its investigation of a matter should it receive additional evidence or if it appears that information previously provided to BIS during the course of its investigation was incorrect.

(2)*Pursuing an administrative enforcement case.* The issuance of a charging letter under § 766.3 of this part initiates an administrative proceeding.

(i)Charging letters may be issued when there is reason to believe that a violation has occurred. Cases may be settled before or after the issuance of a charging letter. *See* § 766.18 of this part.

(ii)Although not required to do so by law, BIS may send a proposed charging letter to a party to inform the party of the violations that BIS has reason to believe occurred and how BIS expects that those violations would be charged. Issuance of the proposed charging letter provides an opportunity for the party and BIS to consider settlement of the case prior to the initiation of formal enforcement proceedings.

(3)*Referring for criminal prosecution.* In appropriate cases, BIS may refer a case to the Department of Justice for criminal prosecution, in addition to pursuing an administrative enforcement action.

(c)*Types of administrative sanctions.* Administrative enforcement cases generally are settled on terms that include one or more of three administrative sanctions:

(1)A monetary penalty may be assessed for each violation as provided in § 764.3(a)(1) of the EAR; Note to paragraph (c)(1): The maximum penalty is subject to adjustments under the Federal Civil Penalties Adjustment Act of 1990 (28 U.S.C. 2461, note (2000)), which are codified at 15 CFR 6.4. For violations that occurred before March 9, 2006, the maximum monetary penalty per violation is $11,000. For violations occurring on or after March 9, 2006, the maximum monetary penalty per violation is $50,000.

(2)An order denying a party's export privileges under the EAR may be issued, under § 764.3(a)(2) of the EAR; or

(3)Exclusion from practice under § 764.3(a)(3) of the EAR.

(d)*How BIS determines what sanctions are appropriate in a settlement.*

(1)*General Factors.* BIS looks to the following general factors in determining what administrative sanctions are appropriate in each settlement.

(i)*Degree of seriousness.* In order to violate the antiboycott provisions of the EAR, a U.S. person does not need to have actual “knowledge” or a reason to know, as that term is defined in § 772.1 of the EAR, of relevant U.S. laws and regulations. Typically, in cases that do not involve knowing violations, BIS will seek a settlement for payment of a civil penalty (unless the matter is resolved with a warning letter). However, in cases involving knowing violations, conscious disregard of the antiboycott provisions, or other such serious violations ( *e.g.* , furnishing prohibited information in response to a boycott questionnaire with knowledge that such furnishing is in violation of the EAR), BIS is more likely to seek a denial of export privileges or an exclusion from practice, and/or a greater monetary penalty as BIS considers such violations particularly egregious.

(ii)*Category of violations.* In connection with its activities described in paragraph (a)(1) of this supplement, BIS recognizes three categories of violations under the antiboycott provisions of the EAR. ( *See* § 760.2, § 760.4 and § 760.5 of the EAR for examples of each type of violation other than recordkeeping). These categories reflect the relative seriousness of a violation, with Category A violations typically warranting the most stringent penalties, including up to the maximum monetary penalty, a denial order and/or an exclusion order. Through providing these categories in this penalty guidelines notice, BIS hopes to give parties a general sense of how it views the seriousness of various violations. This guidance, however, does not confer any right or impose any obligation as to what penalties BIS may impose based on its review of the specific facts of a case.

(A)The Category A violations and the sections of the EAR that set forth their elements are: ( *1* ) Discriminating against U.S. persons on the basis of race, religion, sex, or national origin—§ 760.2(b); ( *2* ) Refusing to do business or agreeing to refuse to do business—§ 760.2(a); ( *3* ) Furnishing information about race, religion, sex, or national origin of U.S. persons including, but not limited to, providing information in connection with a boycott questionnaire about the religion of employees—§ 760.2(c); ( *4* ) Evading the provisions of part 760—§ 760.4; ( *5* ) Furnishing information about business relationships with boycotted countries or blacklisted persons—§ 760.2(d); and ( *6* ) Implementing letters of credit—§ 760.2(f).

(B)The Category B violations and the sections of the EAR that set forth their elements are: ( *1* ) Furnishing information about associations with charitable or fraternal organizations which support a boycotted country—§ 760.2(e); and ( *2* ) Making recordkeeping violations—part 762.

(C)The Category C violation and the section of the EAR that sets forth its elements is: Failing to report timely receipt of boycott requests—§ 760.5.

(iii)*Violations arising out of related transactions.* Frequently, a single transaction can give rise to multiple violations. Depending on the facts and circumstances, BIS may choose to impose a smaller or greater penalty per violation. In exercising its discretion, BIS typically looks to factors such as whether the violations resulted from conscious disregard of the requirements of the antiboycott provisions; whether they stemmed from the same underlying error or omission; and whether they resulted in distinguishable or separate harm. The three scenarios set forth below are illustrative of how BIS might view transactions that lead to multiple violations.

(A)*First scenario.* An exporter enters into a sales agreement with a company in a boycotting country. In the course of the negotiations, the company sends the exporter a request for a signed statement certifying that the goods to be supplied do not originate in a boycotted country. The exporter provides the signed certification. Subsequently, the exporter fails to report the receipt of the request. The exporter has committed two violations of the antiboycott provisions, first, a violation of § 760.2(d) for furnishing information concerning the past or present business relationships with or in a boycotted country, and second, a violation of § 760.5 for failure to report the receipt of a request to engage in a restrictive trade practice or boycott. Although the supplier has committed two violations, BIS may impose a smaller mitigated penalty on a per violation basis than if the violations had stemmed from two separate transactions.

(B)*Second scenario.* An exporter receives a boycott request to provide a statement that the goods at issue in a sales transaction do not contain raw materials from a boycotted country and to include the signed statement along with the invoice. The goods are shipped in ten separate shipments. Each shipment includes a copy of the invoice and a copy of the signed boycott-related statement. Each signed statement is a certification that has been furnished in violation of § 760.2(d)'s bar on the furnishing of prohibited business information. Technically, the exporter has committed ten separate violations of § 760.2(d) and one violation of § 760.5 for failure to report receipt of the boycott request. Given that the violations arose from a single boycott request, however, BIS may treat the violations as related and impose a smaller penalty than it would if the furnishing had stemmed from ten separate requests.

(C)*Third scenario.* An exporter has an ongoing relationship with a company in a boycotting country. The company places three separate orders for goods on different dates with the exporter. In connection with each order, the company requests the exporter to provide a signed statement certifying that the goods to be supplied do not originate in a boycotted country. The exporter provides a signed certification with each order of goods that it ships to the company. BIS has the discretion to penalize the furnishing of each of these three items of information as a separate violation of § 760.2(d) of the EAR for furnishing information concerning past or present business relationships with or in a boycotted country.

(iv)*Multiple violations from unrelated transactions.* In cases involving multiple unrelated violations, BIS is more likely to seek a denial of export privileges, an exclusion from practice, and/or a greater monetary penalty than in cases involving isolated incidents. For example, the repeated furnishing of prohibited boycott-related information about business relationships with or in boycotted countries during a long period of time could warrant a denial order, even if a single instance of furnishing such information might warrant only a monetary penalty. BIS takes this approach because multiple violations may indicate serious compliance problems and a resulting risk of future violations. BIS may consider whether a party has taken effective steps to address compliance concerns in determining whether multiple violations warrant a denial or exclusion order in a particular case.

(v)*Timing of settlement.* Under § 766.18 of this part, settlement can occur before a charging letter is served, while a case is before an administrative law judge, or while a case is before the Under Secretary for Industry and Security under § 766.22 of this part. However, early settlement—for example, before a charging letter has been filed—has the benefit of freeing resources for BIS to deploy in other matters. In contrast, for example, the BIS resources saved by settlement on the eve of an adversary hearing under § 766.13 of this part are fewer, insofar as BIS has already expended significant resources on discovery, motions practice, and trial preparation. Given the importance of allocating BIS resources to maximize enforcement of the EAR, BIS has an interest in encouraging early settlement and will take this interest into account in determining settlement terms.

(vi)*Related criminal or civil violations.* Where an administrative enforcement matter under the antiboycott provisions involves conduct giving rise to related criminal charges, BIS may take into account the related violations and their resolution in determining what administrative sanctions are appropriate under part 766 of the EAR. A criminal conviction indicates serious, willful misconduct and an accordingly high risk of future violations, absent effective administrative sanctions. However, entry of a guilty plea can be a sign that a party accepts responsibility for complying with the antiboycott provisions and will take greater care to do so in the future. In appropriate cases where a party is receiving substantial criminal penalties, BIS may find that sufficient deterrence may be achieved by lesser administrative sanctions than would be appropriate in the absence of criminal penalties. Conversely, BIS might seek greater administrative sanctions in an otherwise similar case where a party is not subjected to criminal penalties. The presence of a related criminal or civil disposition may distinguish settlements among civil penalty cases that appear to be otherwise similar. As a result, the factors set forth for consideration in civil penalty settlements will often be applied differently in the context of a “global settlement” of both civil and criminal cases, or multiple civil cases involving other agencies, and may therefore be of limited utility as precedent for future cases, particularly those not involving a global settlement.

(vii)*Familiarity with the Antiboycott Provisions.* Given the scope and detailed nature of the antiboycott provisions, BIS will consider whether a party is an experienced participant in the international business arena who may possess (or ought to possess) familiarity with the antiboycott laws. In this respect, the size of the party's business, the presence or absence of a legal division or corporate compliance program, and the extent of prior involvement in business with or in boycotted or boycotting countries, may be significant.

(2)*Specific mitigating and aggravating factors.* In addition to the general factors described in paragraph (d)(1) of this supplement, BIS also generally looks to the presence or absence of the specific mitigating and aggravating factors in this paragraph in determining what sanctions should apply in a given settlement. These factors describe circumstances that, in BIS's experience, are commonly relevant to penalty determinations in settled cases. However, this listing of factors is not exhaustive and BIS may consider other factors that may further indicate the blameworthiness of a party's conduct, the actual or potential harm associated with a violation, the likelihood of future violations, and/or other considerations relevant to determining what sanctions are appropriate. The assignment of mitigating or aggravating factors will depend upon the attendant circumstances of the party's conduct. Thus, for example, one prior violation should be given less weight than a history of multiple violations, and a previous violation reported in a voluntary self-disclosure by a party whose overall compliance efforts are of high quality should be given less weight than previous violation(s) not involving such mitigating factors. Some of the mitigating factors listed in this paragraph are designated as having “great weight.” When present, such a factor should ordinarily be given considerably more weight than a factor that is not so designated.

(i)*Specific mitigating factors.*

(A)*Voluntary self-disclosure.* (GREAT WEIGHT) The party has made a voluntary self-disclosure of the violation, satisfying the requirements of § 764.8 of the EAR.

(B)*Effective compliance program.* (GREAT WEIGHT) ( *1* ) *General policy or program pertaining to Antiboycott Provisions.* BIS will consider whether a party's compliance efforts uncovered a problem, thereby preventing further violations, and whether the party has taken steps to address compliance concerns raised by the violation, including steps to prevent recurrence of the violation, that are reasonably calculated to be effective. The focus is on the party's demonstrated compliance with the antiboycott provisions. Whether a party has an effective export compliance program covering other provisions of the EAR is not relevant as a mitigating factor. In the case of a party that has done previous business with or in boycotted countries or boycotting countries, BIS will examine whether the party has an effective antiboycott compliance program and whether its overall antiboycott compliance efforts have been of high quality. BIS may deem it appropriate to review the party's internal business documents relating to antiboycott compliance ( *e.g.* , corporate compliance manuals, employee training materials). ( *2* ) *Compliance with reporting and recordkeeping requirements.* In the case of a party that has received reportable boycott requests in the past, BIS may examine whether the party complied with the reporting and recordkeeping requirements of the antiboycott provisions.

(C)*Limited business with or in boycotted or boycotting countries.* The party has had little to no previous experience in conducting business with or in boycotted or boycotting countries. Prior to the current enforcement proceeding, the party had not engaged in business with or in such countries, or had only transacted such business on isolated occasions. BIS may examine the volume of business that the party has conducted with or in boycotted or boycotting countries as demonstrated by the size and dollar amount of transactions or the percentage of a party's overall business that such business constitutes.

(D)*History of compliance with the Antiboycott Provisions of the EAR.* ( *1* ) BIS will consider it to be a mitigating factor if: ( *i* ) The party has never been convicted of a criminal violation of the antiboycott provisions; ( *ii* ) In the past 5 years, the party has not entered into a settlement or been found liable in a boycott-related administrative enforcement case with BIS or another U.S. government agency; ( *iii* ) In the past 3 years, the party has not received a warning letter from BIS relating to the antiboycott provisions; or ( *iv* ) In the past 5 years, the party has not otherwise violated the antiboycott provisions. ( *2* ) Where necessary to ensure effective enforcement, the prior involvement in violations of the antiboycott provisions of a party's owners, directors, officers, partners, or other related persons may be imputed to a party in determining whether these criteria are satisfied. When an acquiring firm takes reasonable steps to uncover, correct, and disclose to BIS conduct that gave rise to violations that the acquired business committed before the acquisition, BIS typically will not take such violations into account in applying this factor in settling other violations by the acquiring firm.

