Unknown. Final rule; official staff interpretation

112,012 words·~509 min read·/register/2007/11/09/07-5628

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

--- schema: federal-register doc_type: fedreg source_file: FR-2007-11-09.xml --- 72 217 Friday, November 9, 2007 Contents African African Development Foundation NOTICES Meetings; Sunshine Act, 63547 07-5628 Agriculture Agriculture Department See Foreign Agricultural Service See Forest Service NOTICES Agency information collection activities; proposals, submissions, and approvals, 63547 E7-22065 Army Army Department See Engineers Corps Blind Blind or Severely Disabled, Committee for Purchase From People Who Are See Committee for Purchase From People Who Are Blind or Severely Disabled Centers Centers for Disease Control and Prevention NOTICES Agency information collection activities; proposals, submissions, and approvals, 63608-63611 E7-21992 E7-21994 E7-21995 Committees; establishment, renewal, termination, etc.:

Immunization Practices Advisory Committee, 63611 E7-22013 Meetings: Disease, Disability, and Injury Prevention and Control Special Emphasis Panel, 63611 E7-22032 Centers Centers for Medicare & Medicaid Services NOTICES Agency information collection activities; proposals, submissions, and approvals, 63611-63614 E7-21989 E7-21990 07-5480 Coast Guard Coast Guard RULES Drawbridge operations: Florida, 63487-63488 E7-22067 Louisiana, 63486-63487 E7-21885 New Jersey, 63488 E7-22068 Ports and waterways safety; regulated navigation areas, safety zones, security zones, etc.:

San Francisco Bay, CA, 63488-63490 E7-21977 PROPOSED RULES Drawbridge operations: Louisiana, 63530-63532 E7-21884 NOTICES Grants and cooperative agreements; availability, etc.: National boating safety activities, 63619-63621 E7-21972 Meetings: Houston/Galveston Navigation Safety Advisory Committee, 63621 07-5606 Commerce Commerce Department See International Trade Administration See National Oceanic and Atmospheric Administration Committee for Purchase Committee for Purchase From People Who Are Blind or Severely Disabled NOTICES Procurement list; additions and deletions, 63554-63555 E7-22036 E7-22037 Comptroller Comptroller of the Currency RULES Fair and Accurate Credit Transactions Act:

Identity theft red flags and address discrepancies, 63718-63775 07-5453 Copyright Copyright Royalty Board, Library of Congress PROPOSED RULES Statutory licenses; rates and terms: Digital performance right in sound recordings and ephemeral recordings for new subscription service, 63532-63535 E7-22044 Defense Defense Department See Engineers Corps See Navy Department Education Education Department NOTICES Grants and cooperative agreements; availability, etc.: Elementary and secondary education— Advanced Placement Test Fee Program, 63778-63781 E7-22051 Energy Energy Department See Federal Energy Regulatory Commission NOTICES Environmental statements; availability, etc.:

Commercial and industrial equipment; energy conservation program— Distribution transformers, 63563-63564 E7-22004 Engineers Engineers Corps NOTICES Environmental statements; notice of intent: Alabama-Coosa-Tallapoosa River Basin, AL; water control manuals, 63561-63562 E7-22043 EPA Environmental Protection Agency RULES Air programs: Stratospheric ozone protection— Refrigerant recovery and recyling equipment standards, 63490-63499 E7-21943 PROPOSED RULES Air programs: Stratospheric ozone protection— Refrigerant recovery and recycling equipment standards, 63535-63537 E7-21941 NOTICES Environmental statements; availability, etc.:

Agency comment availability, 63578 E7-22035 Agency weekly receipts, 63579-63580 E7-22038 FAA Federal Aviation Administration PROPOSED RULES Airworthiness directives: Airbus, 63503-63508 E7-21997 E7-22002 Boeing, 63512-63513 E7-22009 Pratt & Whitney, 63510-63512 E7-22005 Rolls-Royce Deutschland Ltd. & Co., 63508-63510 E7-22003 FCC Federal Communications Commission RULES Common carrier services: Wireless telecommunications services— Competitive bidding procedures; correction, 63499 E7-22046 FDIC Federal Deposit Insurance Corporation RULES Fair and Accurate Credit Transactions Act:

Identity theft red flags and address discrepancies, 63718-63775 07-5453 Federal Election Federal Election Commission NOTICES Meetings; Sunshine Act, 63580 07-5631 Federal Energy Federal Energy Regulatory Commission NOTICES Electric rate and corporate regulation combined filings, 63565-63566 E7-22033 Environmental statements; availability, etc.: Gulf Crossing Pipeline Co., LLC, et al., 63566-63567 E7-22021 Environmental statements; notice of intent: El Paso Natural Gas Co., 63567-63569 E7-22022 Southern Star Central Gas Pipeline, Inc., 63569-63570 E7-22023 Hydroelectric applications, 63570-63576 E7-22016 E7-22024 E7-22025 E7-22026 E7-22027 Meetings:

Enforcement policy; conference, 63576-63577 E7-22028 Interconnection queuing practices; technical conference, 63577-63578 E7-22017 *Applications, hearings, determinations, etc.:* Nornew Energy Supply, Inc, 63564 E7-22020 Texas Eastern Transmission, LP, 63564 E7-22018 Wyoming Interstate Co., Ltd., 63564-63565 E7-22019 Federal Highway Federal Highway Administration NOTICES Environmental statements; notice of intent: Worcester County, MD, 63642 07-5599 Federal agency actions on proposed highways; judicial review claims:

Yamhill County, OR; Newberg Dundee Transportation Improvement Project (Tier 1), Oregon 99W, 63642-63643 E7-22031 Federal Housing Federal Housing Finance Board NOTICES Meetings; Sunshine Act, 63580 07-5630 Federal Motor Federal Motor Carrier Safety Administration NOTICES Grants and cooperative agreements; availability, etc.: Safety Data Improvement Program (2008 FY), 63643 E7-22055 Federal Railroad Federal Railroad Administration NOTICES Environmental statements; availability, etc.:

Expanded Moynihan/Penn Station Redevelopment Project, New York, NY, 63643-63646 E7-22069 Federal Reserve Federal Reserve System RULES Consumer Leasing (Regulation M): Electronic disclosures delivery; official staff interpretation, 63456-63462 E7-21699 Electronic Fund Transfer (Regulation E): Electronic disclosures delivery; official staff interpretation, 63452-63456 E7-21698 Equal Credit Opportunity (Regulation B): Electronic disclosures delivery; official staff interpretation, 63445-63452 E7-21697 Fair and Accurate Credit Transactions Act:

Identity theft red flags and address discrepancies, 63718-63775 07-5453 Truth in Lending (Regulation Z): Electronic disclosures delivery; official staff interpretation, 63462-63477 E7-21700 Truth in savings (Regulation DD): Electronic disclosures delivery; official staff interpretation, 63477-63484 E7-21701 NOTICES Agency information collection activities; proposals, submissions, and approvals, 63580-63592 E7-21960 Federal Reserve Bank services: Private sector adjustment factor and FY 2008 fee schedules, 63592-63608 07-5602 FTC Federal Trade Commission RULES Fair and Accurate Credit Transactions Act:

Identity theft red flags and address discrepancies, 63718-63775 07-5453 Federal Transit Federal Transit Administration NOTICES Reports and guidance documents; availability, etc.: National Transit Database; Urbanized Area Annual Reporting Manual amendments, 63646-63648 E7-22063 Financial Financial Management Service See Fiscal Service Fiscal Fiscal Service NOTICES Treasury book-entry securities held on National Book-Entry System; transfer fee schedule, 63657-63658 E7-22007 Fish Fish and Wildlife Service NOTICES Endangered and threatened species permit applications, 63623-63624 E7-22070 Meetings:

Sporting Conservation Council, 63624 E7-22015 Food Food and Drug Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 63614-63616 E7-21971 E7-21988 Medical devices: Premarket approval applications, list safety and effectiveness summaries availability, 63616-63617 E7-21986 Meetings: Medical Devices Advisory Committee, 63617-63618 E7-21979 Reports and guidance documents; availability, etc.: Chronic Obstructive Pulmonary Disease; treatment drugs development, 63618 E7-21985 MISSING FOR:

Foreign Agricultural Service Foreign Agricultural Service NOTICES Committees; establishment, renewal, termination, etc.: Edward R. Madigan United States Agricultural Export Excellence Award Board of Evaluators, 63547-63548 07-5607 Forest Forest Service NOTICES Environmental statements; notice of intent: Ashley National Forest, UT, 63551-63554 E7-22030 Ashley National Forest, UT and WY, 63548-63551 E7-22029 Health Health and Human Services Department See Centers for Disease Control and Prevention See Centers for Medicare & Medicaid Services See Food and Drug Administration See Health Resources and Services Administration Health Health Resources and Services Administration NOTICES Meetings:

Nurse Education and Practice National Advisory Council, 63618-63619 E7-21978 Homeland Homeland Security Department See Coast Guard See Transportation Security Administration See U.S. Citizenship and Immigration Services See U.S. Customs and Border Protection Housing Housing and Urban Development Department NOTICES Grants and cooperative agreements; availability, etc.: Homeless assistance; excess and surplus Federal properties, 63623 E7-21817 Interior Interior Department See Fish and Wildlife Service See Land Management Bureau See Reclamation Bureau IRS Internal Revenue Service PROPOSED RULES Income Taxes:

Benefit restrictions; underfunded pension plans Correction, 63528-63529 E7-21964 Real estate mortgage investment conduit; commercial mortgage loans, 63523-63527 E7-21987 NOTICES Agency information collection activities; proposals, submissions, and approvals, 63658-63659 E7-21963 International International Trade Administration NOTICES Antidumping: Cut-to-length carbon steel plate from— Romania, 63555-63557 E7-22048 Heavy forged hand tools, finished or unfinished, with or without handles from— China, 63557 E7-22047 Stainless steel sheet and strip in coils from— Taiwan, 63557 E7-22045 Steel nails from— China and United Arab Emirates, 63558 E7-22049 Overseas trade missions: 2007 trade missions— China and India;

U.S. electronic education fairs, 63558-63559 E7-21976 *Applications, hearings, determinations, etc.:* University of— Oklahoma, et al., 63558 E7-22041 International International Trade Commission NOTICES Import investigations: Raw flexibile magnets from— China and Taiwan, 63629 E7-22014 Labor Labor Department See Mine Safety and Health Administration Land Land Management Bureau NOTICES Alaska Native claims selection: Kuskokwim Corp., 63624 E7-22011 Realty actions; sales, leases, etc.:

Utah, 63624-63625 E7-22010 Resource management plans, etc.: Black Rock Desert-High Rock Canyon Emigrant Trails National Conservation Area, NV, 63625-63628 E7-22001 Library Library of Congress See Copyright Royalty Board, Library of Congress Maritime Maritime Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 63648-63649 E7-21965 Coastwise trade laws; administrative waivers: MERRIE ELLEN, 63649 E7-21974 TRANQUILO, 63649-63650 E7-21975 Mine Mine Safety and Health Administration PROPOSED RULES Coal mine safety and health:

Underground mines— Rescue teams; revision of existing standards for training, certification, etc., 63529-63530 E7-22088 E7-22089 National Credit National Credit Union Administration RULES Fair and Accurate Credit Transactions Act: Identity theft red flags and address discrepancies, 63718-63775 07-5453 National Highway National Highway Traffic Safety Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 63650-63651 E7-22074 Motor vehicle safety standards:

Nonconforming vehicles importation eligibility determinations, 63651-63653 E7-21967 E7-21969 Motor vehicle safety standards; exemption petitions, etc.: General Motors Corp., 63653-63654 E7-22057 Reports and guidance documents; availability, etc.: Controls, telltales, and indicators; interpretation, 63654-63657 E7-21431 NOAA National Oceanic and Atmospheric Administration RULES Fishery conservation and management: Alaska; fisheries of Exclusive Economic Zone— Bering Sea and Aleutian Islands groundfish, crab, salmon and scallop; correction, 63500-63502 E7-22050 PROPOSED RULES Marine mammals:

Sea turtle conservation— Chain-mat modified gear and sea scallop dredge gear; incidental take in compliance with gear modification requirements, 63537-63546 E7-22073 NOTICES Atlantic highly migratory species: Exempted fishing, scientific research, display, and chartering permits; letters of acknowledgment, 63559-63561 E7-22071 National Science National Science Foundation NOTICES Reports and guidance documents; availability, etc.: Research Performance Progress Report; standardized format; comment request, 63629-63631 07-5601 Navy Navy Department RULES Navigation, COLREGS compliance exemptions:

USS NORTH CAROLINA, 63485-63486 E7-22008 NOTICES Environmental statement; notice of intent: Laurelwood Housing Area and Naval Weapons Station Earle, NJ; public scoping meeting, 63562-63563 E7-22039 Nuclear Nuclear Regulatory Commission NOTICES Agency information collection activities; proposals, submissions, and approvals, 63631-63632 E7-22034 Postal Postal Regulatory Commission RULES Practice and procedure: Postal ratemaking system; implementation, 63662-63704 E7-21596 Public Public Debt Bureau See Fiscal Service Reclamation Reclamation Bureau NOTICES Meetings:

California Bay-Delta Public Advisory Committee, 63628-63629 07-5597 SEC Securities and Exchange Commission RULES Financial reporting matters: Staff accounting bulletin No. 109, 63484-63485 E7-21927 PROPOSED RULES Electronic Data Gathering, Analysis, and Retrieval System (EDGAR): Mandatory electronic submission of Investment Company Act applications and Regulation E filings, 63513-63523 E7-21911 NOTICES Agency information collection activities; proposals, submissions, and approvals, 63632-63633 E7-22006 Securities:

Suspension of trading— Ames Department Stores, Inc, et al., 63633 07-5625 Self-regulatory organizations; proposed rule changes: Municipal Securities Rulemaking Board, 63633-63635 E7-21981 NASDAQ Stock Market LLC, 63635-63636 E7-21982 New York Stock Exchange LLC, 63636-63637 E7-21983 Self regulatory organizations; regulatory responsibilities allocation: American Stock Exchange LLC, et al., 63637-63642 E7-21980 Surface Surface Transportation Board NOTICES Railroad operation, acquisition, construction, etc.:

Montgomery Short Line LLC, 63657 E7-21958 Union Pacific Railroad Co., 63657 E7-21956 Thrift Thrift Supervision Office RULES Fair and Accurate Credit Transactions Act: Identity theft red flags and address discrepancies, 63718-63775 07-5453 NOTICES *Applications, hearings, determinations, etc.:* Atlantic Coast Bank et al., 63659 07-5604 Baltimore County Savings Bank, F.S.B., et al., 63659 07-5596 Transportation Transportation Department See Federal Aviation Administration See Federal Highway Administration See Federal Motor Carrier Safety Administration See Federal Railroad Administration See Federal Transit Administration See Maritime Administration See National Highway Traffic Safety Administration See Surface Transportation Board Transportation Transportation Security Administration RULES Privacy Act; implementation, 63706-63710 E7-21907 NOTICES Privacy Act; systems of records, 63711-63715 E7-21908 Treasury Treasury Department See Comptroller of the Currency See Fiscal Service See Internal Revenue Service See Thrift Supervision Office MISSING FOR:

U.S. Citizenship and Immigration Services U.S. Citizenship and Immigration Services NOTICES Immigration: H-2A nonimmigrant classification; employers petitioning for temporary or seasonal agricultural workers coming to U.S., 63621-63622 E7-21984 Customs U.S. Customs and Border Protection NOTICES Agency information collection activities; proposals, submissions, and approvals, 63622-63623 E7-21968 E7-21998 Veterans Veterans Affairs Department NOTICES Meetings: Homeless Veterans Advisory Committee, 63659-63660 07-5600 Separate Parts In This Issue Part II Postal Regulatory Commission, 63662-63704 E7-21596 Part III Homeland Security Department, Transportation Security Administration, 63706-63715 E7-21907 E7-21908 Part IV Federal Deposit Insurance Corporation;

Federal Reserve System; Federal Trade Commission; National Credit Union Administration; Treasury Department, Comptroller of the Currency; Treasury Department, Thrift Supervision Office, 63718-63775 07-5453 Part V Education Department, 63778-63781 E7-22051 Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws. To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions. 72 217 Friday, November 9, 2007 Rules and Regulations FEDERAL RESERVE SYSTEM 12 CFR Part 202 [Regulation B;

Docket No. R-1281] Equal Credit Opportunity AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule; official staff interpretation. SUMMARY: The Board is amending Regulation B, which implements the Equal Credit Opportunity Act, and the official staff commentary to the regulation, to withdraw portions of the interim final rules for the electronic delivery of disclosures issued March 30, 2001. The interim final rules address the timing and delivery of electronic disclosures, consistent with the requirements of the Electronic Signatures in Global and National Commerce Act (E-Sign Act).

Because compliance with the 2001 interim final rules has not been mandatory, withdrawal of these provisions from the *Code of Federal Regulations* reduces confusion about the status of the provisions and simplifies the regulation. In addition, the Board is adopting final amendments to Regulation B to provide guidance on the electronic delivery of disclosures. For example, the final rules provide that when an application is accessed by an applicant in electronic form, disclosures may be provided to the consumer in electronic form on or with the application without regard to the consumer consent and other provisions of the E-Sign Act.

Similar final rules are being adopted under other consumer financial services regulations administered by the Board. DATES: The final rule is effective December 10, 2007. The mandatory compliance date is October 1, 2008. FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, Division of Consumer and Community Affairs, at

(202)452-2412 or

(202)452-3667. For users of Telecommunications Device for the Deaf

(TDD)only, contact

(202)263-4869. SUPPLEMENTARY INFORMATION: I. Statutory Background The Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 *et seq.* , makes it unlawful for creditors to discriminate in any aspect of a credit transaction on the basis of sex, race, color, religion, national origin, marital status, or age (provided the applicant has the capacity to contract), because all or part of an applicant's income derives from public assistance, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act. The Board's Regulation B (12 CFR part 202) implements the ECOA. The ECOA and Regulation B require certain disclosures to be provided to applicants, and some of those disclosures must be provided in writing. The Electronic Signatures in Global and National Commerce Act (the E-Sign Act), 15 U.S.C. 7001 *et seq.* , was enacted in 2000. The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met. The E-Sign Act, including the special consumer notice and consent provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, creditors are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulation B if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act. II. Board Proposals and Interim Rules Regarding Electronic Disclosures On April 4, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation B (66 FR 17779). Similar interim final rules for Regulations E, M, Z, and DD (implementing the Electronic Fund Transfer Act, the Consumer Leasing Act, the Truth in Lending Act, and the Truth in Savings Act, respectively) were published on March 30, 2001 (66 FR 17322 and 66 FR 17329) (Regulations M and Z, respectively), and April 4, 2001 (66 FR 17786 and 66 FR 17795) (Regulations E and DD, respectively). Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Creditors and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act. The interim final rules also incorporated many of the provisions that were part of earlier regulatory proposals issued by the Board regarding electronic disclosures. 1 1 On May 2, 1996, the Board proposed to amend Regulation E to permit financial institutions to provide disclosures by sending them electronically (61 FR 19696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14528, March 25, 1998) and similar proposals under Regulations B, M, Z, and DD (63 FR 14552, 14538, 14548, and 14533, respectively, March 25, 1998). Based on comments received on the 1998 proposals, in 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 1999). Under the 2001 interim final rules, disclosures could be sent to an e-mail address designated by the consumer, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, creditors would have to provide a notice to consumers (typically by e-mail) alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow consumers adequate time to access and retain the information. Creditors also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Commenters on the interim final rules identified significant operational and information security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers who choose to receive electronic disclosures do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection. In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41439, August 8, 2001.) Thus, creditors are not required to comply with the interim final rules. Since that time, the Board had not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices. In April 2007, the Board proposed to amend Regulation B and the official staff commentary by

(1)withdrawing portions of the 2001 interim final rule that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary;

(2)withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and

(3)retaining the substance of certain provisions of the interim final rule that provide regulatory relief or guidance regarding electronic disclosures. (72 FR 21125, April 30, 2007.) Similar amendments were also proposed by the Board under Regulations E, M, Z, and DD (72 FR 21131, 72 FR 21135, 72 FR 21141, and 72 FR 21155, respectively). III. Summary of the Final Rule The Board received about 25 comments on the April 2007 proposal, primarily from creditors and their representatives. Most of the industry commenters generally supported the proposal, although some provided suggestions for clarifications or changes to particular elements of the proposal. A comment letter was also submitted on behalf of four consumer groups. The consumer group commenters suggested a number of changes to strengthen consumer protections. The comments are discussed in more detail in the Section-by-Section Analysis below. For the reasons discussed below, the Board is now adopting amendments to Regulation B in final form, largely as proposed in April 2007. As stated in the proposal, because compliance with the 2001 interim final rules has not been mandatory, the final rule will reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. (Certain provisions in the 2001 interim rules, including provisions addressing foreign language disclosures, were not affected by the lifting of the mandatory compliance date and became final in 2001; thus, those provisions are not dealt with in this rulemaking.) The Board is also adopting certain provisions that are identical or similar to provisions in the 2001 interim rules in order to enhance the ability of consumers to shop for credit online, minimize the information-gathering burdens on consumers, and provide guidance or eliminate a substantial burden on the use of electronic disclosures, as discussed further below. Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a creditor, government agency, or other trusted entity) that have become more pronounced since 2001. The Board is also eliminating certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices. The 2001 interim final rule allowed creditors to provide certain disclosures to applicants in electronic form without obtaining E-Sign consent if the disclosures were provided on or with an application. Similarly, in the April 2007 proposal, pursuant to the Board's authority under section 703(a)(1) of the ECOA, as well as under section 104(d) of the E-Sign Act, 2 the Board proposed to specify the circumstances under which certain disclosures may be provided on or with an application in electronic form, rather than in writing as required by Regulation B, without obtaining the applicant's consent under section 101(c) of the E-Sign Act. 2 Section 703(a)(1) of the ECOA provides that regulations prescribed by the Board under the ECOA “may provide for such adjustments and exceptions * * * as in the judgment of the Board are necessary or proper to effectuate the purposes of [the ECOA], * * * or to facilitate or substantiate compliance [with the requirements of the ECOA].” Section 104(d) of the E-Sign Act authorizes federal agencies to adopt exemptions for specified categories of disclosures from the E-Sign notice and consent requirements, “if such exemption is necessary to eliminate a substantial burden on electronic commerce and will not increase the material risk of harm to consumers.” For the reasons stated in this **Federal Register** notice, the Board believes that these criteria are met in the case of the application disclosures. In addition, the Board believes ECOA section 703(a)(1) authorizes the Board to permit creditors to provide disclosures electronically, rather than in paper form, independent of the E-Sign Act. Commenters supported the Board's approach with regard to this issue. This final rule adopts the approach in the April 2007 proposal. The Board continues to believe that creditors should not be required to obtain the consumer's consent in order to provide application-related disclosures if the consumer accesses the application containing these disclosures in electronic form, such as at an Internet Web site. The Board believes consumers would not be harmed if the E-Sign consent procedures do not apply and would obtain significant benefits by having timely access to application-related disclosures in electronic form. Conversely, consumers who choose to apply for credit online would be unduly burdened if they had to consent in accordance with the E-Sign Act in order to access application forms that are accompanied by disclosures. Applying the consumer consent provisions of the E-Sign Act to these disclosures could impose substantial burdens on electronic commerce and make it more difficult for consumers to apply for credit. At the same time, the Board recognizes that consumers who apply for credit online may not want to receive other disclosures electronically. Therefore, with respect to adverse action notices and copies of appraisal reports, creditors are required to obtain the consumer's consent, in accordance with the E-Sign Act, to provide such disclosures in electronic form, or else provide written disclosures. Finally, as proposed, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) and electronic signatures are being deleted as unnecessary, because the E-Sign Act is a self-effectuating statute. The revisions to Regulation B and the official staff commentary are described more fully below in the Section-by-Section Analysis. IV. Section-by-Section Analysis 12 CFR Part 202 (Regulation B) Section 202.4 General Rules Section 202.4(d) prescribes the form of disclosures, and specifically provides that a creditor that provides in writing any disclosures or information required by the regulation must provide the disclosures in a clear and conspicuous manner and, except for the disclosures required by §§ 202.5 and 202.13, in a form that the applicant may keep. As proposed, the Board is revising § 202.4(d) to clarify that, with regard to disclosures that the regulation requires to be given in writing, creditors may provide such disclosures in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some creditors may provide disclosures to applicants both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those creditors, the duplicate electronic form of the disclosures may be provided to applicants without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's disclosure requirements. The Board also proposed to revise § 202.4(d) to provide that certain disclosures, when included on or with an application, must be provided to the applicant in electronic form if the applicant accesses the application electronically, such as on a home computer. The proposal further provided that, under those circumstances, these disclosures may be provided in electronic form without regard to the consumer consent or other provisions of the E-Sign Act. The proposal affected the following disclosures: *Section 202.5(b)(1)* . Section 202.5(b)(1) provides that if a creditor inquires about an applicant's race, color, religion, national origin, or sex for the purpose of conducting a self-test, the creditor must disclose that providing the information is optional for the applicant, that the information is requested to monitor compliance with the ECOA, and that the creditor may not discriminate either on the basis of the information or whether the applicant chooses to furnish it. *Section 202.5(b)(2)* . Section 202.5(b)(2) provides that when a creditor requests an applicant to designate a title on an application form, the application form must disclose that the designation of a title is optional. *Section 202.5(d)(1)* . Section 202.5(d)(1) provides that if an application is for other than individual unsecured credit, a creditor may inquire about the applicant's marital status, but must use only the terms *married* , *unmarried* , and *separated* . The creditor may also explain that the *unmarried* category includes single, divorced, and widowed persons. *Section 202.5(d)(2)* . Section 202.5(d)(2) prohibits a creditor from inquiring whether income stated in an application is derived from alimony, child support, or separate maintenance payments, unless the creditor discloses to the applicant that such income need not be revealed if the applicant does not want the creditor to consider it in determining the applicant's creditworthiness. *Section 202.13* . Section 202.13(a) requires a creditor to request information regarding an applicant's ethnicity, race, sex, marital status, and age as part of an application for dwelling-secured credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence. Section 202.13(b) provides that questions about ethnicity, race, sex, marital status and age may be listed, at the creditor's option, on the application form or on a separate form that refers to the application. Section 202.13(c) requires the creditor to disclose to the applicant that the information about ethnicity, race, sex, marital, status and age is being requested by the federal government to monitor compliance with federal statutes that prohibit creditors from discriminating against applicants. The creditor must also disclose that if the applicant chooses not to provide the information, the creditor is required to note the ethnicity, race, and sex on the basis of visual observation or surname. *Section 202.14(a)(2)(i)* . Section 202.14(a)(2)(i) requires a creditor that provides copies of appraisal reports only upon request (rather than routinely) to notify the applicant of the right to obtain a copy of the report. Under Regulation B, an application generally is not required to be in writing. 3 Section 202.2(f) of the regulation defines the term “application” to include “an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested.” Since an application does not have to be in writing, the disclosures that are provided on or with an application in certain circumstances do not have to be provided in writing in all cases. These disclosures include those required under §§ 202.5(b)(1), 202.5(b)(2), 202.5(d)(1), 202.5(d)(2), and 202.13. (Section 202.14(a)(2)(i) specifies that the notice of the right to a copy of the appraisal report must be provided in writing.) However, most creditors use written or electronic application forms and make these disclosures, where applicable, on the written or electronic application form or a separate accompanying form. The Board's Model Application Forms in Appendix B to the regulation include some of these disclosures on the application forms. 3 Under § 202.4(c), a creditor must take written applications for dwelling-related credit for which monitoring information (under § 202.13) must be collected. However, use of a printed form is not required. A creditor may accept telephone or other oral applications and either write down or enter into a computer the pertinent information provided orally by the applicant. *See* Comments 202.4(c)-1 and 2. The April proposal revised § 202.4(d) to provide that each of the disclosures noted above, where given on or with the application form and where the application is accessed by the applicant in electronic form, must be provided to the applicant in electronic form on or with the application. The proposed revision also clarified that under these circumstances, the disclosures may be provided in electronic form without regard to the consumer consent or other provisions of the E-Sign Act. The Board proposed to add comment 4(d)-2 to clarify this point and also to make clear that if an applicant is provided with a paper application form, the required disclosures must be provided in paper form on or with the application (and not, for example, by including a reference in the paper application to the Web site where the disclosures are located). Many creditor commenters urged the Board to revise the regulation and commentary to permit disclosures to be given in paper form in appropriate cases, even where an application is in electronic form. In particular, commenters noted that requiring electronic disclosures could present problems for applications taken in person using electronic means. Commenters stated, for example, that a consumer or creditor employee might complete an electronic application by entering information at a terminal or kiosk in the creditor's office. These commenters noted that paper disclosures would be more appropriate in such cases, because the applicant would be able to retain them. For example, a loan officer could give the disclosures to the consumer, or in the case of an unattended kiosk, the kiosk could have a printer to provide paper disclosures. Some creditor commenters argued that the proposed requirement would contravene the E-Sign Act, based on the provisions in E-Sign that state

