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Code · REGISTER · 2007-09-18 · Animal and Plant Health Inspection Service, USDA · Proposed Rules

Proposed Rules. Proposed rule

16,226 words·~74 min read·/register/2007/09/18/07-4596

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

BILLING CODE 3510-22-S 72 180 Tuesday, September 18, 2007 Proposed Rules DEPARTMENT OF AGRICULTURE Animal and Plant Health Inspection Service 7 CFR Parts 301 and 305 [Docket No. APHIS-2007-0084] RIN 0579-AC57 Consolidation of the Fruit Fly Regulations AGENCY: Animal and Plant Health Inspection Service, USDA. ACTION: Proposed rule. SUMMARY: We are proposing to consolidate our domestic regulations regarding exotic fruit flies. Currently, these regulations are contained in six separate subparts, each of which covers a different species of fruit fly, and each of these subparts has parallel sections that are substantially the same as the corresponding sections in the other subparts.
Therefore, we are proposing to combine these six subparts into a single subpart. We are also proposing to modify the regulations by adding a mechanism through which quarantined areas can be removed from the regulations as quickly as they are added. These proposed changes would eliminate duplication and enhance the flexibility of the regulations. DATES: We will consider all comments that we receive on or before November 19, 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-2007-0084 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-2007-0084, 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-2007-0084. *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. Wayne D. Burnett, Domestic Coordinator, Fruit Fly Exclusion and Detection Programs, PPQ, APHIS, 4700 River Road Unit 137, Riverdale, MD 20737-1234;
(301)734-4387. SUPPLEMENTARY INFORMATION: Background The Animal and Plant Health Inspection Service (APHIS) administers regulations in 7 CFR part 301, “Domestic Quarantine Notices,” that are designed to prevent the interstate spread of pests that are new to or not widely distributed within the United States. The regulations in part 301 are currently divided into 23 subparts, each of which addresses a specific plant pest concern. Of those 23 subparts, 6 deal with fruit flies, those being the Mexican, Mediterranean, Oriental, Melon, West Indian, and Sapote fruit flies. All of the fruit fly subparts are constructed in the same manner and consist of 11 sections: • Restrictions on interstate movement of regulated articles; • Definitions; • Regulated articles; • Quarantined areas; • Conditions governing the interstate movement of regulated articles from quarantined areas; • Issuance and cancellation of certificates and limited permits; • Compliance agreements and cancellation; • Assembly and inspection of regulated articles; • Attachment and disposition of certificates and limited permits; • Costs and charges; and • Treatments. With the exception of quarantined area descriptions, regulated article lists, and approved treatments that are specific to a particular fruit fly, there is little to no variation in the content of the six subparts; apart from those exceptions, any differences are more editorial than substantive. Given the large degree to which the provisions of these six subparts overlap, we are proposing to consolidate them into a single subpart. The new “Subpart—Fruit Flies” would allow us to eliminate the duplicative regulatory text that results from maintaining six separate but similar subparts while allowing us to retain all the necessary distinctions dictated by the differing treatments for and biology, life cycle, and host range of each species of fruit fly. This consolidation would result in 66 sections of regulatory text being condensed into 11 sections, with 7 of those sections being no longer than they currently are in any one of the existing subparts. Given the May 2006 detection (and the July 2006 eradication) of peach fruit fly ( *Bactrocera zonata* ) in two counties in California, this proposed rule would also include peach fruit fly within the consolidated regulations. The proposed new subpart is discussed below. Restrictions on Interstate Movement of Regulated Articles Proposed § 301.32(a) would establish that the interstate movement of regulated articles from quarantined areas is prohibited except in accordance with the regulations. A footnote in this paragraph would note that the interstate movement of any of the fruit flies regulated under the subpart is subject to the regulations in 7 CFR part 330, which contains the Federal plant pest regulations. Paragraph
(b)of § 301.32 would explain that sec. 414 of the Plant Protection Act (7 U.S.C. 7714) provides that the Secretary of Agriculture may, under certain conditions, hold, seize, quarantine, treat, apply other remedial measures to, destroy, or otherwise dispose of any plant, plant pest, plant product, article, or means of conveyance that is moving, or has moved into or through the United States or interstate if the Secretary has reason to believe the article is a plant pest or is infested with a plant pest at the time of movement. These proposed provisions are all drawn from and consistent with those found in the existing fruit fly subparts. Definitions Proposed § 301.32-1 contains definitions of the terms used in the subpart; all the terms and their definitions were drawn from the existing fruit fly subparts. Although some definitions would be modified to reflect the fact that they no longer apply to a specific species of fruit fly, we are proposing to make substantive changes to only two definitions: *Core area* and *day degrees.* In the Mediterranean, West Indian, and Sapote fruit fly subparts, *core area* is defined as a 1-square-mile area surrounding each property where the particular fruit fly has been detected, whereas the term is defined as “The area within a circle surrounding each detection using a 1/2 mile radius with the detection as a center point” in the Mexican and Oriental fruit fly subparts (the term is not defined in the melon fruit fly subpart). In proposed § 301.32-1, we use the definition that appears in the Mexican and Oriental fruit fly subparts, as those definitions have both been recently updated to reflect the use of GPS technology, which allows us to more accurately measure the distance from a positive detection site. The regulations in the Mexican, Mediterranean, West Indian, and Sapote fruit fly subparts currently define the term *day degrees* as a mathematical construct combining average temperature over time that is used to calculate the length of a particular fruit fly's life cycle. Day degrees are the product of a formula, with all temperatures measured in °F, such as that which appears in the sapote fruit fly regulations: “[(Minimum Daily Temp + Maximum Daily Temp)/2]−54° Day Degrees.” We recently amended the definition of *day degrees* in the Oriental fruit fly subpart to reflect the fact that we can now use weather service data entered into a computer model to more accurately measure day degree accumulation based upon the latest biological information than was previously possible. Therefore, the definition of *day degrees* that appears in proposed § 301.32-1 matches the definition in the Oriental fruit fly subpart, i.e.: “A unit of measurement used to measure the amount of heat required to further the development of fruit flies through their life cycle. Day-degree life cycle requirements are calculated through a modeling process specific for each fruit fly species.” Regulated Articles In proposed § 301.32-2, we have consolidated the lists of regulated articles that appear in each of the six fruit fly subparts and have also included those articles identified as regulated articles for the peach fruit fly. Because there is quite a bit of overlap among the lists, i.e., the same articles are regulated articles in two or more subparts, the list in proposed § 301.32(a) appears in table form, with the articles themselves appearing in the left column and the one or more fruit fly species for which those articles are regulated appearing in the right column. Quarantined Areas Proposed § 301.32-3 provides the criteria for the designation of States, or portions of States, as quarantined areas. Apart from the substantive addition we discuss in the following paragraphs, the content of this proposed section has been drawn from, and is consistent with, the corresponding sections in the six existing fruit fly subparts. The substantive addition we are proposing involves the designation of quarantined areas. The regulations in each of the six subparts, as well as in proposed § 301.32-3(a) in this document, provide APHIS with the ability to temporarily designate any nonquarantined area in a State as a quarantined area when a fruit fly has been found in that area by an inspector, when the Administrator has reason to believe that the fruit fly is present in that area, or when the Administrator considers it necessary to quarantine that area because of its inseparability for quarantine enforcement purposes from localities in which the fruit fly has been found. This temporary designation of a quarantined area is communicated in writing to the owner or person in possession of the nonquarantined area; after that written notice is served, the interstate movement of any regulated article from an area temporarily designated as a quarantined area will be subject to the regulations. As soon as practicable, the area will be added to the list of quarantined areas in the regulations or the temporary designation of a quarantined area may be terminated by the Administrator or an inspector in accordance with the specified criteria for such termination. The owner or person in possession of an area for which designation of a quarantined area is terminated before being added to the regulations will be given notice of the termination as soon as practicable. In this document, we are proposing to establish a mechanism that would allow us to take a similar approach to removing areas from quarantine. Under our current procedures, we normally add a quarantined area to the regulations through an interim rule, then, after determining that the fruit fly has been eradicated from that area, we issue a second interim rule that removes the area from the regulations. Even with the comparatively expedited process afforded by using an interim rule to remove a quarantined area from the regulations, there is routinely a period of 2 or more weeks that passes between the time we determine that eradication has been achieved and the time we can publish that second interim rule to relieve restrictions on the interstate movement of regulated articles from the area. In order to address this situation and enable us to remove restrictions on interstate movement as quickly as possible once we determine they are no longer warranted, proposed § 301.32-3(b)(2) would provide that the Administrator or an inspector may terminate the temporary designation of a quarantined area or the designation of a quarantined area listed in paragraph
(c)when the Administrator determines that sufficient time has passed without finding additional flies or other evidence of infestation in the area to conclude that the fruit fly no longer exists in that area. The procedure for quickly removing a quarantined area would mirror the current procedure for quickly adding a quarantined area, *i.e.* , written notice would be given to all individuals in the quarantined area, who would then be permitted to move regulated articles from the previously quarantined area without restriction, and the designation of the area as a quarantined area, if listed in the regulations, would then be removed from the list in paragraph
(c)as soon as practicable. Conditions Governing the Interstate Movement of Regulated Articles From Quarantined Areas The provisions in proposed § 301.32-4 were drawn from the provisions that appear in the corresponding sections of each of the six subparts, which do not differ substantively among themselves except in one instance. In § 301.78-4 of the Mediterranean fruit fly subpart, paragraph (b)(2) includes a provision for the movement of a regulated article without a certificate or limited permit if it is moving as air cargo or as a meal intended for in-flight consumption, and is transiting Los Angeles International Airport in California. Proposed § 301.32-4 would not include this provision, as the more general movement provisions in this section would cover that situation. Issuance and Cancellation of Certificates and Limited Permits Proposed § 301.32-5 explains the conditions that must be met in order for a certificate or limited permit authorizing the interstate movement of a regulated article to be issued and provides for the withdrawal of a certificate or limited permit by an inspector under certain circumstances. These proposed provisions are all drawn from and consistent with those found in the existing fruit fly subparts. Compliance Agreements and Cancellation Proposed § 301.32-6 provides for the use of and cancellation of compliance agreements, which are provided for the convenience of persons who are involved in the growing, handling, or moving of regulated articles from quarantined areas. These proposed provisions are all drawn from and consistent with those found in the existing fruit fly subparts. Assembly and Inspection of Regulated Articles Proposed § 301.32-7 provides instructions for obtaining the services of an inspector when inspection is necessary to secure a certificate or limited permit to move regulated articles interstate. These proposed provisions are all drawn from and consistent with those found in the existing fruit fly subparts. Attachment and Disposition of Certificates and Limited Permits Proposed § 301.32-8 provides instructions for attaching certificates or limited permits to regulated articles or their accompanying documentation and requires that copies of the certificate or limited permit be provided to the consignee of the regulated articles upon arrival at their destination. These proposed provisions are all drawn from and consistent with those found in the existing fruit fly subparts. Costs and Charges Proposed § 301.32-9 explains the APHIS policy that the services of an inspector that are needed to comply with the regulations are provided without cost between 8 a.m. and 4:30 p.m., Monday through Friday, except holidays, to persons requiring those services, but that we will not be responsible for any other costs or charges. These proposed provisions are all drawn from and consistent with those found in the existing fruit fly subparts. Treatments In combining the “Treatments” sections found in each subpart, we would omit the treatment schedules that also appear in 7 CFR part 305, “Phytosanitary Treatments.” Proposed new § 301.32-10 would direct the reader to part 305 for the treatment schedules authorized for use against specific fruit flies. Paragraph