(E)*Exceptional cooperation with the investigation.* The party has provided exceptional cooperation to OAC during the course of the investigation.

(F)*Clarity of request to furnish prohibited information or take prohibited action.* The party responded to a request to furnish information or take action that was ambiguously worded or vague.

(G)*Violations arising out of a party's “passive” refusal to do business in connection with an agreement.* The party has acquiesced in or abided by terms or conditions that constitute a prohibited refusal to do business ( *e.g.* , responded to a tender document that contains prohibited language by sending a bid). *See* “active” agreements to refuse to do business in paragraph (d)(2)(ii)(I) of this supplement.

(H)*Isolated occurrence of violation.* The violation was an isolated occurrence. (Compare to long duration or high frequency of violations as an aggravating factor in paragraph (d)(2)(ii)(F) of this supplement.)

(ii)*Specific Aggravating Factors.*

(A)*Concealment or obstruction.* The party made a deliberate effort to hide or conceal the violation. (GREAT WEIGHT)

(B)*Serious disregard for compliance responsibilities.* (GREAT WEIGHT] There is evidence that the party's conduct demonstrated a serious disregard for responsibilities associated with compliance with the antiboycott provisions ( *e.g.:* knowing violation of party's own compliance policy or evidence that a party chose to treat potential penalties as a cost of doing business rather than develop a compliance policy).

(C)*History of compliance with the Antiboycott Provisions.* ( *1* ) BIS will consider it to be an aggravating factor if: ( *i* ) The party has been convicted of a criminal violation of the antiboycott provisions; ( *ii* ) In the past 5 years, the party has entered into a settlement or been found liable in a boycott-related administrative enforcement case with BIS or another U.S. government agency; ( *iii* ) In the past 3 years, the party has received a warning letter from BIS relating to the antiboycott provisions; or ( *iv* ) In the past 5 years, the party has otherwise violated the antiboycott provisions. ( *2* ) Where necessary to ensure effective enforcement, the prior involvement in violations of the antiboycott provisions of a party's owners, directors, officers, partners, or other related persons may be imputed to a party in determining whether these criteria are satisfied. ( *3* ) When an acquiring firm takes reasonable steps to uncover, correct, and disclose to BIS conduct that gave rise to violations that the acquired firm committed before being acquired, BIS typically will not take such violations into account in applying this factor in settling other violations by the acquiring firm.

(D)*Familiarity with the type of transaction at issue in the violation.* For example, in the case of a violation involving a letter of credit or related financial document, the party routinely pays, negotiates, confirms, or otherwise implements letters of credit or related financial documents in the course of its standard business practices.

(E)*Prior history of business with or in boycotted countries or boycotting countries.* The party has a prior history of conducting business with or in boycotted and boycotting countries. BIS may examine the volume of business that the party has conducted with or in boycotted and boycotting countries as reflected by the size and dollar amount of transactions or the percentage of a party's overall business that such business constitutes.

(F)*Long duration or high frequency of violations.* Violations that occur at frequent intervals or repeated violations occurring over an extended period of time may be treated more seriously than a single violation or related violations that are committed within a brief period of time, particularly if the violations are committed by a party with a history of business with or in boycotted and boycotting countries. (Compare to isolated occurrence of violation in paragraph (d)(2)(i)(H) of this supplement.)

(G)*Clarity of request to furnish prohibited information or take prohibited action.* The request to furnish information or take other prohibited action ( *e.g.* , enter into agreement to refuse to do business with a boycotted country or entity blacklisted by a boycotting country) is facially clear as to its intended purpose.

(H)*Violation relating to specific information concerning an individual entity or individual.* The party has furnished prohibited information about business relationships with specific companies or individuals.

(I)*Violations relating to “active” conduct concerning an agreement to refuse to do business.* The party has taken action that involves altering, editing, or enhancing prohibited terms or language in an agreement to refuse to do business, including a letter of credit, or drafting a clause or provision including prohibited terms or language in the course of negotiating an agreement to refuse to do business, including a letter of credit. *See* “passive” agreements to refuse to do business in paragraph (d)(2)(i)(G) of this supplement.

(e)*Determination of Scope of Denial or Exclusion Order.* In deciding whether and what scope of denial or exclusion order is appropriate, the following factors are particularly relevant: The presence of mitigating or aggravating factors of great weight; the degree of seriousness involved; the extent to which senior management participated in or was aware of the conduct in question; the number of violations; the existence and seriousness of prior violations; the likelihood of future violations (taking into account relevant efforts to comply with the antiboycott provisions); and whether a civil monetary penalty can be expected to have a sufficient deterrent effect.

(f)*How BIS Makes Suspension and Deferral Decisions.*

(1)*Civil Penalties.* In appropriate cases, payment of a civil monetary penalty may be deferred or suspended. See § 764.3(a)(1)(iii) of the EAR. In determining whether suspension or deferral is appropriate, BIS may consider, for example, whether the party has demonstrated a limited ability to pay a penalty that would be appropriate for such violations, so that suspended or deferred payment can be expected to have sufficient deterrent value, and whether, in light of all the circumstances, such suspension or deferral is necessary to make the impact of the penalty consistent with the impact of BIS penalties on other parties who committed similar violations.

(2)*Denial of Export Privileges and Exclusion from Practice.* In deciding whether a denial or exclusion order should be suspended, BIS may consider, for example, the adverse economic consequences of the order on the party, its employees, and other persons, as well as on the national interest in maintaining or promoting the competitiveness of U.S. businesses. An otherwise appropriate denial or exclusion order will be suspended on the basis of adverse economic consequences only if it is found that future violations of the antiboycott provisions are unlikely and if there are adequate measures (usually a substantial civil monetary penalty) to achieve the necessary deterrent effect. Dated: July 9, 2007. Christopher A. Padilla, Assistant Secretary for Export Administration. [FR Doc. E7-13717 Filed 7-16-07; 8:45 am] BILLING CODE 3510-33-P DEPARTMENT OF COMMERCE Bureau of Industry and Security 15 CFR Part 774 [Docket No. 070426097-7099-01] RIN 0694-AE02 Export Licensing Jurisdiction for Microelectronic Circuits AGENCY: Bureau of Industry and Security, Commerce. ACTION: Final rule. SUMMARY: This rule provides clarifying guidance for distinguishing the export and reexport licensing jurisdiction of the U.S. Department of State from that of the U.S. Department of Commerce concerning microelectronic circuits. In this same issue of the **Federal Register** , the U.S. Department of State is amending the International Traffic in Arms Regulations

(ITAR)with respect to radiation-hardened microelectronic circuits in Category XV(d) of the United States Munitions List (USML). The Bureau of Industry and Security

(BIS)is publishing this rule to assist readers of the Export Administration Regulations

(EAR)in evaluating agency licensing jurisdiction over microelectronic circuits while taking into account the new standard in Category XV(d) of the USML. DATES: *Effective Date:* This rule is effective July 17, 2007. ADDRESSES: Although this is a final rule, comments are welcome and should be sent to *publiccomments@bis.doc.gov,* fax

(202)482-3355, or to Regulatory Policy Division, Bureau of Industry and Security, Room H2705, U.S. Department of Commerce, Washington, DC 20230. Please refer to regulatory identification number

(RIN)0694-AE02 in all comments, and in the subject line of e-mail comments. Comments on the collection of information should also be sent to David Rostker, Office of Management and Budget (OMB), by e-mail to *David_Rostker@omb.eop.gov* , or by fax to

(202)395-7285. FOR FURTHER INFORMATION CONTACT: Brian Baker, Deemed Exports and Electronics Division, Office of National Security and Technology Transfer Controls, by telephone at 202-482-5534 or by e-mail at *bbaker@bis.doc.gov.* SUPPLEMENTARY INFORMATION: Entries for certain Export Control Classification Numbers (ECCNs) contain “Related Controls” paragraphs that alert readers to the possible application of export controls administered by other U.S. government agencies or that of export controls set forth in other similar ECCNs. The “Related Controls” paragraph of ECCN 3A001 currently provides guidance on the licensing jurisdiction of the Directorate of Defense Trade Controls of the U.S. Department of State with respect to certain “space qualified” and certain radiation-hardened commodities. Concurrent with this final rule, the U.S. Department of State is publishing a final rule amending the ITAR with respect to State's jurisdiction over radiation-hardened microelectronic circuits in Category XV(d) of the USML (22 CFR part 121). Within Category XV(d) of the USML, the U.S. Department of State is changing the measurement for the single event upset rate parameter. As a result, radiation-hardened microelectronic circuits that meet or exceed the four unchanged parameters in Category XV(d) and whose single event upset rate parameter lies between the old and new standard will be moved to the Commerce Control List

(CCL)under ECCN 3A001.a.1. To reflect the new licensing jurisdiction standard in the USML, this rule adds language to the “Related Controls” paragraph of ECCN 3A001 to assist readers in correctly determining whether certain microelectronic circuits are covered by the CCL and subject to the licensing jurisdiction of the Bureau of Industry and Security of the U.S. Department of Commerce, or are on the USML and subject to the licensing jurisdiction of the Directorate of Defense Trade Controls of the U.S. Department of State. Specifically, the language added to ECCN 3A001 states that the following are subject to the licensing jurisdiction of the Department of State, Directorate of Defense Trade Controls: Radiation-hardened microelectronic circuits controlled by Category XV(d) of the United States Munitions List

(USML)and all specifically designed or modified systems or subsystems, components, parts, accessories, attachments, and associated equipment controlled by Category XV(e) of the USML. Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as extended by the Notice of August 3, 2006, 71 FR 44551 (August 7, 2006), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act. Rulemaking Requirements 1. This final rule has been determined to be not significant for purposes of E.O. 12866. 2. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ) (PRA), unless that collection of information displays a currently valid Office of Management and Budget

(OMB)Control Number. This rule involves a collection of information subject to the requirements of the PRA. This collection has previously been approved by OMB under control number 0694-0088 (Multi-Purpose Application), which carries a burden hour estimate of 58 minutes to prepare and submit form BIS-748. Miscellaneous and recordkeeping activities account for 12 minutes per submission. BIS expects that this rule will not change that burden hour estimate. 3. This rule does not contain policies with Federalism implications as that term is defined under E.O. 13132. 4. BIS finds that there is good cause under 5 U.S.C. 553 (b)(B) to waive the provisions of the Administrative Procedure Act requiring prior notice and the opportunity for public comment because it is unnecessary. The revisions made by this rule are clarifying in nature and do not affect the rights and obligations of the public because they merely provide a cross reference to related regulations of another administrative agency. Because these revisions are not substantive changes to the EAR, it is unnecessary to provide notice and opportunity for public comment. In addition, the 30-day delay in effectiveness required by 5 U.S.C. 553(d) is not applicable because this rule is not a substantive rule. No other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this rule. Because notice of proposed rulemaking and opportunity for public comment are not required to be given for this rule under the Administrative Procedure Act or by any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) are not applicable. Therefore, this regulation is issued in final form. List of Subjects in 15 CFR Part 774 Exports, Reporting and recordkeeping requirements. Accordingly, part 774 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows: PART 774—[AMENDED] 1. The authority citation for 15 CFR part 774 continues to read as follows: Authority: 50 U.S.C. app. 2401 *et seq.* ; 50 U.S.C. 1701 *et seq.* ; 10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c, 22 U.S.C. 3201 *et seq.* , 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; Sec. 901-911, Pub. L. 106-387; Sec. 221, Pub. L. 107-56; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 3, 2006, 71 FR 44551 (August 7, 2006). 2. In Supplement No. 1 to part 774 (the Commerce Control List), Category 3—Electronics, ECCN 3A001 is amended by adding a note

(3)to the “Related Controls” paragraph in the “List of Items Controlled” section before the phrase “ *See also* 3A101, 3A201, and 3A991” to read as follows: Supplement No. 1 to Part 774—The Commerce Control List Category 3—Electronics 3A001 Electronic components, as follows (see List of Items Controlled). List of Items Controlled *Unit:* * * * *Related Controls:* * * *

(3)The following commodities are under the export licensing authority of the Department of State, Directorate of Defense Trade Controls (22 CFR part 121):

(a)Radiation-hardened microelectronic circuits controlled by Category XV

(d)of the United States Munitions List (USML); and

(b)All specifically designed or modified systems or subsystems, components, parts, accessories, attachments, and associated equipment controlled by Category XV