(1)that the statute does not require any person to accept or use electronic records in place of paper, and

(2)that any regulations interpreting E-Sign may not add to its requirements. Creditor commenters suggested that, at a minimum, the regulation should provide an exception to allow paper disclosures for in-person electronic applications. Consumer group commenters stated that the regulation should not only permit, but should require, paper disclosures in the case of in-person electronic applications. For example, the commenters noted that a door-to-door solicitor could otherwise simply display certain disclosures to a consumer on the screen of a laptop computer, even though the consumer would have no way to later access the disclosures. One creditor commenter suggested that, in addition to permitting paper disclosures for electronic applications, the regulation should also permit electronic disclosures for paper applications without consumers' consent in certain cases. For example, the commenter suggested, a basic or short-form disclosure could be provided in paper form along with the paper application, together with a Web site where a more complete disclosure could be obtained. In the final regulation, § 202.4(d) is revised to state that if an application is accessed by the consumer in electronic form, the required application-related disclosures may (rather than must) be provided in electronic form, without regard to the consumer consent or other provisions of the E-Sign Act. The Board believes that this will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will facilitate applications for credit by enabling applicants to receive important disclosures at the same time they access an application electronically without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring applicants to follow the consent procedures set forth in the E-Sign Act in order to complete an online application is potentially burdensome and could discourage applicants from shopping for credit online. Moreover, because these applicants are viewing the application online, there appears to be little, if any, risk that the applicant will be unable to view the disclosures online as well. The final rule states that the disclosures may, rather than must, be provided in electronic form. The proposal to require electronic disclosures for credit applications that are accessed electronically was intended to ensure that the disclosures are provided on or with the application in compliance with the timing and delivery requirements of Regulation B. Several sections of the regulation that relate to credit applications already require that the credit application disclosures be provided on or with the application, and this requirement applies to electronic as well as paper applications; the only added requirement under the proposal would have been to require that, in the case of an electronic application, the disclosures be in electronic form. Where a consumer accesses and submits an application form using a home computer via a creditor's Web site, the creditor must provide the disclosures in electronic form with the application form on the Web site in order to meet the requirement to provide disclosures in a timely manner on or with the application. If the creditor instead mailed paper disclosures to the consumer, this requirement would not be met. This guidance is stated in new comment 4(d)-2. In contrast, if a consumer is physically present in the creditor's office, and accesses and submits an electronic application—such as via a terminal or kiosk—the Board believes the creditor could provide disclosures in paper form and comply with the timing and delivery requirements of the regulation. In addition, as discussed by the commenters, paper disclosures may be preferable in this situation because they can be retained by the consumer. Therefore, paper disclosures are permissible in the case of in-person electronic applications in a creditor's office, when the timing and delivery requirements are met. This guidance is also stated in new comment 4(d)-2. The final regulation, however, does not require paper disclosures for such in-person electronic applications, as suggested by the consumer group commenters. Electronic disclosures would comply with the regulation for these applications in some cases. For example, for an electronic in-person credit application in a creditor's office, the creditor could display most of the required Regulation B disclosures to the consumer on a terminal or kiosk screen. The requirement to provide disclosures in a form the consumer may retain does not apply to the application-related disclosures under §§ 202.5 and 202.13, so this procedure would comply with the regulation for those disclosures. In the case of the notice regarding copies of appraisal reports under § 202.14, the retainability requirement does apply, and therefore creditors would likely have to provide that disclosure in paper form in an in-person application in a creditor's office. New comment 4(d)-2 is modified from the proposal to provide the guidance discussed above. In addition, the portion of the proposed comment stating that paper applications must be accompanied by paper disclosures has been deleted as unnecessary. For example, if a credit application in paper form did not contain all of the required disclosures, but instead referred the consumer to a Web site where some or all of the disclosures could be found, the application would not be in compliance with the requirement that the disclosures be provided in a timely manner on or with the application. In addition, the provisions that state that electronic disclosures may be provided without regard to the consumer consent or other provisions of the E-Sign Act are limited to situations where the application itself is in electronic form. Thus, if a creditor wanted to provide electronic disclosures for a paper application (for example, where a paper application is submitted in person at the creditor's office), the creditor would first have to comply with the E-Sign notice and consent requirements. Section 202.9 Notifications Section 202.9(g) provides that when an application for credit is submitted through a third party to more than one creditor and no credit is offered (or the applicant does not expressly accept or use any credit offered), each creditor taking adverse action must provide the notice required by § 202.9(a), but may do so through a third party. The 2001 interim final rule added a new § 202.9(h) to clarify that such third parties may use electronic disclosures to provide the required adverse action notice. As proposed in April 2007, this provision is being deleted as unnecessary because the E-Sign Act is a self-effectuating statute and permits any person to use electronic records subject to the conditions set forth in the Act. Section 202.16 Requirements for Electronic Communication Section 202.16 was added by the 2001 interim final rule to address the general requirements for electronic communications. 4 In the April 2007 proposal, the Board proposed to delete § 202.16 from Regulation B and the accompanying sections of the staff commentary. Creditor commenters largely supported the proposed deletion, and § 202.16 and the accompanying commentary are deleted in the final rule. 4 The requirements for electronic communication were initially adopted in § 202.17. In the Board's comprehensive review of Regulation B, this provision was renumbered as § 202.16. (68 FR 13144, March 18, 2003.) In the interim rule, § 202.16(a) defined the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 202.16(a) does not change applicable legal requirements under the E-Sign Act. Sections 202.16(b),

(c)and

(f)incorporated by reference provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form, the requirement to obtain the applicant's affirmative consent before providing such disclosures, and the provision allowing electronic signatures. The deletion of these provisions has no impact on the general applicability of the E-Sign Act to Regulation B disclosures. The special rule in § 202.16(c) exempting the disclosures relating to adverse action in connection with business credit, appraisal reports, and the collection of monitoring information from the E-Sign Act consent requirements has been eliminated. The special rule for disclosures relating to adverse action notices provided in connection with business credit has been removed because the E-Sign Act's consumer consent requirements do not apply to business credit. The special rules for disclosures relating to appraisal reports and the collection of monitoring information are addressed in § 202.4(d)(2) of the final rule. Sections 202.16(d) and

(e)of the interim final rule addressed specific timing and delivery requirements for electronic disclosures under Regulation B, such as the requirement to send disclosures to an applicant's e-mail address (or post the disclosures on a Web site and send a notice alerting the applicant to the disclosures). The Board stated in the proposal that it no longer believed that these additional provisions were necessary or appropriate. The Board noted that electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them, and also noted concerns about e-mail related to data security, identity theft, and phishing. The consumer group commenters urged the Board to require the use of e-mail to provide required disclosures in electronic form, arguing that e-mail is the only reliable way to ensure that consumers are able to actually access, receive, and retain disclosures. The consumer groups also disagreed with the statement that concerns relating to phishing, identity theft, and data security are a valid reason for not requiring the use of e-mail, noting that phishing involves gathering information from the consumer, while disclosures would be provided to the consumer, and need not include sensitive information. While the consumer's receipt of an e-mail message that is actually from the consumer's creditor would not in general pose a security risk, consumers might ignore or delete e-mails from creditors (real or purported), in order to avoid falling victim to fraud schemes. Thus, disclosures sent by consumers' creditors may not receive the attention they should. Consequently, some creditors may be reluctant to communicate by e-mail. To the extent consumers are instructed not to ignore electronic mail messages from their creditors, the risk of consumers being victimized by fraudulent e-mail might be increased. In any event, the Board believes it is preferable not to mandate the use of any particular means of electronic delivery of disclosures, but instead to allow flexibility for creditors to use whatever method may be best suited to particular types of disclosure. Under the April 2007 proposed rule, the requirement in the 2001 interim final rule for creditors to maintain disclosures posted on a Web site for at least 90 days would be deleted. Creditor commenters supported the proposed deletion; consumer group commenters expressed concern about its impact on consumers. The Board continues to believe that an appropriate time period consumers may want electronic disclosures to be available may vary depending upon the type of disclosure, and is reluctant to establish specific time periods that would vary depending on the disclosures, which would increase the compliance burden. Therefore, the 90-day retention provision is deleted as proposed. Nevertheless, while the Board is not requiring disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation B continue to apply to electronic disclosures, such as the requirement to provide disclosures to consumers at certain specified times and in a form that the consumer may keep. The Board expects creditors to maintain disclosures on Web sites for a reasonable period of time (which may vary depending upon the particular disclosure) so that consumers have an opportunity to access, view, and retain the disclosures. As stated in the April 2007 proposal, the Board will monitor creditors' electronic disclosure practices with regard to the ability of consumers to retain Regulation Z disclosures and would consider further revisions to the regulation to address this issue if necessary. Section 202.17 Enforcement, Penalties, and Liabilities As proposed, § 202.17 is redesignated as § 202.16 (together with the corresponding section of the official staff commentary), concurrent with the deletion of current § 202.16, as discussed above. V. Other Issues Raised by Commenters Clear and Conspicuous Disclosures An issue raised in the comments on the April 2007 proposal related to small hand-held electronic devices through which consumers may conduct financial transactions using the Internet or other electronic means (for example, personal digital assistants, Internet-enabled cellphones, and similar devices). One commenter requested clarification on whether creditors would be deemed to comply with the requirement to provide disclosures in a clear and conspicuous form, even when the consumer views them on a small screen of a hand-held electronic device. The commenter noted that the creditor has no control over what devices consumers choose to use, for example, to view disclosures on a web page. The Board believes that disclosures comply with the “clear and conspicuous” requirement as long as they are provided in a manner such that they would be clear and conspicuous when viewed on a typical home personal computer monitor. Retainable Form Several industry commenters requested guidance on how creditors can be sure of meeting the requirement to provide disclosures in a form that the consumer can keep. Commenters noted that some of the disclosures that are exempted from the E-Sign requirements regarding notice and consent are nevertheless required to be given in retainable form (for example, the notice of right to a copy of an appraisal report, under § 202.14(a)(2)(i)). Commenters pointed out that the E-Sign Act requires, with regard to consumer disclosures generally, that a creditor disclose “the hardware and software requirements for access to and retention of the electronic records” and that the consumer consent to electronic disclosures “in a manner that reasonably demonstrates that the consumer can access” the disclosures electronically. A commenter noted that if the E-Sign procedures are followed, a creditor has some degree of comfort that the retainability requirement has been met; however, with regard to disclosures that are exempted from the E-Sign notice and consent provisions (such as those under § 202.14(a)(2)(i)), it is not clear how the creditor can demonstrate compliance with the retainability requirement. The consumer group commenters were concerned about retainability of disclosures in light of the deletion of the requirement to maintain disclosures on a Web site for at least 90 days. They urged that the final regulations require that disclosures be delivered in a format that is both downloadable and printable. The Board believes that creditors satisfy the requirement for providing electronic disclosures in a form the consumer can retain if they are provided in a standard electronic format that can be downloaded and saved or printed on a typical home personal computer. Typically, any document that can be downloaded by the consumer can also be printed. The Board will, however, monitor creditors' practices to evaluate whether further guidance is needed on this issue. In a situation where the consumer is provided electronic disclosures through equipment under the creditor's control—such as a terminal or kiosk in the creditor's offices—the creditor could, for example, provide a printer that automatically prints the disclosures. Expansion of Exception From E-Sign Notice and Consent Requirements One commenter suggested that the Board adopt an additional exception from the E-Sign notice and consent requirements. Specifically, the commenter suggested that the regulation should allow adverse action notices and incomplete application notices, under § 202.9, to be provided in electronic form without E-Sign notice and consent if the consumer applies online, or applies by telephone and orally consents to receiving these notices electronically. The commenter argued that such an exception would permit faster notice, and that online credit applicants expect to receive communications from the creditor online. The Board believes that, at this time, there is insufficient evidence that the consent requirements are a burden on electronic commerce in this situation. VI. Use of “Plain Language” Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. In the proposal, the Board invited comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand. No comments were received on “plain language” issues involving Regulation B. VII. Final Regulatory Flexibility Analysis The Board prepared an initial regulatory flexibility analysis as required by the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* )

(PRA)(44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is subject to the PRA by this final rulemaking is found in 12 CFR part 202. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0201. Section 703(a)(1) of the Equal Credit Opportunity Act (15 U.S.C. 1691b(a)(1)) authorizes the Board to issue regulations to carry out the provisions of the Act. The purpose of the Act is to ensure that credit is made available to all creditworthy customers without discrimination on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to contract), receipt of public assistance income, or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act (15 U.S.C. 1601 *et seq.* ). This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality normally arises. However, in the event the Board were to retain records during the course of an examination, the information may be protected from disclosure under the exemptions (b)(4), (6), and

(8)of the Freedom of Information Act (5 U.S.C. 522 (b)). The adverse action disclosure is confidential between the creditor and the consumer involved. Regulation B applies to all types of creditors, not just state member banks. However, under the Paperwork Reduction Act, the Federal Reserve accounts for the burden of the paperwork associated with the regulation only for entities that are supervised by the Federal Reserve. Appendix A of Regulation B defines these creditors as state member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Other federal agencies account for the paperwork burden for the institutions they supervise. Creditors are required to retain records for 12 to 25 months as evidence of compliance. The annual burden is estimated to be 165,630 hours for the 1,172 Federal Reserve-supervised creditors that are respondents for purposes of the PRA. As mentioned in the Preamble, on April 30, 2007, a notice of proposed rulemaking was published in the **Federal Register** (72 FR 21125). No comments specifically addressing the burden estimate were received. The Federal Reserve has a continuing interest in the public's opinions of our collections of information. At any time, comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, may be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551; and to the Office of Management and Budget, Paperwork Reduction Project (7100-0201), Washington, DC 20503. List of Subjects in 12 CFR Part 202 Aged, Banks, banking, Civil rights, Credit, Federal Reserve System, Marital status discrimination, Penalties, Religious discrimination, Reporting and recordkeeping requirements, Sex discrimination. For the reasons set forth in the preamble, the Board amends 12 CFR part 202 as set forth below: PART 202—EQUAL CREDIT OPPORTUNITY (REGULATION B) 1. The authority citation for part 202 continues to read as follows: Authority: 15 U.S.C. 1691-1691f. 2. Section 202.4 is amended by revising paragraph

(d)to read as follows: § 202.4 General rules.

(d)*Form of disclosures* —(1) *General rule.* A creditor that provides in writing any disclosures or information required by this regulation must provide the disclosures in a clear and conspicuous manner and, except for the disclosures required by §§ 202.5 and 202.13, in a form the applicant may retain.

(2)*Disclosures in electronic form.* The disclosures required by this part that are required to be given in writing may be provided to the applicant in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 *et seq.* ). Where the disclosures under §§ 202.5(b)(1), 202.5(b)(2), 202.5(d)(1), 202.5(d)(2), 202.13, and 202.14(a)(2)(i) accompany an application accessed by the applicant in electronic form, these disclosures may be provided to the applicant in electronic form on or with the application form, without regard to the consumer consent or other provisions of the E-Sign Act. § 202.9 [Removed] 3. Section 202.9 is amended by removing paragraph (h). § 202.16 [Removed] 4. Section 202.16 is removed. § 202.17 [Redesignated] 5. Section 202.17 is redesignated as § 202.16. 6. In Supplement I to Part 202, the following amendments are made: a. In *Section 202.4—General Rules* , under *Paragraph (4)(d)* , new paragraph 2. is added. b. Section 202.16—Requirements for Electronic Communication is removed; c. Section 202.17—Enforcement, Penalties, and Liabilities is redesignated as section 202.16. The amendments to read as follows: SUPPLEMENT I TO PART 202—OFFICIAL STAFF INTERPRETATIONS *Section 202.4—General Rules* *Paragraph (4)(d)* 2. *Form of disclosures.* Whether the disclosures required to be on or with an application must be in electronic form depends upon the following: i. If an applicant accesses a credit application electronically other than in-person in a creditor's office (covered under ii. below), such as online at a home computer, the creditor must provide the disclosures in electronic form (such as with the application form on its Web site) in order to meet the requirement to provide disclosures in a timely manner on or with the application. If the creditor instead mailed paper disclosures to the applicant, this requirement would not be met. ii. In contrast, if an applicant is physically present in the creditor's office, and accesses a credit application electronically, such as via a terminal or kiosk, the creditor may provide disclosures in either electronic or paper form, provided the creditor complies with the timing, delivery, and retainability requirements of the regulation. By order of the Board of Governors of the Federal Reserve System, October 31, 2007. Jennifer J. Johnson, Secretary of the Board. [FR Doc. E7-21697 Filed 11-8-07; 8:45 am] BILLING CODE 6210-01-P FEDERAL RESERVE SYSTEM 12 CFR Part 205 [Regulation E; Docket No. R-1282] Electronic Fund Transfer AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule; official staff interpretation. SUMMARY: The Board is amending Regulation E, which implements the Electronic Fund Transfer Act, and the official staff commentary to the regulation, to withdraw portions of the interim final rules for the electronic delivery of disclosures issued March 30, 2001. The interim final rules addressed the timing and delivery of electronic disclosures, consistent with the requirements of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). Because compliance with the 2001 interim final rules has not been mandatory, withdrawal of these provisions from the *Code of Federal Regulations* reduces confusion about the status of the provisions and simplifies the regulation. Similar rules are being adopted under other consumer fair lending and financial services regulations administered by the Board. DATES: The final rule is effective December 10, 2007. The mandatory compliance date is October 1, 2008. FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, Division of Consumer and Community Affairs, at

(202)452-2412 or

(202)452-3667. For users of Telecommunications Device for the Deaf

(TDD)only, contact

(202)263-4869. SUPPLEMENTARY INFORMATION: I. Statutory Background The purpose of the Electronic Fund Transfer Act (EFTA), 15 U.S.C. 1693 *et seq.* , is to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer

(EFT)systems, and to provide individual consumer rights. The Board's Regulation E (12 CFR part 205) implements the EFTA. Examples of types of transfers covered by the EFTA and Regulation E include transfers initiated through an automated teller machine (ATM), point-of-sale

(POS)terminal, automated clearinghouse (ACH), telephone bill-payment plan, or remote banking service. The EFTA and Regulation E require financial institutions to provide certain disclosures to consumers in writing, including but not limited to initial disclosures of terms and conditions of an EFT service, documentation of EFTs by means of terminal receipts and periodic account activity statements, and change in terms notices. Certain persons other than financial institutions are also required to comply with specific disclosure provisions of Regulation E. The Electronic Signatures in Global and National Commerce Act (the E-Sign Act), 15 U.S.C. 7001 *et seq.* , was enacted in 2000. The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met. The E-Sign Act, including the special consumer notice and consent provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, financial institutions are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulation E if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act. II. Board Proposals and Interim Rules Regarding Electronic Disclosures On April 4, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation E (66 FR 17786). Similar interim final rules for Regulations B, M, Z, and DD (implementing the Equal Credit Opportunity Act, the Consumer Leasing Act, the Truth in Lending Act, and the Truth in Savings Act, respectively) were published on March 30, 2001 (66 FR 17322 and 66 FR 17329) (Regulations M and Z, respectively), and April 4, 2001 (66 FR 17779 and 66 FR 17795) (Regulations B and DD, respectively). Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Financial institutions and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act. The interim final rules also incorporated many of the provisions that were part of earlier regulatory proposals issued by the Board regarding electronic disclosures. 1 1 On May 2, 1996, the Board proposed to amend Regulation E to permit financial institutions to provide disclosures by sending them electronically (61 FR 19696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14528, March 25, 1998) and similar proposals under Regulations B, M, Z, and DD (63 FR 14552, 14538, 14548, and 14533, respectively, March 25, 1998). Based on comments received on the 1998 proposals, in 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 1999). Under the 2001 interim final rules, disclosures could be sent to an e-mail address designated by the consumer, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, financial institutions would have to provide a notice to consumers (typically by e-mail) alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow consumers adequate time to access and retain the information. Institutions also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Commenters on the interim final rules identified significant operational and information security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers who choose to receive electronic disclosures do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection. In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41439, August 8, 2001.) Thus, institutions are not required to comply with the interim final rules. Since that time, the Board had not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices. In April 2007, the Board proposed to amend Regulation E and the official staff commentary by

(1)withdrawing portions of the 2001 interim final rule that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary;

(2)withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and

(3)adding certain provisions to provide guidance regarding electronic disclosures. (72 FR 21131, April 30, 2007.) Similar amendments were also proposed by the Board under Regulations B, M, Z, and DD. (72 FR 21125, 72 FR 21135, 72 FR 21141, and 72 FR 21155, respectively). III. Summary of the Final Rule The Board received about 25 comments on the April 2007 proposal, primarily from financial institutions and their representatives. Most of the financial industry commenters generally supported the proposal, although some provided suggestions for clarifications or changes to particular elements of the proposal. A comment letter was also submitted on behalf of four consumer groups. The consumer group commenters suggested a number of changes to strengthen consumer protections. The comments are discussed in more detail in the Section-by-Section Analysis below. For the reasons discussed below, the Board is now adopting amendments to Regulation E in final form, largely as proposed in April 2007. As stated in the proposal, because compliance with the 2001 interim final rules has not been mandatory, the final rule will reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. (Certain provisions in the 2001 interim rules, including provisions addressing foreign language disclosures, were not affected by the lifting of the mandatory compliance date and became final in 2001; thus, those provisions are not dealt with in this rulemaking.) Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” ( *i.e.* , prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a financial institution, government agency, or other trusted entity) that have become more pronounced since 2001. The Board is eliminating certain aspects of the 2001 interim final rules, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices. Finally, as proposed, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) and electronic signatures are being deleted as unnecessary, because the E-Sign Act is a self-effectuating statute. The revisions to Regulation E and the official staff commentary are described more fully below in the Section-by-Section Analysis. IV. Section-by-Section Analysis 12 CFR Part 205 (Regulation E) Section 205.4 General Disclosure Requirements; Jointly Offered Services Section 205.4 contains the general disclosure requirements under Regulation E, including provisions relating to the form of disclosure. Section 205.4(a)(1) generally requires financial institutions to provide disclosures in writing and in a form that the consumer may keep. As proposed, the Board is revising § 205.4(a)(1) to clarify that institutions may provide disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some institutions may provide disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those institutions, the duplicate electronic form of the disclosures may be provided to consumers without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's disclosure requirements. Section 205.4(c) in the 2001 interim final rule refers to § 205.17, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is deleting § 205.17, as discussed below, the Board is also deleting § 205.4(c), as proposed. Sections 205.4(d) (multiple accounts and account holders) and