(a)would set out the treatment schedules for soil within the dripline of plants that are producing or have produced regulated articles, and paragraph
(b)would present the premises treatments available for fields, groves, or areas that are located within a quarantined area but outside the infested core area and that produce regulated articles. These treatments have all been drawn from the existing subparts. We are also proposing to make irradiation available as a treatment option for regulated articles in those cases where it is not already available. The Mexican fruit fly and Mediterranean fruit fly regulations have been amended in recent years to provide for the use of irradiation as a treatment, but the Oriental, Melon, West Indian, and Sapote fruit fly regulations have not been similarly updated. There is an approved irradiation dose listed for each of those species of fruit fly in the irradiation-specific provisions of the phytosanitary treatments regulations in part 305, and the regulations in part 305 currently provide for the use of irradiation as a treatment for imported articles when treatment is necessary to mitigate the risk presented by fruit flies. Our proposed change would allow irradiation to be used to qualify regulated articles for interstate movement as well. In part 305, § 305.32 contains specific instruction for the use of irradiation as a treatment of regulated fruit to be moved interstate from areas quarantined for Mexican fruit fly, and § 305.33 contains the same information for the treatment of regulated fruit to be moved interstate from areas quarantined for Mediterranean fruit fly. We would amend § 305.32 by replacing specific references to the Mexican fruit fly and the Mexican fruit fly regulations with more general references to fruit flies and the regulations in “Subpart—Fruit Flies.” This change would make the section's irradiation treatment provisions applicable to all regulated fruit fly species; in addition to making irradiation available for use against the Oriental, Peach, Melon, West Indian, and Sapote fruit flies, this change would render the Mediterranean fruit fly-specific § 305.33 unnecessary, so we would remove and reserve that section. We would also amend the table of treatment schedules in § 305.2(h)(2)(ii), “Treatment for shipments from U.S. quarantine localities,” to indicate that irradiation is an authorized treatment for regulated articles produced in an area quarantined because of fruit flies under our domestic quarantine regulations. 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 modify the current regulations controlling exotic fruit flies. Currently, these regulations are contained in 7 CFR part 301 and are divided into separate subparts, each of which covers a different species of fruit fly. Each of these subparts has parallel sections that are substantially similar to the sections in other subparts. Therefore, we are proposing to combine these sections into one subpart that will cover all fruit fly species. We are also proposing to modify the regulations by adding a mechanism through which quarantined areas can be removed from the regulations as quickly as they can be added. The consolidation of the 66 sections to 11 sections under the new “Subpart—Fruit Flies,” would allow APHIS to eliminate the duplicative regulatory text. This change is an administrative one without any direct economic effect on any entity. The second change would offer irradiation as one more treatment option for articles regulated because of Oriental, Melon, West Indian, or Sapote fruit flies. There are no areas currently quarantined because of any of these fruit fly species. If there were, the irradiation treatment option may benefit affected entities by providing them with an alternative means of treating regulated articles. We do not know how costs of irradiation treatment may compare to the costs of other treatments, but at least entities would have a broader choice of options. The third change would affect the interstate movement of regulated articles directly by allowing producers of those commodities in an area that has been under quarantine to more quickly resume moving articles without first having to obtain a certificate or limited permit. Entities that may benefit from this change include fresh fruit producers, nurserymen and tree growers, and transportation entities such as long distance general freight trucking with storage, scheduled freight air transportation companies, and/or short line railroad transportation companies. There are no significant alternatives to the rule; however, we do not anticipate that the economic effects of these actions would be significant. Impacts on small entities would be attributable to the availability and the cost of irradiation as a treatment against all regulated fruit flies and to the ability of APHIS to relieve quarantine-related restrictions on the interstate movement of regulated articles more quickly. The overall economic effects of these proposed changes are expected to be positive, if minimal. We cannot estimate how many entities would be affected or what percentage of these entities would be small entities; those numbers depend entirely on the number and size of entities that might be present in a quarantined area at the time these proposed provisions become effective or at any time thereafter. While the number of entities affected may eventually prove to be a large number of entities, most of which are likely to be small entities, the economic effects on those entities, while positive, would not be significant. 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)State and local laws and regulations will not 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 7 CFR Part 301 Agricultural commodities, Plant diseases and pests, Quarantine, Reporting and recordkeeping requirements, Transportation. 7 CFR Part 305 Irradiation, Phytosanitary treatment, Plant diseases and pests, Quarantine, Reporting and recordkeeping requirements. Accordingly, we propose to amend 7 CFR parts 301 and 305 as follows: PART 301—DOMESTIC QUARANTINE NOTICES 1. The authority citation for part 301 continues 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. In part 301, by adding a new “Subpart—Fruit Flies,” (§§ 301.32 through 301.32-10) to read as follows: Subpart—Fruit Flies Sec. 301.32 Restrictions on interstate movement of regulated articles. 301.32-1 Definitions. 301.32-2 Regulated articles. 301.32-3 Quarantined areas. 301.32-4 Conditions governing the interstate movement of regulated articles from quarantined areas. 301.32-5 Issuance and cancellation of certificates and limited permits. 301.32-6 Compliance agreements and cancellation. 301.32-7 Assembly and inspection of regulated articles. 301.32-8 Attachment and disposition of certificates and limited permits. 301.32-9 Costs and charges. 301.32-10 Treatments. Subpart—Fruit Flies § 301.32 Restrictions on interstate movement of regulated articles.
(a)No person may move interstate from any quarantined area any regulated article except in accordance with this subpart. 1 1 Permit and other requirements for the interstate movement of any of the fruit flies regulated under this subpart are contained in part 330 of this chapter.
(b)Section 414 of the Plant Protection Act (7 U.S.C. 7714) provides that the Secretary of Agriculture may, under certain conditions, hold, seize, quarantine, treat, apply other remedial measures to, destroy, or otherwise dispose of any plant, plant pest, plant product, article, or means of conveyance that is moving, or has moved into or through the United States or interstate if the Secretary has reason to believe the article is a plant pest or is infested with a plant pest at the time of movement. § 301.32-1 Definitions. *Administrator* . The Administrator, Animal and Plant Health Inspection Service, or any person authorized to act for the Administrator. *Animal and Plant Health Inspection Service* . The Animal and Plant Health Inspection Service (APHIS) of the United States Department of Agriculture. *Certificate.* A document in which an inspector or person operating under a compliance agreement affirms that a specified regulated article is free of fruit flies and may be moved interstate to any destination. *Commercially produced.* Fruits and vegetables that an inspector identifies as having been produced for sale and distribution in mass markets. Such identification will be based on a variety of indicators, including, but not limited to: Quantity of produce, monocultural practices, pest management programs, good sanitation practices including destruction of culls, type of packaging, identification of grower or packinghouse on the packaging, and documents consigning the shipment to a wholesaler or retailer. *Compliance agreement.* A written agreement between APHIS and a person engaged in growing, handling, or moving regulated articles, wherein the person agrees to comply with this subpart. *Core area* . The area within a circle surrounding each site where fruit flies have been detected using a 1/2 mile radius with the detection site as a center point. *Day degrees.* A unit of measurement used to measure the amount of heat required to further the development of fruit flies through their life cycle. Day-degree life cycle requirements are calculated through a modeling process specific for each species of fruit fly. *Departmental permit.* A document issued by the Administrator in which he or she affirms that interstate movement of the regulated article identified on the document is for scientific or experimental purposes and that the regulated article is eligible for interstate movement in accordance with § 301.32-4(c). *Dripline.* The line around the canopy of a plant. *Fruit fly (fruit flies).* The melon fruit fly, Mexican fruit fly, Mediterranean fruit fly, Oriental fruit fly, peach fruit fly, sapote fruit fly, or West Indian fruit fly, or other species of insects found in the family Tephritidae, collectively. *Infestation.* The presence of fruit flies or the existence of circumstances that makes it reasonable to believe that fruit flies are present. *Inspector.* Any employee of APHIS or other person authorized by the Administrator to enforce this subpart. *Interstate* . From any State into or through any other State. *Limited permit.* A document in which an inspector or person operating under a compliance agreement affirms that the regulated article identified on the document is eligible for interstate movement in accordance with § 301.32-5(b) only to a specified destination and only in accordance with specified conditions. *Mediterranean fruit fly.* The insect known as Mediterranean fruit fly, *Ceratitis capitata* (Wiedemann), in any stage of development. *Melon fruit fly.* The insect known as the melon fruit fly, *Bactrocera cucurbitae* (Coquillett), in any stage of development. *Mexican fruit fly.* The insect known as Mexican fruit fly, *Anastrepha ludens* (Loew), in any stage of development. *Move (moved, movement)* . Shipped, offered to a common carrier for shipment, received for transportation or transported by a common carrier, or carried, transported, moved, or allowed to be moved. *Oriental fruit fly* . The insect known as Oriental fruit fly, *Bactrocera dorsalis* (Hendel), in any stage of development. *Peach fruit fly* . The insect known as peach fruit fly, *Anastrepha zonata* (Saunders), in any stage of development. *Person.* Any individual, partnership, corporation, association, joint venture, or other legal entity. *Plant Protection and Quarantine.* The organizational unit within the Animal and Plant Health Inspection Service that has been delegated responsibility for enforcing provisions of the Plant Protection Act and related legislation, quarantines, and regulations. *Quarantined area.* Any State, or any portion of a State, listed in § 301.32-3(c) or otherwise designated as a quarantined area in accordance with § 301.32-3(b). *Regulated article* . Any article listed in § 301.32-2 or otherwise designated as a regulated article in accordance with § 301.32-2(d). *Sapote fruit fly.* The insect known as the sapote fruit fly, *Anastrepha serpentina* , in any stage of development. *State* . Any of the several States of the United States, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, the District of Columbia, Guam, the Virgin Islands of the United States, or any other territory or possession of the United States. *West Indian fruit fly.* The insect known as the West Indian fruit fly, *Anastrepha obliqua* (Macquart), in any stage of development. § 301.32-2 Regulated articles.