(e)of the USML. * * * Dated: July 5, 2007. Christopher A. Padilla, Assistant Secretary for Export Administration. [FR Doc. E7-13364 Filed 7-16-07; 8:45 am] BILLING CODE 3510-33-P DEPARTMENT OF STATE 22 CFR Part 121 [Public Notice 5867] Amendment to the International Traffic in Arms Regulations: United States Munitions List AGENCY: Department of State. ACTION: Final rule. SUMMARY: The Department of State, in consultation with the Departments of Defense and Commerce, is amending the text of the United States Munitions List (USML), Category XV—Spacecraft Systems and Associated Equipment to clarify the coverage and to alter one of the five performance characteristics that define radiation-hardened microelectronic circuits that are subject to the licensing jurisdiction of the International Traffic in Arms Regulations (ITAR). DATES: *Effective Date:* This rule is effective July 17, 2007. ADDRESSES: Interested parties are invited to submit comments at any time by the following methods: • *Mail:* Department of State, Directorate of Defense Trade Controls, Office of Defense Trade Controls Policy, ATTN: Regulatory Change, USML Part 121, Category XV, 12th Floor, SA-1, Washington DC 20522-0112. • *E-mail:* *DTCPResponseTeam@state.gov* with the subject line: USML Review—Category XV. Persons with access to the Internet may also view this notice by going to the regulations.gov Web site at: *http://www.regulations.gov/index.cfm* . Comments will be accepted at any time. FOR FURTHER INFORMATION CONTACT: Mr. Stephen Tomchik, Office of Defense Trade Controls Policy, Department of State, Telephone

(202)663-2799 or Fax

(202)261-8199. ATTN: Regulatory Change, USML Part 121, Category XV. SUPPLEMENTARY INFORMATION: The specific results of the Department of State-led interagency review are as follows: 1. Category XV. One substantive change is made to the characteristics defining radiation hardened microelectronic circuits in paragraph (d). The exponential measure describing the single event upset rate described in (d)(4) is changed from 1×10 −7 to 1×10 −10 . This change reflects the minimal performance standard for space applications, and addresses the outcome of evolving refinements in the manufacturing process for these circuits. 2. Several additional textual clarifications are made to the five characteristics. The word “threshold” is inserted in (d)(2) and (d)(4) for purposes of technical clarity. In (d)(3) the insertion of the expression “1 MeV Equivalent” describes the energetic activity of neutrons. Finally, in (d)(4) an expression is added to clarify the representative environment for performance in space. 3. It is stressed that any microelectronic circuit that is specifically designed, developed, configured, adapted, or modified for a military or space application, to include its incorporation into any defense article described on the United States Munitions List

(USML)remains subject to the licensing requirements of the International Traffic in Arms Regulations (ITAR). 4. Manufacturers and exporters are responsible for compliance with the controls of this subchapter. Consequently, the Department of State advises that companies must be able to demonstrate, either through testing, statistical analyses, design analyses, or other means, whether semiconductors meet or fail to meet the parameters established in USML Category XV(d). Records of such testing, analyses, or other means must be retained and made available as appropriate to demonstrate compliance. Regulatory Analysis and Notices Administrative Procedure Act This amendment involves a foreign affairs function of the United States and, therefore, is not subject to the procedures required by 5 U.S.C. 553 and 554. Regulatory Flexibility Act This rule does not require analysis under the Regulatory Flexibility Act. Unfunded Mandates Act of 1995 This rule does not require analysis under the Unfunded Mandates Reform Act. Small Business Regulatory Enforcement Fairness Act of 1996 This amendment has been found not to be a major rule within the meaning of the Small Business Regulatory Enforcement Fairness Act of 1996. It will not have substantial direct effects on the States, the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Executive Orders 12372 and 13132 It is determined that this rule does not have sufficient federalism implications to warrant application of the consultation provisions of Executive Orders 12372 and 13132. Executive Order 12866 This amendment is exempt from review under Executive Order 12866, but has been reviewed internally by the Department of State to ensure consistency with the purposes thereof. Paperwork Reduction Act This rule does not impose any new reporting or recordkeeping requirements subject to the Paperwork Reduction Act, 44 U.S.C. Chapter 35. List of Subjects in 22 CFR Part 121 Arms and munitions, Exports. Accordingly, for the reasons set forth above, Title 22, Chapter I, Subchapter M, part 121 is amended as follows: PART 121—UNITED STATES MUNITIONS LIST 1. The authority citation for part 121 continues to read as follows: Authority: Sec. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 U.S.C. 2752, 2278, 2797); E.O. 11958, 42 FR 4311; 3 CFR, 1977 Comp. p. 79; 22 U.S.C. 2658; Pub. L. 105-261, 112 Stat. 1920. 2. In § 121.1, paragraph (c), Category XV—Spacecraft Systems and Associated Equipment is amended by revising paragraph

(d)to read as follows: § 121.1 General. The United States Munition List. Category XV—Spacecraft Systems and Associated Equipment

(d)Radiation-hardened microelectronic circuits that meet or exceed all five of the following characteristics:

(1)A total dose of 5×10 5 Rads (Si);

(2)A dose rate upset threshold of 5×10 8 Rads (Si)/sec;

(3)A neutron dose of 1×10 14 n/cm 2 (1 MeV equivalent);

(4)A single event upset rate of 1×10 −10 errors/bit-day or less, for the CREME96 geosynchronous orbit, Solar Minimum Environment;

(5)Single event latch-up free and having a dose rate latch-up threshold of 5×10 8 Rads (Si). Dated: July 11, 2007. Frank J. Ruggiero, Acting Deputy Assistant Secretary, Political Military Affairs, Department of State. [FR Doc. E7-13826 Filed 7-16-07; 8:45 am] BILLING CODE 4710-25-P POSTAL SERVICE 39 CFR Parts 230, 233, 273 Authority of Office of Inspector General and Postal Inspection Service AGENCY: Postal Service. ACTION: Final rule. SUMMARY: The Postal Service is revising portions of title 39, Code of Federal Regulations, to clarify the division of investigatory responsibilities between the Office of the Inspector General of the Postal Service and the Postal Inspection Service. DATES: Effective July 17, 2007. FOR FURTHER INFORMATION CONTACT: Gladis C. Griffith, Deputy General Counsel, Office of the Inspector General, United States Postal Service, 703-248-4683. SUPPLEMENTARY INFORMATION: To promote efficient use of resources, and prevent unnecessary duplication of effort, the Postal Service has determined it is appropriate to clarify the division of investigative authority between the Office of the Inspector General and the Postal Inspection Service. Most notably, it has been determined that the Office of the Inspector General should investigate allegations of violations of postal laws or misconduct by postal employees, including mail theft, and the Inspection Service should investigate allegations of violations or postal laws or misconduct by all other persons. This delineation of responsibilities reflects agreement between the Postmaster General and the Chairman of the Board of Governors. List of Subjects 39 CFR Part 230 Authority delegations (Government agencies), Freedom of information, Organization and functions (Government agencies), Privacy 39 CFR Part 233 Administrative practice and procedure, Banks, banking, Credit, Crime, Infants and children, Law enforcement, Penalties. 39 CFR part 273 False claims and statements, Law enforcement, Penalties, Program fraud. In view of the considerations discussed above, the Postal Service adopts the following amendments to parts 230, 233, and 273 of title 39 of the Code of Federal Regulations. PART 230—OFFICE OF INSPECTOR GENERAL 1. The authority citation for part 230 continues to read as follows: Authority: 5 U.S.C. App. 3; 39 U.S.C. 401(2) and 1001. 2. Section 230.1 is amended by revising paragraph

(d)to read as follows: § 230.1 Establishment and authority.

(d)The Office of Inspector General is responsible for detecting and preventing fraud, waste, and abuse in the programs and operations of the Postal Service, including, investigating all allegations of violations of postal laws or misconduct by postal employees, including mail theft, and for reviewing existing and proposed legislation and regulations relating to the programs and operations of the Postal Service. PART 233—INSPECTION SERVICE AUTHORITY 3. The authority citation for part 233 continues to read as follows: Authority: 39 U.S.C. 101, 102, 202, 204, 401, 402, 403, 404, 406, 410, 411, 1003, 3005(e)(1); 12 U.S.C. 3401-3422; 18 U.S.C. 981, 1956, 1957, 2254, 3061; 21 U.S.C. 881; Omnibus Reconciliation Act of 1996, sec. 662 (Pub. L. 104-208). 4. Section 233.1 is amended by revising paragraphs

(b)introductory text and (b)(1) to read as follows: § 233.1 Arrest and investigative powers of Postal Inspectors.

(b)*Limitations.* The powers granted by paragraph

(a)of this section shall be exercised only—

(1)In the enforcement of laws regarding property in the custody of the Postal Service, property of the Postal Service, the use of the mails, and other postal offenses. With the exception of enforcing laws related to the mails:

(i)The Office of Inspector General will investigate all allegations of violations of postal laws or misconduct by postal employees, including mail theft; and

(ii)The Inspection Service will investigate all allegations of violations of postal laws or misconduct by all other persons. 5. Section 233.7 is amended by paragraph

(a)to read as follows: § 233.7 Forfeiture authority and procedures.

(a)*Designation of officials having forfeiture authority.* The Chief Postal Inspector is authorized to perform all duties and responsibilities necessary on behalf of the Postal Service and the Office of Inspector General to enforce 18 U.S.C. 981, 2254, and 21 U.S.C. 881, to delegate all or any part of this authority to Deputy Chief Inspectors, Inspectors in Charge, and Inspectors of the Postal Inspection Service, and to issue such instructions as may be necessary to carry out this authority. PART 273—ADMINISTRATION OF PROGRAM FRAUD CIVIL REMEDIES ACT 6. The authority citation for part 273 continues to read as follows: Authority: 31 U.S.C. Chapter 38; 39 U.S.C. 401. 7. Section 273.2 is amended by revising paragraph

(c)to read as follows: § 273.2 Definitions. (c ) *Investigating Official* refers to the Inspector General of the Postal Service or any designee within the United States Office of the Inspector General who serves in a position for which the rate of basic pay is not less than the minimum rate of basic pay for grade GS-15 under the General Schedule. Stanley F. Mires, Chief Counsel, Legislative. [FR Doc. E7-13740 Filed 7-16-07; 8:45 am] BILLING CODE 7710-12-P DEPARTMENT OF TRANSPORTATION Pipeline and Hazardous Materials Safety Administration 49 CFR Parts 192 and 195 [Docket No. PHMSA-04-18938; Amdt. Nos. 192-104, 195-87] RIN 2137-AE07 Pipeline Safety: Integrity Management Program Modifications and Clarifications AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT. ACTION: Final rule. SUMMARY: This action modifies the integrity management regulations for hazardous liquid and natural gas transmission pipelines. The modifications include adding an eight-month window to the period for reassessing hazardous liquid pipelines; modifying notification requirements for operators of hazardous liquid and natural gas pipelines; repealing a requirement for gas operators to notify local authorities; and allowing alternatives in calculating pressure reduction when making an immediate repair on a hazardous liquid pipeline. This action is intended to improve pipeline safety by clarifying the integrity management regulations and providing operators with increased flexibility in implementing their integrity management

(IM)programs. DATES: This rule is effective August 16, 2007. FOR FURTHER INFORMATION CONTACT: Mike Israni by phone at

(202)366-4571 or by e-mail at *mike.israni@dot.gov* . SUPPLEMENTARY INFORMATION: I. Background Statutory and Regulatory Requirements PHMSA is the Federal regulatory agency responsible for promoting the safe, reliable, and environmentally sound operation of over two million miles of natural gas and hazardous liquid pipelines in the United States. PHMSA has broad authority under 49 U.S.C. 60102 to issue regulations establishing standards for pipeline facility design, installation, inspection, emergency planning and response, testing, construction, extension, operation, replacement, and maintenance. By law, PHMSA pipeline safety standards must be both practicable and designed to meet the need for environmental safety and protection, taking account of specified criteria (49 U.S.C. 60102(b)(1-2)). Our rulemaking actions are reviewed by one or both of two statutorily-mandated advisory committees—the Technical Pipeline Safety Standards Committee, and the Technical Hazardous Liquid Pipeline Safety Standards Committee—which provide peer review of all proposed pipeline safety rules to assure technical feasibility, reasonableness, cost-effectiveness, and practicability. Integrity Management Program Since 2000, PHMSA has issued IM requirements for pipeline operators. PHMSA's pipeline IM regulations require operators of hazardous liquid and gas transmission pipelines to assess, evaluate, repair, and validate through comprehensive analyses the integrity of pipeline segments in areas where a leak or failure would do the most damage. These areas are referred to as “High Consequence Areas” and include populated, unusually sensitive environmental areas, and other areas defined by the IM regulations. On December 1, 2000, PHMSA issued IM program regulations at 49 CFR 195.452 for operators with more than 500 miles of hazardous liquid pipeline (65 FR 75378). On January 14, 2002, PHMSA issued IM program repair criteria (67 FR 1650). On January 16, 2002, the IM program regulations were extended to operators with less than 500 miles of hazardous liquid pipeline (67 FR 2136). On December 15, 2003, PHMSA issued IM program regulations for gas transmission pipelines at 49 CFR Part 192, Subpart O (68 FR 69778). Petition for Rulemaking The American Petroleum Institute