(e)(services offered jointly) are renumbered as §§ 205.4(c) and

(d)respectively. Section 205.17 Requirements for Electronic Communication Section 205.17 was added by the 2001 interim final rule to address the general requirements for electronic communications. In the April 2007 proposal, the Board proposed to delete § 205.17 from Regulation E and the accompanying sections of the staff commentary. Financial institution commenters largely supported the proposed deletion, and § 205.17 and the accompanying commentary are deleted in the final rule, reserving that section for future use. In the interim rule, § 205.17(a) defined the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 205.17(a) does not change applicable legal requirements under the E-Sign Act. Section 205.17(b) incorporated by reference the provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form. The deletion of this provision has no impact on the general applicability of the E-Sign Act to Regulation E disclosures. Section 205.17(e) was added in the 2001 interim final rule to clarify that persons, other than financial institutions, that are required to comply with the regulation may use electronic disclosures. This provision is deleted as unnecessary because the E-Sign Act is a self-effectuating statute and permits any person to use electronic records subject to the conditions set forth in the Act. Sections 205.17(c) and

(d)addressed specific timing and delivery requirements for electronic disclosures under Regulation E, such as the requirement to send disclosures to a consumer's e-mail address (or post the disclosures on a Web site and send a notice alerting the consumer to the disclosures). The Board stated in the proposal that it no longer believed that these additional provisions were necessary or appropriate. The Board noted that electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them, and also noted concerns about e-mail related to data security, identity theft, and phishing. The consumer group commenters urged the Board to require the use of e-mail to provide required disclosures in electronic form, arguing that e-mail is the only reliable way to ensure that consumers are able to actually access, receive, and retain disclosures. The consumer groups also disagreed with the statement that concerns relating to phishing, identity theft, and data security are a valid reason for not requiring the use of e-mail, noting that phishing involves gathering information from the consumer, while disclosures would be provided to the consumer, and need not include sensitive information. While the consumer's receipt of an e-mail message that is actually from the consumer's financial institution would not in general pose a security risk, consumers might ignore or delete e-mails from financial institutions (real or purported), in order to avoid falling victim to fraud schemes. Thus, disclosures sent by consumers' financial institutions may not receive the attention they should. Consequently, some financial institutions may be reluctant to communicate by e-mail. To the extent consumers are instructed not to ignore electronic mail messages from their financial institutions, the risk of consumers being victimized by fraudulent e-mail might be increased. In any event, the Board believes it is preferable not to mandate the use of any particular means of electronic delivery of disclosures, but instead to allow flexibility for institutions to use whatever method may be best suited to particular types of disclosure (for example, account-opening, periodic statements, or change in terms). With regard to the requirement to attempt to redeliver returned electronic disclosures, institutions would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. As stated in the April 2007 proposal, the Board continues to believe that both requirements would likely be unduly burdensome. Under the April 2007 proposed rule, the requirement in the 2001 interim final rule for institutions to maintain disclosures posted on a Web site for at least 90 days would be deleted. Financial institution commenters supported the proposed deletion; consumer group commenters expressed concern about its impact on consumers. As stated in the proposal, based on a review of industry practices, it appears that many institutions maintain disclosures posted on an Internet Web site for several months, and, in a number of cases, for more than a year. For example, it appears that institutions that offer online periodic statements to consumers typically make those statements available without charge for six months or longer in electronic form. This practice has developed even though Regulation E does not currently require institutions to maintain disclosures for any specific period of time. In addition, the Board continues to believe that an appropriate time period consumers may want electronic disclosures to be available may vary depending upon the type of disclosure, and is reluctant to establish specific time periods that would vary depending on the disclosures, which would increase the compliance burden. Therefore, the 90-day retention provision is deleted as proposed. Nevertheless, while the Board is not requiring disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation E continue to apply to electronic disclosures, such as the requirement to provide disclosures to consumers at certain specified times and in a form that the consumer may keep. The Board expects institutions to maintain disclosures on Web sites for a reasonable period of time (which may vary depending upon the particular disclosure) so that consumers have an opportunity to access, view, and retain the disclosures. As stated in the April 2007 proposal, the Board will monitor institutions' electronic disclosure practices with regard to the ability of consumers to retain Regulation E disclosures and would consider further revisions to the regulation to address this issue if necessary. V. Other Issues Raised by Commenters Clear and Readily Understandable Disclosures An issue raised in the comments on the April 2007 proposal related to small hand-held electronic devices through which consumers may conduct financial transactions using the Internet or other electronic means (for example, Internet-enabled cellphones, personal digital assistants, and similar devices). One commenter requested clarification on whether financial institutions would be deemed to comply with the requirement to provide disclosures in a clear and readily understandable form, even when the consumer views them on a small screen of a hand-held electronic device. The commenter noted that the institution has no control over what devices consumers choose to use, for example, to view disclosures on a web page. The Board believes that disclosures comply with the “clear and readily understandable” requirement as long as they are provided in a manner such that they would be clear and readily understandable when viewed on a typical home personal computer monitor. Retainable Form Several industry commenters requested guidance on how financial institutions can be sure of meeting the requirement to provide disclosures in a form that the consumer can keep. The consumer group commenters were concerned about retainability of disclosures in light of the deletion of the requirement to maintain disclosures on a Web site for at least 90 days. They urged that the final regulations require that disclosures be delivered in a format that is both downloadable and printable. The Board believes that institutions satisfy the requirement for providing electronic disclosures in a form the consumer can retain if they are provided in a standard electronic format that can be downloaded and saved or printed on a typical home personal computer. Typically any document that can be downloaded by the consumer can also be printed. The Board will, however, monitor financial institutions' practices to evaluate whether further guidance is needed on this issue. In a situation where the consumer is provided electronic disclosures through equipment under the institution's control—such as a terminal or kiosk in the institution's offices—the institution could, for example, provide a printer that automatically prints the disclosures. Exceptions From E-Sign Notice and Consent Requirements A few commenters suggested that the Board adopt various exceptions from the E-Sign notice and consent requirements. Some of these commenters encouraged the Board to allow the delivery of the Regulation E account-opening disclosures under § 205.7 (as well as similar disclosures under the other four regulations involved in the parallel rulemakings) electronically, without regard to the consumer consent provisions of E-Sign, using the Board's authority under the E-Sign Act as well as the statutes underlying the regulations. One of the commenters asserted that, since Internet commerce has expanded greatly over the past few years, when consumers choose to conduct financial transactions online, they presume that they will receive related disclosures online as well. Other suggested exceptions from the E-Sign consent provisions included

(1)the copy of a consumer's written authorization for recurring debits under § 205.10(b) and

(2)the notice of recurring debits varying in amount under § 205.10(d). The commenter suggesting the latter exception also recommended that the regulation permit the notice to be given orally, such as by toll-free telephone. The Board believes that, at this time, there is insufficient evidence that the consent requirements are a burden on electronic commerce in these situations. VI. Use of “Plain Language” Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. In the proposal, the Board invited comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand. No comments were received on “plain language” issues involving Regulation E. VII. Final Regulatory Flexibility Analysis The Board prepared an initial regulatory flexibility analysis as required by the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* )

(EFT)systems. The primary purpose of the act is the provision of individual consumer rights. 15 U.S.C. 1593. The EFTA authorizes the Board to prescribe regulations to carry out the purposes of the statute. 15 U.S.C. 1693b. The Act expressly states that the Board's regulations may contain “such classifications, differentiations, or other provisions, * * * as, in the judgment of the Board, are necessary or proper to carry out the purposes of [the Act], to prevent circumvention or evasion [of the Act], or to facilitate compliance [with the Act].” 15 U.S.C. 1693b(c). The Board believes that the revisions to Regulation E discussed above are within Congress's broad grant of authority to the Board to adopt provisions that carry out the purposes of the statute. 2. *Issues raised by comments in response to the initial regulatory flexibility analysis.* In accordance with section 603(a) of the RFA, the Board conducted an initial regulatory flexibility analysis in connection with the proposed rule. The Board did not receive any comments on its initial regulatory flexibility analysis. 3. *Small entities affected by the final rule.* The final rule deletes provisions of Regulation E that are not in effect on a mandatory basis and, accordingly, the final rule does not change the legal requirements applicable to any financial institutions, regardless of their size. Therefore, the final rule would not have a significant economic impact on small entities. The number of small entities affected by this final rule is unknown. 4. *Other federal rules.* The Board believes no federal rules duplicate, overlap, or conflict with the final revisions to Regulation E. 5. *Significant alternatives to the proposed revisions.* The Board solicited comment on any significant alternatives that could provide additional ways to reduce regulatory burden associated with the proposed rule. Commenters did not suggest any significant alternatives to the proposed rule. VIII. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Ch. 3506; 5 CFR Part 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is subject to the PRA by this final rulemaking is found in 12 CFR Part 205. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0200. Section 904 of the Electronic Fund Transfer Act

(EFTA)(15 U.S.C. 1693b) authorizes the Board to issue regulations to carry out the purposes of the Act. This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality normally arises. However, in the event the Board were to retain records during the course of an examination, the information may be protected from disclosure under exemptions (b)(4), (6), and

(8)of the Freedom of Information Act (5 U.S.C. 552 (b)(4), (6), and (8)). The disclosures required by the rule and information about error allegations and their resolution are confidential between the institution and the consumer. The EFTA and Regulation E are designed to ensure adequate disclosure of basic terms, costs, and rights relating to electronic fund transfer

(EFT)services provided to consumers. Institutions offering EFT services must disclose to consumers certain information, including: initial and updated EFT terms, transaction information, periodic statements of activity, the consumer's potential liability for unauthorized transfers, and error resolution rights and procedures. These disclosures are triggered by certain events specified in the EFTA and Regulation E. Institutions are required to retain evidence of compliance for not less than two years from the date that disclosures are required to be made or action is required to be taken; however, the regulation does not specify the types of records that must be retained. To ease institutions' burden and cost of complying with the disclosure requirements of Regulation E (particularly for small entities), the Federal Reserve publishes model forms and disclosure clauses. Regulation E applies to all financial institutions that engage in EFT transactions. The Board has determined that no new requirements or revisions to existing requirements are contained in this final rulemaking. The estimated annual burden for the entities supervised by the Federal Reserve is approximately 74,141 hours for the 1,172 financial institutions that are deemed respondents for purposes of the PRA. As mentioned in the Preamble, on April 30, 2007, a notice of proposed rulemaking was published in the **Federal Register** (72 FR 21131). No comments specifically addressing the burden estimate were received. The Federal Reserve has a continuing interest in the public's opinions of our collections of information. At any time, comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, may be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551; and to the Office of Management and Budget, Paperwork Reduction Project (7100-0200), Washington, DC 20503. List of Subjects in 12 CFR Part 205 Consumer protection, Electronic fund transfers, Federal Reserve System, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, the Board amends 12 CFR part 205 as set forth below: PART 205—ELECTRONIC FUND TRANSFERS (REGULATION E) 1. The authority citation for part 205 continues to read as follows: Authority: 15 U.S.C. 1693b. 2. Section 205.4 is amended by revising paragraph (a)(1), removing paragraph (c), and redesignating paragraph

(d)as paragraph (c), and paragraph

(e)as paragraph (d), respectively, as follows: § 205.4 General disclosure requirements; jointly offered services. (a)(1) *Form of disclosures.* Disclosures required under this part shall be clear and readily understandable, in writing, and in a form the consumer may keep. The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act)(15 U.S.C. 7001 *et seq.* ). A financial institution may use commonly accepted or readily understandable abbreviations in complying with the disclosure requirements of this part. § 205.17 [Removed] 3. Section 205.17 is removed and reserved. 4. In Supplement I to Part 205, section 205.17—Requirements for Electronic Communication is removed and reserved. By order of the Board of Governors of the Federal Reserve System, October 31, 2007. Jennifer J. Johnson, Secretary of the Board. [FR Doc. E7-21698 Filed 11-8-07; 8:45 am] BILLING CODE 6210-01-P FEDERAL RESERVE SYSTEM 12 CFR Part 213 [Regulation M; Docket No. R-1283] Consumer Leasing AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule; official staff interpretation. SUMMARY: The Board is amending Regulation M, which implements the Consumer Leasing Act, to withdraw portions of the interim final rules for the electronic delivery of disclosures issued March 30, 2001. The interim final rules addressed the timing and delivery of electronic disclosures, consistent with the requirements of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). Because compliance with the 2001 interim final rules has not been mandatory, withdrawal of these provisions from the *Code of Federal Regulations* reduces confusion about the status of the provisions and simplifies the regulation. In addition, the Board is adopting final amendments to Regulation M to provide guidance on the electronic delivery of disclosures. For example, the final rules provide that when a lease advertisement is accessed by a consumer in electronic form, disclosures may be provided to the consumer in electronic form in the advertisement without regard to the consumer consent and other provisions of the E-Sign Act. Similar final rules are being adopted under other consumer fair lending and financial services regulations administered by the Board. DATES: The final rule is effective December 10, 2007. The mandatory compliance date is October 1, 2008. FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, Division of Consumer and Community Affairs, at

(202)452-2412 or

(202)452-3667. For users of Telecommunications Device for the Deaf

(TDD)only, contact

(202)263-4869. SUPPLEMENTARY INFORMATION: I. Statutory Background The Consumer Leasing Act (CLA), 15 U.S.C. 1667-1667e, was enacted into law in 1976 as an amendment to the Truth in Lending Act (TILA), 15 U.S.C. 1601 *et seq.* The CLA requires lessors to provide lessees with uniform cost and other disclosures about consumer lease transactions. The act generally applies to consumer leases of personal property in which the contractual obligation does not exceed $25,000 and has a term of more than four months. An automobile lease is the most common type of consumer lease covered by the act. The Board's Regulation M (12 CFR part 213) implements the act. The CLA and Regulation M require disclosures to be provided in writing. The Electronic Signatures in Global and National Commerce Act (the E-Sign Act), 15 U.S.C. 7001 *et seq.* , was enacted in 2000. The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met. The E-Sign Act, including the special consumer notice and consent provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, lessors are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulation M if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act. II. Board Proposals and Interim Rules Regarding Electronic Disclosures On March 30, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation M (66 FR 17,322). Similar interim final rules for Regulations B, E, Z, and DD (implementing the Equal Credit Opportunity Act, the Electronic Fund Transfer Act, the Truth in Lending Act, and the Truth in Savings Act, respectively) were published on March 30, 2001 (66 FR 17,329) (Regulation Z) and April 4, 2001 (66 FR 17,779, 66 FR 17,786, and 66 FR 17,795) (Regulations B, E, and DD, respectively). Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Lessors, financial institutions, creditors, and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act. The interim final rules also incorporated many of the provisions that were part of earlier regulatory proposals issued by the Board regarding electronic disclosures. 1 1 On May 2, 1996, the Board proposed to amend Regulation E to permit financial institutions to provide disclosures by sending them electronically (61 FR 19696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14,528, March 25, 1998) and similar proposals under Regulations B, M, Z, and DD (63 FR 14,552, 14,538, 14,548, and 14,533, respectively, March 25, 1998). Based on comments received on the 1998 proposals, in 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 1999). Under the 2001 interim final rules, disclosures could be sent to an e-mail address designated by the lessee, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, lessors would have to provide a notice to lessees (typically by e-mail) alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow lessees adequate time to access and retain the information. Lessors also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Commenters on the interim final rules identified significant operational and information security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers who choose to receive electronic disclosures do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection. In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41439, August 8, 2001.) Thus, institutions are not required to comply with the interim final rules. Since that time, the Board had not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices. In April 2007, the Board proposed to amend Regulation M and the official staff commentary by

(1)withdrawing portions of the 2001 interim final rule that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary;

(2)withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and

(3)retaining the substance of certain provisions of the interim final rule that provide regulatory relief or guidance regarding electronic disclosures. (72 FR 21135, April 30, 2007.) Similar amendments were also proposed by the Board under Regulations B, E, Z, and DD (72 FR 21125, 72 FR 21131, 72 FR 21141, and 72 FR 21155, respectively). III. Summary of the Final Rule The Board received about 15 comments on the April 2007 proposal from financial institutions and retailers and their representatives. Most of the financial industry commenters generally supported the proposal, although some provided suggestions for clarifications or changes to particular elements of the proposal. A comment letter was also submitted on behalf of four consumer groups. The consumer group commenters suggested a number of changes to strengthen consumer protections. The comments are discussed in more detail in the Section-by-Section Analysis below. For the reasons discussed below, the Board is now adopting amendments to Regulation M in final form, largely as proposed in April 2007. As stated in the proposal, because compliance with the 2001 interim final rules has not been mandatory, the final rule will reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. The Board is also adopting certain provisions that are identical or similar to provisions in the 2001 interim rules in order to enhance the ability of consumers to shop for leases online, minimize the information-gathering burdens on consumers, and provide guidance or eliminate a substantial burden on the use of electronic disclosures, as discussed further below. Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a financial institution, government agency, or other trusted entity) that have become more pronounced since 2001. Finally, the Board is eliminating certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices. With regard to disclosures required to be provided in an electronic lease advertisement, the 2001 interim final rule allowed lessors to provide these disclosures to lessees electronically without regard to the consumer consent or other provisions of the E-Sign Act. The Board reasoned that these disclosures, which would be available to the general public while shopping for a lease, did not “relate to a transaction,” which is a prerequisite for triggering the E-Sign consumer consent provisions, and thus were not subject to the consent provisions. Some commenters on the interim final rules agreed with the result but did not agree with the Board's rationale. In the April 2007 proposal, the Board stated that, upon further consideration, it did not believe it was necessary to determine whether or not these disclosures are related to a transaction. Instead, pursuant to the Board's authority under section 187 of the CLA, as well as under section 104(d) of the E-Sign Act, 2 the Board proposed to specify the circumstances under which certain disclosures may be provided to a lessee in electronic form, rather than in writing as generally required by Regulation M, without obtaining the lessee's consent under section 101(c) of the E-Sign Act. 2 Section 187 of CLA provides that regulations prescribed by the Board under CLA “may provide for adjustments and exceptions * * * as the Board considers appropriate.” Section 104(d) of the E-Sign Act authorizes federal agencies to adopt exemptions for specified categories of disclosures from the E-Sign notice and consent requirements, “if such exemption is necessary to eliminate a substantial burden on electronic commerce and will not increase the material risk of harm to consumers.” For the reasons stated in this **Federal Register** notice, the Board believes that these criteria are met in the case of the advertising disclosures. In addition, the Board believes CLA section 187 authorizes the Board to permit institutions to provide disclosures electronically, rather than in paper form, independent of the E-Sign Act. Commenters supported the Board's approach with regard to this issue. This final rule adopts the approach in the April 2007 proposal. The Board continues to believe that lessors should not be required to obtain the consumer's consent in order to provide advertising disclosures to the consumer in electronic form if the consumer accesses an advertisement containing those disclosures in electronic form, such as at an Internet Web site. The Board believes that when viewing online lease advertising, consumers would not be harmed if the E-Sign consent procedures do not apply and would obtain significant benefits by having timely access to advertising disclosures in electronic form. The Board also believes that consumers' ability to shop for leases online and compare the terms of various lease offers could be substantially diminished if consumers had to consent in accordance with the E-Sign Act in order to access advertisements that must be accompanied by disclosures. Applying the consumer consent provisions of the E-Sign Act to these disclosures could impose substantial burdens on electronic commerce and make it more difficult for consumers to gather information and shop for leases. At the same time, the Board recognizes that consumers who shop or apply for leases online may not want to receive other disclosures electronically. Therefore, with respect to the disclosures required prior to the consummation of a lease, lessors are required to obtain the lessee's consent, in accordance with the E-Sign Act, to provide such disclosures in electronic form, or else provide written disclosures. Finally, as proposed, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) are being deleted as unnecessary, because the E-Sign Act is a self-effectuating statute. The revisions to Regulation M and the official staff commentary are described more fully below in the Section-by-Section Analysis. IV. Section-by-Section Analysis 12 CFR Part 213 (Regulation M) Section 213.3 General Disclosure Requirements Section 213.3(a) generally requires lessors to provide disclosures in writing and in a form that the lessee may keep. As proposed, the Board is revising § 213.3(a) to clarify that lessors may provide disclosures to lessees in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some lessors may provide disclosures to lessees both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those lessors, the duplicate electronic form of the disclosures may be provided to lessees without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's disclosure requirements. The Board also proposed to revise § 213.3(a) to provide that the advertising disclosures required by § 213.7 must be provided to the consumer in electronic form if the consumer accesses an advertisement in electronic form (such as on a home computer), and that, under those circumstances, those disclosures may be provided in electronic form without regard to the consumer consent or other provisions of the E-Sign Act. The Board proposed to add comment 7(c)-3 to clarify this point and also to make clear that if a consumer accesses a paper advertisement, the required disclosures must be provided in paper form on or with the advertisement (and not, for example, by including a reference in the paper advertisement to the Web site where the disclosures are located). Commenters did not address this aspect of the proposal. In the final regulation, § 213.3(a) is revised to state that if an advertisement is accessed by the consumer in electronic form, the required disclosures may (rather than must) be provided in electronic form, and comment 7(c)-3 is not being adopted. Section 213.7(d) requires that if a lease advertisement includes trigger terms, the advertisement itself must “contain” the required disclosures. Therefore, under the existing regulation, providing paper disclosures for an advertisement in electronic form, or vice versa, would not comply because the disclosures would not be set forth in the advertisement itself. The Board believes that for an advertisement accessed by the consumer in electronic form, permitting (although not requiring) lessors to provide lease advertising disclosures in electronic form without regard to the consumer consent and other provisions of the E-Sign Act will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will facilitate shopping for leases by enabling consumers to receive important disclosures at the same time they access an advertisement without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to access an online advertisement is potentially burdensome and could discourage consumers from shopping for leases online. Moreover, because these consumers are viewing the advertisement online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well. Section 213.3(a)(5) in the 2001 interim final rule refers to § 213.6, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is deleting § 213.6, as discussed below, § 213.3(a)(5) is also deleted, as proposed. Section 213.6 Electronic Communication Section 213.6 was added by the 2001 interim final rule to address the general requirements for electronic communications. In the April 2007 proposal, the Board proposed to delete § 213.6 from Regulation M and the accompanying sections of the staff commentary, reserving that section for future use. Financial institution and retailer commenters largely supported the proposed deletion, and § 213.6 and the accompanying commentary are deleted in the final rule. In the interim rule, § 213.6(a) defined the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 213.6(a) does not change applicable legal requirements under the E-Sign Act. Sections 213.6(b) and

(c)incorporated by reference provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form and the requirement to obtain the lessee's affirmative consent before providing such disclosures. The deletion of these provisions has no impact on the general applicability of the E-Sign Act to Regulation M disclosures. Sections 213.6(d) and