(a)In the following table, the berry, fruit, nut, or vegetable listed in each row in the left column is a regulated article for each of the fruit fly species listed in that row in the right column, unless the article is canned, dried, or frozen below −17.8 °C (0 °F): Botanical name Common name(s) Fruit fly *Abelmoschus esculentus* = *Hibiscus esculentus* Okra Melon, Peach. *Acca sellowiana* = *Feijoa sellowiana* Pineapple guava Mediterranean, Oriental, Peach. *Actinidia chinensis* Kiwi Mediterranean. *Aegle marmelos* Indian bael Peach. *Anacardium occidentale* Cashew Oriental. *Annona cherimola* Cherimoya Mexican, Oriental, Peach. *Annona glabra* Pond-apple Sapote. *Annona muricata* Soursop Melon, Oriental, Peach. *Annona reticulata* Custard apple, Annona Melon, Mexican, Oriental, Peach. *Annona squamosa* Custard apple Peach. *Artocarpus altilis* Breadfruit Oriental. *Artocarpus heterophyllus* Jackfruit Oriental. *Averrhoa carambola* Carambola, Country gooseberry Oriental, West Indian. *Benincasa hispida* Melon, Chinese Melon. *Brassica juncea* Mustard, leaf Melon. *Brassica oleracea* var. *botrytis* Cauliflower Melon. *Brosimum alicastrum* Ramón West Indian. *Byrsonima crassifolia* Nance Sapote. *Calophyllum inophyllum* Alexandrian-laurel, Laurel Oriental. *Cananga odorata* Ylang-Ylang Oriental. *Capsicum annum* Pepper, chili Mediterranean, Melon, Oriental. *Capsicum frutescens* Pepper, tabasco Mediterranean, Melon. *Capsicum frutescens abbreviatum* Oriental bush red pepper Oriental. *Capsicum frutescens* var. *grossum* Pepper, sweet Oriental. *Carica papaya* Papaya Mediterranean, Melon, Oriental, Peach. *Carissa grandiflora* Natal plum Oriental. *Carissa macrocarpa* Natal plum Mediterranean. *Casimiroa edulis* Sapote, white Mediterranean. *Casimiroa greggii* = *Sargentia greggii* Sargentia, yellow chapote Mexican. *Casimiroa* spp Sapote. Mexican. *Cereus coerulescens* Cactus Oriental. *Chrysophyllum cainito* Star apple Oriental, Sapote. *Chrysophyllum oliviforme* Caimitillo Oriental. *Citrofortunella japonica* Orange, calamondin Peach. *Citrullus colocynthis* Colocynth Melon. *Citrullus lanatus* = *Citrullus vulgaris* Watermelon Melon, Peach. *Citrullus* spp Melon Melon. *Citrus aurantiifolia* Lime Mediterranean, Mexican, 1 Oriental, Peach. *Citrus aurantium* Orange, sour Mediterranean, Mexican, Oriental, Peach. *Citrus jambhiri* Lemon, Rough Mediterranean. *Citrus latifolia* Lime, Persian Oriental. *Citrus limon* Lemon Mediterranean, 2 Mexican, 3 Oriental, Peach. *Citrus limon × reticulata* Lemon, Meyer Mediterranean. *Citrus madurensis* = × *Citrofortunella mitis* Orange, Panama Sapote. *Citrus maxima* = *Citrus grandis* Pummelo or Shaddock Mediterranean, Mexican, Oriental, Peach. *Citrus medica* Citrus citron Mediterranean, Mexican, Peach. *Citrus paradisi* Grapefruit Mediterranean, Melon, Mexican, Oriental, Peach. *Citrus reticulata* Mandarin orange, tangerine Mediterranean, Mexican, Oriental, Peach. *Citrus reticulata* var. *Unshu* Orange, Unshu Mediterranean, Oriental. *Citrus reticulata* x *C. sinensis* = *Citrus nobilis* Orange, king Mediterranean, Melon, Oriental, Peach. *Citrus reticulata* x *Fortunella* Orange, calamondin Mediterranean, Mexican, Oriental. *Citrus sinensis* Orange, sweet Mediterranean, Melon, Mexican, Oriental, Peach. *Citrus* spp Citrus Sapote. *Clausena lansium* Wampi Oriental. *Coccinia* spp Gourds Melon, Peach. *Coccoloba uvifera* Seagrape Oriental. *Coffea arabica* Coffee, Arabian Oriental. *Cresentia* spp Gourds Melon, Peach. *Cucumis melo* and *Cucumis melo* var. *Cantalupensis* Cantaloupe Melon, Peach. *Cucumis melo* var. *conomon* Melon, oriental pickling Melon. *Cucumis pubescens* and *Cucumis trigonus* Cucurbit Melon. *Cucumis sativus* Cucumber Melon, Oriental, Peach. *Cucumis utilissimus* Melon, long Peach. *Cucurbita maxima* Squash Melon. *Cucurbita moschata* Pumpkin, Canada Melon. *Cucurbita pepo* Pumpkin Melon. *Cydonia oblonga* Quince Mexican, Mediterranean, Oriental, Peach, Sapote. *Cyphomandra betaceae* Tomato, tree Melon. *Diospyros digyna* Black sapote Sapote *Diospyros discolor* Velvet apple Oriental. *Diospyros khaki* Japanese persimmon Mediterranean, Oriental. *Diospyros* spp Sapote Sapote, West Indian. *Dovyalis hebecarpa* Kitembilla Oriental, Sapote, West Indian. *Dracena draco* Dragon tree Oriental. *Elaeocarpus angustifolius* Blue marbletree; New Guinea quandong Peach. *Elaeocarpus grandiflorus* Lily of the valley tree Peach. *Elaeocarpus madopetalus* Ma-kok-nam Peach. *Eriobotrya japonica* Loquat Mediterranean, Oriental, Peach, West Indian. *Eugenia brasiliensis* = *E. dombeyi* Brazil-cherry, grumichama Mediterranean, Oriental, Peach. *Eugenia malaccensis* Malay apple Oriental. *Eugenia uniflora* Surinam cherry Mediterranean, Oriental, Peach. *Euphoria longan* Longan Oriental. *Ficus benghalensis* Fig, Banyan Peach. *Ficus carica* Fig Mediterranean, Melon, Oriental, Peach. *Ficus macrophylla* Fig, Moreton Bay Peach. *Ficus retusa* Fig, glossy leaf Peach. *Ficus rubiginosa* Fig, Port Jackson Peach. *Ficus* spp Fig Peach. *Fortunella japonica* Chinese Orange, Kumquat Mediterranean, Oriental, Peach. *Garcinia celebica* Gourka Oriental. *Garcinia mangostana* Mangosteen Oriental. *Grewia asiatica* Phalsa Peach. *Jubaea chilensis* = *Jubaea spectabilis* Syrup palm Oriental. *Juglans hindsii* Walnut Oriental. *Juglans regia* Walnut, English Oriental. *Juglans* spp Walnut with husk Mediterranean. *Lablab purpureus* subsp. *purpureus* = *Dolichos lablab* Bean, hyacinth Melon. *Lagenaria* spp Gourds Melon, Peach. *Luffa acutangula* Gourd, ribbed or ridged, luffa Peach. *Luffa aegyptiaca* Gourd, smooth luffa, sponge Peach. *Luffa* spp Gourds Melon, Peach. *Luffa vulgaris* Gourd Peach. *Lychee chinensis* Lychee nut Oriental. *Lycopersicon esculentum* Tomato Mediterranean, Melon, 4 Oriental, 4 Peach. 4 *Madhuca indica* = *Bassia latifolia* Mahua, mowra-buttertree Peach. *Malpighia glabra* Cherry, Barbados Oriental, West Indian. *Malpighia punicifolia* West Indian cherry Oriental. *Malus sylvestris* Apple Mediterranean, Melon, Mexican, Oriental, Sapote, Peach. *Mammea americana* Mammy apple Mexican, Oriental, Peach, Sapote. *Mangifera foetida* Mango, Bachang Peach. *Mangifera indica* Mango All. *Mangifera odorata* Kuine Peach. *Manilkara hexandra* Sapodilla, balata Peach. *Manilkara jaimiqui* subsp. *emarginata* Sapodilla, wild Peach. *Manilkara zapota* Sapodilla, chiku Oriental, Peach, Sapote, West Indian. *Mimusops elengi* Spanish cherry Mediterranean, Oriental. *Momordica balsamina* Balsam apple, hawthorn Peach. *Momordica charantia* Balsam pear, bitter melon Peach. *Momordica cochinchinensis* Balsam apple, gac Peach. *Momordica* spp Gourds Melon, Peach. *Morus nigra* Mulberry Oriental. *Murraya exotica* Mock orange Mediterranean, Oriental. *Musa × paradisiaca* = *Musa paradisiaca* subsp *. sapientum* Banana Oriental. *Musa acuminata* = *Musa nana* Banana, dwarf Oriental. *Ochrosia elliptica* Orange, bourbon Peach. *Olea europea* Olive Mediterranean. *Opuntia ficus-indica* = *Opuntia megacantha* Prickly pear Oriental. *Opuntia* spp Opuntia cactus Mediterranean. *Passiflora edulis* Passionflower, passionfruit, yellow lilikoi Melon, Oriental, West Indian. *Passiflora laurifolia* Lemon, water Melon. *Passiflora ligularis* Granadilla, sweet Oriental. *Passiflora quadrangularis* Granadilla, giant West Indian. *Passiflora tripartita* var. *mollissima* Passionflower, softleaf Oriental. *Persea americana* Avocado Mediterranean, Melon, Mexican, Oriental, Peach, Sapote. *Phaseolus lunatus* = *Phaseolus limensis* Bean, lima Melon. *Phaseolus vulgaris* Bean, mung Melon. *Phoenix dactylifera* Date palm Mediterranean, Melon, Oriental, Peach. *Planchonia careya* = *Careya arborea* Patana oak, kumbhi Peach. *Pouteria caimito* Abiu Sapote. *Pouteria campechiana* Eggfruit tree Oriental, Sapote. *Pouteria obovata* Lucmo Sapote. *Pouteria viridis* Sapote, green Sapote. *Prunus americana* Plum, American Mediterranean, Mexican, Oriental, Peach. *Prunus armeniaca* Apricot Mediterranean, Mexican, Oriental, Peach. *Prunus avium* Sweet cherry Mediterranean, Peach. *Prunus cerasus* Sour cherry Mediterranean, Peach. *Prunus domestica* Plum, European Mediterranean, Mexican, Oriental, Peach. *Prunus dulcis* = *P. amygdalus* Almond with husk Mediterranean, Peach. 5 *Prunus ilicifolia* Cherry, Catalina Oriental, Peach. *Prunus lusitanica* Cherry, Portuguese Oriental, Peach. *Prunus persica* Peach All. *Prunus persica* var. *nectarine* Nectarine Mediterranean, Mexican, Oriental, Peach. *Prunus salicina* Japanese plum Mediterranean, Mexican, Peach, West Indian. *Prunus salicina* x *Prunus cerasifera* Methley plum Peach. *Psidium cattleianum* Strawberry guava, Cattley guava Mediterranean, Melon, Oriental. *Psidium cattleianum* var. *cattleianum* f. *lucidum* Yellow strawberry guava Peach. *Psidium cattleianum* var. *littorale* Red strawberry guava Oriental, West Indian, Peach. *Psidium guajava* Guava All. *Punica granatum* Pomegranate Mediterranean, Mexican, Oriental, Peach. *Pyrus communis* Pear All. *Pyrus pashia* Kaeuth Peach. *Pyrus pyrifolia* Pear, sand Peach. *Rhodomyrtus tomentosa* Myrtle, downy rose Oriental. *Sandoricum koetjape* Santol Oriental. *Santalum album* Sandalwood, white Oriental. *Santalum paniculatum* Sandalwood Oriental. *Sapotaceae* Sapota, Sapodilla Mexican. *Sechium edule* Chayote Melon. *Sesbania grandiflora* Scarlet wisteria tree Melon. *Sicyes* sp. Cucumber, bur Melon. *Solanum aculeatissimum* Nightshade Peach. *Solanum mauritianum* = *S. auriculatum* Tobacco, wild Peach. *Solanum melongena* Eggplant Mediterranean, 6 Melon, Peach. *Solanum muricatum* Pepino Oriental, Peach. *Solanum pseudocapsicum* Jerusalem cherry Oriental, Peach. *Solanum seaforthianum* Nightshade, Brazilian Peach. *Solanum verbascifolium* Nightshade, Mullein Peach. *Spondias dulcis* = *Spondias cytherea* Otaheite apple, Jew plum Oriental, West Indian. *Spondias mombin* Hog-plum Sapote, West Indian. *Spondias purpurea* Red mombin Sapote, West Indian. *Spondias* spp Spanish plum, purple mombin or Ciruela Mexican. *Spondias tuberose* Imbu Oriental. *Syzygium aquem* Water apple, watery roseapple Peach. *Syzygium cumini* Java plum, jambolana Peach. *Syzygium jambos* = *Eugenia jambos* Rose apple Mediterranean, Mexican, Oriental, Peach, West Indian. *Syzygium malaccense* = *Eugenia malaccensis* Mountain apple, Malay apple Mediterranean, Peach, West Indian. *Syzygium samarangense* Java apple Peach. *Terminalia bellirica* Myrobalan, belleric Peach. *Terminalia catappa* Tropical almond Oriental, Peach. *Terminalia chebula* Myrobalan, black or chebulic Mediterranean, Oriental, Peach. *Thevetia peruviana* Yellow oleander Mediterranean, Oriental. *Trichosanthis* spp Gourds Melon, Peach. *Vigna unguiculata* Cowpea Melon. *Vitis* spp Grapes Mediterranean, Oriental. *Vitis trifolia* Grape Melon. *Wikstroemia phillyreifolia* Akia Oriental. *Ziziphus mauritiana* Chinese date, jujube Peach. 1 Sour limes are not regulated articles for Mexican fruit fly. 2 Smooth-skinned lemons harvested for packing by commercial packinghouses are not regulated articles for Mediterranean fruit fly. 3 Eureka, Lisbon, and Villa Franca cultivars (smooth-skinned sour lemon) are not regulated articles for Mexican. fruit fly. 4 Only pink and red ripe tomatoes are regulated articles for melon, Oriental, and peach fruit flies. 5 Harvested almonds with dried husks are not regulated articles for peach fruit fly. 6 Commercially produced eggplants are not regulated articles for Mediterranean fruit fly.