(API)and the Association of Oil Pipelines

(AOPL)represent members who operate more than 85 percent of the U.S hazardous liquid infrastructure. On June 18, 2004, API and AOPL jointly submitted a petition for rulemaking seeking changes to the hazardous liquid pipeline IM regulations. API and AOPL requested the rule changes to benefit pipeline safety and provide operators additional flexibility in the following three areas: Adding flexibility to reassessment intervals; adding flexibility to scheduling repairs, and providing for notification to PHMSA when an operator is unable to make a repair because of permitting or other problems. An important concept in IM is that an operator's program is to evolve into a more detailed and comprehensive program as the operator gains information about its pipeline system. An operator is required to continually improve its IM program. Similarly, as PHMSA gains experience in enforcing the IM regulations, we see ways that the regulations can be clarified and improved. Based on our experience and the operators' experience with IM, PHMSA considers how the IM regulations can be improved to benefit public safety and provide operators the flexibility they need in carrying out effective IM programs. PHMSA published a notice of proposed rulemaking

(NPRM)on December 15, 2005 (70 FR 74265), proposing to revise its pipeline IM regulations to address the API and AOPL petition to improve the IM regulations and to get additional information about reasons for repair delays. In the NPRM, PHMSA proposed four revisions. First, we proposed to allow more flexibility in the integrity reassessment intervals for hazardous liquid pipelines by adding an eight-month window to the five-year time frame for operators to complete reassessments. Second, we proposed to require hazardous liquid pipeline and gas transmission pipeline operators to notify us of repair-related reductions in operating pressure. The proposal would require operators to notify us whenever they reduce pipeline pressure to make a repair, to provide reasons for any pressure reduction, and to provide further notice and explanation when a pressure reduction exceeds 365 days. Third, we proposed to repeal as unnecessary an existing regulation requiring gas operators to provide notice of pressure reductions to local authorities. Lastly, PHMSA proposed to amend an existing provision for calculating a pressure reduction when making an immediate repair on a hazardous liquid pipeline. The proposal would allow use of an alternative method to calculate reduced operating pressure when the prescribed formula is not applicable or results in a calculated pressure higher than the operating pressure. II. Disposition of NPRM Comments PHMSA received comments from 12 parties: API and AOPL; the American Gas Association; Texas Pipeline Association; Kinder Morgan Energy Partners, L.P.; Southwest Gas Corporation; Paiute Pipeline Company; Orange and Rockland Utilities, Inc.; Duke Energy Gas Transmission Corporation; Magellan Midstream Partners, L.P.; Panhandle Energy; Puget Sound Energy; and Enbridge Energy Company, Inc.—Liquids Transportation Segment.

(1)Flexibility in Reassessment Intervals Current regulations require hazardous liquid pipeline operators to set up intervals not to exceed five years for continually assessing pipeline integrity (§ 195.452(j)(3)). The NPRM proposed adding an eight-month window to the five-year time frame for operators to complete reassessments. *Comment* : No commenter opposed this proposal. Commenters supported the proposed revision, stating they would benefit from flexibility to allow for unforeseeable events that could affect intervals. Commenters asserted added flexibility would not materially affect pipeline safety. They noted that adding the proposed window to the prescribed reassessment interval would comport with similar latitude provided in other periodic intervals under the pipeline safety regulations (e.g., for patrolling). One commenter suggested PHMSA develop an approach for extending reassessment intervals based on sound engineering, technical studies, and IM principles. Commenters also recognized operators may establish shorter reassessment intervals as a result of risk prioritization. A commenter also requested that PHMSA extend similar flexibility to gas transmission pipeline operators, maintaining that the current reassessment time frames on gas transmission pipelines do not have a technical basis. The commenter offered RSTRENG, a means of predicting the effects of metal loss on the remaining strength of the corroded pipe, and other industry-accepted methods as alternatives that could be useful in setting reassessment time frames on gas transmission pipelines. *PHMSA Response* : Adding an eight-month window to the hazardous liquid pipeline five-year reassessment interval in § 195.452(j)(3) gives operators flexibility in scheduling and completing reassessments without compromising pipeline safety. Operators must allow time in their schedules for unforeseen problems or contingencies that could delay assessments. In practice, operators must thus schedule their assessments on intervals of less than five years in order to assure compliance with a five-year regulatory requirement. This was never PHMSA's intent. This final rule maintains a nominal five-year interval while recognizing that unexpected contingencies can arise. This change is consistent with other pipeline safety regulations specifying compliance intervals. PHMSA agrees that reassessment intervals should be adjusted over time based on engineering, technical studies, and integrity management principles. At this point, we do not have sufficient scientific and technical data to support modifying the five-year interval in regulation. Nevertheless, section § 195.452(j)(4) of the IM regulations allows hazardous liquid operators to seek a variance from the five-year interval for particular pipeline facilities based on engineering data or if needed technology is not available. In these instances, operators notify PHMSA and provide scientific and technical justifications and alternate intervals for variation requests. PHMSA (and States where pipelines are under State jurisdiction) reviews the documentation to ensure sufficient justification has been provided for the proposed interval. This approach has been adequate to cover situations in which longer intervals are needed. Both PHMSA and the U.S. General Accountability Office have testified that assessment intervals for natural gas transmission pipelines should be established based on technical data, risk factors, and engineering analyses. However, making those changes to the gas IM regulations in this action is outside the scope of the NPRM.

(2)Scheduling Repairs In the NPRM, PHMSA requested submission of data and comments on operators' experience with identification of defect characteristics needing short-term (60 and 180-day) remediation. The NPRM allowed a longer period to submit these analyses, and API and AOPL responded to this request by submitting engineering analysis produced by Kiefner and Associates, Inc. on April 13, 2006. This analysis required detailed technical review. PHMSA contracted with Oak Ridge National Laboratory to review the API/AOPL analysis. The Oak Ridge review documented which of the proposed changes in the API analysis could lead to improvements in safety and which could lead to reduced safety. It attempted neither to evaluate the significance to safety of each proposed change, nor to describe the composite impact on safety of the group of proposed changes. The Oak Ridge review did identify the technical factors that a comprehensive evaluation of the proposed changes should consider. PHMSA is currently evaluating operator treatment of many of these factors in ongoing IMP inspections. DOT's Inspector General issued an audit in September 2006 addressing, among other issues, uncertainties in the characterization of defects using in-line inspection (ILI). Although uncertainties, both modest under-sizing and over-sizing of defects, in ILI readings are a fact of life, improvements in technology are continuing to reduce these uncertainties. ILI vendors and pipeline operators must account for potential inaccuracies in tool indications in their evaluation of ILI results. PHMSA inspections are evaluating approaches being used by operators to assure prudent decisions are made in the light of these uncertainties. The PHMSA inspection approach has been evaluated by the IG, and the issue closed satisfactorily. PHMSA is collecting additional data to better characterize the extent to which ILI has mischaracterized actual pipeline defects. PHMSA's ongoing inspection process is providing the necessary assurance that operators are addressing in a responsible way the impact of various sources of uncertainty on key decisions, including whether to excavate, timing of repairs, and timing of reassessment interval PHMSA will address potential changes to repair schedules in a future rulemaking action.

(3)Notification of Special Circumstances—Pressure Reduction Both the hazardous liquid (§ 195.452(h)) and gas transmission (§ 192.933) pipeline IM remediation criteria require operators to reduce pressure or to shut down the pipeline until they can remediate all anomalous conditions. The IM regulations do not require notification when an operator reduces pressure unless the operator cannot meet its schedule for evaluating and remediating conditions and cannot provide safety through a temporary decrease in operating pressure. If a pressure reduction exceeds 365 days, a gas transmission pipeline operator must provide technical justification that the continued pressure reduction will not jeopardize the pipeline's integrity, and a hazardous liquid pipeline operator must take further remedial action to ensure the safety of the pipeline. PHMSA proposed amending its regulations to require an operator of a gas transmission or hazardous liquid pipeline to notify PHMSA when it reduces pressure on an IM program segment (to remediate a defect), and to provide a justification for the pressure reduction. If a repair was not completed within 365 days, the operator would again be required to notify PHMSA and provide an explanation for the delay. PHMSA intended the proposed notification to provide better information on what causes schedule delays (permitting, scheduling, other); and where and under what circumstances PHMSA would be in a position to help streamline the permit process. For gas transmission pipeline operators, PHMSA proposed repealing the requirement for notification of local pipeline safety authorities. PHMSA is not aware of any instance where an intrastate gas transmission pipeline is regulated by a local, rather than a State or Federal, authority. *Comment* : The commenters supported efforts to better understand repair delays and supported efforts to improve pipeline IM. Nevertheless, the commenters opposed the notifications as proposed, stating that PHMSA needs to provide a clear statement of issues, analysis of possible solutions, and the expected costs and benefits of such a regulatory solution. Commenters contended the proposed notifications would impose a significant, undue, and problematic administrative burden on industry. Commenters said many discretionary pressure reductions are part of voluntary, normal, and circumstantial events unrelated to remediation scheduling requirements. Some commenters recommended a demonstration project and suggested PHMSA collect and review the proposed notification data over a two-year period before making a final determination on the need for continued notification. Commenters also suggested collecting the information through annual reporting for any case where operators could not meet the remediation schedule requirements of § 195.452(h). Other commenters suggested pressure reduction notifications should apply where remediation requirements cannot be met due to circumstances beyond the operator's control, when events impact energy supply, or when the operator cannot meet the remediation time limits and the pressure reduction exceeds 365 days. Notifications in these situations would provide PHMSA with more information on conditions interfering with repair attempts and help PHMSA recognize patterns potentially affecting pipeline safety. Commenters also requested PHMSA clarify that the notifications requested are for pressure reductions related to IM remediation and not for other situations, such as pressure reductions done as safety precautions. *PHMSA Response:* After analyzing the comments, PHMSA agrees that adding a requirement to notify PHMSA (and States, when applicable) of every pressure reduction would add a significant burden and likely would not result in commensurate useful information. Temporary pressure reductions add extra safety margin and serve to mitigate the safety impacts of repair delays, making early notifications unnecessary. PHMSA believes the current notification requirements address most cases where, for safety reasons, notification is important—those instances when an operator is unable to make repairs within the required time frames and cannot provide safety through pressure reductions. Thus, this existing notification requirement will remain unchanged. In addition to the existing requirement, PHMSA has added a requirement for notification when a pressure reduction exceeds 365 days. PHMSA believes that notification of extended delay, with justification for the pressure reduction, will provide important information on conditions interfering with the operator's ability to complete defect remediation without placing an undue burden on the operator. This notification will enable PHMSA to intervene if necessary in order to facilitate needed repairs (e.g., by assisting in resolving permitting delays) and to evaluate the necessity for additional safety measures until remediation can be completed. PHMSA expects that greater understanding of the causes of repair delays will help identify where extra actions can help. We are particularly interested in whether any delays are due to permitting problems. We also agree that periodic information collection, as part of the annual report, would reduce the paperwork burden without compromising safety. In the future, PHMSA will consider revising requirements for annual reports to include the number of times repairs required by IM regulations are delayed, beyond required repair times, because of permitting issues. PHMSA has clarified that the notification requirements apply to certain pressure reductions made for purposes of IM remediation requirements. We have also modified the wording in §§ 192.933(c) and 195.452(h)(3) to make it clearer and consistent with wording in the IM notification requirements. There is no change in the requirement. With the revised wording, this section will now require an operator to explain why it cannot meet its schedule for evaluation and remediation of a condition and that the changed schedule will not jeopardize public safety (gas transmission) or public safety or environmental protection (hazardous liquid). We received favorable comments on the proposal to eliminate the notification provisions for local pipeline safety authorities. Accordingly, we are repealing this requirement as proposed. For gas transmission pipeline operators, State notification requirements will continue for intrastate pipelines regulated by that State or for interstate gas transmission pipelines in States where PHMSA has an interstate agent agreement.