(e)addressed specific timing and delivery requirements for electronic disclosures under Regulation M, such as the requirement to send disclosures to a lessee's e-mail address (or post the disclosures on a Web site and send a notice alerting the lessee to the disclosures). The Board stated in the proposal that it no longer believed that these additional provisions were necessary or appropriate. The Board noted that electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them, and also noted concerns about e-mail related to data security, identity theft, and phishing. The consumer group commenters urged the Board to require the use of e-mail to provide required disclosures in electronic form, arguing that e-mail is the only reliable way to ensure that consumers are able to actually access, receive, and retain disclosures. The consumer groups also disagreed with the statement that concerns relating to phishing, identity theft, and data security are a valid reason for not requiring the use of e-mail, noting that phishing involves gathering information from the consumer, while disclosures would be provided to the consumer, and need not include sensitive information. While the consumer's receipt of an e-mail message that is actually from the consumer's financial institution would not in general pose a security risk, consumers might ignore or delete e-mails from such parties (real or purported), in order to avoid falling victim to fraud schemes. Thus, disclosures sent by consumers' financial institutions and retailers may not receive the attention they should. Consequently, some companies may be reluctant to communicate by e-mail. To the extent consumers are instructed not to ignore electronic mail messages from companies they do business with, the risk of consumers being victimized by fraudulent e-mail might be increased. In any event, the Board believes it is preferable not to mandate the use of any particular means of electronic delivery of disclosures, but instead to allow flexibility for institutions and retailers to use whatever method may be best suited to particular types of disclosure. With regard to the requirement to attempt to redeliver returned electronic disclosures, lessors would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. As stated in the April 2007 proposal, the Board continues to believe that both requirements would likely be unduly burdensome. Under the April 2007 proposed rule, the requirement in the 2001 interim final rule for lessors to maintain disclosures posted on a Web site for at least 90 days would be deleted. Industry commenters supported the proposed deletion; consumer group commenters expressed concern about its impact on consumers. The 90-day retention provision is deleted as proposed. However, while the Board is not requiring disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation M continue to apply to electronic disclosures, such as the requirement to provide disclosures to lessees at certain specified times and in a form that the lessee may keep. The Board expects lessees to maintain disclosures on Web sites for a reasonable period of time so that consumers have an opportunity to access, view, and retain the disclosures. As stated in the April 2007 proposal, the Board will monitor lessors' electronic disclosure practices with regard to the ability of consumers to retain Regulation M disclosures and would consider further revisions to the regulation to address this issue if necessary. Section 213.7 Advertising Section 213.7 contains requirements for lease advertisements and requires that if an advertisement includes certain “trigger terms” (such as the payment amount), the advertisement must also include certain required disclosures (such as the total amount due prior to or at consummation and a statement that an extra charge may be imposed at the end of the lease term). Section 213.7(c) provides that in a catalog or other multipage advertisement, the required disclosures need not be shown on each page where a “trigger term” appears, as long as each such page includes a cross-reference to the page where the required disclosures appear. The 2001 interim final rule clarified, in comment 7(c)-2, that the multipage rule for lease advertising also applies to advertisements in electronic form. For example, if a “trigger term” appears on a particular Web page, the additional disclosures may appear in a table or schedule on another Web page and still be considered part of a single advertisement if there is a clear reference to the page or location where the table or schedule begins (which may be accomplished, for example, by including a link). In April 2007, the Board proposed to retain this rule, by amending § 213.7(c) and retaining comment 7(c)-2 with minor wording changes. Commenters did not address this provision. The final rule retains these provisions as proposed. The Board also proposed to add a new comment 7(c)-3 to clarify that if a consumer accesses a lease advertisement in electronic form, the disclosures required on or with the advertisement must be provided to the consumer in electronic form on or with the advertisement. This comment is not being adopted in the final rule, as discussed above in connection with § 213.3. Section 213.7(b)(1) requires that any affirmative or negative reference to a charge that constitutes part of the total amount due prior to or at consummation of the lease not be more prominent in the advertisement than the disclosure of the total amount due. In the 2001 interim final rule, comment 7(b)(1)-3 was added to state that in an advertisement using electronic communication, both the reference to the charge and the disclosure of the total amount due must appear in the same location so that they can be viewed simultaneously. Section 213.7(b)(2) requires that a percentage rate in an advertisement not be more prominent than any of the required disclosures, except for a notice required to accompany the rate under § 213.4(s). The interim final rule revised comment 7(b)(2)-1 to state that in an advertisement using electronic communication, both the rate and the accompanying notice must appear in the same location so that they can be viewed simultaneously, and that this requirement is not satisfied by the use of a link that connects the consumer to information appearing at another location. In the April 2007 proposal, the Board proposed to delete comment 7(b)(1)-3, and to delete the language added to comment 7(b)(2)-1 by the interim final rule, as unnecessary, because the prominence and proximity requirements of § 213.7(b) continue to apply to electronic advertisements no less than to advertisements in other media. In the supplementary information, the Board stated that requiring the consumer to scroll to another part of the page, or access a link, in order to view the required disclosures would likely not satisfy this requirement. Some commenters were concerned by the foregoing discussion in the April 2007 proposal, and contended that in the case of small hand-held electronic devices that a consumer might use to view a lease advertisement, the small size of the screen might necessitate scrolling or the use of links for viewing the required disclosures. Commenters also said the proposal was confusing in that the commentary provisions stating that the use of links would not comply were proposed to be deleted, yet the supplementary information appeared to impose the same restrictions. Comment 7(b)(1)-3 and the language added to comment 7(b)(2)-1 by the interim final rule are being deleted as proposed. As stated in the proposal, the prominence and proximity requirements of § 213.7(b) apply in the electronic context. However, the Board believes that these requirements can be applied with some degree of flexibility, to account for variations in devices consumers may use to view electronic advertisements. Therefore, the use of scrolling or links would not necessarily fail to comply with the regulation in all cases; however, lessors should ensure that electronic advertisements comply with the prominence and proximity requirements. V. Other Issues Raised by Commenters Retainable Form Several industry commenters requested guidance on how lessors can be sure of meeting the requirement to provide disclosures in a form that the consumer can keep. The consumer group commenters were concerned about retainability of disclosures in light of the deletion of the requirement to maintain disclosures on a Web site for at least 90 days. They urged that the final regulations require that disclosures be delivered in a format that is both downloadable and printable. The Board believes that lessors satisfy the requirement for providing electronic disclosures in a form the consumer can retain if they are provided in a standard electronic format that can be downloaded and saved or printed on a typical home personal computer. Typically any document that can be downloaded by the consumer can also be printed. The Board will, however, monitor lessors' practices to evaluate whether further guidance is needed on this issue. In a situation where the consumer is provided electronic disclosures through equipment under the lessor's control—such as a terminal or kiosk in the lessor's offices—the lessor could, for example, provide a printer that automatically prints the disclosures. Expansion of Exceptions from E-Sign Notice and Consent Requirements One commenter suggested that the Board adopt another exception from the E-Sign notice and consent requirements in addition to the exception for lease advertisements. The commenter encouraged the Board to allow the delivery of the Regulation M lease consummation disclosures (as well as similar disclosures under the other four regulations involved in the parallel rulemakings) electronically, without regard to the consumer consent provisions of E-Sign, using the Board's authority under the E-Sign Act as well as the statutes underlying the regulations. The commenter argued that, since Internet commerce has expanded greatly over the past few years, when consumers choose to conduct financial transactions online, they presume that they will receive related disclosures online as well. The Board believes that, at this time, there is insufficient evidence that the consent requirements are a burden on electronic commerce in this situation; and that consumers who shop for leases online may not necessarily want to receive disclosures online. VI. Use of “Plain Language” Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. In the proposal, the Board invited comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand. No comments were received on “plain language” issues involving Regulation M. VII. Final Regulatory Flexibility Analysis The Board prepared an initial regulatory flexibility analysis as required by the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* )

(RFA)in connection with the April 2007 proposal. The Board received no comments on its initial regulatory flexibility analysis. The RFA generally requires an agency to perform an assessment of the impact a rule is expected to have on small entities. However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility analysis otherwise required under section 604 of the RFA is not required if an agency certifies, along with a statement providing the factual basis for such certification, that the rule will not have a significant economic impact on a substantial number of small entities. Based on its analysis and for the reasons stated below, the Board certifies that the rule will not have a significant economic impact on a substantial number of small entities. 1. *Statement of the need for, and objectives of, the final rule.* The Board is adopting revisions to Regulation M to withdraw the 2001 interim final rule on electronic communication and to allow lessors to provide certain disclosures to lessees in electronic form on or with an advertisement that is accessed by the lessee in electronic form without regard to the consumer consent and other provisions of the E-Sign Act. The Board is also clarifying that other Regulation M disclosures may be provided to lessees in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act. The purpose of the CLA is to assure a meaningful disclosure of the terms of consumer leases, so that the lessee can compare more readily the various lease terms available, limit balloon payments in consumer leasing, enable comparison of lease terms with credit terms where appropriate, and assure meaningful and accurate disclosures of lease terms in advertisements. 15 U.S.C. 1601. The CLA authorizes the Board to prescribe regulations to carry out the purposes of the statute. 15 U.S.C. 1604(a), 1667f. The Act expressly states that the Board's regulations may contain “such classifications, differentiations, or other provisions, * * *, as in the judgment of the Board are necessary or proper to effectuate the purposes of [the Act], to prevent circumvention or evasion of [the Act], or to facilitate compliance with [the Act].” 15 U.S.C. 1604(a). The Board believes that the revisions to Regulation M discussed above are within Congress's broad grant of authority to the Board to adopt provisions that carry out the purposes of the statute. These revisions facilitate the informed use of leases by consumers in circumstances where a consumer accesses a lease advertisement in electronic form. 2. *Issues raised by comments in response to the initial regulatory flexibility analysis.* In accordance with section 603(a) of the RFA, the Board conducted an initial regulatory flexibility analysis in connection with the proposed rule. The Board did not receive any comments on its initial regulatory flexibility analysis. 3. *Small entities affected by the final rule.* The ability to provide advertising disclosures in electronic form on or with an advertisement that is accessed by the consumer in electronic form applies to all lessors, regardless of their size. Accordingly, the final rule would reduce burden and compliance costs for small entities by providing relief, to the extent the E-Sign Act applies in these circumstances. The number of small entities affected by this final rule is unknown. 4. *Other federal rules.* The Board believes no federal rules duplicate, overlap, or conflict with the final revisions to Regulation M. 5. *Significant alternatives to the proposed revisions.* The Board solicited comment on any significant alternatives that could provide additional ways to reduce regulatory burden associated with the proposed rule. Commenters did not suggest any significant alternatives to the proposed rule. VIII. Paperwork Reduction Act ** In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR Part 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is subject to the PRA by this final rulemaking is found in 12 CFR Part 213. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0202. Sections 105(a) and 187 of TILA (15 U.S.C. 1604(a) and 1667f) authorize the Board to issue regulations to carry out the provisions of the Consumer Leasing Act (CLA). The CLA and Regulation M are intended to provide consumers with meaningful disclosures about the costs and terms of leases for personal property. The disclosures enable consumers to compare the terms for a particular lease with those for other leases and, when appropriate, to compare lease terms with those for credit transactions. The act and regulation also contain rules about advertising consumer leases and limit the size of balloon payments in consumer lease transactions. The information collection pursuant to Regulation M is triggered by specific events. All disclosures must be provided to the lessee prior to the consummation of the lease and when the availability of consumer leases on particular terms is advertised. This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality normally arises. However, in the event the Board were to retain records during the course of an examination, the information may be kept confidential pursuant to section (b)(8) of the Freedom of Information Act (5 U.S.C. 522 (b)(8)). Regulation M applies to all types of lessors of personal property. The Federal Reserve accounts for the paperwork burden associated with the regulation only for Federal Reserve-supervised institutions. Appendix B of Regulation M defines the Federal Reserve-supervised institutions as: State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Other federal agencies account for the paperwork burden on other lessors for which they have administrative enforcement authority. To ease the compliance cost (particularly for small entities) model forms are appended to the regulation. Lessors are required to retain evidence of compliance for 24 months, but the regulation does not specify types of records that must be retained. The estimated annual burden for the entities supervised by the Federal Reserve is approximately 3,534 hours for the estimated 270 state member banks that engage in consumer leasing. As mentioned in the Preamble, on April 30, 2007, a notice of proposed rulemaking was published in the **Federal Register** (72 FR 21135). No comments specifically addressing the burden estimate were received. The Federal Reserve has a continuing interest in the public's opinions of our collections of information. At any time, comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, may be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551; and to the Office of Management and Budget, Paperwork Reduction Project (7100-0202), Washington, DC 20503. List of Subjects in 12 CFR Part 213 Advertising, Federal Reserve System, Reporting and record keeping requirements, Truth in lending. For the reasons set forth in the preamble, the Board amends 12 CFR part 213 as set forth below: PART 213—CONSUMER LEASING (REGULATION M) 1. The authority citation for part 213 continues to read as follows: Authority: 15 U.S.C. 1604 and 1667f. 2. Section 213.3 is amended by revising paragraph

(a)introductory text, to read as follows, and removing paragraph (a)(5): § 213.3 General disclosure requirements.

(a)*General requirements.* A lessor shall make the disclosures required by § 213.4, as applicable. The disclosures shall be made clearly and conspicuously in writing in a form the consumer may keep, in accordance with this section. The disclosures required by this part may be provided to the lessee in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. § 7001 *et seq.* ). For an advertisement accessed by the consumer in electronic form, the disclosures required by § 213.7 may be provided to the consumer in electronic form in the advertisement, without regard to the consumer consent or other provisions of the E-Sign Act. § 213.6 [Removed] 3. Section 213.6 is removed and reserved. 4. Section 213.7 is amended by revising paragraph (c), to read as follows: § 213.7 Advertising.

(c)*Catalogs or other multipage advertisements; electronic advertisements.* A catalog or other multipage advertisement , or an electronic advertisement (such as an advertisement appearing on an Internet Web site), that provides a table or schedule of the required disclosures shall be considered a single advertisement if, for lease terms that appear without all the required disclosures, the advertisement refers to the page or pages on which the table or schedule appears. 5. In Supplement I to Part 213, the following amendments are made: a. Section 213.6—Electronic Communication is removed and reserved. b. In *Section 213.7—Advertising* , under *7(b)(1) Amount Due at Lease Signing or Delivery* , paragraph 3 is removed. c. In *Section 213.7—Advertising* , under *7(b)(2) Advertisement of a Lease Rate* , paragraph 1., the last two sentences are removed. d. In *Section 213.7—Advertising* , under *7(c) Catalogs or Other Multipage Advertisements; Electronic Advertisements* , paragraph 2. is revised. The amendments read as follows: SUPPLEMENT I TO PART 213—OFFICIAL STAFF COMMENTARY TO REGULATION M Section 213.7—Advertising 7(b)(2) Advertisement of a Lease Rate 7(c) * * * 2. *Cross references* . A catalog or other multiple-page advertisement or an electronic advertisement (such as an advertisement appearing on an Internet Web site) is a single advertisement (requiring only one set of lease disclosures) if it contains a table, chart, or schedule with the disclosures required under § 213.7(d)(2)(i) through (v). If one of the triggering terms listed in § 213.7(d)(1) appears in a catalog, or in a multiple-page or electronic advertisement, it must clearly direct the consumer to the page or location where the table, chart, or schedule begins. For example, in an electronic advertisement, a term triggering additional disclosures may be accompanied by a link that directly connects the consumer to the additional information. By order of the Board of Governors of the Federal Reserve System, October 31, 2007. Jennifer J. Johnson, Secretary of the Board. [FR Doc. E7-21699 Filed 11-8-07; 8:45 am] BILLING CODE 6210-01-P FEDERAL RESERVE SYSTEM 12 CFR Part 226 [Regulation Z; Docket No. R-1284] Truth in Lending AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule; official staff interpretation. SUMMARY: The Board is amending Regulation Z, which implements the Truth in Lending Act, and the official staff commentary to the regulation, to withdraw portions of the interim final rules for the electronic delivery of disclosures issued March 30, 2001. The 2001 interim final rules addressed the timing and delivery of electronic disclosures, consistent with the requirements of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). Because compliance with the 2001 interim final rules has not been mandatory, withdrawal of these provisions from the *Code of Federal Regulations* reduces confusion about the status of the provisions and simplifies the regulation. In addition, the Board is adopting final amendments to Regulation Z to provide guidance on the electronic delivery of disclosures. For example, the final rules provide that when an application for a credit card is accessed by a consumer in electronic form, disclosures may be provided to the consumer in electronic form on or with the application without regard to the consumer consent and other provisions of the E-Sign Act. Similar final rules are being adopted under other consumer fair lending and financial services regulations administered by the Board. DATES: The final rule is effective December 10, 2007. The mandatory compliance date is October 1, 2008. FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, Division of Consumer and Community Affairs, at

(202)452-2412 or

(202)452-3667. For users of Telecommunications Device for the Deaf

(TDD)only, contact

(202)263-4869. SUPPLEMENTARY INFORMATION: I. Statutory Background The purpose of the Truth in Lending Act (TILA), 15 U.S.C. 1601 *et seq.* , is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. The Board's Regulation Z (12 CFR part 226) implements the act. The act requires creditors to disclose the cost of credit as a dollar amount (the finance charge) and as an annual percentage rate (the APR). Uniformity in creditors' disclosures is intended to promote the informed use of credit and assist in shopping for credit. TILA requires additional disclosures for loans secured by consumers' homes and permits consumers to rescind certain transactions that involve their principal dwellings. TILA and Regulation Z require a number of disclosures to be provided in writing. The Electronic Signatures in Global and National Commerce Act (the E-Sign Act), 15 U.S.C. 7001 *et seq.* , was enacted in 2000. The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met. The E-Sign Act, including the special consumer notice and consent provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, creditors are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulation Z if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act. II. Board Proposals and Interim Rules Regarding Electronic Disclosures On March 30, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation Z (66 FR 17,329). Similar interim final rules for Regulations B, E, M, and DD (implementing the Equal Credit Opportunity Act, the Electronic Fund Transfer Act, the Consumer Leasing Act, and the Truth in Savings Act, respectively) were published on March 30, 2001 (66 FR 17,322) (Regulation M) and April 4, 2001 (66 FR 17,779, 66 FR 17,786, and 66 FR 17,795) (Regulations B, E, and DD, respectively). Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Creditors and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act. The interim final rules also incorporated many of the provisions that were part of earlier regulatory proposals issued by the Board regarding electronic disclosures. 1 1 On May 2, 1996, the Board proposed to amend Regulation E to permit financial institutions to provide disclosures by sending them electronically (61 FR 19696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14,528, March 25, 1998) and similar proposals under Regulations B, M, Z, and DD (63 FR 14,552, 14,538, 14,548, and 14,533, respectively, March 25, 1998). Based on comments received on the 1998 proposals, in 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 1999). Under the 2001 interim final rules, disclosures could be sent to an e-mail address designated by the consumer, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, creditors would have to provide a notice to consumers (typically by e-mail) alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow consumers adequate time to access and retain the information. Creditors also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Commenters on the interim final rules identified significant operational and information security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers who choose to receive electronic disclosures do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection. In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41439, August 8, 2001.) Thus, creditors are not required to comply with the interim final rules. Since that time, the Board had not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices. In April 2007, the Board proposed to amend Regulation Z and the official staff commentary by

(1)withdrawing portions of the 2001 interim final rule that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary;

(2)withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and

(3)retaining the substance of certain provisions of the interim final rule that provide regulatory relief or guidance regarding electronic disclosures. (72 FR 21141, April 30, 2007.) Similar amendments were also proposed by the Board under Regulations B, E, M, and DD (72 FR 21125, 72 FR 21131, 72 FR 21135, and 72 FR 21155, respectively). In addition, the Board proposed to amend Regulation Z to implement certain provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Public Law 109-8, 119 Stat. 23 (the “Bankruptcy Act”), that amend TILA and relate to electronic credit card disclosures. III. Summary of the Final Rule The Board received about 25 comments on the April 2007 proposal, primarily from creditors and their representatives. Most of the financial industry commenters generally supported the proposal, although some provided suggestions for clarifications or changes to particular elements of the proposal. A comment letter was also submitted on behalf of four consumer groups. The consumer group commenters suggested a number of changes to strengthen consumer protections. The comments are discussed in more detail in the Section-by-Section Analysis below. For the reasons discussed below, the Board is now adopting amendments to Regulation Z in final form, largely as proposed in April 2007. As stated in the proposal, because compliance with the 2001 interim final rules has not been mandatory, the final rule will reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. (Certain provisions in the 2001 interim rules, including provisions addressing foreign language disclosures, were not affected by the lifting of the mandatory compliance date and became final in 2001; thus, those provisions are not dealt with in this rulemaking.) The Board is also adopting certain provisions that are identical or similar to provisions in the 2001 interim rules in order to enhance the ability of consumers to shop for credit online, minimize the information-gathering burdens on consumers, and provide guidance or eliminate a substantial burden on the use of electronic disclosures, as discussed further below. As stated above, the Board also proposed to implement certain provisions of the Bankruptcy Act that amended TILA and relate to electronic disclosures. Action on the proposed provisions to implement the Bankruptcy Act is being deferred. The same revisions are contained in the Board's proposed amendments to the Regulation Z rules for open-end credit, which were published for comment in June 2007 (72 FR 32,948, June 14, 2007). The Board will consider the provisions relating to the Bankruptcy Act in connection with its final action on the rules for open-end credit after considering the comments submitted on the June 2007 proposal. Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a creditor, government agency, or other trusted entity) that have become more pronounced since 2001. Finally, the Board is eliminating certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices. With regard to disclosures required to be provided on or with a credit application or solicitation (the “shopping disclosures”) or in an advertisement, the 2001 interim final rule allowed creditors to provide these disclosures electronically without regard to the consumer consent or other provisions of the E-Sign Act. The Board reasoned that these disclosures, which would be available to the general public while shopping for credit, did not necessarily “relate to a transaction,” which is a prerequisite for triggering the E-Sign consumer consent provisions, and thus were not subject to the consent provisions. Some commenters on the interim final rules agreed with the result but did not agree with the Board's rationale. In the April 2007 proposal, the Board stated that, upon further consideration, it did not believe it was necessary to determine whether or not these disclosures are related to a transaction. Instead, pursuant to the Board's authority under section 105(a) of TILA, as well as under section 104(d) of the E-Sign Act, 2 the Board proposed to specify the circumstances under which certain disclosures may be provided to a consumer in electronic form, rather than in writing as generally required by Regulation Z, without obtaining the consumer's consent under section 101(c) of the E-Sign Act. 2 Section 105(a) of TILA provides that regulations prescribed by the Board under TILA “may provide for such adjustments and exceptions * * * as in the judgment of the Board, are necessary or proper to effectuate the purposes of [TILA], * * * or to facilitate compliance [with the requirements of TILA].” Section 104(d) of the E-Sign Act authorizes federal agencies to adopt exemptions for specified categories of disclosures from the E-Sign notice and consent requirements, “if such exemption is necessary to eliminate a substantial burden on electronic commerce and will not increase the material risk of harm to consumers.” For the reasons stated in this **Federal Register** notice, the Board believes that these criteria are met in the case of the application, solicitation, and advertising disclosures. In addition, the Board believes TILA section 105(a) authorizes the Board to permit institutions to provide disclosures electronically, rather than in paper form, independent of the E-Sign Act. Commenters supported the Board's approach with regard to this issue. This final rule adopts the approach in the April 2007 proposal. The Board continues to believe that creditors should not be required to obtain the consumer's consent in order to provide shopping or advertising disclosures to the consumer in electronic form if the consumer accesses an application, solicitation, or advertisement containing those disclosures in electronic form, such as at an Internet Web site. The Board believes that when shopping for credit or viewing credit advertising online, consumers would not be harmed if the E-Sign consent procedures do not apply and would obtain significant benefits by having timely access to shopping and advertising disclosures in electronic form. Conversely, consumers who choose to apply for credit online would be unduly burdened if they had to consent in accordance with the E-Sign Act in order to access application forms that must be accompanied by disclosures. The Board also believes that consumers' ability to shop for credit online and compare the terms of various credit offers could be substantially diminished if consumers had to consent in accordance with the E-Sign Act in order to access solicitations and advertisements that must be accompanied by disclosures. Applying the consumer consent provisions of the E-Sign Act to these disclosures could impose substantial burdens on electronic commerce and make it more difficult for consumers to gather information and shop for credit. At the same time, the Board recognizes that consumers who shop or apply for credit online may not want to receive other disclosures electronically. Therefore, with respect to account-opening disclosures, periodic statements, and change-in-terms notices, creditors are required to obtain the consumer's consent, in accordance with the E-Sign Act, to provide such disclosures in electronic form, or else provide written disclosures. Finally, as proposed, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) and electronic signatures are being deleted as unnecessary, because the E-Sign Act is a self-effectuating statute. The revisions to Regulation Z and the official staff commentary are described more fully below in the Section-by-Section Analysis. IV. Section-by-Section Analysis 12 CFR Part 226 (Regulation Z) Subpart B—Open-end Credit Section 226.5 General Disclosure Requirements Section 226.5(a) prescribes the form of disclosures required for open-end credit plans. Section 226.5(a)(1) generally requires creditors to provide open-end credit disclosures in writing and in a form that the consumer may keep. As proposed, the Board is revising § 226.5(a)(1) to clarify that creditors may provide open-end credit disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some creditors may provide open-end credit disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those creditors, the duplicate electronic form of the open-end credit disclosures may be provided to consumers without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's open-end credit disclosure requirements. Section 226.5(a)(1) is also revised, as proposed, to provide that the open-end credit disclosures required by §§ 226.5a (credit card applications and solicitations), 226.5b (home equity credit line applications), and 226.16 (open-end credit advertising) may be provided to the consumer in electronic form, under the circumstances set forth in those sections, without regard to the consumer consent or other provisions of the E-Sign Act. Commenters supported this aspect of the proposal. The Board believes that this will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will facilitate shopping for credit by enabling consumers to receive important disclosures online at the same time they access an electronic application, solicitation, or advertisement without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to access an online application, solicitation, or advertisement is potentially burdensome and could discourage consumers from shopping for credit online. Moreover, because these consumers are viewing the application, solicitation, or advertisement online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well. Section 226.5(a)(5) in the 2001 interim final rule refers to § 226.36, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is deleting § 226.36, as discussed below, § 226.5(a)(5) is also deleted, as proposed. The 2001 interim final rule revised comment 5(b)(2)(ii)-3 to reference the E-Sign Act's consumer consent requirements. As proposed, this language is being deleted as unnecessary because the E-Sign Act is a self-effectuating statute. Section 226.5a Credit and Charge Card Applications and Solicitations 5a(a) General Rules Section 226.5a(a)(2) prescribes the form of disclosures required with credit and charge card applications and solicitations. The Board proposed to amend § 226.5a(a)(2) by adding a new paragraph

(v)to provide that if a consumer accesses an application or solicitation for a credit or charge card in electronic form, such as on a home computer, the disclosures required on or with the application or solicitation must also be provided to the consumer in electronic form. The Board proposed to add comment 5a(a)(2)-9 to clarify this point and also to make clear that if a consumer is provided with a paper application or solicitation, the required disclosures must be provided in paper form on or with the application or solicitation (and not, for example, by including a reference in the paper application or solicitation to the Web site where the disclosures are located). Many creditor commenters urged the Board to revise the regulation and commentary to permit disclosures to be given in paper form in appropriate cases, even where an application or solicitation is in electronic form. In particular, commenters noted that requiring electronic disclosures could present problems for applications taken in person using electronic means. Commenters stated, for example, that a consumer or creditor employee might complete an electronic application by entering information at a terminal or kiosk in the creditor's office. These commenters noted that paper disclosures would be more appropriate in such cases, because the applicant would be able to retain them. For example, a loan officer could give the disclosures to the consumer, or in the case of an unattended kiosk, the kiosk could have a printer to provide paper disclosures. (Although the credit card application and solicitation disclosures are not required to be given in retainable form, application-related disclosures for other types of accounts raise the same issue and are required to be in retainable form.) Some creditor commenters argued that the proposed requirement would contravene the E-Sign Act, based on the provisions in E-Sign that state