(b)Plants of the following species in the family Curcurbitaceae are regulated articles for the melon fruit fly only: Cantaloupe ( *Cucumis melo* ) Chayote ( *Sechium edule* ) Colocynth ( *Citrullus colocynthis* ) Cucumber ( *Cucumis sativus* ) Cucumber, bur ( *Sicyes* spp.) Cucurbit ( *Cucumis pubescens* and *C. trigonus* ) Cucurbit, wild ( *Cucumis trigonus* ) Gherkin, West India ( *Cucumis angaria* ) Gourds ( *Coccinia, Cresentia, Lagenaria, Luffa, Momordica,* and *Trichosanthis* spp.) Gourd, angled luffa ( *Luffa acutangula* ) Gourd, balsam apple ( *Momordica balsaminia* ) Gourd, ivy ( *Coccinia grandis* ) Gourd, kakari ( *Momordica dioica* ) Gourd, serpent cucumber ( *Trichosanthis anguina* ) Gourd, snake ( *Trichosanthis cucumeroides* ) Gourd, sponge ( *Luffa aegyptiaca* ) Gourd, white flowered ( *Lagenaria siceraria* ) Melon, Chinese ( *Benincasa hispida* ) Melon, long ( *Cucumis utilissimus* ) Pumpkin ( *Cucurbita pepo* ) Pumpkin, Canada ( *Cucurbita moschata* ) Squash ( *Cucurbita maxima* ) Watermelon ( *Citrullus lanatus* = *Citrullus vulgaris* )
(c)Soil within the dripline of the plants listed in paragraph
(b)of this section or plants that are producing or have produced any article listed in paragraph
(a)of this section.
(d)Any other product, article, or means of conveyance not listed in paragraphs (a), (b), or
(c)of this section that an inspector determines presents a risk of spreading fruit flies, when the inspector notifies the person in possession of the product, article, or means of conveyance that it is subject to the restrictions of this subpart. § 301.32-3 Quarantined areas.
(a)Except as otherwise provided in paragraph
(b)of this section, the Administrator will list as a quarantined area in paragraph
(c)of this section each State, or each portion of a State, in which a fruit fly subject to the regulations in this subpart has been found by an inspector, or in which the Administrator has reason to believe that the fruit fly is present, or that the Administrator considers necessary to quarantine because of its inseparability for quarantine enforcement purposes from localities in which the fruit fly has been found. Less than an entire State will be designated as a quarantined area only if the Administrator determines that:
(1)The State has adopted and is enforcing restrictions on the intrastate movement of the regulated articles that are equivalent to those imposed by this subpart on the interstate movement of regulated articles; and
(2)The designation of less than the entire State as a quarantined area will prevent the interstate spread of the fruit fly. (b)(1) The Administrator or an inspector may temporarily designate any nonquarantined area in a State as a quarantined area in accordance with the criteria specified in paragraph
(a)of this section for listing such area. The Administrator will give a written notice of this temporary designation and a copy of these regulations to the owner or person in possession of the nonquarantined area; thereafter, the interstate movement of any regulated article from an area temporarily designated as a quarantined area is subject to the regulations in this subpart. As soon as practicable, the area will be added to the appropriate list in paragraph
(c)of this section or the temporary designation of the quarantined area may be terminated by the Administrator or an inspector in accordance with the criteria specified in paragraph (b)(2) of this section. The owner or person in possession of an area for which designation as a quarantined area is terminated will be given notice of the termination as soon as practicable.
(2)The Administrator or an inspector may terminate the temporary designation of a quarantined area or the designation of a quarantined area listed in paragraph
(c)of this section when the Administrator determines that sufficient time has passed without finding additional flies or other evidence of infestation in the area to conclude that the fruit fly no longer exists in that area. The Administrator will give written notice of this termination to the owner or person in possession of the area that has been quarantined; thereafter, the interstate movement of regulated articles from the area will no longer be subject to the regulations in this subpart. As soon as practicable, the area listed in paragraph
(c)will be removed from the list in paragraph
(c)of this section.
(c)The areas described below are designated as quarantined areas:
(1)*Mediterranean fruit fly.* There are no areas in the continental United States quarantined for the Mediterranean fruit fly.
(2)*Melon fruit fly.* There are no areas in the continental United States quarantined for the melon fruit fly.
(3)*Mexican fruit fly.* The following areas in Texas are quarantined for the Mexican fruit fly: *Cameron County.* The entire county. *Hidalgo County.* The entire county. *Willacy County.* The entire county.
(4)*Oriental fruit fly.* There are no areas in the continental United States quarantined for the Oriental fruit fly.
(5)*Peach fruit fly.* There are no areas in the continental United States quarantined for the peach fruit fly.
(6)*Sapote fruit fly.* There are no areas in the continental United States quarantined for the sapote fruit fly.
(7)*West Indian fruit fly.* There are no areas in the continental United States quarantined for the West Indian fruit fly. § 301.32-4 Conditions governing the interstate movement of regulated articles from quarantined areas. Any regulated article may be moved interstate from a quarantined area 2 only if moved under the following conditions: 2 Requirements under all other applicable Federal domestic plant quarantines and regulations must also be met.
(a)With a certificate or limited permit issued and attached in accordance with §§ 301.32-5 and 301.32-8;
(b)Without a certificate or limited permit if:
(1)The regulated article originated outside the quarantined area and is either moved in an enclosed vehicle or is completely enclosed by a covering adequate to prevent access by fruit flies (such as canvas, plastic, or other closely woven cloth) while moving through the quarantined area; and
(2)The point of origin of the regulated article is indicated on the waybill, and the enclosed vehicle or the enclosure that contains the regulated article is not opened, unpacked, or unloaded in the quarantined area; and
(3)The regulated article is moved through the quarantined area without stopping except for refueling or for traffic conditions, such as traffic lights or stop signs.
(c)Without a certificate or limited permit if the regulated article is moved:
(1)By the United States Department of Agriculture for experimental or scientific purposes;
(2)Pursuant to a permit issued by the Administrator for the regulated article;
(3)Under conditions specified on the permit and found by the Administrator to be adequate to prevent the spread of fruit flies; and
(4)With a tag or label bearing the number of the permit issued for the regulated article attached to the outside of the container of the regulated article or attached to the regulated article itself if not in a container. § 301.32-5 Issuance and cancellation of certificates and limited permits.
(a)A certificate may be issued by an inspector 3 for the interstate movement of a regulated article if the inspector determines that: 3 Services of an inspector may be requested by contacting local PPQ offices, which are listed in telephone directories. (1)(i) The regulated article has been treated under the direction of an inspector in accordance with § 301.32-10; or
(ii)Based on inspection of the premises of origin, the premises are free from fruit flies; or
(iii)Based on inspection of the regulated article, the regulated article is free of fruit flies; and
(2)The regulated article will be moved through the quarantined area in an enclosed vehicle or will be completely enclosed by a covering adequate to prevent access by fruit flies; and
(3)The regulated article is to be moved in compliance with any additional emergency conditions the Administrator may impose under section 414 of the Plant Protection Act (7 U.S.C. 7714) to prevent the spread of fruit flies; and
(4)The regulated article is eligible for unrestricted movement under all other Federal domestic plant quarantines and regulations applicable to the regulated article.
(b)An inspector 4 will issue a limited permit for the interstate movement of a regulated article if the inspector determines that: 4 See footnote 3.
(1)The regulated article is to be moved interstate to a specified destination for specified handling, processing, or utilization (the destination and other conditions to be listed in the limited permit), and this interstate movement will not result in the spread of fruit flies because life stages of the fruit flies will be destroyed by the specified handling, processing, or utilization;
(2)The regulated article is to be moved in compliance with any additional emergency conditions the Administrator may impose under section 414 of the Plant Protection Act (7 U.S.C. 7714) to prevent the spread of fruit flies; and
(3)The regulated article is eligible for interstate movement under all other Federal domestic plant quarantines and regulations applicable to the regulated article.