(4)Formula for Reducing Operating Pressure Section 195.452(h)(4) requires a hazardous liquid pipeline operator to calculate a temporary reduction in operating pressure using the formula in section 451.7 of ASME/ANSI B 31.4 when making an immediate repair. The requirement is to ensure an extra safety margin. However, this formula only applies to metal loss anomalies, not to all immediate repair conditions, and can result in a calculated pressure higher than the original operating pressure. PHMSA proposed revising the provision by allowing hazardous liquid pipeline operators to use the ASME/ANSI B 31.4 formula, if applicable. If not applicable to the anomaly, or if the formula results in a calculated pressure higher than the original operating pressure, operators could use an alternative acceptable method to calculate pressure reductions. *Comment:* Commenters supported PHMSA's proposal to allow operators to use alternative methods to address anomalies and pipeline operating conditions. No commenter opposed the proposal. *PHMSA Response:* We are adopting the proposal with minor wording changes. This final rule provides flexibility in methods an operator may use to calculate a pressure reduction when making immediate repairs on a hazardous liquid pipeline. III. Advisory Committee Recommendations The amendments adopted in this final rule have been reviewed and approved by both of our pipeline safety standards advisory committees, the Technical Pipeline Safety Standards Committee, and the Technical Hazardous Liquid Pipeline Safety Standards Committee. On June 28, 2006, PHMSA held a joint meeting of the Committees and two concurrent public workshops in Alexandria, VA. PHMSA presented the proposed changes to the committees for a vote. Following a brief discussion, the committee members unanimously carried a motion to accept the rule changes. IV. Regulatory Analyses and Notices A. Privacy Act Anyone can search the electronic form of all comments received in response to any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). DOT's complete Privacy Act Statement was published in the **Federal Register** on April 11, 2000 (65 FR 19477) and is available on the Web at *http://dms.dot.gov.* B. Executive Order 12866 and DOT Regulatory Policies and Procedures This final rule is not considered a significant regulatory action under section 3(f) of Executive Order 12866 (58 FR 51735; Oct. 4, 1993) or the Regulatory Policies and Procedures of the Department of Transportation (44 FR 11034; Feb. 26, 1979). A final regulatory evaluation is in the docket for this rulemaking. The rule's provision concerning scheduling continued integrity assessments will yield benefits in the form of additional flexibility, and will have no cost effects. PHMSA believes the change to the notification requirement for pressure reductions exceeding 365 days will add minimally to the annual average cost to each operator, and to the number of operators affected. PHMSA expects the benefits will offset costs. Together, PHMSA expects these changes to IM regulations for hazardous liquid and gas transmission pipelines to create positive net benefits. C. Regulatory Flexibility Act and Executive Order 13272 The Regulatory Flexibility Act (5 U.S.C. 601-611) requires agencies to review each new regulation and assess its impact on small businesses and other small entities to determine whether the final rule will have a significant impact on a substantial number of small entities. This rule imposes minimal new costs of compliance on the regulated community. The requirements do not apply to a substantial number of small entities. The revisions to the IM rules will affect hazardous liquid pipeline operators and gas transmission pipeline operators. PHMSA expects notification costs per operator to be significantly less than $3.04 annually, a non-significant burden on any pipeline operator, large or small. The changes to add scheduling flexibility to the integrity reassessments will create positive benefits and impose minimal additional costs. The changed notification requirements for pressure reductions exceeding 365 days will also create benefits, and negligible added costs. Together, PHMSA expects these changes to the IM regulations for hazardous liquid and gas transmission pipelines to create positive net benefits to the affected industry. Based on the cost benefit analysis the regulatory changes will not have a significant impact on a substantial number of small entities. PHMSA developed this final rule in accordance with Executive Order 13272 (“Proper Consideration of Small Entities in Agency Rulemaking”) and DOT's procedures and policies to promote compliance with the Regulatory Flexibility Act to ensure that the potential impact of rules on small entities are properly considered. The Small Business Administration's small business definition is either $6 million in revenue (for natural gas pipelines under North American Industry Classification System (NAICS) 486210) or 1,500 employees (for crude oil and refined petroleum product pipelines under NAICS 486110 and 486910). Based on a review of data collected from the hazardous liquid pipeline industry, PHMSA estimates there are 10-20 small entities. PHMSA does not have an estimate of the number of gas transmission pipeline operators that meet the small business definition. Information collection determining pipeline operator staffing or revenue would require separate Office of Management and Budget

(OMB)approval. However, as stated above, compliance with this regulation requires a trivial expenditure and imposes a minimal burden on small businesses. I certify this final rule would not have a significant economic impact on a substantial number of small entities. The costs associated with this final rule will be offset with benefits such as increased flexibility for operators. The changed notification requirements for pressure reductions exceeding 365 days would create benefits and negligible added costs. D. Executive Order 13132 PHMSA analyzed this rule under the principles and criteria contained in Executive Order 13132 (Federalism). None of the changes in this final rule:

(1)Have a substantial direct effect on States, relationships between the Federal government and the States, or on distribution of power and responsibilities among various levels of government;

(2)imposes substantial direct compliance costs on States and local governments; or

(3)preempts State law. Therefore, the consultation and funding requirements of Executive Order 13132 (64 FR 43255; August 10, 1999) do not apply. E. Executive Order 13175 PHMSA analyzed this rule under the principles and criteria contained in Executive Order 13175 (“Consultation and Coordination with Indian Tribal Governments”) (63 FR 27655; November 9, 2000). Because this rule will not significantly or uniquely affect the communities of the Indian tribal governments, the funding and consultation requirements of this Executive Order do not apply. F. Executive Order 13211 This rule is not a “significant energy action” under Executive Order 13211 (Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use). It is not likely to have a significant adverse effect on energy supply, distribution, or use. This rule does not change the pressure reduction restrictions in the IM regulations. It only changes the notification requirements associated with those pressure reductions. G. Unfunded Mandates This rule does not impose unfunded mandates under the 1995 Unfunded Mandates Reform Act. It does not result in costs of $100 million or more to either State, local, or tribal governments, in aggregate, or to the private sector, and is the least burdensome alternative for achieving the objectives. H. Paperwork Reduction Act PHMSA evaluated the rule, as required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), and believes the rule will impose no significant paperwork burden on industry or individual operators. Industry commenters to the rule supported the revised notification requirements. As required, PHMSA presented a separate paperwork analysis to OMB for review and will file a copy of the analysis in the docket. This rule imposes minimal information collection requirements. Based on information currently available to PHMSA, 26 operators filed 74 pressure reduction notifications over the last three years. The revised notification requirements will likely result in minimal additional paperwork burden. The estimated average time to prepare a notification request is 30 minutes. PHMSA does not know how many more notifications will result from the requirement but estimates, on average, less than $3.04 per affected operator per year. Therefore, there should be no significant cost or hourly burden on individual operators or the industry because of the notification requirement in this rule. I. National Environmental Policy Act PHMSA analyzed this rule under section 102(2)(c) of the National Environmental Policy Act (42 U.S.C. 4332), the Council on Environmental Quality regulations (40 CFR 1500-1508), and DOT Order 5610.1C, and determined this action will not significantly affect the quality of the human environment. PHMSA did not receive comments on the environmental assessment prepared on the proposed rule. The final environmental assessment is in the Docket. List of Subjects 49 CFR Part 192 Pipeline safety, Reporting and recordkeeping requirements. 49 CFR Part 195 Pipeline safety, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, PHMSA amends 49 CFR parts 192 and 195 as follows: PART 192—TRANSPORTATION OF NATURAL AND OTHER GAS BY PIPELINE: MINIMUM FEDERAL SAFETY STANDARDS 1. The authority citation for part 192 continues to read as follows: Authority: 49 U.S.C. 5103, 60102, 60104, 60108, 60109, 60110, 60113, and 60118; and 49 CFR 1.53. 2. Amend § 192.933 by revising paragraphs

(a)and (c), to read as follows: § 192.933 What actions must an operator take to address integrity issues?

(a)*General requirements* . An operator must take prompt action to address all anomalous conditions the operator discovers through the integrity assessment. In addressing all conditions, an operator must evaluate all anomalous conditions and remediate those that could reduce a pipeline's integrity. An operator must be able to demonstrate that the remediation of the condition will ensure the condition is unlikely to pose a threat to the integrity of the pipeline until the next reassessment of the covered segment.

(1)*Temporary pressure reduction* . If an operator is unable to respond within the time limits for certain conditions specified in this section, the operator must temporarily reduce the operating pressure of the pipeline or take other action that ensures the safety of the covered segment. An operator must determine any temporary reduction in operating pressure required by this section using ASME/ANSI B31G (incorporated by reference, *see* § 192.7) or AGA Pipeline Research Committee Project PR-3-805 (“RSTRENG,” incorporated by reference, *see* § 192.7) or reduce the operating pressure to a level not exceeding 80 percent of the level at the time the condition was discovered. (See appendix A to this part for information on availability of incorporation by reference information.) An operator must notify PHMSA in accordance with § 192.949 if it cannot meet the schedule for evaluation and remediation required under paragraph

(c)of this section and cannot provide safety through temporary reduction in operating pressure or other action. An operator must also notify a State pipeline safety authority when either a covered segment is located in a State where PHMSA has an interstate agent agreement, or an intrastate covered segment is regulated by that State.

(2)*Long-term pressure reduction* . When a pressure reduction exceeds 365 days, the operator must notify PHMSA under § 192.949 and explain the reasons for the remediation delay. This notice must include a technical justification that the continued pressure reduction will not jeopardize the integrity of the pipeline. The operator also must notify a State pipeline safety authority when either a covered segment is located in a State where PHMSA has an interstate agent agreement, or an intrastate covered segment is regulated by that State.

(c)*Schedule for evaluation and remediation* . An operator must complete remediation of a condition according to a schedule prioritizing the conditions for evaluation and remediation. Unless a special requirement for remediating certain conditions applies, as provided in paragraph

(d)of this section, an operator must follow the schedule in ASME/ANSI B31.8S (incorporated by reference, see § 192.7), section 7, Figure 4. If an operator cannot meet the schedule for any condition, the operator must explain the reasons why it cannot meet the schedule and how the changed schedule will not jeopardize public safety. PART 195—TRANSPORTATION OF HAZARDOUS LIQUIDS BY PIPELINE 3. The authority citation for part 195 continues to read as follows: Authority: 49 U.S.C. 5103, 60102, 60104, 60108, 60109, 60118; and 49 CFR 1.53. 4. Amend § 195.452 by revising paragraphs (h)(1), (h)(3), (h)(4), and (j)(3) to read as follows: § 195.452 Pipeline integrity management in high consequence areas.

(h)* * *

(1)*General requirements* . An operator must take prompt action to address all anomalous conditions the operator discovers through the integrity assessment or information analysis. In addressing all conditions, an operator must evaluate all anomalous conditions and remediate those that could reduce a pipeline's integrity. An operator must be able to demonstrate that the remediation of the condition will ensure the condition is unlikely to pose a threat to the long-term integrity of the pipeline. An operator must comply with § 195.422 when making a repair.

(i)*Temporary pressure reduction* . An operator must notify PHMSA, in accordance with paragraph

(m)of this section, if the operator cannot meet the schedule for evaluation and remediation required under paragraph (h)(3) of this section and cannot provide safety through a temporary reduction in operating pressure.

(ii)*Long-term pressure reduction* . When a pressure reduction exceeds 365 days, the operator must notify PHMSA in accordance with paragraph

(m)of this section and explain the reasons for the delay. An operator must also take further remedial action to ensure the safety of the pipeline.

(3)*Schedule for evaluation and remediation* . An operator must complete remediation of a condition according to a schedule prioritizing the conditions for evaluation and remediation. If an operator cannot meet the schedule for any condition, the operator must explain the reasons why it cannot meet the schedule and how the changed schedule will not jeopardize public safety or environmental protection.

(4)*Special requirements for scheduling remediation* .