(1)that the statute does not require any person to accept or use electronic records in place of paper, and

(ARM)application disclosures, discussed below—the retainability requirement does apply, and therefore creditors would likely have to provide paper disclosures for in-person applications in a creditor's office for these types of credit.) New comment 5a(a)(2)-9 is modified from the proposal to provide the guidance discussed above. In addition, the portion of the proposed comment stating that paper applications must be accompanied by paper disclosures has been deleted as unnecessary. For example, if a credit card application in paper form did not contain all of the required § 226.5a disclosures, but instead referred the consumer to a Web site where some or all of the disclosures could be found, the application would not be in compliance with the Regulation Z requirement that the disclosures be provided in a timely manner on or with the application. In addition, the provisions that state that electronic disclosures may be provided without regard to the consumer consent or other provisions of the E-Sign Act are limited to situations where the application or solicitation itself is in electronic form. Thus, if a card issuer wanted to provide electronic disclosures for a paper application or solicitation (for example, where a paper application is submitted in person at the issuer's office), the issuer would first have to comply with the E-Sign notice and consent requirements. Comment 5a(a)(2)-8 of the 2001 interim final rule states that a consumer must be able to access the electronic disclosures at the time the application form or solicitation reply form is made available by electronic communication, and lists a number of alternative methods by which card issuers may satisfy this requirement. The Board proposed to revise this comment to clarify that the listed methods are intended to be examples, not an exhaustive list. Proposed revised comment 5a(a)(2)-8 also cross-references comment 5a(a)(2)-2.ii., which was added in 2000 and specifies how the tabular disclosures required by § 226.5a can be “prominently located” if provided on or with electronic applications and solicitations. Creditor commenters generally urged that the “non-bypassable link” example in the comment be deleted, or at least that the final comment make clear that the various methods of presenting disclosures electronically are only examples and not requirements. (In the “non-bypassable link” method, a card issuer would provide, on the application or solicitation web page, a link to the required disclosures that would require the consumer to access the disclosures before submitting the application or solicitation reply form.) Comment 5a(a)(2)-8 has been modified to clarify that the various methods of presenting disclosures electronically are not the exclusive means of satisfying the disclosure requirements, but examples. In addition, another example has been added, and other modifications have been made for clarity. Of course, any method used would have to ensure that the disclosures are provided (not merely made available) to the consumer, clearly and conspicuously, in a timely manner on or with the application or solicitation. The Bankruptcy Act amends Section 127(c) of TILA to require that credit card application and solicitation disclosures provided “using the Internet or other interactive computer service” must be “readily accessible to consumers in close proximity” to the solicitation. 15 U.S.C. 1637(c)(7). The April 2007 proposal contained a discussion of whether the Board should retain the existing guidance in comment 5a(a)(2)-2.ii on “prominent location” to interpret the “close proximity” standard of the Bankruptcy Act. The same issue is raised in the Board's proposed amendments to the Regulation Z rules for open-end credit, which were published for comment in June 2007 (72 FR 32,948, June 14, 2007). The Board will consider this issue in connection with its final action on the rules for open-end credit after considering the comments submitted on the June 2007 proposal. *5a(b) Required disclosures* and *5a(c) Direct-mail and electronic applications and solicitations* The Bankruptcy Act provides that the disclosures for electronic credit card offers must be “updated regularly to reflect the current policies, terms, and fee amounts.” The April 2007 proposal contained proposed amendments to §§ 226.5a(b)(1), 226.5a(c), and 226.5a(e), as well as the staff commentary, to implement this requirement, particularly with regard to the accuracy of variable-rate APR disclosures in credit card applications and solicitations. The same proposals are also contained in the June 2007 proposal to revise the rules for open-end credit under Regulation Z. As stated above, the Board will consider revisions related to the Bankruptcy Act in connection with its final action on the June 2007 proposal. Section 226.5b Requirements for Home-Equity Plans Section 226.5b(a) sets forth requirements for the form of disclosures required to be made on or with applications for home equity lines of credit (HELOCs). The Board proposed to amend § 226.5b(a) by adding a new paragraph

(3)to provide that if a consumer accesses a HELOC application in electronic form, such as on a home computer, the disclosures required on or with the application must also be provided to the consumer in electronic form. The Board proposed to add comment 5b(a)(3)-1 to clarify this point and also to make clear that if a consumer is provided with a paper application, the required disclosures must be provided in paper form on or with the application (and not, for example, by including a reference in the paper application to the Web site where the disclosures are located). As in the case of the credit card application and solicitation disclosures required under § 226.5a, discussed above, many creditor commenters urged the Board to revise the regulation and commentary to permit disclosures to be given in paper form in appropriate cases, even where a HELOC application is in electronic form. Commenters mentioned the same reasons as for the credit card disclosures, focusing in particular on problems that might arise in the context of in-person electronic applications (involving, for example, a consumer completing the application in a creditor's office by entering information into a terminal or kiosk). Consumer group commenters suggested that the regulation not only should permit, but should require, paper disclosures in the case of in-person electronic HELOC applications. For the same reasons as discussed above in connection with credit card application and solicitation disclosures, in the final regulation, new § 226.5b(a)(3) is revised to state that if an application is accessed by the consumer in electronic form, the required disclosures may (rather than must) be provided in electronic form. New comment 5b(a)(3)-1 has been modified from the proposal to provide guidance parallel to that in new comment 5a(a)(2)-9 for credit card applications and solicitations. Where a consumer accesses an electronic HELOC application in person in a creditor's office, the creditor could provide disclosures in paper form and comply with the timing and delivery requirements of the regulation. In addition, as discussed by the commenters, paper disclosures may be preferable in this situation because they can be retained by the consumer. Indeed, paper disclosures would likely be necessary to comply with the timing requirements and the requirement to provide the home-equity brochure in a form the consumer may retain under § 226.5b(e) in the case of an in-person electronic application in the creditor's office. (The Board anticipates that creditors will provide the other HELOC application disclosures, under § 226.5b(d), in retainable form even though not technically required, and would consider further revisions to the regulation to address this issue if necessary.) In addition, the portion of the proposed comment stating that paper applications must be accompanied by paper disclosures has been deleted as unnecessary, parallel to comment 5a(a)(2)-9. Section 226.5b(c) states that persons, other than the creditor, that provide HELOC applications to consumers must provide the required home equity disclosures in certain cases. The 2001 interim final rule added a new § 226.5b(c)(2) to clarify that such third parties may use electronic disclosures. As proposed, this provision is being deleted as unnecessary, because the E-Sign Act is a self-effectuating statute and permits any person to use electronic records subject to the conditions set forth in the Act. Comment 5b(b)-7 of the 2001 interim final rule states that a consumer must be able to access the electronic disclosures at the time the application form is made available by electronic communication. This comment is substantially similar to comment 5a(a)(2)-8 of the 2001 interim final rule, discussed above. The Board proposed to delete comment 5b(b)-7 and substitute a new comment 5b(a)(1)-5 in its place, which generally would parallel the content of proposed revised comment 5a(a)(2)-8. The new comment would describe alternative methods for presenting electronic disclosures, which are examples rather than an exhaustive list. As in the case of proposed revised comment 5a(a)(2)-8, discussed above, creditor commenters addressing the proposed comment generally urged that the “non-bypassable link” example in the comment be deleted, or at least that the final comment make clear that the various methods of presenting disclosures electronically are only examples and not requirements. The comment has been modified to clarify that the methods are not the exclusive means of satisfying the disclosure requirements, but examples. In addition, another example has been added, and other modifications have been made for clarity. Of course, similarly to electronic credit card applications, any method used for providing disclosures for electronic HELOC applications would have to ensure that the disclosures are provided (not merely made available) to the consumer, clearly and conspicuously, in a timely manner on or with the application. Section 226.15 Right of Rescission Section 226.15 gives consumers the right to rescind certain open-end credit plans secured by their principal dwelling. Under § 226.15(b), creditors must provide two copies of a notice of this right to each consumer entitled to rescind. For written (paper) disclosures, this allows consumers to return one copy to the creditor if they exercise the right of rescission and retain the second copy. The 2001 interim final rule added language permitting creditors to provide only one copy of the rescission notice to each consumer when the notice is provided in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act. The April 2007 proposal retained this provision from the 2001 interim final rule. The few commenters that addressed this proposal supported it. The final rule adopts this provision as proposed with minor wording changes for clarification. It does not appear that consumers would benefit by receiving two electronic copies of rescission notices. In the 2001 interim final rule, comment 15(b)-1 was revised to state that if there is more than one property owner, a single rescission notice may be sent to each property owner if electronic communication is used, that each co-owner must consent to electronic disclosures, and that each must designate an electronic (e-mail) address to be used for this purpose. In the April 2007 proposal, the Board proposed to modify comment 15(b)-1 by deleting the requirement to use e-mail. The statement that each co-owner must consent to electronic disclosures was also proposed to be deleted. A few commenters expressed concern about the proposed deletion of the statement that each co-owner must consent to electronic disclosures, and suggested that the Board clarify this issue. The E-Sign Act clearly states that any consumer to whom written disclosures are required to be given must affirmatively consent to the use of electronic disclosures before such disclosures may be used in place of paper disclosures; accordingly, the Board believes that it is unnecessary to address this issue in Regulation Z. In addition, a commenter suggested that creditors should be able to provide a single electronic rescission notice to co-owners who have the same e-mail address or other electronic point of contact, and also that a creditor may require that consumers who wish to receive disclosures electronically provide such a single contact point. The Board believes that these suggestions might not be consistent with the Truth in Lending Act, which requires delivery of the rescission notice and disclosures to each consumer entitled to rescind. Accordingly, the revisions to comment 15(b)-1 are adopted as proposed. Section 226.16 Advertising Section 226.16 contains requirements for advertisements for open-end credit, and in particular requires that if an advertisement includes certain “trigger terms” (such as an APR), the advertisement must also include certain required disclosures (such as the minimum finance charge and transaction charges and annual fees). Section 226.16(c) relates to catalogs and other multiple-page advertisements and to electronic advertisements. The Board proposed to add a new paragraph

(3)to § 226.16(c) to provide that if a consumer accesses an advertisement for open-end credit in electronic form, such as on a home computer, the disclosures required on or with the advertisement must also be provided to the consumer in electronic form on or with the advertisement. The Board proposed to add comment 16(c)(3)-1 to clarify this point and also to make clear that if a consumer accesses a paper advertisement, the required disclosures must be provided in paper form on or with the advertisement (and not, for example, by including a reference in the paper advertisement to the Web site where the disclosures are located). Commenters did not address this aspect of the proposal. In the final regulation, new § 226.16(c)(3) and comment 16(c)(3)-1 are not being adopted. Section 226.16(b) requires that if an advertisement includes trigger terms, the advertisement itself must “clearly and conspicuously set forth” the required disclosures. Therefore, under the existing regulation, providing paper disclosures for an advertisement in electronic form, or vice versa, would not comply because the disclosures would not be set forth in the advertisement itself. Section 226.16(c) provides that in a catalog or other multiple-page advertisement, the required disclosures need not be shown on each page where a “trigger term” appears, as long as each such page includes a cross-reference to the page where the required disclosures appear. The 2001 interim final rule (in § 226.16(c)(1) and (2), and comments 16(c)(1)-1 and -2) clarified that this multiple-page rule also applies to credit advertisements in electronic form. For example, if a “trigger term” appears on a particular web page, the additional disclosures may appear in a table or schedule on another web page and still be considered part of a single advertisement if there is a clear reference to the page or location where the table or schedule begins (which may be accomplished, for example, by including a link). In April 2007, the Board proposed to retain this provision. Only one commenter addressed the provision and expressed concern that consumers may not receive clear product information from online advertisements (noting, for example, that in one online advertisement the commenter was aware of, details were disclosed several linked pages away from the initial credit advertisement). The final rule retains this provision as proposed. Subpart C—Closed-end Credit Section 226.17 General Disclosure Requirements Section 226.17(a) prescribes the form of disclosures required for closed-end credit. Section 226.17(a)(1) requires creditors to provide closed-end credit disclosures in writing and in a form that the consumer may keep. As proposed, § 226.17(a)(1) is revised to clarify that creditors may provide the closed-end credit disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some creditors may provide closed-end credit disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those creditors, the duplicate electronic form of the closed-end credit disclosures may be provided to consumers without regard to the consumer consent and other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's closed-end credit disclosure requirements. Section 226.17(a)(1) is also revised, as proposed, to provide that the closed-end credit disclosures required by §§ 226.19(b) (adjustable-rate mortgage loan applications) and 226.24 (closed-end credit advertising) may be provided to the consumer in electronic form, and that the disclosures required by § 226.17(g) (delay in disclosures for mail or telephone transactions) may be made available to the consumer or to the public in electronic form, under the circumstances set forth in those sections, without regard to the consumer consent or other provisions of the E-Sign Act. Commenters supported this provision. The Board believes that this will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will assist consumers in shopping for credit by enabling them to receive important disclosures online at the same time they access an application or advertisement without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to access an online application or advertisement is potentially burdensome and could discourage consumers from shopping for credit online. Moreover, because these consumers are viewing the application or advertisement online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well. Section 226.17(a)(3) in the interim final rule cross-references § 226.36, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is deleting § 226.36, as discussed below, § 226.17(a)(3) is also being deleted. Section 227.17(g) applies where a creditor receives a request for credit by mail, telephone, or electronic communication without face-to-face or direct telephone solicitation. In these circumstances, the creditor may delay making the TILA disclosures for the credit transaction until the due date of the first payment, provided certain disclosures (specified in § 226.17(g)(1)-(5)) have been made available to the consumer or to the public generally (such as in a catalog or advertisement). For example, a retailer may mail catalogs to consumers, or provide advertising inserts in newspapers, containing information for ordering merchandise by telephone or mail. If a consumer calls the retailer, orders an item, and agrees to pay for the item by obtaining a closed-end extension of credit from the retailer, the TILA closed-end disclosures would normally be required to be provided to the consumer before the consummation of the transaction. Since this is impracticable where the transaction is consummated by telephone, however, § 226.17(g) permits the retailer to delay providing the specific disclosures for the transaction, as long as the disclosures in § 226.17(g)(1)-(5), for representative amounts or ranges of credit, are included in the catalog or newspaper insert. In the 2001 interim final rule, the Board replaced the term “electronic communication” in § 226.17(g) with “facsimile machine.” The Board explained that the rule in § 226.17(g) predated Internet commerce, and the term “electronic communication” was intended to cover credit requests by facsimile or telegram. The rationale underlying the rule was that creditors are unable to provide written transaction-specific disclosures at the time of the consumer's credit request where the request is made by facsimile or telegram, no less than in the case of requests made by telephone or mail. That practical problem does not exist, however, where a consumer requests credit at a Web site. Therefore, the Board believes it would be inappropriate to extend the application of § 226.17(g) to electronic requests for credit made at an Internet Web site. In the April 2007 proposal, the Board proposed to retain the amendment to § 226.17(g) from the 2001 interim final rule. A few commenters discussed this provision, as well as other provisions of Regulation Z permitting delayed disclosures where an application is submitted by telephone. These commenters contended that the same reasons permitting disclosures to be delayed in the case of a telephone application might also apply in other situations, such as where applications are conducted through mobile hand-held electronic devices, ATMs, or computers not owned by the consumer (such as an employer's computer). The Board has determined not to extend the telephone provisions to additional situations; refer to the discussion below under “Delayed Disclosures.” Accordingly, § 226.17(g) remains unchanged in this regard. Where § 226.17(g) does apply, *i.e.,* where the consumer requests credit by telephone, mail, or facsimile machine, the regulation requires the creditor (as a condition of delaying the transaction-specific TILA disclosures) to make available in written form to the consumer or the public the disclosures set forth in § 226.17(g)(1)-(5) before the actual purchase order or request. The Board believes that these disclosures can appropriately be made available to the consumer or to the public either in electronic form (for example, on the creditor's Web site) or in paper form. In the April 2007 proposal, the Board proposed to amend § 226.17(g) to provide that the requirement to make available the § 226.17(g)(1)-(5) disclosures in written form to the consumer or to the public may be satisfied by making the disclosures available in electronic form, such as at a creditor's Web site. Thus, for example, a consumer might see information about a product on a retailer's Web site and order the product by telephone using closed-end credit; the transaction-specific disclosures could be delayed, provided the § 226.17(g)(1)-(5) disclosures are set forth on the Web site. In this situation, the E-Sign consent procedures would not have to be followed in order for the § 226.17(g)(1)-(5) disclosures to be provided in electronic form. On the other hand, if the consumer ordered the product via the Web site itself, the transaction-specific disclosures could not be delayed and would be required to be provided before consummation of the transaction. For the disclosures to be provided in electronic form in this situation, the E-Sign consent procedures would have to be followed. The amendment to § 226.17(g) is adopted as proposed. Section 226.19 Certain Residential Mortgage and Variable-Rate Transactions Section 226.19(b) requires creditors to provide certain disclosures relating to adjustable-rate mortgage

(ARM)loans secured by the consumer's principal dwelling. These disclosures must be provided when an application form is provided to the consumer or before the consumer pays a nonrefundable fee, whichever is earlier. The Board proposed to amend § 226.19 by adding a new paragraph

(c)to provide that if a consumer accesses an ARM application in electronic form, the disclosures required on or with an application for an ARM must be provided to the consumer in electronic form. The Board also proposed to add comment 19(c)-1 to clarify this point, and to make clear that if a consumer is provided with a paper ARM application, the required disclosures must be provided in paper form on or with the application (and not, for example, by including a reference in the application to the Web site where the disclosures are located). As in the case of the credit card application and solicitation disclosures required under § 226.5a and the HELOC application disclosures under § 226.5b, discussed above, many creditor commenters urged the Board to revise § 226.19(c) in the final regulation and the accompanying commentary provisions to permit disclosures to be given in paper form even where an ARM application is provided in electronic form. These commenters focused in particular on problems that might arise in the context of in-person electronic applications (involving, for example, a consumer in a creditor's office entering information at an electronic terminal to complete an application). Consumer group commenters suggested that the regulation should not only permit, but should require, paper disclosures in the case of in-person ARM applications made electronically. For the same reasons as discussed above in connection with credit card application and solicitation disclosures and HELOC application disclosures, new § 226.19(c) is revised to state that if an application is accessed by the consumer in electronic form, the required disclosures may (rather than must) be provided in electronic form. New comment 19(c)-1 has been modified from the proposal to provide guidance parallel to that in new comments 5a(a)(2)-9 and 5b(a)(3)-1 for credit card applications and solicitations and for HELOC applications, respectively. Where a consumer accesses an electronic ARM application in person in a creditor's office, the creditor could provide disclosures in paper form and comply with the timing and delivery requirements of the regulation. Indeed, in the case of an in-person electronic application in a creditor's office, paper disclosures would likely be necessary to comply with the timing requirements and the requirement to provide the ARM disclosures in a form the consumer may retain. The portion of the proposed comment stating that paper applications must be accompanied by paper disclosures has been deleted as unnecessary, to parallel new comments 5a(a)(2)-9 and 5b(a)(3)-1. Comment 19(b)-2 of the 2001 interim final rule states that a consumer must be able to access the electronic disclosures at the time the blank application form for ARMs is made available by electronic communication. The Board proposed to revise comment 19(b)-2 in a manner substantially similar to proposed comments 5b(a)(1)-5 and 5a(a)(2)-8, discussed above. The proposed revised comment described alternative methods for presenting electronic disclosures, which are examples rather than an exhaustive list. As in the case of proposed revised comments 5b(a)(1)-5 and 5a(a)(2)-8, discussed above, creditor commenters addressing the proposed comment generally urged that the “non-bypassable link” example in the comment be deleted, or at least that the final comment make clear that the various methods of presenting disclosures electronically are only examples and not requirements. The comment has been modified to clarify that the methods are not the exclusive means of satisfying the disclosure requirements, but rather examples. In addition, another example has been added, and other modifications have been made for clarity. Of course, any method used for providing disclosures for electronic ARM applications would have to ensure that the disclosures are provided (not merely made available) to the consumer, clearly and conspicuously, in a timely manner. Section 226.23 Right of Rescission Section 226.23 gives consumers the right to rescind certain closed-end mortgage loans secured by their principal dwelling. Under § 226.23(b), creditors must provide two copies of a notice of this right to each consumer entitled to rescind. For written (paper) disclosures, this allows consumers to return one copy to the creditor if they exercise the right of rescission and retain the second copy. The 2001 interim final rule added language permitting creditors to provide only one copy of the rescission notice to each consumer when the notice is provided in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act. The April 2007 proposal retained this provision from the 2001 interim final rule. The few commenters that addressed this proposal supported it. The final rule adopts this provision as proposed with minor wording changes. It does not appear that consumers would benefit by receiving two electronic copies of rescission notices. In the 2001 interim final rule, comment 23(b)-1 was revised to state that if there is more than one property owner, a single rescission notice may be sent to each property owner if electronic communication is used, that each co-owner must consent to electronic disclosures, and that each must designate an electronic (e-mail) address to be used for this purpose. In the April 2007 proposal, the Board proposed to modify comment 23(b)-1 by deleting the requirement to use e-mail. The statement that each co-owner must consent to electronic disclosures was also proposed to be deleted, as consent requirements are already set forth in the E-Sign Act. The comments received by the Board on the proposed revisions to comment 15(b)-1 relating to rescission in the open-end context, discussed above, apply to closed-end rescission as well. See the discussion under § 226.15 above. Accordingly, the revisions to comment 23(b)-1 are adopted as proposed. Section 226.24 Advertising Section 226.24 contains requirements for advertisements for closed-end credit and requires that if an advertisement includes certain “trigger terms” (such as the payment amount), the advertisement must also include certain required disclosures (such as the APR, the amount or percentage of any downpayment, and the terms of repayment, as applicable). Section 226.24(d) relates to catalogs and other multiple-page advertisements and to electronic advertisements. The Board proposed to add a new paragraph

(3)to § 226.24(d) (comparable to proposed new paragraph

(3)to § 226.16(c) for open-end credit advertising) to clarify that if a consumer accesses an advertisement for closed-end credit in electronic form, the disclosures required on or with the closed-end credit advertisement must be provided to the consumer in electronic form on or with the advertisement. The Board proposed to add comment 24(d)-5 to clarify this point, and also to make clear that if a consumer accesses a paper advertisement, the required disclosures must be provided in paper form on or with the advertisement (and not, for example, by including a reference in the advertisement to the Web site where the disclosures are located). Commenters did not address this provision. In the final regulation, new § 226.24(d)(3) and comment 24(d)-5 are not being adopted. Section 226.24(c) requires that if an advertisement includes trigger terms, the advertisement itself must “state” the required disclosures. Therefore, under the existing regulation, providing paper disclosures for an advertisement in electronic form, or vice versa, would not comply because the disclosures would not be stated in the advertisement itself. Section 226.24(d) provides that in a catalog or other multiple-page advertisement, the required disclosures need not be shown on each page where a “trigger term” appears, as long as each such page includes a cross-reference to the page where the required disclosures appear. The 2001 interim final rule clarified (in § 226.24(d)(1) and (2), and comments 24(d)-2 and 24(d)-4), as in the case of open-end credit advertising, that the multiple-page rule for closed-end credit advertising also applies to credit advertisements in electronic form. For example, if a “trigger term” appears on a particular web page, the additional disclosures may appear in a table or schedule on another web page and still be considered part of a single advertisement if there is a clear reference to the page or location where the table or schedule begins (which may be accomplished, for example, by including a link). In April 2007, the Board proposed to retain this provision. Only one commenter addressed this provision and expressed concern that consumers may not receive clear product information (see discussion under open-end advertising above). The final rule retains this provision as proposed. Section 226.24(b) permits creditors to state a simple annual rate of interest or periodic rate in addition to the APR, as long as the rate is stated in conjunction with, but not more conspicuously than, the APR. In the 2001 interim final rule, comment 24(b)-6 was added to state that in an advertisement using electronic communication, the consumer must be able to view both rates simultaneously, and that this requirement is not satisfied if the consumer can view the APR only by use of a link that takes the consumer to another web location. In the April 2007 proposal, the Board proposed to delete comment 24(b)-6 as unnecessary, because the requirement to state the simple annual rate or periodic rate in conjunction with, and not more conspicuously than, the APR, applies to electronic advertisements no less than to advertisements in other media. In the supplementary information, the Board stated that requiring the consumer to scroll to another part of the page, or access a link, in order to view the APR would likely not satisfy this requirement. Some commenters were concerned by the foregoing discussion in the April 2007 proposal, and contended that in the case of small hand-held electronic devices (such as Internet-enabled cellphones or personal digital assistants) that a consumer might use to view a credit advertisement, the small size of the screen might necessitate scrolling or the use of links for viewing the APR. Commenters also said the proposal was confusing in that comment 24(b)-6, stating that the use of links would not comply, was proposed to be deleted, yet the supplementary information appeared to impose the same restriction. Comment 24(b)-6 is being deleted as proposed. As stated in the proposal, the existing regulatory requirement is to state the APR no less conspicuously than the simple rate of interest, and this rule applies in the electronic context. However, the Board believes that the rule can be applied with some degree of flexibility, to account for variations in devices consumers may use to view electronic advertisements. Therefore, the use of scrolling or links would not necessarily fail to comply with the regulation in all cases; however, creditors should ensure that electronic advertisements comply with the equal conspicuousness requirement. Subpart E—Special Rules for Certain Home Mortgage Transactions Section 226.31 General Rules Subpart E implements the Home Ownership and Equity Protection Act (HOEPA) and sets forth special rules, including disclosure requirements, for certain mortgage loans with rates or fees above specified thresholds (HOEPA loans) and for reverse mortgage loans. Section 226.31(b) prescribes the form of disclosures required under Subpart E. Section 226.31(b)(1) requires creditors to provide the HOEPA and reverse mortgage disclosures in writing and in a form that the consumer may keep. As proposed, § 226.31(b)(1) is renumbered as § 226.31(b) and revised to clarify that the HOEPA and reverse mortgage disclosures may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some creditors may provide the HOEPA and reverse mortgage disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those creditors, the duplicate electronic form of the HOEPA and reverse mortgage disclosures may be provided to consumers without regard to the consumer consent and other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's HOEPA and reverse mortgage disclosure requirements. Section 226.31(b)(2) in the interim final rule cross-references § 226.36, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is deleting § 226.36, as discussed below, § 226.31(b)(2) is also being deleted in the final rule. Subpart F—Electronic Communication Section 226.36 Requirements for Electronic Communication Section 226.36 was added by the 2001 interim final rule to address the general requirements for electronic communications. In the April 2007 proposal, the Board proposed to delete § 226.36 (which constitutes all of Subpart F) from Regulation Z and the accompanying sections of the staff commentary. Creditor commenters largely supported the proposed deletion, and § 226.36 and the accompanying commentary are deleted in the final rule. In the interim rule, § 226.36(a) defined the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 226.36(a) does not change applicable legal requirements under the E-Sign Act. Sections 226.36(b),