(c)Certificates and limited permits for the interstate movement of regulated articles may be issued by an inspector or person operating under a compliance agreement. A person operating under a compliance agreement may issue a certificate for the interstate movement of a regulated article if an inspector has determined that the regulated article is eligible for a certificate in accordance with paragraph
(a)of this section. A person operating under a compliance agreement may issue a limited permit for interstate movement of a regulated article when an inspector has determined that the regulated article is eligible for a limited permit in accordance with paragraph
(b)of this section.
(d)Any certificate or limited permit that has been issued may be withdrawn, either orally or in writing, by an inspector if he or she determines that the holder of the certificate or limited permit has not complied with all conditions in this subpart for the use of the certificate or limited permit. If the withdrawal is oral, the withdrawal and the reasons for the withdrawal will be confirmed in writing as promptly as circumstances allow. Any person whose certificate or limited permit has been withdrawn may appeal the decision in writing to the Administrator within 10 days after receiving the written notification of the withdrawal. The appeal must state all of the facts and reasons upon which the person relies to show that the certificate or limited permit was wrongfully withdrawn. As promptly as circumstances allow, the Administrator will grant or deny the appeal, in writing, stating the reasons for the decision. A hearing will be held to resolve any conflict as to any material fact. Rules of practice concerning a hearing will be adopted by the Administrator. § 301.32-6 Compliance agreements and cancellation.
(a)Any person engaged in growing, handling, or moving regulated articles may enter into a compliance agreement when an inspector determines that the person is aware of this subpart, agrees to comply with its provisions, and agrees to comply with all the provisions contained in the compliance agreement. 5 5 Compliance agreement forms are available without charge from the Animal and Plant Health Inspection Service, Plant Protection and Quarantine, Emergency and Domestic Programs, 4700 River Road Unit 134, Riverdale, MD 20737-1236, and from local PPQ offices, which are listed in telephone directories.
(b)Any compliance agreement may be canceled, either orally or in writing, by an inspector whenever the inspector finds that the person who has entered into the compliance agreement has failed to comply with any of the conditions of this subpart or with any of the provisions of the compliance agreement. If the cancellation is oral, the cancellation and the reasons for the cancellation will be confirmed in writing as promptly as circumstances allow. Any person whose compliance agreement has been canceled may appeal the decision, in writing, within 10 days after receiving written notification of the cancellation. The appeal must state all of the facts and reasons upon which the person relies to show that the compliance agreement was wrongfully canceled. As promptly as circumstances allow, the Administrator will grant or deny the appeal, in writing, stating the reasons for the decision. A hearing will be held to resolve any conflict as to any material fact. Rules of practice concerning a hearing will be adopted by the Administrator. § 301.32-7 Assembly and inspection of regulated articles.
(a)Any person, other than a person authorized to issue certificates or limited permits under § 301.32-5(c), who desires to move a regulated article interstate accompanied by a certificate or limited permit must notify an inspector 6 as far in advance of the desired interstate movement as possible, but no less than 48 hours before the desired interstate movement. 6 See footnote 3 to § 301.32-5(a).
(b)The regulated article must be assembled at the place and in the manner the inspector designates as necessary to comply with this subpart. § 301.32-8 Attachment and disposition of certificates and limited permits.
(a)A certificate or limited permit required for the interstate movement of a regulated article must, at all times during the interstate movement, be:
(1)Attached to the outside of the container containing the regulated article; or
(2)Attached to the regulated article itself if not in a container; or
(3)Attached to the consignee's copy of the accompanying waybill: Provided, however, that if the certificate or limited permit is attached to the consignee's copy of the waybill, the regulated article must be sufficiently described on the certificate or limited permit and on the waybill to identify the regulated article.
(b)The certificate or limited permit for the interstate movement of a regulated article must be furnished by the carrier to the consignee listed on the certificate or limited permit upon arrival at the location provided on the certificate or limited permit. § 301.32-9 Costs and charges. The services of the inspector during normal business hours (8 a.m. to 4:30 p.m., Monday through Friday, except holidays) will be furnished without cost. The user will be responsible for all costs and charges arising from inspection and other services provided outside normal business hours. § 301.32-10 Treatments. Treatment schedules listed in part 305 of this chapter to destroy fruit flies are authorized for use on regulated articles. The following treatments also may be used for the regulated articles indicated:
(a)*Soil within the dripline of plants that are producing or have produced regulated articles listed § 301.32(a) or (b)* . The following soil treatments may be used for the fruit fly species indicated: Mexican fruit fly Drench the soil under the host plants with 5 lb a.i. diazinon per acre (0.12 lb or 2 oz avdp per 1,000 ft 2 ) mixed with 130 gal of water per acre (3 gal per 1,000 ft 2 ). Apply at 14- to 16-day intervals as needed. Repeat applications if infestations become established. In addition to the above, follow all label directions for diazinon. Oriental and Mediterranean fruit flies Apply diazinon at the rate of 5 pounds active ingredient per acre to the soil within the dripline with sufficient water to wet the soil to at least a depth of 0.5 inch. Both immersion and pour-on treatment procedures are also acceptable. All other fruit flies Apply diazinon at the rate of 5 pounds active ingredient per acre to the soil within the dripline with sufficient water to wet the soil to at least a depth of 0.5 inch.
(b)*Premises* . Fields, groves, or areas that are located within a quarantined area but outside the infested core area and that produce regulated articles may receive regular treatments with either malathion or spinosad bait spray as an alternative to treating fruits and vegetables as provided in part 305 of this chapter. These treatments must take place at 6- to 10-day intervals, starting a sufficient time before harvest (but not less than 30 days before harvest) to allow for development of fruit fly egg and larvae. Determination of the time period must be based on the day degrees model for the specific fruit fly. Once treatment has begun, it must continue through the harvest period. The malathion bait spray treatment must be applied by aircraft or ground equipment at a rate of 2.4 oz of technical grade malathion and 9.6 oz of protein hydrolysate per acre. The spinosad bait spray treatment must be applied by aircraft or ground equipment at a rate of 0.01 oz of a USDA-approved spinosad formulation and 48 oz of protein hydrolysate per acre. For ground applications, the mixture may be diluted with water to improve coverage. Subpart—Mexican Fruit Fly Quarantine and Regulations [ Removed ] 3. Subpart—Mexican Fruit Fly Quarantine and Regulations, consisting of §§ 301.64 through 301.64-10, is removed. Subpart—Mediterranean Fruit Fly [ Removed ] 4. Subpart—Mediterranean Fruit Fly, consisting of §§ 301.78 through 301.78-10, is removed. Subpart—Oriental Fruit Fly [ Removed ] 5. Subpart—Oriental Fruit Fly, consisting of §§ 301.93 through 301.93-10, is removed. Subpart—Melon Fruit Fly [ Removed ] 6. Subpart—Melon Fruit Fly, consisting of §§ 301.97 through 301.97-10, is removed. Subpart—West Indian Fruit Fly [ Removed ] 7. Subpart—West Indian Fruit Fly, consisting of §§ 301.98 through 301.98-10, is removed. Subpart—Sapote Fruit Fly [ Removed ] 8. Subpart—Sapote Fruit Fly, consisting of §§ 301.99 through 301.99-10, is removed. PART 305—PHYTOSANITARY TREATMENTS 9. The authority citation for part 305 continues to read as follows: Authority: 7 U.S.C. 7701-7772 and 7781-7786; 21 U.S.C. 136 and 136a; 7 CFR 2.22, 2.80, and 371.3. 10. In § 305.2, the table in paragraph (h)(2)(ii) is amended by removing, in the entry for “Areas in the United States under Federal quarantine for the listed pest”, the entries for “Any fruit listed in § 301.64-2(a) of this chapter” and “Any article listed in § 301.78-2(a) of this chapter” and adding a new entry in their place to read as set forth below. § 305.2 Approved treatments.
(h)* * *
(2)* * *
(ii)* * * Location Commodity Pest Treatment schedule Areas in the United States under Federal quarantine for the listed pest. * * * * * * * Any fruit or article listed in § 301.32-2(a) of this chapter All fruit fly species of the Family Tephritidae IR. * * * * * * * § 305.32 [Amended] 11. Section 305.32 is amended as follows: a. In the introductory text, by removing the word “fruit” and adding the words “berry, fruit, nut, or vegetable” in its place, and by removing the citation “§ 301.64-2(a)” and adding the citation “§ 301.32-2(a)” in its place. b. In paragraph (a)(1), by removing the words “Mexican fruit fly” and adding the words “the fruit fly of concern” in their place, and by removing the words “the fruit” and adding the words “the regulated articles” in their place. c. In paragraph (a)(2), by removing the words “fruit, except that fruit” and adding the words “regulated articles, except that articles” in their place. d. In paragraph (a)(3), by removing the citation “§ 301.64-6” and adding the citation “§ 301.32-6” in its place. e. In paragraph (d), by removing the words “Mexican fruit fly” and adding the words “the fruit fly of concern” in their place. f. In paragraph (e)(2), by removing the words “Mexican fruit fly” and adding the words “the fruit fly of concern” in their place. g. In paragraph (i), by removing the words “Mexican fruit fly” and adding the words “fruit flies” in their place, and by adding the words “and vegetables” after the word “fruits”. § 305.33 [Removed and reserved] 12. Section 305.33 is removed and reserved. Done in Washington, DC, this 12th day of September 2007. Kevin Shea, Acting Administrator, Animal and Plant Health Inspection Service. [FR Doc. E7-18316 Filed 9-17-07; 8:45 am] BILLING CODE 3410-34-P FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 327 RIN 3064-AD19 Assessment Dividends AGENCY: Federal Deposit Insurance Corporation (FDIC). ACTION: Advance notice of proposed rulemaking (ANPR). SUMMARY: The FDIC is seeking comments on alternative methods for allocating dividends as part of a permanent final rule to implement the dividend requirements of the Federal Deposit Insurance Reform Act of 2005 (Reform Act) and the Federal Deposit Insurance Reform Conforming Amendments Act of 2005 (Amendments Act). The existing FDIC regulations on assessment dividends will expire on December 31, 2008. DATES: Comments must be submitted on or before November 19, 2007. ADDRESSES: You may submit comments by any of the following methods: • *Agency Web Site: http://www.fdic.gov/regulations/laws/federal.* Follow instructions for submitting comments on the Agency Web Site. • *E-mail: Comments@FDIC.gov.* Include “ANPR on Assessment Dividends” in the subject line of the message. • *Mail:* Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. • *Hand Delivery/Courier:* Guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7 a.m. and 5 p.m. (EST). • *Federal eRulemaking Portal: http://www.regulations.gov.* Follow the instructions for submitting comments. *Public Inspection:* All comments received will be posted without change to *http://www.fdic.gov/regulations/laws/federal* including any personal information provided. Comments may be inspected and photocopied in the FDIC Public Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 p.m.