(i)*Immediate repair conditions* . An operator's evaluation and remediation schedule must provide for immediate repair conditions. To maintain safety, an operator must temporarily reduce the operating pressure or shut down the pipeline until the operator completes the repair of these conditions. An operator must calculate the temporary reduction in operating pressure using the formula in section 451.7 of ASME/ANSI B31.4 (incorporated by reference, see § 195.3), if applicable. If the formula is not applicable to the type of anomaly or would produce a higher operating pressure, an operator must use an alternative acceptable method to calculate a reduced operating pressure. An operator must treat the following conditions as immediate repair conditions:

(3)*Assessment intervals* . An operator must establish five-year intervals, not to exceed 68 months, for continually assessing the line pipe's integrity. An operator must base the assessment intervals on the risk the line pipe poses to the high consequence area to determine the priority for assessing the pipeline segments. An operator must establish the assessment intervals based on the factors specified in paragraph

(e)of this section, the analysis of the results from the last integrity assessment, and the information analysis required by paragraph

(g)of this section. Issued in Washington, DC, on July 6, 2007. Thomas J. Barrett, Administrator. [FR Doc. E7-13772 Filed 7-16-07; 8:45 am] BILLING CODE 4910-60-P 72 136 Tuesday, July 17, 2007 Proposed Rules DEPARTMENT OF AGRICULTURE Animal and Plant Health Inspection Service 7 CFR Part 301 [Docket No. APHIS-2006-0075] RIN 0579-AC46 Gypsy Moth Regulations; Updates and Clarifications AGENCY: Animal and Plant Health Inspection Service, USDA. ACTION: Proposed rule. SUMMARY: We are proposing to amend the gypsy moth regulations by making editorial and nonsubstantive changes to several terms and providing necessary updates throughout the regulations. These actions would improve the clarity and consistency of the regulations while continuing to provide protection against the artificial spread of gypsy moth into noninfested areas of the United States. DATES: We will consider all comments that we receive on or before September 17, 2007. ADDRESSES: You may submit comments by either of the following methods: • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov,* select “Animal and Plant Health Inspection Service” from the agency drop-down menu, then click “Submit.” In the Docket ID column, select APHIS-2006-0075 to submit or view public comments and to view supporting and related materials available electronically. Information on using Regulations.gov, including instructions for accessing documents, submitting comments, and viewing the docket after the close of the comment period, is available through the site's “User Tips” link. • *Postal Mail/Commercial Delivery:* Please send four copies of your comment (an original and three copies) to Docket No. APHIS-2006-0075, Regulatory Analysis and Development, PPD, APHIS, Station 3A-03.8, 4700 River Road, Unit 118, Riverdale, MD 20737-1238. Please state that your comment refers to Docket No. APHIS-2006-0075. *Reading Room:* You may read any comments that we receive on this docket in our reading room. The reading room is located in room 1141 of the USDA South Building, 14th Street and Independence Avenue, SW., Washington, DC. Normal reading room hours are 8 a.m. to 4:30 p.m., Monday through Friday, except holidays. To be sure someone is there to help you, please call

(202)690-2817 before coming. *Other Information:* Additional information about APHIS and its programs is available on the Internet at *http://www.aphis.usda.gov.* FOR FURTHER INFORMATION CONTACT: Mr. Weyman Fussell, Program Manager, Emergency and Domestic Programs, PPQ, APHIS, 4700 River Road Unit 134, Riverdale, MD 20737-1236;

(301)734-5705. SUPPLEMENTARY INFORMATION: Background The regulations in “Subpart-Gypsy Moth” (7 CFR 301.45 through 301.45-12, referred to below as the regulations) restrict the interstate movement of regulated articles from generally infested areas of States quarantined for gypsy moth in order to prevent the artificial spread of gypsy moth into noninfested areas of the United States. The gypsy moth, *Lymantria dispar* (Linnaeus), is an introduced, highly destructive pest of trees that, during its caterpillar stage, poses a serious threat to hundreds of species of trees and shrubs. A female gypsy moth lays a cluster of eggs (called an egg mass) on and near trees. Up to a thousand caterpillars can hatch from a single egg mass. The caterpillars feed on nearby trees and shrubs, removing much, if not all, foliage. This defoliation, when combined with other forms of stress such as drought and soil compaction, may ultimately result in the death of the tree. The first major outbreak of gypsy moth in the United States occurred in Massachusetts in 1889. Since then, the gypsy moth has infested 19 States and the District of Columbia and has defoliated thousands of acres of hardwood forests across the northeastern United States. The infestation continues to move south and west despite ongoing eradication and control efforts. We are proposing to amend the regulations by making editorial and nonsubstantive changes to several terms and providing necessary updates throughout the regulations. These actions would improve the clarity and consistency of the regulations, while continuing to provide protection against the spread of gypsy moth into noninfested areas of the United States. Definitions Section 301.45-1 defines certain terms used in the regulations. We are proposing to make nonsubstantive changes to several of these definitions to improve the clarity and consistency of the regulations. These proposed change are described below. The current definition of *certificate* describes a document issued to allow the movement of regulated articles to any destination. We would amend this definition to clarify that a certificate can be a form, stamp, or document approved by Plant Protection and Quarantine

(PPQ)and that the purpose of a certificate is to affirm that a regulated article is eligible for interstate movement under the regulations, rather than the current “to allow the movement” description in the definition. We believe this definition would more accurately convey what constitutes a certificate. The current definition of *compliance agreement* is rather circular, i.e., it describes a compliance agreement as a written agreement in which a person agrees to comply with the requirements of the compliance agreement. In actuality, a compliance agreement in the context of our domestic quarantines is an agreement in which a person engaged in growing, moving, or handling regulated articles agrees to comply with the requirements of the regulations. We would amend the definition of *compliance agreement* in § 301.45-1 to reflect this. *Inspector* is currently defined as “Any employee of APHIS, a State government, or any other person, authorized by the Administrator in accordance with the law to enforce the provisions of the quarantine and regulations in this subpart.” To eliminate any possible confusion, we would add a sentence to that definition stating that a person operating under a compliance agreement is not an inspector. While persons operating under a compliance agreement are authorized to take certain actions, e.g., issuing certificates, they are not authorized to enforce the regulations. *Limited permit* is currently defined as “A document issued by an inspector to allow the interstate movement of regulated articles to a specified destination.” In actuality, persons operating under a compliance agreement may also issue limited permits. Further, the regulated articles moving under a limited permit must be moved in accordance with conditions specified on the permit to a specified destination, rather than simply “to a specified destination,” as mentioned in the current definition. We would amend the definition of *limited permit* in § 301.45-1 to more accurately convey what constitutes a limited permit. The definition of *qualified certified applicator* refers to “restricted pesticides.” The correct term is “restricted use pesticides.” We would amend the definition accordingly. We would also update the definition's citation to provisions of the Federal Insecticide, Fungicide, and Rodenticide Act. We are also proposing to revise footnote 1 in the definition of *qualified certified applicator.* Because PPQ no longer maintains a list of qualified certified applicators as stated in the footnote, we would revise the footnote to refer the reader to officials of the various State departments of agriculture for the names of qualified certified applicators. Similarly, footnote 2 in the definition of *treatment manual* is outdated. We no longer provide pamphlets describing methods from the Gypsy Moth Program Manual, and the appendix to the regulations mentioned in the footnote no longer exists. We would remove these outdated references and instead provide a Web site address for viewing the Gypsy Moth Program Manual on the Internet. We are also proposing to add a definition for *OHA document.* We mention throughout the regulations that an OHA document may be issued by the owner of an outdoor household article

(OHA)for the interstate movement of the article, but we do not provide a definition for OHA document anywhere in the regulations. To improve the clarity and consistency of the regulations, we would add a definition of *OHA document.* Safeguarding Methods for Interstate Movement Section 301.45-4, paragraph (b), specifies that any regulated article moved interstate from a noninfested area through a generally infested area during certain months of the year “must be in an enclosed vehicle, or completely enclosed by a covering adequate to prevent access by gypsy moths, such as canvas, plastic, or closely woven cloth.” We are proposing to revise this paragraph by removing the references to specific types of enclosures and coverings, and put in its place a more general requirement that the regulated articles “must be safeguarded by a covering adequate to prevent access by any gypsy moth life stages.” We believe that moving to a more performance-based standard would offer more flexibility in meeting the requirements for the interstate movement of regulated articles, while continuing to provide protection against the artificial spread of gypsy moth into noninfested areas of the United States. Disqualification of Qualified Certified Applicators Section 301.45-12 pertains to the disqualification of qualified certified applicators. In the regulations, a qualified certified applicator may be disqualified if he or she is not certified by a State and/or Federal government to use specific pesticides, fails to comply with the provisions in the regulations, or fails to attend and complete a recertification workshop approved by the Administrator on the identification and treatment of life stages of gypsy moth on outdoor household articles and mobile homes. We are proposing to amend § 301.45-12, paragraph (a)(1), by removing the references to specific pesticides. What would remain would be the simple requirement that a person be certified as a qualified certified applicator under the Federal Insecticide, Fungicide, and Rodenticide Act in a category allowing the use of restricted use pesticides. That basic requirement renders the citing of specific pesticides by name unnecessary. For consistency, we are also proposing to amend paragraph (a)(2) of § 301.45-12 by adding the requirement that qualified certified applicators must also comply “* * * with stipulations agreed on in the compliance agreement between the certified applicator and the Administrator.” We are also proposing to remove paragraph (a)(3) of this section, which states that qualified certified applicators may be disqualified from issuing certificates if they fail to attend and complete a recertification workshop approved by the Administrator on the identification and treatment of life stages of gypsy moth on outdoor household articles and mobile homes. We would remove this paragraph in its entirety because we have not offered, or approved, the referenced recertification workshops for several years. Other Miscellaneous Updates The regulations in § 301.45-2(a)(1) refer to the Integrated Pest Management

(IPM)alternative of the March 1985 Final Environmental Impact Statement

(FEIS)on Gypsy Moth Suppression and Eradication Projects. The March 1985 FEIS has been superseded by an updated FEIS that was filed February 15, 1996. In the 1996 FEIS, the IPM alternative was replaced by the Eradication, Suppression, and Slow the Spread alternative. We would update this paragraph so that it refers to the most recent FEIS and alternative. Section 301.45-7 addresses the assembly and inspection of regulated articles and outdoor household articles prior to interstate movement. The section refers to inspectors and qualified certified applicators examining regulated articles. However, § 301.45-5(e) authorizes an individual to self-certify outdoor household articles for interstate movement if that person has inspected the outdoor household article and has found it to be free of any life stage of gypsy moth. To ensure that § 301.45-7 includes references to all the possible certification options, we would amend the section to included a reference to the self-certification provisions of § 301.45-5(e). Finally, because the APHIS “officer in charge” position title has been changed to “State Plant Health Director,” we would update § 301.45-8 to reflect the position name change. Executive Order 12866 and Regulatory Flexibility Act This proposed rule has been reviewed under Executive Order 12866. The rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget. We are proposing to amend the gypsy moth regulations by making editorial and nonsubstantive changes to several terms and providing necessary updates throughout the regulations. These actions would improve the clarity and consistency of the regulations, while continuing to provide protection against the artificial spread of gypsy moth into noninfested areas of the United States. The gypsy moth is a pest of concern for the U.S. forest industry. Defoliation of trees by gypsy moths often results in the death of the trees, which leads to economic loss, changes in ecosystems and wildlife habitat, and disturbed water flow and water quality. Economic costs to the U.S. forest industry, in addition to the costs of timber losses and pest control, can also arise from trade reductions as importing countries impose protective restrictions on access to their markets for wood products. Gypsy moths are already causing losses in quarantined areas in the United States. Annual losses attributable to gypsy moths are estimated to be about $22 million. 1 Any spread of gypsy moth to noninfested areas could have a negative economic and environmental impact. 1 David Pimentel, Lori Latch, Rodolfo Zuniga, and Doug Morrison, “Environmental and Economic Costs Associated with Non-indigenous Species in the United States,” College of Agriculture and Life Sciences, Cornell University, Ithaca, NY 14850-0901, June 12, 1999. The Small Business Administration

(SBA)has established size standards based on the North American Industry Classification System (NAICS) to determine and to classify which economic entities can be considered small entities. Entities potentially affected by our gypsy moth regulations include sawmills, pulp mills, nursery and tree production farms and nurseries and garden centers that are involved in the interstate movement of Christmas trees, nursery products, household products, and bark and bark products from gypsy moth generally infested areas. The effects on all these entities of the proposed updates to the regulations would be positive. The SBA classifies nursery and tree production (floriculture, nursery, Christmas trees, etc.) farms (NAICS code 111421) small if their annual receipts are not more than $750,000. 2 Sawmills (NAICS code 321113) are regarded small if they employ 500 or fewer employees, and pulp mills (NAICS code 322110) are small if they employ 750 or fewer employees. Nursery and garden centers (NAICS code 444220) are considered small if their annual sales are less than $6.5 million. In 2002, the most recent year for which data are available, there were 17,300 nursery and tree production farms, 1,215 sawmills, 7 pulp mills, and 4,093 nursery and garden centers in generally infested areas of the United States. 3 Approximately 93 percent of all these entities are considered to be small under the SBA's standards. Although the majority of these establishments are small entities, the economic effect of the proposed changes would be negligible. The proposed changes would not impose additional restrictions or requirements; rather, they would help ensure that the existing regulations are as up to date, clear, consistent, and as flexible as possible. 2 SBA, Small Business Size Standards matched to North American Industry Classification System 2002, Effective January 2006 ( *http://www.sba.gov/size/sizetable2002.html* ). 3 U.S. Census Bureau, 2002 Economic Census Geographic Area Series: Manufacturing and Wholesale Trade, Revised January 2006 ( *http://www.census.gov/prod/ec02/ec0231sq1t.pdf* ). Information on the number of sawmills, pulp mills, nursery and garden centers is available at the State level only. County information is withheld to avoid disclosing data for individual establishments. This may result in an overestimate of the number of affected entities because not all counties within quarantined States are in generally infested areas. Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action would not have a significant economic impact on a substantial number of small entities. Executive Order 12372 This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.) Executive Order 12988 This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. If this proposed rule is adopted:

(1)All State and local laws and regulations that are inconsistent with this rule will be preempted;