(c)and

(f)incorporated by reference provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form, the requirement to obtain the consumer's affirmative consent before providing such disclosures, and the provision allowing electronic signatures. The deletion of these provisions has no impact on the general applicability of the E-Sign Act to Regulation Z disclosures. Sections 226.36(d) and

(e)addressed specific timing and delivery requirements for electronic disclosures under Regulation Z, such as the requirement to send disclosures to a consumer's e-mail address (or post the disclosures on a Web site and send a notice alerting the consumer to the disclosures). The Board stated in the proposal that it no longer believed that these additional provisions were necessary or appropriate. The Board noted that electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them, and also noted concerns about e-mail related to data security, identity theft, and phishing. The consumer group commenters urged the Board to require the use of e-mail to provide required disclosures in electronic form, arguing that e-mail is the only reliable way to ensure that consumers are able to actually access, receive, and retain disclosures. The consumer groups also disagreed with the statement that concerns relating to phishing, identity theft, and data security are a valid reason for not requiring the use of e-mail, noting that phishing involves gathering information from the consumer, while disclosures would be provided to the consumer, and need not include sensitive information. While the consumer's receipt of an e-mail message that is actually from the consumer's creditor would not in general pose a security risk, consumers might ignore or delete e-mails from creditors (real or purported), in order to avoid falling victim to fraud schemes. Thus, disclosures sent by consumers' creditors may not receive the attention they should. Consequently, some creditors may be reluctant to communicate by e-mail. To the extent consumers are instructed not to ignore electronic mail messages from their creditors, the risk of consumers being victimized by fraudulent e-mail might be increased. In any event, the Board believes it is preferable not to mandate the use of any particular means of electronic delivery of disclosures, but instead to allow flexibility for creditors to use whatever method may be best suited to particular types of disclosure (for example, account-opening, periodic statements, or change in terms). With regard to the requirement to attempt to redeliver returned electronic disclosures, creditors would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. As stated in the April 2007 proposal, the Board continues to believe that both requirements would likely be unduly burdensome. Under the April 2007 proposed rule, the requirement in the 2001 interim final rule for creditors to maintain disclosures posted on a Web site for at least 90 days would be deleted. Creditor commenters supported the proposed deletion; consumer group commenters expressed concern about its impact on consumers. As stated in the proposal, based on a review of industry practices, it appears that many creditors maintain disclosures posted on an Internet Web site for several months, and, in a number of cases, for more than a year. For example, it appears that credit card issuers that offer online periodic statements to consumers typically make those statements available without charge for six months or longer in electronic form. This practice has developed even though Regulation Z does not currently require creditors to maintain disclosures for any specific period of time. In addition, the Board continues to believe that an appropriate time period consumers may want electronic disclosures to be available may vary depending upon the type of disclosure, and is reluctant to establish specific time periods that would vary depending on the disclosures, which would increase the compliance burden. Therefore, the 90-day retention provision is deleted as proposed. Nevertheless, while the Board is not requiring disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation Z continue to apply to electronic disclosures, such as the requirement to provide disclosures to consumers at certain specified times and in a form that the consumer may keep. The Board expects creditors to maintain disclosures on Web sites for a reasonable period of time (which may vary depending upon the particular disclosure) so that consumers have an opportunity to access, view, and retain the disclosures. As stated in the April 2007 proposal, the Board will monitor creditors' electronic disclosure practices with regard to the ability of consumers to retain Regulation Z disclosures and would consider further revisions to the regulation to address this issue if necessary. V. Other Issues Raised by Commenters Clear and Conspicuous Disclosures An issue raised in the comments on the April 2007 proposal related to small hand-held electronic devices through which consumers may conduct financial transactions using the Internet or other electronic means (for example, personal digital assistants, Internet-enabled cellphones, and similar devices). One commenter requested clarification on whether creditors would be deemed to comply with the requirement to provide disclosures in a clear and conspicuous form, even when the consumer views them on a small screen of a hand-held electronic device. The commenter noted that the creditor has no control over what devices consumers choose to use, for example, to view disclosures on a web page. The Board believes that disclosures comply with the “clear and conspicuous” requirement as long as they are provided in a manner such that they would be clear and conspicuous when viewed on a typical home personal computer monitor. In addition, with regard to disclosures subject to specific font size requirements, the disclosures must be provided such that the required size requirement would be met when viewed on a typical home personal computer monitor. Retainable Form Several industry commenters requested guidance on how creditors can be sure of meeting the requirement to provide disclosures in a form that the consumer can keep. Commenters noted that some of the disclosures that are exempted from the E-Sign requirements regarding notice and consent are nevertheless required to be given in retainable form (for example, the HELOC brochure under § 226.5b(e) and the ARM application disclosures under § 226.19(b)). Commenters pointed out that the E-Sign Act requires, with regard to consumer disclosures generally, that a creditor disclose “the hardware and software requirements for access to and retention of the electronic records” and that the consumer consent to electronic disclosures “in a manner that reasonably demonstrates that the consumer can access” the disclosures electronically. A commenter noted that if the E-Sign procedures are followed, a creditor has some degree of comfort that the retainability requirement has been met; however, with regard to disclosures that are exempted from the E-Sign notice and consent provisions (such as those under §§ 226.5b(e) and 226.19(b)), it is not clear how the creditor can demonstrate compliance with the retainability requirement. The consumer group commenters were concerned about retainability of disclosures in light of the deletion of the requirement to maintain disclosures on a Web site for at least 90 days. They urged that the final regulations require that disclosures be delivered in a format that is both downloadable and printable. The Board believes that creditors satisfy the requirement for providing electronic disclosures in a form the consumer can retain if they are provided in a standard electronic format that can be downloaded and saved or printed on a typical home personal computer. Typically, any document that can be downloaded by the consumer can also be printed. The Board will, however, monitor creditors' practices to evaluate whether further guidance is needed on this issue. In a situation where the consumer is provided electronic disclosures through equipment under the creditor's control—such as a terminal or kiosk in the creditor's offices—the creditor could, for example, provide a printer that automatically prints the disclosures. Delayed Disclosures A number of creditor commenters suggested that, in the case of transactions involving small hand-held electronic devices, creditors should be permitted to treat the transactions as though they were conducted by telephone and thus delay disclosures. For example, for telephone credit card applications and solicitations, § 226.5a permits the disclosures to be provided within 30 days after the consumer requests the credit card (but no later than the delivery of the card). For telephone HELOC applications and ARM loan applications, §§ 226.5b and 226.19(b), respectively, permit the disclosures to be provided within three business days after the creditor receives the application. For telephone applications for closed-end credit in general, § 226.17(g) allows the § 226.18 loan (or retail sale) disclosures to be provided no later than the due date of the first payment, if certain generic disclosures have been made available to the consumer or to the public generally (for example, in a catalog). Since small hand-held electronic devices may not be well suited to displaying or retaining disclosures, commenters argued that creditors should be permitted to mail paper disclosures to consumers within the timeframes specified in the regulations applicable to telephone transactions, instead of providing electronic disclosures that consumers might view using a small hand-held device. Commenters contended that such devices are more like telephones than home computers. Some commenters suggested that such a delayed disclosure provision should apply to other situations as well, such as “enhanced ATMs” and computers not owned by the consumer (e.g., a computer in an employer's office or a public library). However, it does not appear that at present, use of such devices for financial transactions has advanced to the point where the relief suggested by the commenters is necessary to avoid burdens on electronic commerce. Expansion of Exception From E-Sign Notice and Consent Requirements One commenter suggested that the Board adopt additional exemptions from the E-Sign notice and consent requirements. For example, if a consumer applied for a credit card or mortgage online, the commenter suggested that the creditor should be able to provide the account-opening disclosures under § 226.6, or loan closing disclosures under § 226.18 (in addition to the application-related disclosures already permitted under this final rule) online, without notice and consent under the E-Sign Act. The commenter argued that, since Internet commerce has expanded greatly over the past few years, when consumers choose to conduct financial transactions online, they presume that they will receive related disclosures online as well. The Board believes that, at this time, there is insufficient evidence that the consent requirements are a burden on electronic commerce in this situation; and that consumers who shop for credit online may not necessarily want to receive account-opening or loan closing disclosures online. VI. Use of “Plain Language” Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. In the proposed rule, the Board invited comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand. A few commenters made suggestions for clarifying the regulatory language. These comments are discussed above, under “IV. Section-by-Section Analysis.” The Board has attempted to clarify the language in the final rule as suggested by commenters. VII. Final Regulatory Flexibility Analysis The Board prepared an initial regulatory flexibility analysis as required by the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* )

(PRA)(44 U.S.C. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is subject to the PRA by this final rulemaking is found in 12 CFR 226. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0199. Title I of the Consumer Credit Protection Act authorizes the Federal Reserve to issue regulations to carry out the provisions of that Act. 15 U.S.C. 1601, 1604(a). This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality normally arises. However, in the event the Board were to retain records during the course of an examination, the information may be protected from disclosure under the exemptions (b)(4), (6), and

(8)of the Freedom of Information Act (5 U.S.C. 522 (b)). Transaction- or account-specific disclosures and billing error allegations are not publicly available and are confidential between the creditor and the consumer. General disclosures of credit terms that appear in advertisements or take-one applications are available to the public. TILA and Regulation Z ensure adequate disclosure of the costs and terms of credit to consumers. For open-end credit, creditors are required to disclose information about the initial costs and terms and to provide periodic statements of account activity, notices of changes in terms, and statements of rights concerning billing error procedures. The regulation also requires specific types of disclosures for credit and charge card accounts and home-equity plans. For closed-end loans, such as mortgage and installment loans, cost disclosures are required to be provided prior to consummation. Special disclosures are required of certain products, such as reverse mortgages, certain variable-rate loans, and certain mortgages with rates and fees above specified thresholds. TILA and Regulation Z also contain rules concerning credit advertising. To ease the burden and cost of complying with Regulation Z (particularly for small entities), the Federal Reserve provides model forms, which are appended to the regulation. Creditors are required to retain evidence of compliance for twenty-four months (subpart D, section 226.25), but the regulation does not specify the types of records that must be retained. Under the PRA, the Federal Reserve accounts for the paperwork burden associated with Regulation Z for the state member banks and other creditors supervised by the Federal Reserve that engage in lending covered by Regulation Z and, therefore, are respondents under the PRA. Appendix I of Regulation Z defines the Federal Reserve-supervised institutions as: State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Other federal agencies account for the paperwork burden on other creditors. The annual burden is estimated to be 552,398 hours for the 1,172 Federal Reserve-supervised institutions that are deemed to be respondents for the purposes of the PRA. As mentioned in the Preamble, on April 30, 2007, a notice of proposed rulemaking was published in the **Federal Register** (72 FR 21141). No comments specifically addressing the burden estimate were received. The Federal Reserve has a continuing interest in the public's opinions of our collections of information. At any time, comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, may be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551; and to the Office of Management and Budget, Paperwork Reduction Project (7100-0199), Washington, DC 20503. List of Subjects in 12 CFR Part 226 Advertising, Federal Reserve System, Mortgages, Reporting and recordkeeping requirements, Truth in Lending. For the reasons set forth in the preamble, the Board amends 12 CFR part 226 as set forth below: PART 226—TRUTH IN LENDING (REGULATION Z) 1. The authority citation for part 226 continues to read as follows: Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5). Subpart B—Open-end Credit 2. Section 226.5 is amended by revising paragraph (a)(1), to read as follows, and removing paragraph (a)(5): § 226.5 General disclosure requirements.

(a)*Form of disclosures.*

(1)The creditor shall make the disclosures required by this subpart clearly and conspicuously in writing, 7 in a form that the consumer may keep. 8 The disclosures required by this subpart may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. § 7001 *et seq.* ). The disclosures required by §§ 226.5a, 226.5b, and 226.16 may be provided to the consumer in electronic form without regard to the consumer consent or other provisions of the E-Sign Act in the circumstances set forth in those sections. 7 The disclosure required by section 226.9(d) when a finance charge is imposed at the time of a transaction need not be written. 8 The disclosures required under § 226.5a for credit and charge card applications and solicitations, the home equity disclosures required under § 226.5b(d), the alternative summary billing rights statement provided for in § 226.9(a)(2s), the credit and charge card renewal disclosures required under § 226.9(e), and the disclosures made under § 226.10(b) about payment requirements need not be in a form that the consumer can keep. 3. Section 226.5a is amended by adding a new paragraph (a)(2)(v), to read as follows: § 226.5a Credit and charge card applications and solicitations.

(a)* * *

(2)* * *

(v)For an application or a solicitation that is accessed by the consumer in electronic form, the disclosures required under this section may be provided to the consumer in electronic form on or with the application or solicitation. 4. Section 226.5b is amended by adding a new paragraph (a)(3), to read as follows, removing the heading for paragraph (c)(1), redesignating paragraph (c)(1) as paragraph (c), and removing paragraph (c)(2): § 226.5b Requirements for home equity plans.

(a)* * *

(3)For an application that is accessed by the consumer in electronic form, the disclosures required under this section may be provided to the consumer in electronic form on or with the application. 5. Section 226.15 is amended by revising the first sentence of the introductory text of paragraph (b), to read as follows: § 226.15 Right of rescission.

(b)*Notice of right to rescind.* In any transaction or occurrence subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind (one copy to each if the notice is delivered in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act). * * * 6. Section 226.16 is amended by revising paragraph

(c)to read as follows: § 226.16 Advertising.

(c)*Catalogs or other multiple-page advertisements; electronic advertisements.*

(1)If a catalog or other multiple-page advertisement, or an electronic advertisement (such as an advertisement appearing on an Internet Web site), gives information in a table or schedule in sufficient detail to permit determination of the disclosures required by paragraph

(b)of this section, it shall be considered a single advertisement if:

(i)The table or schedule is clearly and conspicuously set forth; and

(ii)Any statement of terms set forth in § 226.6 appearing anywhere else in the catalog or advertisement clearly refers to the page or location where the table or schedule begins.

(2)A catalog or other multiple-page advertisement or an electronic advertisement (such as an advertisement appearing on an Internet Web site) complies with this paragraph if the table or schedule of terms includes all appropriate disclosures for a representative scale of amounts up to the level of the more commonly sold higher-priced property or services offered. Subpart C—Closed-end Credit 7. Section 226.17 is amended by revising paragraph (a)(1), removing paragraph (a)(3), and revising paragraph (g), to read as follows: § 226.17 General disclosure requirements.

(a)*Form of disclosures.*

(1)The creditor shall make the disclosures required by this subpart clearly and conspicuously in writing, in a form that the consumer may keep. The disclosures required by this subpart may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 *et seq.* ). The disclosures required by §§ 226.17(g), 226.19(b), and 226.24 may be provided to the consumer in electronic form without regard to the consumer consent or other provisions of the E-Sign Act in the circumstances set forth in those sections. The disclosures shall be grouped together, shall be segregated from everything else, and shall not contain any information not directly related 37 to the disclosures required under § 226.18. 38 The itemization of the amount financed under § 226.18(c)(1) must be separate from the other disclosures under that section. 37 The disclosures may include an acknowledgment of receipt, the date of the transaction, and the consumer's name, address, and account number. 38 The following disclosures may be made together with or separately from other required disclosures: the creditor's identity under § 226.18(a), the variable rate example under § 226.18(f)(1)(iv), insurance or debt cancellation under § 226.18(n), and certain security interest charges under § 226.18(o).

(g)*Mail or telephone orders—delay in disclosures.* If a creditor receives a purchase order or a request for an extension of credit by mail, telephone, or facsimile machine without face-to-face or direct telephone solicitation, the creditor may delay the disclosures until the due date of the first payment, if the following information for representative amounts or ranges of credit is made available in written form or in electronic form to the consumer or to the public before the actual purchase order or request:

(1)The cash price or the principal loan amount.

(2)The total sale price.

(3)The finance charge.

(4)The annual percentage rate, and if the rate may increase after consummation, the following disclosures:

(i)The circumstances under which the rate may increase.

(ii)Any limitations on the increase.

(iii)The effect of an increase.

(5)The terms of repayment. 8. Section 226.19 is amended by adding a new paragraph (c), to read as follows: § 226.19 Certain residential mortgage and variable-rate transactions.

(c)*Electronic disclosures.* For an application that is accessed by the consumer in electronic form, the disclosures required by paragraph

(b)of this section may be provided to the consumer in electronic form on or with the application. 9. Section 226.23 is amended by revising the first sentence of paragraph (b)(1), to read as follows: § 226.23 Right of rescission. (b)(1) *Notice of right to rescind.* In a transaction subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind (one copy to each if the notice is delivered in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act). * * * 10. Section 226.24 is amended by revising paragraph

(d)to read as follows: § 226.24 Advertising.

(d)*Catalogs or other multiple-page advertisements; electronic advertisements.*

(i)The table or schedule is clearly and conspicuously set forth; and

(ii)Any statement of terms of the credit terms in paragraph (c)(1) of this section appearing anywhere else in the catalog or advertisement clearly refers to the page or location where the table or schedule begins.

(2)A catalog or other multiple-page advertisement or an electronic advertisement (such as an advertisement appearing on an Internet Web site) complies with paragraph (c)(2) of this section if the table or schedule of terms includes all appropriate disclosures for a representative scale of amounts up to the level of the more commonly sold higher-priced property or services offered. Subpart E—Special Rules for Certain Home Mortgage Transactions 11. Section 226.31 is amended by revising paragraph

(b)to read as follows: § 226.31 General rules.

(b)*Form of disclosures.* The creditor shall make the disclosures required by this subpart clearly and conspicuously in writing, in a form that the consumer may keep. The disclosures required by this subpart may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. § 7001 *et seq.* ). Subpart F—[Removed] 12. Subpart F, consisting of § 226.36, is removed. 13. In Supplement I to Part 226, the following amendments are made: a. In *Section 226.5—General Disclosure Requirements,* under *Paragraph 5(b)(2)(ii),* paragraph 3. is revised. b. In *Section 226.5a—Credit and Charge Card Applications and Solicitations,* under *5a(a)(2) Form of Disclosures,* paragraph 8. is revised and new paragraph 9. is added. c. In *Section 226.5b—Requirements for Home Equity Plans,* under *5b(a) Form of Disclosures,* under *5b(a)(1) General,* new paragraph 5. is added. d. In *Section 226.5b—Requirements for Home Equity Plans,* under *5b(a) Form of Disclosures,* new heading *Paragraph 5b(a)(3)* is added, and under the new heading new paragraph 1. is added. e. In *Section 226.5b—Requirements for Home Equity Plans,* under *5b(b) Time of Disclosures,* paragraph 7. is removed. f. In *Section 226.15—Right of Rescission,* under *15(b) Notice of Right to Rescind.,* paragraph 1. is revised. g. In *Section 226.16—Advertising,* under *Paragraph 16(c)(1),* paragraphs 1. and 2. are revised. h. In *Section 226.19—Certain Residential Mortgage and Variable-Rate Transactions,* under *19(b) Certain variable-rate transactions,* paragraph 2.v. is revised. i. In *Section 226.19—Certain Residential Mortgage and Variable-Rate Transactions,* new heading *19(c) Electronic disclosures* is added, and under the new heading new paragraph 1. is added. j. In *Section 226.23—Right of Rescission,* under *23(b) Notice of Right to Rescind.,* paragraph 1. is revised. k. In *Section 226.24—Advertising,* under *24(b) Advertisement of Rate of Finance Charge,* paragraph 6. is removed. l. In *Section 226.24—Advertising,* under *24(d) Catalogs or other multiple-page advertisements; electronic advertisements,* paragraphs 2. and 4. are revised. m. Subpart F, section 226.36—Requirements for Electronic Communications, is removed. The amendments read as follows: SUPPLEMENT I TO PART 226—OFFICIAL STAFF INTERPRETATIONS Subpart B—Open-End Credit Section 226.5—General Disclosure Requirements *5(b)(2) Periodic statements.* *Paragraph 5(b)(2)(ii).* 3. *Calling for periodic statements.* When the consumer initiates a request, the creditor may permit, but may not require, consumers to pick up their periodic statements. If the consumer wishes to pick up the statement and the plan has a free-ride period, the statement must be made available in accordance with the 14-day rule. Section 226.5a—Credit and Charge Card Applications and Solicitations *5a(a) General rules.* *5a(a)(2) Form of disclosures.* 8. *Form of electronic disclosures provided on or with electronic applications or solicitations.* Card issuers must provide the disclosures required by this section on or with a blank application or reply form that is made available to the consumer in electronic form, such as on a card issuer's Internet Web site. Card issuers have flexibility in satisfying this requirement. Methods card issuers could use to satisfy the requirement include, but are not limited to, the following examples: i. The disclosures could automatically appear on the screen when the application or reply form appears; ii. The disclosures could be located on the same Web page as the application or reply form (whether or not they appear on the initial screen), if the application or reply form contains a clear and conspicuous reference to the location of the disclosures and indicates that the disclosures contain rate, fee, and other cost information, as applicable; iii. Card issuers could provide a link to the electronic disclosures on or with the application (or reply form) as long as consumers cannot bypass the disclosures before submitting the application or reply form. The link would take the consumer to the disclosures, but the consumer need not be required to scroll completely through the disclosures; or iv. The disclosures could be located on the same web page as the application or reply form without necessarily appearing on the initial screen, immediately preceding the button that the consumer will click to submit the application or reply. Whatever method is used, a card issuer need not confirm that the consumer has read the disclosures. For disclosures required to be provided in tabular form, card issuers must satisfy the requirements with respect to electronic disclosures set forth in comment 5a(a)(2)-2(ii). 9. *Form of disclosures.* Whether disclosures must be in electronic form depends upon the following: i. If a consumer accesses a credit card application or solicitation electronically other than in-person in a card issuer's office (covered under ii. below), such as online at a home computer, the card issuer must provide the disclosures in electronic form (such as with the application or solicitation on its Web site) in order to meet the requirement to provide disclosures in a timely manner on or with the application or solicitation. If the issuer instead mailed paper disclosures to the consumer, this requirement would not be met. ii. In contrast, if a consumer is physically present in the card issuer's office, and accesses a credit card application or solicitation electronically, such as via a terminal or kiosk, the issuer may provide disclosures in either electronic or paper form, provided the issuer complies with the timing and delivery (“on or with”) requirements of the regulation. Section 226.5b—Requirements for Home Equity Plans *5b(a) Form of disclosures.* 5b(a)(1) General 5. *Form of electronic disclosures provided on or with electronic applications.* Creditors must provide the disclosures required by this section (including the brochure) on or with a blank application that is made available to the consumer in electronic form, such as on a creditor's Internet Web site. Creditors have flexibility in satisfying this requirement. Methods creditors could use to satisfy the requirement include, but are not limited to, the following examples: i. The disclosures could automatically appear on the screen when the application appears; ii. The disclosures could be located on the same web page as the application (whether or not they appear on the initial screen), if the application contains a clear and conspicuous reference to the location of the disclosures and indicates that the disclosures contain rate, fee, and other cost information, as applicable; iii. Creditors could provide a link to the electronic disclosures on or with the application as long as consumers cannot bypass the disclosures before submitting the application. The link would take the consumer to the disclosures, but the consumer need not be required to scroll completely through the disclosures; or iv. The disclosures could be located on the same web page as the application without necessarily appearing on the initial screen, immediately preceding the button that the consumer will click to submit the application. Whatever method is used, a creditor need not confirm that the consumer has read the disclosures. Paragraph 5b(a)(3) 1. *Form of disclosures.* Whether disclosures must be in electronic form depends upon the following: i. If a consumer accesses a home equity credit line application electronically other than in-person in a creditor's office (covered under ii. below), such as online at a home computer, the creditor must provide the disclosures in electronic form (such as with the application form on its Web site) in order to meet the requirement to provide disclosures in a timely manner on or with the application. If the creditor instead mailed paper disclosures to the consumer, this requirement would not be met. ii. In contrast, if a consumer is physically present in the creditor's office, and accesses a home equity credit line application electronically, such as via a terminal or kiosk, the creditor may provide disclosures in either electronic or paper form, provided the creditor complies with the timing, delivery, and retainability requirements of the regulation. Section 226.15—Right of Rescission *15(b) Notice of right to rescind.* 1. *Who receives notice.* Each consumer entitled to rescind must be given: • Two copies of the rescission notice. • The material disclosures. In a transaction involving joint owners, both of whom are entitled to rescind, both must receive the notice of the right to rescind and disclosures. For example, if both spouses are entitled to rescind a transaction, each must receive two copies of the rescission notice (one copy to each if the notice is provided in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act) and one copy of the disclosures. Section 226.16—Advertising *16(c) Catalogs or other multiple-page advertisements; electronic advertisements.* *Paragraph 16(c)(1).* 1. *General.* Section 226.16(c)(1) permits creditors to put credit information together in one place in a catalog or other multiple-page advertisement or an electronic advertisement (such as an advertisement appearing on an Internet Web site). The rule applies only if the advertisement contains one or more of the triggering terms from § 226.16(b). 2. *Electronic advertisement.* If an electronic advertisement (such as an advertisement appearing on an Internet Web site) contains the table or schedule permitted under § 226.16(c)(1), any statement of terms set forth in § 226.6 appearing anywhere else in the advertisement must clearly direct the consumer to the location where the table or schedule begins. For example, a term triggering additional disclosures may be accompanied by a link that directly takes the consumer to the additional information. Subpart C—Closed-End Credit Section 226.19—Certain Residential Mortgage and Variable-Rate Transactions *19(b) Certain variable-rate transactions.* 2. * * * v. *Form of electronic disclosures provided on or with electronic applications.* Creditors must provide the disclosures required by this section (including the brochure) on or with a blank application that is made available to the consumer in electronic form, such as on a creditor's Internet Web site. Creditors have flexibility in satisfying this requirement. Methods creditors could use to satisfy the requirement include, but are not limited to, the following examples: A. The disclosures could automatically appear on the screen when the application appears; B. The disclosures could be located on the same web page as the application (whether or not they appear on the initial screen), if the application contains a clear and conspicuous reference to the location of the disclosures and indicates that the disclosures contain rate, fee, and other cost information, as applicable; C. Creditors could provide a link to the electronic disclosures on or with the application as long as consumers cannot bypass the disclosures before submitting the application. The link would take the consumer to the disclosures, but the consumer need not be required to scroll completely through the disclosures; or D. The disclosures could be located on the same web page as the application without necessarily appearing on the initial screen, immediately preceding the button that the consumer will click to submit the application. Whatever method is used, a creditor need not confirm that the consumer has read the disclosures. *19(c) Electronic disclosures.* 1. *Form of disclosures.* Whether disclosures must be in electronic form depends upon the following: i. If a consumer accesses an ARM loan application electronically other than in-person in a creditor's office (covered under ii. below), such as online at a home computer, the creditor must provide the disclosures in electronic form (such as with the application form on its Web site) in order to meet the requirement to provide disclosures in a timely manner on or with the application. If the creditor instead mailed paper disclosures to the consumer, this requirement would not be met. ii. In contrast, if a consumer is physically present in the creditor's office, and accesses an ARM loan application electronically, such as via a terminal or kiosk, the creditor may provide disclosures in either electronic or paper form, provided the issuer complies with the timing, delivery, and retainability requirements of the regulation. Section 226.23—Right of Rescission *23(b) Notice of right to rescind.* 1. *Who receives notice.* Each consumer entitled to rescind must be given: • Two copies of the rescission notice. • The material disclosures. In a transaction involving joint owners, both of whom are entitled to rescind, both must receive the notice of the right to rescind and disclosures. For example, if both spouses are entitled to rescind a transaction, each must receive two copies of the rescission notice (one copy to each if the notice is provided in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act) and one copy of the disclosures. Section 226.24—Advertising *24(d) Catalogs or other multiple-page advertisements; electronic advertisements.* 2. *General.* Section 226.24(d) permits creditors to put credit information together in one place in a catalog or other multiple-page advertisement, or in an electronic advertisement (such as an advertisement appearing on an Internet Web site). The rule applies only if the advertisement contains one or more of the triggering terms from § 226.24(c)(1). A list of different annual percentage rates applicable to different balances, for example, does not trigger further disclosures under § 226.24(c)(2) and so is not covered by § 226.24(d). 4. *Electronic advertisement.* If an electronic advertisement (such as an advertisement appearing on an Internet Web site) contains the table or schedule permitted under § 226.24(d)(1), any statement of terms set forth in § 226.24(c)(1) appearing anywhere else in the advertisement must clearly direct the consumer to the location where the table or schedule begins. For example, a term triggering additional disclosures may be accompanied by a link that directly takes the consumer to the additional information. By order of the Board of Governors of the Federal Reserve System, October 31, 2007. Jennifer J. Johnson, Secretary of the Board. [FR Doc. E7-21700 Filed 11-8-07; 8:45 am] BILLING CODE 6210-01-P FEDERAL RESERVE SYSTEM 12 CFR Part 230 [Regulation DD; Docket No. R-1285] Truth in Savings AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule; official staff interpretation. SUMMARY: The Board is amending Regulation DD, which implements the Truth in Savings Act, and the official staff commentary to the regulation, to withdraw portions of the interim final rules for the electronic delivery of disclosures issued March 30, 2001. The interim final rules addressed the timing and delivery of electronic disclosures, consistent with the requirements of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). Because compliance with the 2001 interim final rules has not been mandatory, withdrawal of these provisions from the *Code of Federal Regulations* reduces confusion about the status of the provisions and simplifies the regulation. In addition, the Board is adopting final amendments to Regulation DD to provide guidance on the electronic delivery of disclosures. For example, the final rules provide that when a deposit account advertisement is accessed by a consumer in electronic form, disclosures may be provided to the consumer in electronic form in the advertisement without regard to the consumer consent and other provisions of the E-Sign Act. Similar final rules are being adopted under other consumer fair lending and financial services regulations administered by the Board. DATES: The final rule is effective December 10, 2007. The mandatory compliance date is October 1, 2008. FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, Division of Consumer and Community Affairs, at