(EST)on business days. Paper copies of public comments may be ordered from the Public Information Center by telephone at
(877)275-3342 or
(703)562-2200. FOR FURTHER INFORMATION CONTACT: Munsell W. St. Clair, Senior Policy Analyst, Division of Insurance and Research,
(202)898-8967 or *mstclair@fdic.gov* ; Missy Craig, Senior Program Analyst, Division of Insurance and Research,
(202)898-8724 or *mcraig@fdic.gov* ; or Joseph A. DiNuzzo, Counsel, Legal Division,
(202)898-7349 or *jdinuzzo@fdic.gov.* SUPPLEMENTARY INFORMATION: I. Background In October 2006, the FDIC issued a temporary final rule to implement the dividend requirements of the Reform Act. 1 At the time, the FDIC stated its intention to initiate a second, more comprehensive notice-and-comment rulemaking on dividends beginning with an advance notice of proposed rulemaking to explore alternative methods for distributing future dividends after the temporary dividend rules expire on December 31, 2008. 1 71 FR 61385 (October 18, 2006). The possibility of a dividend before the temporary rule expires appears remote. In fact, because the FDIC has the ability to lower assessment rates below the base assessment rate schedule (2 to 4 basis points for institutions in Risk Category I), the FDIC can, if it chooses, reduce the probability of a dividend occurring thereafter. Reform Act Requirements The Federal Deposit Insurance Act (FDI Act), as amended by the Reform Act, 2 requires that the FDIC, under most circumstances, declare dividends from the Deposit Insurance Fund (DIF or fund) when the reserve ratio at the end of a calendar year exceeds 1.35 percent, but is no greater than 1.5 percent. 3 In that event, the FDIC generally must declare one-half of the amount in the DIF in excess of the amount required to maintain the reserve ratio at 1.35 percent as dividends to be paid to insured depository institutions. However, the FDIC's Board of Directors (Board) may suspend or limit dividends to be paid, if the Board determines in writing, after taking a number of statutory factors into account, that: 2 The Reform Act was included as Title II, Subtitle B, of the Deficit Reduction Act of 2005, Public Law 109-171, 120 Stat. 9, which was signed into law by the President on February 8, 2006. 3 12 U.S.C. 1817(e)(2). 1. The DIF faces a significant risk of losses over the next year; and 2. It is likely that such losses will be sufficiently high as to justify a finding by the Board that the reserve ratio should temporarily be allowed to grow without requiring dividends when the reserve ratio is between 1.35 and 1.5 percent or exceeds 1.5 percent. 4 4 This provision would allow the FDIC's Board to suspend or limit dividends in circumstances where the reserve ratio has exceeded 1.5 percent, if the Board made a determination to continue a suspension or limitation that it had imposed initially when the reserve ratio was between 1.35 and 1.5 percent. In addition, the statute requires that the FDIC, except in certain limited circumstances, declare a dividend from the DIF when the reserve ratio at the end of a calendar year exceeds 1.5 percent. In that event, the FDIC generally must declare the amount in the DIF in excess of the amount required to maintain the reserve ratio at 1.5 percent as dividends to be paid to insured depository institutions. The FDI Act directs the FDIC to consider each insured depository institution's relative contribution to the DIF (or any predecessor deposit insurance fund) when calculating an institution's share of any dividend. More specifically, when allocating dividends, the Board must consider: 1. The ratio of the assessment base of an insured depository institution (including any predecessor) on December 31, 1996, to the assessment base of all eligible insured depository institutions on that date (the 1996 assessment base ratio); 2. The total amount of assessments paid on or after January 1, 1997, by an insured depository institution (including any predecessor) to the DIF (and any predecessor fund); 3. That portion of assessments paid by an insured depository institution (including any predecessor) that reflects higher levels of risk assumed by the institution; and 4. Such other factors as the Board deems appropriate. The statute does not define the term “predecessor” (of a depository institution) for purposes of distributing dividends. Predecessor deposit insurance funds are the Bank Insurance Fund
(BIF)and the Savings Association Insurance Fund (SAIF), as those were the deposit insurance funds that existed after 1996 until their merger into the DIF pursuant to the Reform Act. The merger was effective March 31, 2006. Among other things, the statute expressly requires the FDIC to prescribe by regulation the method for calculating, declaring, and paying dividends. 5 In May 2006 the FDIC issued a proposed rule to implement the dividend requirements of the Reform Act. 6 After considering the comments received on the proposed rule, the FDIC, as noted above, issued a temporary final rule on assessment dividends, with a sunset date of December 31, 2008. 5 The dividend regulation must also include provisions allowing a bank or thrift a reasonable opportunity to challenge administratively the amount of dividends it is awarded. Any review by the FDIC pursuant to these administrative procedures is final and not subject to judicial review. 6 71 FR 28804 (May 18, 2006). The Temporary Final Rule The temporary final rule mirrors the dividend provisions of the Reform Act, provides definitions (including the definition of a “predecessor” depository institution) to implement the statute and details how an institution may request the FDIC's Division of Finance
(DOF)to review the FDIC's determination of the institution's dividend amount and how an institution may appeal DOF's response to that request. In the temporary final rule, the FDIC adopted a simple system for allocating any dividends that might be declared during the two-year duration of the regulation. Any dividends awarded before January 1, 2009, will be distributed in proportion to an institution's 1996 assessment base ratio, as determined pursuant to the one-time assessment credit rule. 7 7 12 CFR 327.53. The sole focus of this ANPR is on the type of assessment dividend allocation method that the FDIC should adopt. Whether and how the FDIC should retain or revise the other aspects of the temporary final rule (such as the timetable for determining and paying dividends and institutions' requests for review) will be addressed in the notice of proposed rulemaking that will follow the ANPR. II. Alternative Methods The ANPR presents two general approaches to allocating dividends—the fund balance method and the payments method. These methods are described below. 8 8 Appendix A describes the two methods in more detail, using formulas. The allocation methods potentially differ most significantly in the way they balance two of the statutory factors that the FDIC must consider when allocating dividends—institutions' relative 1996 assessment bases and assessments paid after 1996—and, thus, in the way each method treats older versus newer institutions. The fund balance method implicitly balances the two factors; the payments method requires explicit decision making. “Older” and “Newer” Institutions In this context, the terms “older” and “newer” do not simply refer to age. For purposes of this ANPR, the smaller an institution's 1996 assessment base is compared to its current assessment base, the “newer” it is. Thus, an institution that was chartered after 1996 and had no 1996 assessment base is a newer institution. An institution chartered before 1996 that has since grown greatly—and whose 1996 assessment base is, therefore, small compared to its current assessment base—is also a newer institution. Conversely, the larger an institution's 1996 assessment base is compared to its current assessment base, the “older” it is. Relative Dividend Shares For purposes of analyzing the effects of each allocation method on older and newer institutions, the notion of an institution's *relative* dividend share is useful. An institution's relative dividend share at a given time is the ratio of its share of any potential dividend to its share of the current aggregate assessment base. A high relative dividend share means that an institution would receive more than its proportional share of a dividend given its current assessment base; a low relative dividend share means that an institution would receive less than its proportional share of a dividend given its current assessment base. The notion of a relative dividend share allows comparison of dividend allocation methods by eliminating the effect of size. A newer institution would initially have a zero or low relative dividend share, whatever its size, while an older institution (as that term is used in this ANPR) would initially have a high relative dividend share, again regardless of size. Some of the most important potential differences between the dividend allocation methods are how quickly and under what circumstances the relative dividend share of a newer institution would equal the relative dividend share of an older institution. Equal shares imply that what an institution paid prior to 1997 (using the 1996 assessment base as a proxy) no longer affects its dividend share. Under most variations of the dividend allocation methods, the relative dividend shares of older and newer institutions may never be exactly equal, but they may become approximately equal; that is, over time, for both older and newer institutions, shares of any potential dividend may approximately equal shares of the current aggregate assessment base. For purposes of the analysis in this ANPR, relative dividends shares will be deemed to be approximately equal (or be said to have *converged* ) when the average relative dividend share of the group of institutions that have the highest relative dividend shares as of January 1, 2007, are no more than 15 percent greater (or less) than the average relative dividend shares of newer institutions that initially have no dividend shares. 9 Under both allocation methods, the average relative dividend share of the group of institutions that would have the highest relative dividend shares as of January 1, 2007, would be 2.2; that is, in this group, on average, an institution's share of any potential dividend would be 2.2 times its share of the current assessment base. 9 This group is determined by dividing all institutions into 1 of 10 unequally sized groups, based on the size of their relative dividend shares as of January 1, 2007. Because this date is the beginning of the new risk-based assessment system, initial dividend shares are proportional to shares of the 1996 assessment base. The Fund Balance Method Description Under the fund balance method, every quarter, each institution would be assigned a dollar portion of the fund balance (its fund allocation), solely for purposes of determining the institution's dividend share. Each institution's most recent fund allocation (as a percentage of the fund balance) would determine its share of any dividend. The fund allocation would increase or decrease each quarter depending upon fund performance and assessments paid by each institution. Specifically: • Initially, the December 31, 2006 fund balance would be divided up among institutions in proportion to 1996 assessment bases. Thus, initially, each institution's fund allocation would equal its 1996 ratio times the December 31, 2006 fund balance. • A variant on this method would divide only a portion of the December 31, 2006 fund balance among institutions. The remainder of the fund balance would be unallocated. • Thereafter, from quarter to quarter, fund allocations would grow or shrink depending upon the performance of the fund. • Fund losses, FDIC operating expenses and dividends from the fund would diminish an institution's fund allocation, all else equal. • Fund gains (for example, from investment income or “ineligible” premium income, which is discussed immediately below) would increase an institution's fund allocation, all else equal. • In addition, each “eligible” premium would increase an institution's fund allocation, dollar for dollar. An “eligible” premium (which would need to be defined) would be the portion of an institution's premium that would count toward increasing its share of dividends. • Possible definitions for an eligible premium include:
(1)All premiums charged;
(2)premiums charged up to the lowest rate charged a Risk Category I institution; or
(3)something in between, for example, premiums charged up to the maximum rate for a Risk Category I institution, in all cases minus any credit use. 10 Ineligible premiums would be those paid through the use of credits or those paid in cash at rates in excess of the eligible premium rate. 10 However, an eligible premium would never be negative. • Eligible premiums would include surcharges in a restoration plan. 11 11 The Reform Act requires that the FDIC adopt a restoration plan whenever the DIF reserve ratio is below 1.15 percent or is expected to be below 1.15 percent within 6 months. The plan must provide that the reserve ratio of the DIF will return to 1.15 percent, ordinarily within 5 years. 12 U.S.C. 1817(b)(3)(E). Risk Reduction Incentives As set forth above, when allocating dividends the FDIC is required to take into account the portion of assessments paid by an insured depository institution that reflects higher levels of risk assumed by that institution. Consequently, in defining eligible premiums, an important consideration (which applies to any approach) is the degree to which dividend allocation should reinforce the risk incentives of the risk-based premium system. Would an institution in the riskiest category, for example, get credit for dividend purposes for the full premium it paid or just for some smaller portion? If an eligible premium were defined as a premium paid at the lowest (least-risky) rate, an institution paying the highest assessment rate and an institution paying the lowest assessment rate would increase their dividend shares at the same rate, all else equal. Thus, the institution paying the lower assessment rate on this base would benefit more, thereby increasing the incentives for an institution to lower the risk it poses. On the other hand, if the FDIC defined an eligible premium as any cash premium, dividend awards, per se, would not provide an institution with an incentive to reduce the risk it poses. If the FDIC defined an eligible premium as something in between (for example, cash premiums up to the maximum rate charged to an institution in Risk Category I), the dividend system would give those institutions paying higher rates than the eligible premium rate some incentive to lower risk. The Treatment of Older Versus Newer Institutions *Fund performance and assessment rates.* Under the basic form of the fund balance method, in which the entire fund would be allocated among institutions, *low to moderate* fund losses would lead to older institutions retaining a relatively large share of any dividends for decades, while newer institutions would take decades to obtain a relatively similar share of dividends. In other words, the assessments paid by an institution prior to 1997 (using the 1996 assessment base as a proxy) would affect an institution's potential dividend for a very long time. On the other hand, large fund losses would quickly diminish the relative shares of older institutions compared to newer institutions. 12 12 The results in the text, charts and tables that follow:
(1)Assume that the entire fund balance is allocated among institutions;
(2)assume that an eligible premium is a premium paid at the minimum rate applicable to a Risk Category I institution; and