(2)no retroactive effect will be given to this rule; and

(3)administrative proceedings will not be required before parties may file suit in court challenging this rule. Paperwork Reduction Act This proposed rule contains no new information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ). List of Subjects in 7 CFR Part 301 Agricultural commodities, Plant diseases and pests, Quarantine, Reporting and recordkeeping requirements, Transportation. Accordingly, we propose to amend 7 CFR part 301 as follows: PART 301—DOMESTIC QUARANTINE NOTICES 1. The authority citation for part 301 would continue to read as follows: Authority: 7 U.S.C. 7701-7772 and 7781-7786; 7 CFR 2.22, 2.80, and 371.3. Section 301.75-15 issued under Sec. 204, Title II, Public Law 106-113, 113 Stat. 1501A-293; sections 301.75-15 and 301.75-16 issued under Sec. 203, Title II, Public Law 106-224, 114 Stat. 400 (7 U.S.C. 1421 note). 2. Section 301.45-1 would be amended as follows: a. By adding a definition of *OHA document,* and by revising the definitions of *certificate, compliance agreement,* and *limited permit* to read as set forth below. b. In the definition of *inspector,* by adding a new second sentence to read as set forth below. c. In the definition of *qualified certified applicator,* by removing the citation “86 Stat. 983; 7 U.S.C. 136b” and adding the citation “7 U.S.C. 136i” in its place, by adding the word “use” before the word “pesticides”, and by revising footnote 1 to read as set forth below. d. In the definition of *treatment manual,* by revising footnote 2 to read as set forth below. § 301.45-1 Definitions. *Certificate.* A Plant Protection and Quarantine-approved form, stamp, or document issued and signed by an inspector, or by a qualified certified applicator or by any other person operating in accordance with a compliance agreement, affirming that a specified regulated article is eligible for interstate movement in accordance with this subpart. *Compliance agreement.* A written agreement between APHIS and a person engaged in growing, handling, or moving regulated articles, in which the person agrees to comply with the provisions of this subpart. *Inspector.* * * * A person operating under a compliance agreement is not an inspector. *Limited permit.* A document in which an inspector or a person operating under a compliance agreement affirms that the regulated article identified on the document is eligible for interstate movement in accordance with § 301.45-5 only to the specified destination and only in accordance with the specified conditions. *OHA document.* The self-inspection checklist portion of USDA-APHIS Program Aid Number 1329, “Don't Move Gypsy Moth,” completed and signed by the owner of an outdoor household article

(OHA)affirming that the owner has inspected the OHA for life stages of gypsy moth in accordance with the procedures in the program aid. Qualified certified applicator. * * * 1 1 Names of qualified certified applicators may be obtained from State departments of agriculture. *Treatment Manual.* * * * 2 2 The Gypsy Moth Program Manual may be viewed on the Internet at *http://www.aphis.usda.gov/ppq/manuals/online_manuals.html* . 3. In § 301.45-2, paragraph (a)(1) would be revised to read as follows: § 301.45-2 Authorization to designate and terminate designation of generally infested areas.

(a)* * *

(1)The area is subject to a gypsy moth eradication program conducted by the Federal government or a State government in accordance with the Eradication, Suppression, and Slow the Spread alternative of the Final Environmental Impact Statement

(FEIS)on Gypsy Moth Suppression and Eradication Projects that was filed with the United States Environmental Protection Agency on January 16, 1996; and, 4. In § 301.45-4, paragraph

(b)would be amended by revising the last sentence to read as follows: § 301.45-4 Conditions governing the interstate movement of regulated articles and outdoor household articles from generally infested areas.

(b)* * * The articles must be safeguarded by a covering adequate to prevent access by any gypsy moth life stages. 5. In § 301.45-7, a new sentence would be added after the last sentence to read as follows: § 301.45-7 Assembly and inspection of regulated articles and outdoor household articles. * * * An owner who wants to move outdoor household articles interstate may self-inspect the articles and issue an OHA document in accordance with § 301.45-5(e). § 301.45-8 [Amended] 6. In § 301.45-8, paragraph

(c)would be amended by removing the words “officer in charge” and adding the words “State Plant Health Director” in their place. 7. Section 301.45-12 would be amended as follows: a. By revising paragraph (a)(1) to read as set forth below. b. In paragraph (a)(2), by removing the word “; or,” from the end of the sentence and adding the words “or with stipulations agreed on in the compliance agreement between the certified applicator and the Administrator.” in its place. c. By removing paragraph (a)(3). § 301.45-12 Disqualification of qualified certified applicator to issue certificates.

(a)* * *

(1)Such person is not certified by a State and/or the Federal government as a commercial certified applicator under the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136i) in a category allowing the application of restricted use pesticides. Done in Washington, DC, this 11th day of July 2007. Kevin Shea, Acting Administrator, Animal and Plant Health Inspection Service. [FR Doc. E7-13774 Filed 7-16-07; 8:45 am] BILLING CODE 3410-34-P DEPARTMENT OF AGRICULTURE Animal and Plant Health Inspection Service 7 CFR Part 340 [Docket No. APHIS-2006-0112] RIN 0579-AC31 Introduction of Organisms and Products Altered or Produced Through Genetic Engineering AGENCY: Animal and Plant Health Inspection Service, USDA. ACTION: Notice of availability of draft environmental impact statement and request for comments. SUMMARY: We are evaluating our regulatory program to determine whether we should revise our regulations regarding the importation, interstate movement, and environmental release of genetically engineered organisms. We are seeking public comment on the draft environmental impact statement

(DEIS)we have prepared relative to the regulatory revisions we are considering. The DEIS evaluates the alternatives we have identified in terms of their potential effects on the human environment compared to the effects of our current regulatory program. We believe our ongoing evaluation of these alternatives would benefit from the submission of additional views and data from the public, and we are especially interested in receiving comments on the subset of DEIS alternatives described in this notice. DATES: We will consider all comments that we receive on or before September 17, 2007. ADDRESSES: You may submit comments addressing the draft environmental impact statement by either of the following methods: • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov* , select “Animal and Plant Health Inspection Service” from the agency drop-down menu, then click “Submit.” In the Docket ID column, select APHIS-2006-0112 to submit or view public comments and to view supporting and related materials, including the DEIS, that are available electronically. Information on using Regulations.gov, including instructions for accessing documents, submitting comments, and viewing the docket after the close of the comment period, is available through the site's “User Tips” link. • *Postal Mail/Commercial Delivery* : Please send four copies of your comment (an original and three copies) to Docket No. APHIS-2006-0112, Regulatory Analysis and Development, PPD, APHIS, Station 3A-03.8, 4700 River Road Unit 118, Riverdale, MD 20737-1238. Please state that your comment refers to Docket No. APHIS-2006-0112. Issues in the DEIS are organized using 10 numbered issue areas developed through the scoping process. When possible, please relate each point in your comment to one of these 10 issue areas. *Public Meetings* : APHIS intends to hold public meetings to encourage additional public comment on the DEIS. The locations and dates of the public meetings will be announced on the APHIS Web site ( *http://www.aphis.usda.gov/brs/brs_meetings.html* ) and in a future **Federal Register** notice. *Reading Room* : You may read any comments that we receive on this notice and the DEIS in our reading room. The reading room is located in room 1141 of the USDA South Building, 14th Street and Independence Avenue SW., Washington, DC. Normal reading room hours are 8 a.m. to 4:30 p.m., Monday through Friday, except holidays. To be sure someone is there to help you, please call

(202)690-2817 before coming. *Other Information* : Additional information about APHIS and its programs is available on the Internet at *http://www.aphis.usda.gov* . FOR FURTHER INFORMATION CONTACT: Dr. Michael Wach, Biotechnology Regulatory Services, APHIS, 4700 River Road Unit 147, Riverdale, MD 20737-1236;

(301)734-0485. SUPPLEMENTARY INFORMATION: Background Under the Plant Protection Act

(PPA)(7 U.S.C. 7701 *et seq.* ), the Secretary of Agriculture may prohibit or restrict the importation, entry, or movement in interstate commerce of any plant, plant product, biological control organism, noxious weed, article, or means of conveyance, if the Secretary determines that the prohibition or restriction is necessary to prevent the introduction or the dissemination of a plant pest or noxious weed into the United States. The Secretary's authority under the PPA has been delegated to the Administrator of the Animal and Plant Health Inspection Service (APHIS). Under that authority, APHIS administers regulations in 7 CFR part 340, “Introduction of Organisms and Products Altered or Produced Through Genetic Engineering Which are Plant Pests or Which There is Reason to Believe are Plant Pests” (referred to below as the regulations). The regulations govern the introduction (importation, interstate movement, or release into the environment) of any organism or product altered or produced through genetic engineering that is a plant pest or that there is reason to believe may be a plant pest, or any product that contains such an organism that is unclassified and/or whose classification is unknown. The regulations refer to such genetically engineered organisms as “regulated articles.” Current APHIS Regulations Current APHIS regulations for genetically engineered organisms are based on authority in the PPA to regulate the introduction of organisms that are plant pests or for which there is reason to believe may be plant pests. Applicants must submit required information for review by APHIS scientists who evaluate the potential risks posed by the introduction and the procedures that the applicant will use to minimize those risks. Depending on the nature of the genetically engineered organism, an applicant applies for either a permit or a notification. APHIS authorizes introductions after considering the organism, the nature of the genetic engineering, and the ways in which the genetically engineered organism is likely to interact with the environment. A notification is a more streamlined authorization process that is used only for plants with traits considered to be low risk. To qualify for a notification, the genetically engineered plant must meet strict eligibility requirements to ensure that it poses a minimal plant pest risk. The genetically engineered plant must also be grown under conditions designed to meet performance standards ensuring confinement of the regulated material. The remaining organisms—including plants that are genetically engineered to produce pharmaceutical or industrial compounds—are subject to the permitting process. The permit process is designed to ensure the safe introduction of any genetically engineered organism over which APHIS has authority. All required information submitted in a permit application is reviewed by APHIS scientists. Permits will prescribe confinement conditions and standard operating procedures tailored on a case-by-case basis to maintain confinement of the genetically engineered organism throughout the course of the introduction. APHIS requires that all plants genetically engineered to produce pharmaceutical or industrial compounds be grown under extremely strict management protocols. These plants are required to be grown in a way that maintains confinement of the plant to the release area, with additional precautions taken to prevent the escape of pollen, seeds, or plant parts from the field test site. After a genetically engineered organism has been field tested extensively and the developer demonstrates that the organism does not pose a plant pest risk, the developer may request the deregulation of the organism by filing a petition for a “determination of nonregulated status.” After the applicant submits the required data and it has been carefully evaluated, APHIS prepares an environmental assessment or, if warranted, an environmental impact statement

(EIS)to analyze the potential impacts the plant may have on the human environment and seeks public comment. APHIS approves a petition only when it reaches the conclusion that the genetically engineered organism does not pose a plant pest risk. Once APHIS has deregulated an organism, it may be freely moved and planted without the requirement of permits or other regulatory oversight by APHIS. Deregulated status may be extended to genetically engineered organisms which APHIS determines are similar to previously deregulated organisms. Conversely, given new information, APHIS may determine that a previously deregulated genetically engineered organism poses a plant pest risk and should, therefore, be brought back under Agency oversight. The Draft Environmental Impact Statement APHIS is evaluating its regulatory program to determine if there is a need to revise its regulations in light of our current knowledge and experience and advances in science and technology. It is important that any regulations we may develop effectively carry out the purposes of the PPA, ensure environmental protection, provide regulatory processes that are transparent to stakeholders and the public, efficiently use Agency resources, minimize regulatory burdens, adhere to the principles of E.O. 12866, and are consistent with our international agreements, such as the World Trade Organization Agreement on the Application of Sanitary and Phytosanitary Measures. We have prepared a draft EIS