(202)452-2412 or

(202)452-3667. For users of Telecommunications Device for the Deaf

(TDD)only, contact

(202)263-4869. SUPPLEMENTARY INFORMATION: I. Statutory Background The purpose of the Truth in Savings Act (TISA), 12 U.S.C. 4301 *et seq.* , is to enable consumers to make informed decisions about accounts at depository institutions. The act requires depository institutions to disclose yields, fees, and other terms concerning deposit accounts to consumers at account opening, upon request, when changes in terms occur, and in periodic statements. It also includes rules about advertising for deposit accounts. The Board's Regulation DD (12 CFR part 230) implements the act. Credit unions are governed by a substantially similar regulation issued by the National Credit Union Administration. TISA and Regulation DD require a number of disclosures to be provided in writing. The Electronic Signatures in Global and National Commerce Act (the E-Sign Act), 15 U.S.C. 7001 *et seq.* , was enacted in 2000. The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met. The E-Sign Act, including the special consumer notice and consent provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, depository institutions are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulation DD if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act. II. Board Proposals and Interim Rules Regarding Electronic Disclosures On April 4, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation DD (66 FR 17,795). Similar interim final rules for Regulations B, E, M, and Z, (implementing the Equal Credit Opportunity Act, the Electronic Fund Transfer Act, the Consumer Leasing Act, and the Truth in Lending Act, respectively) were published on March 30, 2001 (66 FR 17,322 and 66 FR 17,329) (Regulations M and Z, respectively) and April 4, 2001 (66 FR 17,779 and 66 FR 17,786) (Regulations B and E, respectively). Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Depository institutions, creditors, and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act. The interim final rules also incorporated many of the provisions that were part of earlier regulatory proposals issued by the Board regarding electronic disclosures. 1 1 On May 2, 1996, the Board proposed to amend Regulation E to permit financial institutions to provide disclosures by sending them electronically (61 FR 19696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14,528, March 25, 1998) and similar proposals under Regulations B, M, Z, and DD (63 FR 14,552, 14,538, 14,548, and 14,533, respectively, March 25, 1998). Based on comments received on the 1998 proposals, in 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 1999). Under the 2001 interim final rules, disclosures could be sent to an e-mail address designated by the consumer, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, institutions would have to provide a notice to consumers (typically by e-mail) alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow consumers adequate time to access and retain the information. Institutions also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Commenters on the interim final rules identified significant operational and information security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers who choose to receive electronic disclosures do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection. In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41439, August 8, 2001.) Thus, institutions are not required to comply with the interim final rules. Since that time, the Board had not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices. In April 2007, the Board proposed to amend Regulation DD and the official staff commentary by

(1)withdrawing portions of the 2001 interim final rule that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary;

(2)withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and

(3)retaining the substance of certain provisions of the interim final rule that provide regulatory relief or guidance regarding electronic disclosures. (72 FR 21155, April 30, 2007.) Similar amendments were also proposed by the Board under Regulations B, E, M, and Z (72 FR 21125, 72 FR 21131, 72 FR 21135, and 72 FR 21141, respectively). III. Summary of the Final Rule The Board received about 20 comments on the April 2007 proposal, primarily from depository institutions and their representatives. Most of the financial industry commenters generally supported the proposal, although some provided suggestions for clarifications or changes to particular elements of the proposal. A comment letter was also submitted on behalf of four consumer groups. The consumer group commenters suggested a number of changes to strengthen consumer protections. The comments are discussed in more detail in the Section-by-Section Analysis below. For the reasons discussed below, the Board is now adopting amendments to Regulation DD in final form, largely as proposed in April 2007. As stated in the proposal, because compliance with the 2001 interim final rules has not been mandatory, the final rule will reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. The Board is also adopting certain provisions that are identical or similar to provisions in the 2001 interim rules in order to enhance the ability of consumers to shop for deposit account products online, minimize the information-gathering burdens on consumers, and provide guidance or eliminate a substantial burden on the use of electronic disclosures, as discussed further below. Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a depository institution, government agency, or other trusted entity) that have become more pronounced since 2001. Finally, the Board is eliminating certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices. The 2001 interim final rule allowed depository institutions to provide certain disclosures to consumers electronically without regard to the consumer consent or other provisions of the E-Sign Act. These included disclosures in connection with advertisements and disclosures about deposit accounts that are provided upon a consumer's request. The Board reasoned that these disclosures, which would be available to the general public while shopping for deposit products, did not “relate to a transaction,” which is a prerequisite for triggering the E-Sign consumer consent provisions, and thus were not subject to the consent provisions. Some commenters on the interim final rules agreed with the result but did not agree with the Board's rationale. In the April 2007 proposal, the Board stated that, upon further consideration, it did not believe it was necessary to determine whether or not these disclosures are related to a transaction. Instead, pursuant to the Board's authority under section 269 of TISA, as well as under section 104(d) of the E-Sign Act, 2 the Board proposed to specify the circumstances under which certain disclosures may be provided to a consumer in electronic form, rather than in writing as generally required by Regulation DD, without obtaining the consumer's consent under section 101(c) of the E-Sign Act. 2 Section 269 of TISA provides that regulations prescribed by the Board under TISA “may provide for such adjustments and exceptions * * * as, in the judgment of the Board, are necessary or proper to carry out the purposes of [TISA], * * * or to facilitate compliance with the requirements of [TISA].” Section 104(d) of the E-Sign Act authorizes federal agencies to adopt exemptions for specified categories of disclosures from the E-Sign notice and consent requirements, “if such exemption is necessary to eliminate a substantial burden on electronic commerce and will not increase the material risk of harm to consumers.” For the reasons stated in this **Federal Register** notice, the Board believes that these criteria are met in the case of the advertising disclosures and the disclosures provided to a consumer upon request. In addition, the Board believes TISA section 269 authorizes the Board to permit institutions to provide disclosures electronically, rather than in paper form, independent of the E-Sign Act. Commenters supported the Board's approach with regard to this issue. This final rule adopts the approach in the April 2007 proposal. The Board continues to believe that depository institutions should not be required to obtain the consumer's consent in order to provide advertising disclosures to the consumer in electronic form if the consumer accesses an advertisement containing those disclosures in electronic form, such as at an Internet Web site. Similarly, the Board continues to believe that institutions should not be required to follow the E-Sign consent requirements in order to respond to a consumer's request for account disclosures (although under the final rule, the institution could provide the disclosures in electronic form only if the consumer agrees). The Board believes that when viewing online deposit product advertising, consumers would not be harmed if the E-Sign consent procedures do not apply and would obtain significant benefits by having timely access to advertising disclosures in electronic form. The Board also believes that consumers' ability to shop for deposit accounts online and compare the terms of various offers could be substantially diminished if consumers had to consent in accordance with the E-Sign Act in order to access advertisements that must be accompanied by disclosures, or in order to obtain account disclosures upon request. Applying the consumer consent provisions of the E-Sign Act to these disclosures could impose substantial burdens on electronic commerce and make it more difficult for consumers to gather information and shop for deposit accounts. At the same time, the Board recognizes that consumers who shop or apply for deposit accounts online may not want to receive other disclosures electronically. Therefore, with respect to account-opening disclosures, periodic statements, and change-in-terms notices, depository institutions are required to obtain the consumer's consent, in accordance with the E-Sign Act, to provide such disclosures in electronic form, or else provide written disclosures. Finally, as proposed, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) are being deleted as unnecessary, because the E-Sign Act is a self-effectuating statute. The revisions to Regulation DD and the official staff commentary are described more fully below in the Section-by-Section Analysis. IV. Section-by-Section Analysis 12 CFR Part 230 (Regulation DD) Section 230.3 General Disclosure Requirements Section 230.3(a) prescribes the form of disclosures required for deposit accounts, and generally requires depository institutions to provide the disclosures in writing and in a form that the consumer may keep. As proposed, the Board is revising § 230.3(a) to clarify that institutions may provide disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some institutions may provide disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those institutions, the duplicate electronic form of the disclosures may be provided to consumers without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's disclosure requirements. Section 230.3(a) is also revised, as proposed, to provide that the disclosures required by §§ 230.4(a)(2) (disclosures provided upon request) and 230.8 (advertising) may be provided to the consumer in electronic form, under the circumstances set forth in those sections, without regard to the consumer consent or other provisions of the E-Sign Act. Commenters supported this aspect of the proposal. Section 230.8 requires that if certain information is stated in a deposit account advertisement, or if an advertisement promotes the payment of overdrafts, the advertisement must also include specified disclosures. The Board believes that, for a deposit account advertisement accessed by the consumer in electronic form, permitting institutions to provide the required disclosures in electronic form without regard to the consumer consent and other provisions of the E-Sign Act will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will facilitate shopping for deposit products by enabling consumers to receive important disclosures at the same time they access an advertisement without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to access an online advertisement is potentially burdensome and could discourage consumers from shopping for deposit products online. Moreover, because these consumers are viewing the advertisement online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well. Similarly, § 230.4(a)(2) requires that depository institutions provide disclosures, setting forth account terms and conditions, to consumers upon request. If a consumer is not present at the depository institution and requests the account disclosures, it would appear unnecessary and burdensome to require the consumer to go through the E-Sign consent procedures before the request could be satisfied, as long as the consumer agrees that the disclosures can be provided electronically. Applying the E-Sign consent procedures in this context could discourage consumers from requesting account disclosures. Section 230.3(g) in the 2001 interim final rule refers to § 230.10, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is deleting § 230.10, as discussed further below, § 230.3(g) is also deleted, as proposed. Section 230.4 Account Disclosures Depository institutions generally must provide account-opening disclosures to consumers before an account is opened or a service is provided. Depository institutions may delay delivering the disclosures if the consumer is not present at the institution when the account is opened (or service is provided). Section 230.4(a)(1) provides that in such cases, account-opening disclosures must be mailed or delivered within ten business days. The rationale underlying the ten-day delay is that the institution cannot provide written disclosures when, for example, an account is opened by telephone. The 2001 interim final rule provided that depository institutions opening accounts by electronic communication (for example, on the Internet) may not delay providing disclosures under § 230.4(a)(1). The difficulties in providing disclosures for accounts opened by mail or telephone do not exist for requests to open accounts received by electronic communication using visual text. Thus, the 2001 interim final rule required that disclosures must be provided before accounts are opened using electronic communication. New paragraph

(ii)was added to § 230.4(a)(1) to effectuate this requirement. In the April 2007 proposal, the Board stated that it continued to believe that the rationale underlying § 230.4(a)(1)(ii) was valid, and accordingly proposed to retain the new provision. Several commenters requested that the regulation allow delayed disclosures in a number of situations involving the use of electronic means to open an account. Commenters noted, for example, that small hand-held electronic devices, such as Internet-enabled cellphones or personal digital assistants, may not be well suited to displaying or retaining disclosures. Commenters argued, therefore, that institutions should be permitted to open an account electronically and mail paper disclosures to the consumer within ten business days, rather than providing electronic disclosures that the consumer might view using a small hand-held device. Some commenters suggested that the delayed disclosure provision should apply to other situations as well, such as “enhanced ATMs” and computers not owned by the consumer (e.g., a computer in an employer's office or a public library). However, it does not appear that at present, use of such devices for financial transactions has advanced to the point where the relief suggested by the commenters is necessary to avoid burdens on electronic commerce. Therefore, § 230.4(a)(1)(ii) is retained in the final rule with minor wording changes. As noted above, depository institutions must also provide account disclosures to a consumer upon request. Section 230.4(a)(2)(i) provides that if a consumer is not present at the institution when a request for account disclosures is made, the institution must mail or deliver the disclosures within a reasonable time after the institution receives the request; ten days is deemed to be a reasonable time. The 2001 interim final rule revised § 230.4(a)(2)(i) to allow institutions to mail or deliver disclosures either in paper form or electronically to consumers who are not present at the institution when they make their request. Under the 2001 interim final rule, to provide the requested disclosures electronically, the institution must send the disclosures to the consumer's e-mail address, or send a notice alerting the consumer to the location of the disclosures, such as on the institution's Internet Web site. The interim rule revised comment 4(a)(2)(i)-3 and added comment 4(a)(2)(i)-4 to provide guidance. In the April 2007 proposal, the Board proposed to retain the changes made to § 230.4(a)(2)(i) and the accompanying commentary by the interim final rule, with some revisions for clarification and to provide greater flexibility for both institutions and consumers (in particular, by not requiring that e-mail be used to provide the disclosures electronically). The Board stated that it continued to believe that if the consumer is not present at the institution when requesting disclosures, it is appropriate to allow institutions to respond to requests by electronic means (without following the E-Sign consent provisions, as discussed above under § 230.3) provided the consumer agrees. A few commenters suggested that the last sentence in proposed revised comment 4(a)(2)(i)-4, which states that the regulation “does not require an institution to provide, nor a consumer to agree to receive, disclosures in electronic form,” should be eliminated as unnecessary. The Board believes, however, that the sentence is appropriate because it clarifies that institutions are required to provide account disclosures in paper form if a consumer requests that they be provided in paper form. However, in the final rule language has been added to the sentence to make clear that the sentence applies only to disclosures provided upon request under § 230.4(a)(2). An institution would not be prohibited from offering accounts online that use only electronic disclosures at account-opening and for periodic statements, provided the consumer consents in accordance with the E-Sign Act. Accordingly, the revisions made to § 230.4(a)(2)(i) and the accompanying commentary are adopted as proposed, with the minor wording changes noted. Section 230.8 Advertising Section 230.8 contains requirements for advertisements for deposit accounts, including the requirement that if an advertisement includes certain “trigger terms” (such as a bonus or the annual percentage yield), the advertisement must also include certain disclosures. The Board proposed to add new comment 8(a)-11, to clarify that if a consumer accesses an advertisement for deposit accounts in electronic form, such as on a home computer, the disclosures required on or with the advertisement must be provided to the consumer in electronic form on or with the advertisement. The proposed comment also clarified that if a consumer receives a written advertisement in the mail, the required disclosures must be provided in paper form on or with the advertisement (and not, for example, by including a reference in the advertisement to the Web site where the disclosures are located). Commenters did not address this aspect of the proposal. In the final regulation, new comment 8(a)-11 is not being adopted. Section 230.8 requires that if an advertisement includes trigger terms, the advertisement itself must “state” the required disclosures “clearly and conspicuously.” Therefore, under the existing regulation, providing paper disclosures for an advertisement in electronic form, or vice versa, would not comply because the disclosures would not be stated in the advertisement itself. Comment 8(a)-9, as added by the interim final rule, provides that in an electronic advertisement, the required disclosures need not be shown on each page where a “trigger term” appears, as long as each such page includes a cross-reference to the page where the required disclosures appear. For example, if a “trigger term” appears on a particular web page, the additional disclosures may appear on another web page if there is a clear reference to that page (which may be accomplished, for example, by including a link). In April 2007, the Board proposed to retain this comment. Commenters did not address this issue. The final rule retains the comment as proposed. In April the Board also proposed to add new comment 8(a)-12 to clarify that the rules regarding advertising disclosures provided in electronic form also apply to the disclosures described in § 230.11(b), which are incorporated by reference in § 230.8(f). Commenters did not address this issue; the comment is adopted as proposed (and renumbered as comment 8(a)-11). Section 230.8(b) permits institutions to state an interest rate in addition to the APY, as long as the rate is stated in conjunction with, but not more conspicuously than, the APY. In the 2001 interim final rule, comment 8(b)-4 was added to state that in an advertisement using electronic communication, the consumer must be able to view both rates simultaneously, and that this requirement is not satisfied if the consumer can view the APY only by use of a link that takes the consumer to another web location. In the April 2007 proposal, the Board proposed to delete comment 8(b)-4 as unnecessary, because the requirement to state the simple annual rate or periodic rate in conjunction with, and not more conspicuously than, the APY, continues to apply to electronic advertisements no less than to advertisements in other media. In the supplementary information, the Board stated that requiring the consumer to scroll to another part of the page, or access a link, in order to view the APY would likely not satisfy this requirement. Some commenters were concerned by the foregoing discussion in the April 2007 proposal, and contended that in the case of small hand-held electronic devices that a consumer might use to view a deposit account advertisement, the small size of the screen might necessitate scrolling or the use of links for viewing the APY. Commenters also said the proposal was confusing in that comment 8(b)-4, stating that the use of links would not comply, was proposed to be deleted, yet the supplementary information appeared to impose the same restriction. Comment 8(b)-4 is being deleted as proposed. As stated in the proposal, the regulatory requirement is to state the interest rate in conjunction with, but not more conspicuously than, the APY, and this rule applies in the electronic context as well. However, the Board believes that the rule can be applied with some degree of flexibility, to account for variations in devices consumers may use to view electronic advertisements. Therefore, the use of scrolling or links would not necessarily fail to comply with the regulation in all cases; however, institutions should ensure that electronic advertisements comply with the equal conspicuousness requirement. Section 230.8(e) exempts from some disclosure requirements advertisements made through broadcast or electronic media, such as television and radio or outdoor billboards. The interim final rule added comment 8(e)(1)(i)-1 to provide that this exemption would not apply to advertisements using electronic communication, such as Internet advertisements, which do not have the same time and space constraints as radio or television advertisements. In April, the Board proposed to retain comment 8(e)(1)(i)-1 with minor wording changes. Commenters did not address this issue. The Board continues to believe that space constraints for advertisements on Internet Web sites are not significantly different from those for a print advertisement (a newspaper, for example). Accordingly, comment 8(e)(1)(i)-1 is adopted as proposed. Section 230.10 Electronic Communication Section 230.10 was added by the 2001 interim final rule to address the general requirements for electronic communications. In the April 2007 proposal, the Board proposed to delete § 230.10 from Regulation DD and the accompanying sections of the staff commentary. Depository institution commenters largely supported the proposed deletion, and § 230.10 and the accompanying commentary are deleted in the final rule. In the interim rule, § 230.10(a) defines the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 230.10(a) does not change applicable legal requirements under the E-Sign Act. Sections 230.10

(b)and

(c)incorporate by reference provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form and the requirement to obtain the consumer's affirmative consent before providing disclosures in electronic form. The deletion of these provisions has no impact on the general applicability of the E-Sign Act to Regulation DD disclosures. Section 230.10(f) was added in the interim final rule to clarify that persons, other than depository institutions, that are required to comply with Regulation DD may use electronic disclosures. This provision is unnecessary because the E-Sign Act is a self-effectuating statute and permits any person to use electronic records subject to the conditions set forth in the Act. Sections 230.10