(3)are based upon a model that divides all institutions into 1 of 10 unequally sized groups, based on the size of their relative dividend shares as of January 1, 2007. The model assumes that all institutions grow at the same rate. It makes many other assumptions, as well, including levels of assessment rates, investment income, and corporate expenses. These assumptions are set out in more detail in Appendix B. Chart 1 illustrates the relative dividend shares of two groups of institutions—those that initially have no dividend shares (the newest group) and those with the highest relative dividend shares (the oldest group)—under a low loss scenario; Chart 2 illustrates the relative dividend shares of these two groups under a high loss scenario similar to the banking crisis of the late 1980s and early 1990s for the third through tenth years, preceded and followed by low losses in earlier and subsequent years. Assuming high fund losses similar to the banking crisis of the late 1980s and early 1990s, the relative dividend share of the newest group could take only 9 years to become approximately equal to that of the oldest group (i.e., the relative dividend shares of each group would be nearly equal to one). EP18SE07.000 EP18SE07.001 Using the low loss scenario used in Chart 1, Table 1 compares projected dividend share and dividends received for three institutions, each with $500 million in deposits on December 31, 2006; one initially has no dividend share (or credits) because it is new; one initially has the median relative dividend share of those institutions that have any initial dividend share (or credits); and one initially has a very large relative dividend share because it is in the oldest group shown in the charts above. Table 2 makes the comparison under the high loss scenario used in Chart 2. The institutions are assumed to pay the lowest rate applicable in any period. Like Charts 1 and 2, the dividend share amounts in Tables 1 and 2 illustrate that older institutions will benefit for many years from this method absent a repeat of the banking crisis era. The low loss scenario in Chart 1 and Table 1 (and in subsequent charts in tables) assumes annual insurance losses that are significantly lower than the average annual losses for the past 10 years and that the Board would not lower rates below the base assessment rate schedule (2 to 4 basis points for institutions in Risk Category I). In fact, if the Board did lower assessment rates sufficiently below the base rate schedule, the dividends shown in Chart 1 would not occur. BILLING CODE 6714-01-P EP18SE07.002 All else equal, higher assessment rates (whether to cover rapid insured deposit growth or from other causes) would shorten the time to convergence of relative dividend shares of older and newer institutions. However, the effect of higher rates would likely be less marked than the effect of high fund losses similar to those during the banking crisis of the late 1980s and early 1990s. *Institutions chartered in the future.* Absent significant insurance fund losses, the fund balance will tend to increase over time. Under the fund balance method, all else equal, the larger the fund grows, the longer it would take an institution chartered in the future to obtain a share of potential dividends that was roughly equal to its share of the assessment base; that is, for its relative dividend share to approximately equal that of older institutions. Thus, an institution chartered 30 years from now could take many decades to obtain a share of potential dividends that was roughly equal to its share of the assessment base. Simplicity The fund balance method relies on more data than the payments method described below and is more complex, which may reduce transparency. Both methods of fund allocation discussed in this ANPR are operationally feasible, however. Remaining Decision-Making Requirements Both methods require the FDIC to define eligible premiums. Once the definition of an eligible premium is chosen, however, the fund balance method allocates dividends among older and newer institutions automatically, without the need for explicit FDIC decision making about the relative importance to assign the 1996 assessment base compared to post-1996 eligible premiums. 13 Only if the FDIC adopted the variant of this method in which something less than the December 31, 2006 fund balance was allocated among older institutions would it make explicit decisions about how to allocate dividends between older and newer institutions. 13 The FDIC's definition of an “eligible” premium would have some effect on the way the fund balance method allocates dividends between newer and older institutions, considered as a group. The lower the eligible premium rate, the longer older institutions, as a group, would retain a relatively larger share of dividends, all else equal. The Payments Method Description In its basic form, under most probable scenarios, the fund balance method would most likely benefit older institutions. The payments method, on the other hand, offers considerably more options for allocating dividends between older and newer institutions. The payments method could be constructed so as to benefit older institutions for many years, or it could be constructed to accelerate convergence between older and newer institutions. Under the payments method, unlike the fund balance method, neither fund performance nor dividends paid would affect dividend shares directly. Rather than hinging on its assigned portion of the fund balance, an institution's share of any dividend would depend upon its (and its predecessors') 1996 assessment base (or, equivalently, its 1996 ratio), weighted in some manner, and its quarterly assessments under the new assessment system. Specifically: • Initially, each institution's dividend share would depend upon its 1996 assessment base compared to all other institutions. For example, initially, each institution's dividend share could equal: 1. Its 1996 ratio times the fund balance on December 31, 2006; 2. Its 1996 ratio times the fund balance at some other time; or 3. Its 1996 ratio times insurance fund assessment income over some period of time leading up to December 31, 1996, in each case as a percentage of the total for all institutions. • The resulting value assigned to each institution based on its 1996 ratio could either remain unchanged or be assigned a declining weight over time. • The possible definitions of an eligible (and an ineligible) premium are the same as those under the fund balance method. However, under certain variations of this method discussed below, assessments offset through credit use could increase an institution's dividend share. • Cumulative eligible premiums paid into the fund since 1996 would add to an institution's share. • Alternatively, the FDIC could count only eligible premiums paid over some recent period, for example, the most recent 3, 5, 10 or 15 years. In contrast, the fund balance method would necessarily take into account all assessment payments made under the new assessment system. • Another variation would allow the FDIC to subtract dividends paid to an institution from its eligible premiums. The Board would explicitly determine the relative importance to assign to each institution's 1996 assessment base and to its eligible premiums paid under the new system. The rate at which the relative importance of eligible premiums paid under the new system increased (and the relative importance of the 1996 assessment base decreased) could be slow or fast. Alternatively, the FDIC could, at the outset of the system, reserve the right to change the balance in the future. 14 14 A simplified version of the payments method would substitute assessment bases as proxies for eligible premiums. Each institution's share of any dividend would depend on its portion of the 1996 assessment base, weighted in some fashion, and its cumulative quarterly assessment bases under the new system. In this version, an institution would automatically have an added incentive to be charged the lowest possible rate, since, given identical assessment bases, an institution paying the lowest assessment rate would increase its dividend share at the same rate as an institution paying the highest assessment rate, all else equal. Risk Reduction Incentives As under the fund balance method, the degree to which dividend allocation would reinforce the risk incentives of the risk-based premium system would depend upon the FDIC's definition of an eligible premium. The Treatment of Older Versus Newer Institutions *Relative weight of the 1996 assessment base.* The relative weight to be accorded the 1996 assessment base could have a great influence on how quickly the relative dividend shares of newer and older institutions would converge. How the payments method would affect the dividend shares of older and newer institutions would depend on the weight that the Board assigned the 1996 assessment base (initially and over time) compared to the weight it assigned eligible premiums paid each year after 1996. Two illustrative variations of the payments method are described below. *Variation 1.* The Board could, as under the fund balance method, initially divide the 2006 fund balance based on each institution's share of the December 1996 assessment base. Eligible premiums after 1996 would be added to that amount. As illustrated in Chart 3 and Table 3, this method of implementation would result in older institutions retaining relatively large dividend shares for many years—similar to the fund balance method—given low losses. (Compare with Chart 1 and Table 1.) 15 15 The low loss scenario in Chart 3 and Table 3 again assumes annual insurance losses that are significantly lower than the average annual losses for the past 10 years and that the Board would not lower rates below the base assessment rate schedule (2 to 4 basis points for institutions in Risk Category I). In fact, if the Board did lower assessment rates below the base rate schedule, the dividends shown in Chart 3 and Table 3 would not occur. See also footnote 13. EP18SE07.003 EP18SE07.004 Under the payments method—unlike the fund balance method—fund gains and losses would not *directly* affect an institution's relative dividend share. However, higher insurance fund losses could lead to higher assessment rates, which would affect relative dividend shares. All else equal, higher assessment rates (either resulting from fund losses or rapid insured deposit growth) would tend to make the relative dividend shares of older and newer institutions converge more quickly. However, as illustrated in Chart 4 and Table 4, the effect of an increase in higher assessment rates on relative dividend shares would not be as large as the direct effect of large insurance losses under the fund balance method. (Compare with Table 2 and Chart 2.) 16 16 Chart 4 and Table 4 assume that an institution's dividend share is initially determined by multiplying its 1996 ratio times the fund balance at the end of 2006 and adding eligible premiums over time. See also footnote 13. EP18SE07.005 EP18SE07.006 *Variation 2.* Another way to implement the payments method would be to consider only premiums paid over some prior period (such as the previous 15 years). When the prior period covered any year before 2007, the years 1997 through 2006 would be skipped, since the great majority of institutions paid no deposit insurance premiums then. Thus, for example, to determine dividend shares at the end of 2009, the method would consider premiums paid from 1985 through 1996 and from 2007 through 2009. Premiums paid during 2007, 2008 and 2009 would include only eligible premiums. However, because the weight accorded the 1996 ratio would effectively decline to zero over time, eligible premiums after 2006 would include eligible premiums offset with credits. An eligible premium paid in 1996 or any earlier year would be calculated as an institution's share of the 1996 assessment base times total deposit insurance fund assessment income in that year. 17 17 For years prior to 1990, deposit insurance fund assessment income used to produce Chart 5 and Table 5 includes such income for both the FDIC and the Federal Savings and Loan Insurance Corporation. As illustrated in Chart 5 and Table 5, newer and older institutions would have equal relative dividend shares after 15 years. 18 19 20 18 The low loss scenario in Chart 5 and Table 5 again assumes annual losses that are significantly lower than the average annual losses for the past 10 years and that the Board would not lower rates below the base assessment rate schedule (2 to 4 basis points for institutions in Risk Category I). In fact, if the Board did lower assessment rates below the base rate schedule, the dividends shown in Chart 5 and Table 5 would not occur. See also footnote 13. 19 If eligible premiums did not include eligible premiums offset with credits, newer institutions would actually have higher relative dividend shares than older ones after 15 years (because older institutions would use credits in early years, which would reduce their eligible premiums). Thereafter, however, the dividend shares of older and newer institutions would tend to converge again. 20 A high loss scenario would lead to a more rapid convergence. EP18SE07.007 EP18SE07.008 BILLING CODE 6714-01-C The relative dividend shares of older and newer institutions would converge similarly if an institution's dividend share were initially determined by multiplying its 1996 ratio by the fund balance at the end of 2006 and adding eligible premiums over time, where the weight accorded the 1996 ratio diminished linearly and steadily to zero over 15 years (again allowing eligible premiums to include eligible premiums offset with credits). However, institutions chartered in the future would be at a greater disadvantage than if only recent payments (e.g., those made within the previous 15 years) were considered. In general, the length of time it would take an institution chartered in the future to obtain a share of potential dividends that was roughly equal to its share of the assessment base would depend to a great extent upon the relative weight to be accorded the 1996 ratio. If the 1996 ratio (or 1996 assessment base) were heavily weighted and payments accumulated indefinitely, it could take an institution chartered in the future many years to obtain an equal share of potential dividends. However, if the 1996 ratio received a small weight and only very recent assessments (rather than cumulative payments) were considered, it would take an institution chartered in the future only a short time to obtain an equal share of potential dividends. Simplicity The payments method would require less data than the fund balance method and would be relatively easy to administer. If the payments method considered only recent payments (e.g., 3 or 5 years), data needs and record retention requirements for the industry and the FDIC would be particularly simple. 21 21 The simplification of the method in which assessment bases are used as a proxy for actual payments requires only that institutions and the FDIC retain data on assessment bases. Decision-making Like the fund balance method, the payments method would require that the FDIC define eligible premiums. Under the payments method the FDIC would have considerably more options regarding the allocation of dividends between older and newer institutions than it would under the fund balance method. The FDIC would decide: • How much weight to accord the 1996 assessment base compared to premiums paid under the new system; • Whether that weight should change over time and whether the FDIC should reserve the right to change the weight in the future; and • Whether all payments under the new system should be considered or only more recent payments. III. Request for Comments The FDIC requests comment on all aspects of the fund balance method and the payments method, and on any alternative approach not presented in this ANPR that a commenter chooses to discuss. In particular, the FDIC invites comment on the following: 1. Which method is preferable and why? 2. Is a method not presented in this ANPR preferable? If so, why? 3. Is there a variation or way of implementing any method that is preferable or less preferable? If so, why? 4. How should an eligible premium be defined and why should it be so defined? 5. If the payments method were selected:
(a)Are any of the two illustrative variations more or less preferable?