(DEIS)evaluating all of the regulatory alternatives we are currently considering for a future proposed rule to revise our biotechnology regulations. A copy of the DEIS may be obtained through the Federal eRulemaking Portal as described under ADDRESSES above. When commenting on the DEIS, please identify which of the 10 issue areas identified in the DEIS each point in your comment addresses. While we invite comments on all alternatives in the DEIS, this notice identifies specific areas where we are particularly interested in further public input and data that will assist us in evaluating and refining these regulatory alternatives. We are requesting data on specific topics for some of the alternatives listed below, and we also welcome comments on how each alternative would affect areas such as the overall effectiveness of our biotechnology program, its operational efficiency, industry compliance, and other issues that would be associated with the development, adoption, and implementation of an alternative. The DEIS alternatives highlighted in this notice are discussed in depth in the DEIS, and readers should refer to that document in preparing comments in response to this notice. The issues from the DEIS for which we are especially seeking additional public comment are listed below, with some notes on the particular types of data or views we believe would be most helpful. DEIS Issue 1 and 5—Scope of the Program Given the rapid advances in biotechnology, the present scope of the regulations may not be of sufficient breadth to cover the full range of genetically engineered organisms and the full range of potential agricultural and environmental risks posed by these organisms, including risks to public health. Historically, the Agency has relied exclusively on its authority to protect against plant pests as the basis for regulating genetically engineered organisms. This authority, which is found in the PPA, was derived from the Federal Plant Pest Act and the Plant Quarantine Act. The PPA, however, consolidated and redefined the Agency's plant health authorities. The PPA authorizes the regulation of noxious weeds—defined as any plant or plant product that can directly or indirectly injure or cause damage to crops (including nursery stock or plant products), livestock, poultry, or other interests of agriculture, irrigation, navigation, the natural resources of the United States, the public health, or the environment—and biological control organisms—defined as any enemy, antagonist, or competitor used to control a plant pest or noxious weed. Regulatory alternatives are now being considered with due regard for the revised plant health authorities of the PPA and in light of the many advances in biotechnology. Based on our evaluation of several alternatives in the DEIS, APHIS has made a preliminary determination that regulatory oversight should be enhanced by expanding the scope of regulations to utilize the range of authorities in the PPA, not just the plant pest provision, to include the authority over noxious weeds and biological control organisms. The noxious weed provision would allow oversight of genetically engineered plants by expanding the scope of what is regulated and by allowing a broader consideration of potential risks, including risks to public health. This would allow APHIS to consider what is known about the potential hazards of the introduced proteins and other substances to humans or animals, if inadvertently consumed or released. This information could, in turn, be used to develop appropriate regulatory safeguards in connection with introductions of genetically engineered organisms. APHIS has also made a preliminary determination that it would be beneficial to regulate nonviable plant material originating from field tests when there is reason to believe, based on scientific review, that such debris might be harmful to the environment if it were allowed to remain. Such an approach would allow the Agency to maintain regulatory control if nonviable material poses a hazard (e.g., potential food contamination). APHIS is interested in receiving comment on these preliminary determinations and the other alternatives discussed in the DEIS. In particular, APHIS requests comment on whether APHIS should broaden the scope of its regulations to reflect its authority over noxious weeds and biological control organisms. If APHIS does propose to broaden its regulatory scope to include consideration of noxious weed risk, how should oversight and evaluation of genetically engineered plants differ from what is done under the current plant pest risk-oriented regulations? If APHIS does propose to establish regulations regarding genetically engineered biological control organisms, on what risks should the regulations be focused? Should APHIS tailor the scope of such regulations to focus on specific risks? If so, how? DEIS Issue 2—Transparent, Risk Based Permit System APHIS has always used a risk-based approach in regulating genetically engineered organisms. The Agency has concluded that there is public interest in biotechnology regulation and how APHIS regulates various types of organisms based on to risk and Agency familiarity with a given organism. In addition, there is a trend toward more highly varied organisms and the regulatory process may need greater flexibility and rigor to more appropriately regulate the increasing variety of organisms. Accordingly, the Agency is considering revising the regulations to make the Agency's use of risk-based categories—where genetically engineered organisms are classified according to risk and familiarity so that oversight and confinement vary by category—more refined, more explicit and more transparent to the industry and the public. Redefined risk categories, we believe, can provide added flexibility, improving the Agency's ability to regulate diverse organisms and new types of traits, and provide better clarity to the regulated community and to the public, which may in turn promote greater confidence in the regulatory system. Accordingly, APHIS' has made a preliminary determination to adopt an expanded tiered permitting system based on potential environmental risk and Agency familiarity with the organism. A detailed example of such a system is described in this DEIS. The goals of such a tiered system would be to increase transparency with respect to how the Agency regulates various types of genetically engineered organisms and to increase regulatory flexibility such that the Agency could move genetically engineered organisms among the tiers as new information becomes available. For well characterized low-risk genetically engineered organisms, APHIS would continue to use a process similar to the current notification process found in 7 CFR 340.3; however, the term notification would no longer be used. Such a process would become the lowest risk “permit.” This change would, we believe, increase transparency and avoid any potential confusion about the status of these organisms as regulated articles. APHIS is interested in receiving comment on this alternative, and, in particular, requests comment on the criteria that should be used to establish risk-based categories. What characteristics of genetically engineered plants should be considered in establishing such categories? How many categories should there be? Which types or species of plants should be assigned to which categories? What specific regulatory requirements or restrictions would be appropriate for each such category and why would they be appropriate? DEIS Issue 3—Nonregulated Status Once an article has been deregulated, APHIS does not place any restrictions or requirements on its use. Restrictions have not been deemed necessary because BRS risk assessments have concluded that the genetically engineered plants APHIS has deregulated pose no plant pest risk. APHIS recognizes, however, that future development and commercialization of plants with less familiar traits may pose new challenges for the Agency because even a thorough and comprehensive assessment may not resolve all unknowns regarding an article proposed for deregulation. These unresolved issues may justify continued scrutiny and data collection or use restrictions, but be of such a minor nature and minimal risk or concern that allowing planting of the article without a permit would be appropriate. APHIS is exploring the concept of a system that could give increased flexibility for handling special cases involving less familiar traits by creating provisions that allow for imposition of conditions for unconfined release. This could facilitate commercialization, while requiring appropriate restrictions or monitoring. APHIS has made a preliminary determination to propose a new feature for its regulatory system whereby the Agency would retain oversight in specific cases as appropriate. We envision, of course, that the vast majority of organisms would be fully deregulated and that this determination would be identical to deregulation under our current regulations. The new system could include processes and criteria to allow release and use, with some restrictions, for special cases where there were minor risks that could be mitigated with conditions to ensure safe commercial use. We are therefore interested in receiving comments on how to manage genetically engineered organisms that present only minor unresolved risks that can be mitigated effectively, and on what factors should be considered in establishing appropriate mitigations. APHIS is also considering the use of new terminology to describe both deregulation as it currently exists and the more limited deregulation where some oversight would be retained. One possibility is to use the term “approval” to indicate that specific genetically engineered organisms are “unconditionally approved.” This would be synonymous with full deregulation under our current regulations. Other genetically engineered organisms could be “approved with conditions” but would remain subject to continuing regulatory oversight in some respects. Alternatively, APHIS could retain the term “deregulation” and use “deregulation in part” or another term to refer to situations where genetically engineered organisms remain subject to regulatory oversight in some respects. We are interested in receiving comment on this potential change in terminology. DEIS Issue 4—Oversight of Pharmaceuticals and Industrial Substances Genetic engineering technology has advanced to the point where organisms can be developed that produce novel proteins and other substances with biological activity or industrial utility. Because the gene products made by such pharmaceutical and industrial compound producing plants may pose hazards not associated with proteins and other substances commonly found in the food supply, it is particularly important to ensure effective confinement measures for these plants. At the same time, however, the confinement measures prescribed for plants producing pharmaceutical and industrial compounds would be based on risk, not on the type of plant alone. The Agency has considered various alternatives with respect to the regulation of genetically engineered plants producing pharmaceutical compounds, including whether food crops should be used and whether they should be allowable for open air introductions. We have made a preliminary determination that under stringent conditions and with rigorous oversight, including due consideration of substantive food safety issues, food crops can be safely used for production of these compounds. In connection with this preliminary determination, the Agency seeks input on the need for and development of new or additional regulatory mechanisms to ensure that genetically engineered organisms producing pharmaceutical or industrial compounds are subject to requirements and oversight commensurate with the potential risks. We are also interested in comments regarding the biological characteristics that the Agency should consider in imposing safeguards. What should be done to ensure that such crops are commercialized under appropriate safeguards? DEIS Issue 6—Commercialization Under Multi-Year Permits For organisms that might be commercialized but that do not meet the criteria for deregulation, APHIS is considering whether a new type of permitting system would be more appropriate in terms of efficiency and effectiveness than the current system. In addition, there is much public and State interest in these types of plantings and a new mechanism may increase transparency and allow for greater State involvement. Based on considerations more fully described in the DEIS, APHIS has made a preliminary determination to create a multi-year permit for genetically engineered organisms, with stringent oversight, in cases where developers are not interested or would not qualify for deregulation but plan to produce under permit. This would cover situations where producers are able to commercialize with relatively small plantings (e.g., industrial and pharmaceutical plants). Regulatory rigor would remain high to protect the environment, but efficiency and transparency would increase. The State partnership would be strengthened under this new system. The system would rely on multiyear permits and intensive reviews of standard operating procedures (SOPs), as well as audits and inspections. Though the new system under consideration could be used for pharmaceutical and industrial plants, the Agency might also find it appropriate for other types of genetically engineered plants. We are seeking comments on such a system and are particularly interested in comments regarding new or additional regulatory mechanisms to ensure that genetically engineered organisms produced under multi-year permits would be subject to effective requirements and oversight commensurate with the potential risks. DEIS Issue 7—Low Levels of Biotechnology-Derived Genes and Gene Products Occurring in Commerce That Have Not Gone Through All Applicable Regulatory Reviews As with traditional plant breeding, large scale annual field testing of genetically engineered plants that have not completed all applicable reviews may result in materials from these trials occasionally being detected at low levels in commercial commodities and seeds. Current regulations do not expressly allow for such occurrences, though experience continues to show that such occurrences can occur. In a notice published in the **Federal Register** on August 2, 2002 (67 FR 50577-50580), by the Office of Science and Technology Policy, APHIS committed to conducting a risk-based regulatory program that minimizes the occurrence of these materials but includes safety criteria under which these materials would be allowed at low levels in commercial commodities and seeds. On March 29, 2007, APHIS published a policy statement in the **Federal Register** (72 FR 14649-14651, Docket No. APHIS-2006-0167) to clarify how it currently handles cases of low-level presence of regulated materials in commodities and seeds. Based on our evaluation and assessment of alternatives in the DEIS, APHIS has made a preliminary determination to establish in regulations criteria under which the occurrence of regulated articles would be allowable, that is, considered not actionable by APHIS. The occasional detection of regulated material in commercial crops as seeds can occur as a result of field tests conducted under confinement conditions appropriate for notifications. This is due to cross-pollination and also commingling from shared equipment and facilities. In addition, such incidents will inevitably result from the importation of seeds and commodities from countries where such material has been fully approved but has not completed all U.S. reviews. In the majority of cases, this low-level occurrence of regulated articles will be of minimal risk, and this fact should be accounted for in any regulatory scheme since oversight should be commensurate with risk. APHIS is interested in receiving comment on this alternative, but in particular, requests comment on whether APHIS should establish a new regulatory approach to address such incidents of low-level presence of genetically engineered plant material. If low-level presence incidents occur, what criteria should the Agency use to determine whether remedial action will be required, and to determine the nature and scope of any such remedial action? DEIS Issue 8—Importation of Genetically Engineered Commodities Not Intended for Propagation APHIS anticipates an increasing number of requests to import regulated genetically engineered organisms that are not intended for propagation, such as organisms that are intended for direct use as food, feed, or for processing. The current system of permits and notifications was not designed to handle such requests on a case-by-case basis. However, in anticipation of this increase, APHIS' goal is to design an efficient system that protects U.S. agriculture and human health without erecting unnecessary trade barriers. To that end, the Agency has evaluated several different alternatives. Based on considerations more fully described in the DEIS, APHIS has made a preliminary determination to have a new regulatory mechanism to allow for imports of commodities for nonpropagative use, that is, for food, feed, or processing, in cases where these commodities might not have been deregulated in the United States. With this approach, we could establish criteria to ensure safety and allow for additional environmental review when appropriate. Allowing such imports without prior deregulation would not obviate the need to comply with requirements at other agencies, such as FDA and EPA. APHIS is interested in receiving comment on this alternative and, more specifically, comments as to the commodity characteristics and other data that APHIS should consider when determining the appropriate safeguards for commodities coming in for processing or to be used directly as food or feed. DEIS Issue 9—Interstate Movement of Well-Studied, Low Risk Organisms Currently, genetically engineered *Arabidopsis* spp. and a few other organisms are exempt from interstate movement restrictions under 7 CFR 340.2 because they are well understood and extensively used in research. Based on considerations more fully described in the DEIS, APHIS is considering whether to expand the current exemption from interstate movement restrictions to other well-studied, low-risk, genetically engineered research organisms. Such a change would create a consistent, risk based approach to organisms with similar risk profiles. Are there other genetically engineered organisms that should also be exempt from regulation in the same or similar manner as genetically engineered *Arabidopsis* spp.? Which organisms, if any, should be considered for such an exemption? Should the quantity of seeds or plant material being moved be considered in any exemption? In connection with such an exemption, should there continue to be some limited regulatory oversight, and what should be the nature and scope of such oversight? As noted above, we are interested in receiving comments on all of the issues presented in the DEIS and particularly on the issues and alternatives outlined above. Authority: 7 U.S.C. 7701-7772 and 7781-7786; 31 U.S.C. 9701; 7 CFR 2.22, 2.80, and 371.3. Done in Washington, DC, this 12th day of July 2007. Bruce Knight, Under Secretary for Marketing and Regulatory Programs. [FR Doc. 07-3474 Filed 7-13-07; 8:45 am]

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