(b)Should eligible premiums be considered only over some limited prior period, such as 3, 5 or 10 years?
(c)Should premiums paid with credits count toward dividend share, as described in the second illustrative variation?
(d)Should premiums paid over some very recent period (e.g., the previous year) be excluded to avoid creating an incentive for institutions to increase their assessment base and assessments in hope of obtaining a larger dividend?
(e)Should dividends paid to an institution be subtracted from its eligible premiums?
(f)How should the 1996 assessment base be taken into account or weighted? How quickly should its relative importance decrease over time? Should the FDIC reserve the right to change its relative importance in the future? 6. Is any method particularly burdensome or not burdensome? 7. Any other aspects of either of the two methods or of a method not presented in this ANPR. Appendix A—Definition and Description of the Fund Balance Method An institution's dividend share would equal the dollar portion of the fund balance assigned to it (its fund allocation) as a percent of the total adjusted fund balance. An institution's dividend share would be defined recursively. Its initial dividend share (DS <sup>i,0</sup> ), on January 1, 2007, would be: EP18SE07.009 where a <sup>i,0</sup> is institution i's fund allocation on January 1, 2007, and F <sup>0</sup> is the fund balance as of December 31, 2006. For quarters ending after December 31, 2006, adjusted fund balances are used. An adjusted fund balance differs from the actual fund balance by excluding estimated premium income for the quarter. Premiums earned for each quarter would be estimated because they would not be determined for, and collected from, each institution until the following quarter. An institution's fund allocation at time 0 would be derived from its share of the 1996 aggregate assessment base. Therefore, equation
(1)can be restated as: EP18SE07.010 In the equation above, f <sup>i</sup> is the share of the 1996 aggregate base for institution i and is calculated as: EP18SE07.011 where ab <sup>96i</sup> is 1996 assessment base for institution i and j = 1 through N represents all institutions. Institutions that did not exist on December 31, 1996 or are not successors to institutions in existence then would have 1996 ratios set to zero. An institution's dividend share for each succeeding quarter (DS <sup>i,t</sup> ) would be: EP18SE07.012 where DS <sup>i,t</sup> is institution i's dividend share at time t, t is the end of the most recent quarter for which the fund balance is available, a <sup>i,t</sup> is institution i's fund allocation at time t and F <sup>t</sup> is the adjusted fund balance at time t. Institution i's fund allocation at time t, a <sup>i,t</sup> , in the equation
(4)is derived as: EP18SE07.013 where h <sup>t</sup> is an adjustment factor accounting for the growth or shrinkage of the adjusted fund balance (as defined above) from t-1 to t after excluding eligible premiums for the quarter ending at time t-1 that were collected at time t, r <sup>t</sup> is a redistribution factor that redistributes the shares of institutions that failed after time t-1 but before time t and p <sup>i</sup> , <sup>t</sup> is eligible premiums paid by institution i at time t for the quarter ending at time t-1. The adjustment factor for the growth or shrinkage of the adjusted fund balance, h <sup>t</sup> , is calculated as: EP18SE07.014 where m <sup>t</sup> is all institutions in existence at time t. The redistribution factor, r <sup>t</sup> , is calculated as: 22 22 However, an institution might fail after the end of the quarter on which dividend shares are calculated (which will always be the fourth quarter), but before distribution of a dividend. Consequently, a final adjustment of dividend shares may be necessary. This share would be calculated as follows: *See equation 8 above.* where DS <sup>i</sup> , <sup>B</sup> is institution i's dividend share at the time a dividend is distributed, B is the time at which a dividend is distributed, and m <sup>B</sup> is all institutions at time t that had not failed as of time B. EP18SE07.015 EP18SE07.016 Definition and Description of the Payments Method An institution's dividend share, DS <sup>i,t</sup> , would be defined as: EP18SE07.017 where DS <sup>i,T</sup> is institution i's current dividend share, T is the end of the most recent quarter for which assessment base data is available, w <sup>T</sup> is the weight assigned to the 1996 ratio for period T, ab <sup>96,i</sup> is the 1996 assessment base for institution i, T-k is the earliest period to be covered, which could be all periods after 2006 or some recent period, such as the most recent 3, 5, 10 or 15 years, p <sup>i,t</sup> is eligible premiums paid by institution i at time t for the quarter ending at time t-1, and m <sup>T</sup> is total institutions as of time T. 23 , 24 23 Under Variation 2 described in the text, T-k would not include any year before 2007. When a dividend share in any year depended upon premiums paid before 1997, the premiums would be factored into w <sup>T</sup> rather than being included in p <sup>i,t</sup> . 24 If an institution failed after the end of the quarter on which dividend shares were calculated (which will always be the fourth quarter), but before distribution of a dividend, a final adjustment of dividend shares may be necessary. This share would be calculated simply by deleting the failed institution's payments and 1996 ratio from the preceding formulas. Appendix B—Model Assumptions Among other things, the model assumes the following: 1. Investment income in 2007 equals 4.7 percent of the start-of-year fund balance. For each year thereafter, it equals 4.57 percent of that year's starting fund balance. These estimates are based on projections from an investment model that relies on Blue Chip forecasts of the yield curve through 3rd quarter 2008. 2. The initial assessment rate schedule is 3 basis points above the base rate schedule; thus, the initial minimum rate is 5 basis points. Rates fall to base rates the year after the fund reserve ratio reaches or exceeds 1.25 percent. Risk Category I institutions that pay rates between the minimum and maximum rate for the category are assumed to pay 0.6 basis points above the minimum rate, which reflects the current weighted average rate for the group. 3. Any restoration plan is assumed to be a 5 year plan. Surcharges in a restoration plan are estimated using an iterative procedure to account for the effect of credit use. During a restoration plan, an institution may use no more than 3 basis points in credit use. 4. Operating expenses for 2007 are $988 million and grow at an annual rate of 5 percent thereafter. 5. Insured and domestic deposits are assumed to grow at 5 percent per year. 6. The beginning fund balance at 2007 equals $50,165 million. 7. Credit use is limited by the 90 percent rule during 2008, 2009, and 2010. (No institution may apply credits to offset more than 90 percent of an assessment for these years.) 8. Institutions are assigned to 1 of 10 credit groups and 1 of 6 assessment rate groups based on December 31, 2006 Call Report and TFR data, CAMELS information, and one-time credits. An institution's credits are determined by its share of the December 31, 1996 assessment base. An institution's credit group is determined by the ratio of its credits to its December 31, 2006 deposits. Because an institution's initial relative dividend share is determined analogously, based upon the ratio of its share of the December 31, 1996 assessment base to its share of the December 31, 2006 deposits, institutions in the same credit group will have similar relative dividend shares. In the tables and charts in the text comparing the relative dividend shares under alternative allocation methods, the “oldest” group refers to the credit group with the most credits relative to their December 31, 2006 deposits, those whose credits are more than 12 basis points of their December 31, 2006 deposits. The initial weighted average of credits-to-deposits for the credit group is 15.6 basis points. 9. High fund losses correspond to the losses incurred by the Bank Insurance Fund from 1987 to 1994, with losses measured relative to total domestic deposits. Low fund losses assume losses are equal to 0.1 basis points of domestic deposits each year. Dated at Washington, DC, this 11th day of September, 2007. By order of the Board of Directors. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. 07-4596 Filed 9-17-07; 8:45 am]
Connectionstraces to 8
13 references not yet in our index
  • 7 CFR 301
  • 7 CFR 330
  • 7 CFR 305
  • 7 CFR 3015
  • 7 USC 7701-7772
  • 7 CFR 2.22
  • Pub. L. 106-113
  • Pub. L. 106-224
  • 114 Stat. 400
  • 12 CFR 327
  • Pub. L. 109-171
  • 120 Stat. 9
  • 12 CFR 327.53
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U.S.C.§ 136
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