(d)and

(e)address specific timing and delivery requirements for electronic disclosures under Regulation DD, such as the requirement to send disclosures to a consumer's e-mail address (or post the disclosures on a Web site and send a notice alerting the consumer to the disclosures). The Board stated in the proposal that it no longer believed that these additional provisions were necessary or appropriate. The Board noted that electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them, and also noted concerns about e-mail related to data security, identity theft, and phishing. The consumer group commenters urged the Board to require the use of e-mail to provide required disclosures in electronic form, arguing that e-mail is the only reliable way to ensure that consumers are able to actually access, receive, and retain disclosures. The consumer groups also disagreed with the statement that concerns relating to phishing, identity theft, and data security are a valid reason for not requiring the use of e-mail, noting that phishing involves gathering information from the consumer, while disclosures would be provided to the consumer, and need not include sensitive information. While the consumer's receipt of an e-mail message that is actually from the consumer's depository institution would not in general pose a security risk, consumers might ignore or delete e-mails from depository institutions (real or purported), in order to avoid falling victim to fraud schemes. Thus, disclosures sent by consumers' depository institutions may not receive the attention they should. Consequently, some depository institutions may be reluctant to communicate by e-mail. To the extent consumers are instructed not to ignore electronic mail messages from their depository institutions, the risk of consumers being victimized by fraudulent e-mail might be increased. In any event, the Board believes it is preferable not to mandate the use of any particular means of electronic delivery of disclosures, but instead to allow flexibility for institutions to use whatever method may be best suited to particular types of disclosure (for example, account-opening, periodic statements, or change in terms). With regard to the requirement to attempt to redeliver returned electronic disclosures, institutions would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. As stated in the April 2007 proposal, the Board continues to believe that both requirements would likely be unduly burdensome. Under the April 2007 proposed rule, the requirement in the 2001 interim final rule for institutions to maintain disclosures posted on a Web site for at least 90 days would be deleted. Depository institution commenters supported the proposed deletion; consumer group commenters expressed concern about its impact on consumers. As stated in the proposal, based on a review of industry practices, it appears that many institutions maintain disclosures posted on an Internet Web site for several months, and, in a number of cases, for more than a year. For example, it appears that institutions that offer online periodic statements to consumers typically make those statements available without charge for six months or longer in electronic form. This practice has developed even though Regulation DD does not currently require institutions to maintain disclosures for any specific period of time. In addition, the Board continues to believe that an appropriate time period consumers may want electronic disclosures to be available may vary depending upon the type of disclosure, and is reluctant to establish specific time periods that would vary depending on the disclosures, which would increase the compliance burden. Therefore, the 90-day retention provision is deleted as proposed. Nevertheless, while the Board is not requiring disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation DD continue to apply to electronic disclosures, such as the requirement to provide disclosures to consumers at certain specified times and in a form that the consumer may keep. The Board expects institutions to maintain disclosures on Web sites for a reasonable period of time (which may vary depending upon the particular disclosure) so that consumers have an opportunity to access, view, and retain the disclosures. As stated in the April 2007 proposal, the Board will monitor institutions' electronic disclosure practices with regard to the ability of consumers to retain Regulation DD disclosures and would consider further revisions to the regulation to address this issue if necessary. V. Other Issues Raised by Commenters Clear and Conspicuous Disclosures An issue raised in the comments on the April 2007 proposal related to small hand-held electronic devices through which consumers may conduct financial transactions using the Internet or other electronic means (for example, personal digital assistants, Internet-enabled cellphones, and similar devices). One commenter requested clarification on whether institutions would be deemed to comply with the requirement to provide disclosures in a clear and conspicuous form, even when the consumer views them on a small screen of a hand-held electronic device. The commenter noted that the institution has no control over what devices consumers choose to use, for example, to view disclosures on a Web page. The Board believes that disclosures comply with the “clear and conspicuous” requirement as long as they are provided in a manner such that they would be clear and conspicuous when viewed on a typical home personal computer monitor. Retainable Form Several industry commenters requested guidance on how institutions can be sure of meeting the requirement to provide disclosures in a form that the consumer can keep. Commenters noted that some of the disclosures that are exempted from the E-Sign requirements regarding notice and consent are nevertheless required to be given in retainable form (for example, account disclosures provided upon request under § 230.4(a)(2)). Commenters pointed out that the E-Sign Act requires, with regard to consumer disclosures generally, that an institution disclose “the hardware and software requirements for access to and retention of the electronic records” and that the consumer consent to electronic disclosures “in a manner that reasonably demonstrates that the consumer can access” the disclosures electronically. A commenter noted that if the E-Sign procedures are followed, an institution has some degree of comfort that the retainability requirement has been met; however, with regard to disclosures that are exempted from the E-Sign notice and consent provisions (such as those under § 230.4(a)(2)), it is not clear how the institution can demonstrate compliance with the retainability requirement. The consumer group commenters were concerned about retainability of disclosures in light of the deletion of the requirement to maintain disclosures on a Web site for at least 90 days. They urged that the final regulations require that disclosures be delivered in a format that is both downloadable and printable. The Board believes that institutions satisfy the requirement for providing electronic disclosures in a form the consumer can retain if they are provided in a standard electronic format that can be downloaded and saved or printed on a typical home personal computer. Typically, any document that can be downloaded by the consumer can also be printed. The Board will, however, monitor institutions' practices to evaluate whether further guidance is needed on this issue. In a situation where the consumer is provided electronic disclosures through equipment under the institution's control—such as a terminal or kiosk in the institution's offices—the institution could, for example, provide a printer that automatically prints the disclosures. Expansion of Exception From E-Sign Notice and Consent Requirements One commenter suggested that the Board adopt additional exemptions from the E-Sign notice and consent requirements. For example, if a consumer opened a deposit account online, the commenter suggested that the institution should be able to provide the account-opening disclosures online under § 230.4(a)(1) (in addition to the advertising-related disclosures, and disclosures provided upon request, already permitted under this final rule) without notice and consent under the E-Sign Act. The commenter argued that, since Internet commerce has expanded greatly over the past few years, when consumers choose to conduct financial transactions online, they presume that they will receive any related disclosures online as well. The Board believes that, at this time, there is insufficient evidence that the consent requirements are a burden on electronic commerce in this situation; and that consumers who shop for deposit products online may not necessarily want to receive account-opening disclosures online. VI. Use of “Plain Language” Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. In the proposal, the Board invited comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand. No comments were received on “plain language” issues involving Regulation DD. VII. Final Regulatory Flexibility Analysis The Board prepared an initial regulatory flexibility analysis as required by the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* )

(PRA)(44 U.S.C. 3506; 5 CFR Part 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is subject to the PRA by this final rulemaking is found in 12 CFR Part 230. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0271. Section 269 of the Truth in Savings Act

(TISA)(12 U.S.C. 4308) authorizes the Board to issue regulations to carry out the provisions of TISA. TISA and Regulation DD require depository institutions to disclose yields, fees, and other terms concerning deposit accounts to consumers at account opening, upon request, and when changes in terms occur. Depository institutions that provide periodic statements are required to include information about fees imposed, interest earned, and the annual percentage yield earned during those statement periods. The act and regulation mandate the methods by which institutions determine the account balance on which interest is calculated. They also contain rules about advertising deposit accounts. To ease the compliance cost (particularly for small entities), model clauses and sample forms are appended to the regulation. Depository institutions are required to retain evidence of compliance for twenty-four months, but the regulation does not specify types of records that must be retained. This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality arises. Regulation DD applies to all depository institutions except credit unions. Credit unions are covered by a substantially similar rule issued by the National Credit Union Administration. The Federal Reserve accounts for the paperwork burden associated with Regulation DD only for Federal Reserve-supervised institutions. Federal Reserve supervised institutions are defined by Regulation DD as: State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Other federal agencies account for the paperwork burden imposed on the depository institutions for which they have administrative enforcement authority. The annual burden is estimated to be 232,443 hours for 1,172 Federal Reserve-supervised institutions that are deemed respondents for purposes of the PRA. As mentioned in the Preamble, on April 30, 2007, a notice of proposed rulemaking was published in the **Federal Register** (72 FR 21155). No comments specifically addressing the burden estimate were received. The Federal Reserve has a continuing interest in the public's opinions of our collections of information. At any time, comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, may be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551; and to the Office of Management and Budget, Paperwork Reduction Project (7100-0199), Washington, DC 20503. List of Subjects in 12 CFR Part 230 Advertising, Banks, banking, Consumer protection, Federal Reserve System, Reporting and record keeping requirements, Truth in Savings. For the reasons set forth in the preamble, the Board amends 12 CFR part 230 as set forth below: PART 230—TRUTH IN SAVINGS (REGULATION DD) 1. The authority citation for part 230 continues to read as follows: Authority: 12 U.S.C. 4301 *et seq.* 2. Section 230.3 is amended by revising paragraph (a), to read as follows, and removing paragraph (g): § 230.3 General disclosure requirements.

(a)*Form.* Depository institutions shall make the disclosures required by §§ 230.4 through 230.6 of this part, as applicable, clearly and conspicuously, in writing, and in a form the consumer may keep. The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 *et seq.* ). The disclosures required by §§ 230.4(a)(2) and 230.8 may be provided to the consumer in electronic form without regard to the consumer consent or other provisions of the E-Sign Act in the circumstances set forth in those sections. Disclosures for each account offered by an institution may be presented separately or combined with disclosures for the institution's other accounts, as long as it is clear which disclosures are applicable to the consumer's account. 3. Section 230.4 is amended by republishing paragraph (a)(1)(i) and revising paragraphs (a)(1)(ii) and (a)(2)(i), to read as follows: § 230.4 Account disclosures.

(a)*Delivery of account disclosures* —(1) *Account opening.*

(i)*General.* A depository institution shall provide account disclosures to a consumer before an account is opened or a service is provided, whichever is earlier. An institution is deemed to have provided a service when a fee required to be disclosed is assessed. Except as provided in paragraph (a)(1)(ii) of this section, if the consumer is not present at the institution when the account is opened or the service is provided and has not already received the disclosures, the institution shall mail or deliver the disclosures no later than 10 business days after the account is opened or the service is provided, whichever is earlier.

(ii)*Timing of electronic disclosures.* If a consumer who is not present at the institution uses electronic means (for example, an Internet Web site) to open an account or request a service, the disclosures required under paragraph (a)(1) of this section must be provided before the account is opened or the service is provided.

(2)*Requests.*

(i)A depository institution shall provide account disclosures to a consumer upon request. If a consumer who is not present at the institution makes a request, the institution shall mail or deliver the disclosures within a reasonable time after it receives the request and may provide the disclosures in paper form, or electronically if the consumer agrees. § 230.10 [Removed] 4. Section 230.10 is removed and reserved. 5. In Supplement I to Part 230, the following amendments are made: a. In *Section 230.4—Account disclosures* , under *(a)(2)(i)* , paragraphs 3. and 4. are revised. b. In *Section 230.8—Advertising* , under *(a) Misleading or inaccurate advertisements* , paragraph 9. is revised and new paragraph 11. is added. c. In *Section 230.8—Advertising* , under *(b) Permissible rates* , paragraph 4. is removed. d. In *Section 230.8—Advertising* , under *(e)(1)(i)* , paragraph 1. is revised. e. Section 230.10—Electronic Communication is removed and reserved. The amendments read as follows: Supplement I to Part 230—Official Staff Interpretations Section 230.4—Account Disclosures

(a)Delivery of Account Disclosures *(a)(2) Requests* *(a)(2)(i)* 3. *Timing for response.* Ten business days is a reasonable time for responding to requests for account information that consumers do not make in person, including requests made by electronic means (such as by electronic mail). 4. *Use of electronic means.* If a consumer who is not present at the institution makes a request for account disclosures, including a request made by telephone, e-mail, or via the institution's Web site, the institution may send the disclosures in paper form or, if the consumer agrees, may provide the disclosures electronically, such as to an e-mail address that the consumer provides for that purpose, or on the institution's Web site, without regard to the consumer consent or other provisions of the E-Sign Act. The regulation does not require an institution to provide, nor a consumer to agree to receive, the disclosures required by § 230.4(a)(2) in electronic form. Section 230.8—Advertising *(a) Misleading or Inaccurate Advertisements* 9. *Electronic advertising.* If an electronic advertisement (such as an advertisement appearing on an Internet Web site) displays a triggering term (such as a bonus or annual percentage yield) the advertisement must clearly refer the consumer to the location where the additional required information begins. For example, an advertisement that includes a bonus or annual percentage yield may be accompanied by a link that directly takes the consumer to the additional information. 11. *Additional disclosures in connection with the payment of overdrafts.* The rule in § 230.3(a), providing that disclosures required by § 230.8 may be provided to the consumer in electronic form without regard to E-Sign Act requirements, applies to the disclosures described in § 230.11(b), which are incorporated by reference in § 230.8(f). *(e) Exemption for certain advertisements* *(e)(1) Certain media* *(e)(1)(i)* 1. *Internet advertisements.* The exemption for advertisements made through broadcast or electronic media does not extend to advertisements posted on the Internet or sent by e-mail. By order of the Board of Governors of the Federal Reserve System, October 31, 2007. Jennifer J. Johnson, Secretary of the Board. [FR Doc. E7-21701 Filed 11-8-07; 8:45 am] BILLING CODE 6210-01-P SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 211 [Release No. SAB 109] Staff Accounting Bulletin No. 109 AGENCY: Securities and Exchange Commission. ACTION: Publication of staff accounting bulletin. SUMMARY: This staff accounting bulletin (“SAB”) expresses the views of the staff regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. SAB No. 105, *Application of Accounting Principles to Loan Commitments* (“SAB 105”), provided the views of the staff regarding derivative loan commitments that are accounted for at fair value through earnings pursuant to Statement of Financial Accounting Standards No. 133, *Accounting for Derivative Instruments and Hedging Activities* . SAB 105 stated that in measuring the fair value of a derivative loan commitment, the staff believed it would be inappropriate to incorporate the expected net future cash flows related to the associated servicing of the loan. This SAB supersedes SAB 105 and expresses the current view of the staff that, consistent with the guidance in Statement of Financial Accounting Standards No. 156, *Accounting for Servicing of Financial Assets* , and Statement of Financial Accounting Standards No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities* , the expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. SAB 105 also indicated that the staff believed that internally-developed intangible assets (such as customer relationship intangible assets) should not be recorded as part of the fair value of a derivative loan commitment. This SAB retains that staff view and broadens its application to all written loan commitments that are accounted for at fair value through earnings. The staff expects registrants to apply the views in Question 1 of SAB 109 on a prospective basis to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. DATES: November 5, 2007. FOR FURTHER INFORMATION CONTACT: Ashley W. Carpenter, Office of the Chief Accountant

(202)551-5300 or Craig C. Olinger, Division of Corporation Finance

(202)551-3400, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. SUPPLEMENTARY INFORMATION: The statements in staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission's official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws. Dated: November 5, 2007. Florence E. Harmon, Deputy Secretary. PART 211—[AMENDED] Accordingly, Part 211 of Title 17 of the Code of Federal Regulations is amended by adding Staff Accounting Bulletin No. 109 to the table found in Subpart B. Staff Accounting Bulletin No. 109 The staff hereby amends and replaces Section DD of Topic 5, *Miscellaneous Accounting* , of the Staff Accounting Bulletin Series. Topic 5: DD (as amended) expresses the views of the staff regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. Note: The text of SAB 109 will not appear in the Code of Federal Regulations. Topic 5: Miscellaneous Accounting DD. Written Loan Commitments Recorded at Fair Value Through Earnings *Facts:* Bank A enters into a loan commitment with a customer to originate a mortgage loan at a specified rate. As part of this written loan commitment, Bank A expects to receive future net cash flows related to servicing rights from servicing fees (included in the loan's interest rate or otherwise), late charges, and other ancillary sources, or from selling the servicing rights to a third party. If Bank A intends to sell the mortgage loan after it is funded, pursuant to paragraph 6 of FASB Statement No. 133, *Accounting for Derivative Instruments and Hedging Activities* , as amended by FASB Statement No. 149, *Amendment of Statement 133 on Derivative Instruments and Hedging Activities* (“Statement 133”), the written loan commitment is accounted for as a derivative instrument and recorded at fair value through earnings (referred to hereafter as a “derivative loan commitment”). If Bank A does not intend to sell the mortgage loan after it is funded, the written loan commitment is not accounted for as a derivative under Statement 133. However, paragraph 7(c) of FASB Statement No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities* (“Statement 159”), permits Bank A to record the written loan commitment at fair value through earnings (referred to hereafter as a “written loan commitment”). Pursuant to Statement 159, the fair value measurement for a written loan commitment would include the expected net future cash flows related to the associated servicing of the loan. *Question 1:* In measuring the fair value of a derivative loan commitment accounted for under Statement 133, should Bank A include the expected net future cash flows related to the associated servicing of the loan? *Interpretive Response:* Yes. The staff believes that, consistent with the recently issued guidance in FASB Statement No. 156, *Accounting for Servicing of Financial Assets* (“Statement 156”), 1 and Statement 159, the expected net future cash flows related to the associated servicing of the loan should be included in the fair value measurement of a derivative loan commitment. The expected net future cash flows related to the associated servicing of the loan that are included in the fair value measurement of a derivative loan commitment or a written loan commitment should be determined in the same manner that the fair value of a recognized servicing asset or liability is measured under FASB Statement No. 140, *Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities* , as amended by Statement 156 (“Statement 140”). However, as discussed in paragraphs 61 and 62 of Statement 140, a separate and distinct servicing asset or liability is not recognized for accounting purposes until the servicing rights have been contractually separated from the underlying loan by sale or securitization of the loan with servicing retained. 1 Statement 156 permits an entity to subsequently measure recognized servicing assets and servicing liabilities (which are nonfinancial instruments) at fair value through earnings. The views in Question 1 apply to all loan commitments that are accounted for at fair value through earnings. However, for purposes of electing fair value accounting pursuant to Statement 159, the views in Question 1 are not intended to be applied by analogy to any other instrument that contains a nonfinancial element. *Question 2:* In measuring the fair value of a derivative loan commitment accounted for under Statement 133 or a written loan commitment accounted for under Statement 159, should Bank A include the expected net future cash flows related to internally-developed intangible assets? *Interpretive Response:* No. The staff does not believe that internally-developed intangible assets (such as customer relationship intangible assets) should be recorded as part of the fair value of a derivative loan commitment or a written loan commitment. Such nonfinancial elements of value should not be considered a component of the related instrument. Recognition of such assets would only be appropriate in a third-party transaction. For example, in the purchase of a portfolio of derivative loan commitments in a business combination, a customer relationship intangible asset is recorded separately from the fair value of such loan commitments. Similarly, when an entity purchases a credit card portfolio, EITF Issue No. 88-20, *Difference between Initial Investment and Principal Amount of Loans in a Purchased Credit Card Portfolio* , requires an allocation of the purchase price to a separately recorded cardholder relationship intangible asset. The view in Question 2 applies to all loan commitments that are accounted for at fair value through earnings. [FR Doc. E7-21927 Filed 11-8-07; 8:45 am] BILLING CODE 8011-01-P DEPARTMENT OF DEFENSE Department of the Navy 32 CFR Part 706 Certifications and Exemptions Under the International Regulations for Preventing Collisions at Sea, 1972 AGENCY: Department of the Navy, DoD. ACTION: Final rule. SUMMARY: The Department of the Navy is amending its certifications and exemptions under the International Regulations for Preventing Collisions at Sea, 1972 (72 COLREGS), to reflect that the Deputy Assistant Judge Advocate General (Admiralty and Maritime Law) has determined that USS NORTH CAROLINA (SSN 777) is a vessel of the Navy which, due to its special construction and purpose, cannot fully comply with certain provisions of the 72 COLREGS without interfering with its special function as a naval ship. The intended effect of this rule is to warn mariners in waters where 72 COLREGS apply. DATES: This rule is effective November 9, 2007 and is applicable to October 11, 2007. FOR FURTHER INFORMATION CONTACT: Commander Gregg A. Cervi, JAGC, U.S. Navy, Deputy Assistant Judge Advocate General (Admiralty and Maritime Law), Office of the Judge Advocate General, Department of the Navy, 1322 Patterson Ave., SE., Suite 3000, Washington Navy Yard, DC 20374-5066, telephone 202-685-5040. SUPPLEMENTARY INFORMATION: Pursuant to the authority granted in 33 U.S.C. 1605, the Department of the Navy amends 32 CFR part 706. This amendment provides notice that the Deputy Assistant Judge Advocate General (Admiralty and Maritime Law), under authority delegated by the Secretary of the Navy, has certified that USS NORTH CAROLINA (SSN 777) is a vessel of the Navy which, due to its special construction and purpose, cannot fully comply with the following specific provisions of 72 COLREGS without interfering with its special function as a naval ship: Annex I, paragraph 2(a)(i), pertaining to the height placement of the masthead light above the hull; Annex I, paragraph 2(k), pertaining to the height and relative positions of the anchor lights; Annex I, paragraph 3(b), pertaining to the location of the sidelights; and Rule 21(c), pertaining to the location and arc of visibility of the sternlight. The Deputy Assistant Judge Advocate General (Admiralty and Maritime Law) has also certified that the lights involved are located in closest possible compliance with the applicable 72 COLREGS requirements. Moreover, it has been determined, in accordance with 32 CFR parts 296 and 701, that publication of this amendment for public comment prior to adoption is impracticable, unnecessary, and contrary to public interest since it is based on technical findings that the placement of lights on this vessel in a manner differently from that prescribed herein will adversely affect the vessel's ability to perform its military functions. List of Subjects in 32 CFR Part 706 Marine safety, Navigation (water), and Vessels. For the reasons set forth in the preamble, amend part 706 of title 32 of the Code of Federal Regulations as follows: PART 706—CERTIFICATIONS AND EXEMPTIONS UNDER THE INTERNATIONAL REGULATIONS FOR PREVENTING COLLISIONS AT SEA, 1972 1. The authority citation for part 706 continues to read: Authority: 33 U.S.C. 1605. 2. Table One of § 706.2 is amended by adding, in numerical order, the following entry for USS NORTH CAROLINA: § 706.2 Certifications of the Secretary of the Navy under Executive Order 11964 and 33 U.S.C. 1605. Table One Vessel Number Distance in meters of forward masthead light below minimum required height. § 2(a)(i), Annex I * * * * * * * USS NORTH CAROLINA SSN 777 2.90 * * * * * * * 3. Table Three of § 706.2 is amended by adding, in numerical order, the following entry for USS NORTH CAROLINA: § 706.2 Certifications of the Secretary of the Navy under Executive Order 11964 and 33 U.S.C. 1605. Table Three Vessel Number Masthead lights arc of visibility; rule 21(a) Side lights arc of visibility; rule 21(b) Stern light arc of visibility; rule 21(c) Side lights distance inboard of ship's sides in meters 3(b) annex 1 Stern light, distance forward of stern in meters; rule 21(c) Forward anchor light, height above hull in meters; 2(K) annex 1 Anchor lights relationship of aft light to forward light in meters 2(K) annex 1 * * * * * * * USS NORTH CAROLINA SSN 777 Meets Requirement Meets Requirement 205.6° 4.37 11.05 2.8 0.30 below. * * * * * * * Approved: October 11, 2007. Gregg A. Cervi, Commander, JAGC, U.S. Navy Deputy Assistant Judge Advocate General (Admiralty and Maritime Law). [FR Doc. E7-22008 Filed 11-8-07; 8:45 am] BILLING CODE 3810-FF-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [CGD08-07-034] Drawbridge Operation Regulations; Bonfouca Bayou, Slidell, LA AGENCY: Coast Guard, DHS. ACTION: Notice of temporary deviation from regulations; request for comments. SUMMARY: The Commander, Eighth Coast Guard District, has issued a temporary deviation from the regulation governing the operation of the State Route 433

(S433)Bridge across Bonfouca Bayou, mile 7.0, at Slidell, St. Tammany Parish, Louisiana. This deviation will test a change to the drawbridge operation schedule to determine whether a permanent change to the schedule is needed. DATES: This deviation is effective from November 9, 2007 through May 7, 2008 Comments must be received by January 8, 2008. ADDRESSES: You may mail comments and related material to Commander (dpb), Eighth Coast Guard District, 500 Poydras Street, New Orleans, Louisiana 70130-3310. The Commander, Eighth Coast Guard District, Bridge Administration Branch maintains the public docket for this rulemaking. Comments and material received from the public, as well as documents indicated in this preamble as being available in the docket, will become part of this docket and will be available for inspection or copying at the Bridge Administration office between 7 a.m. and 3 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Phil Johnson, Bridge Administration Branch, telephone

(504)671-2128. SUPPLEMENTARY INFORMATION: Request for Comments We encourage you to participate in evaluating this test schedule by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this deviation [CGD08-07-034], indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. Comments must be received by January 8, 2008. Background and Purpose The Louisiana Department of Transportation and Development has requested that the operating regulation of the S433 swing span bridge, located on Bonfouca Bayou at mile 7.0 in Slidell, St. Tammany Parish, Louisiana, be changed in order to make more efficient use of operating resources, while accommodating the flow of vehicular traffic at rush hour peaks. Currently, the draw of the S433 Bridge operates as follows:

(a)The draw need not open for passage of vessels from 7 a.m. to 8 a.m. and from 1:45 p.m. to 2:45 p.m., Monday through Friday except Federal holidays.

(b)The draw need open only on the hour and half-hour from 6 a.m. to 7 a.m. and from 3 p.m. to 6 p.m., Monday through Friday except Federal holidays.

(c)The draw shall open on signal from 9 p.m. to 5 a.m., if at least four hours notice is given to the Louisiana Department of Transportation and Development Security Service at

(504)375-0100.

(d)At all other times the draw shall open on signal. This Temporary Deviation from Drawbridge Operating Regulations allows the bridge to operate as follows: The draw of the S433 Bridge, mile 7.0 at Slidell, shall open on signal, except that from 6 p.m. to 6 a.m., the draw shall open on signal if at least two hours notice is given. On Monday through Friday, except Federal holidays, the draw need not open for the passage of vessels from 7 a.m. to 8 a.m. and from 1:45 p.m. to 2:45 p.m. A notice of proposed rule making [CGD08-07-33] is being issued in conjunction with this temporary deviation to obtain public comments. The Coast Guard will evaluate public comments from this temporary deviation and the above referenced notice of proposed rule making to determine if a permanent special drawbridge operating regulation is warranted. In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35. Dated: October 29, 2007. David M. Frank, Bridge Administrator, Eighth Coast Guard District. [FR Doc. E7-21885 Filed 11-8-07; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [Docket No. CGD07-07-251] Drawbridge Operation Regulations; Atlantic Intracoastal Waterway, New Smyrna Beach, Volusia County, FL AGENCY: Coast Guard, DHS. ACTION: Notice of temporary deviation from regulations. SUMMARY: The Commander, Seventh Coast Guard District, has issued a temporary deviation from the regulation governing the operation of the George C. Musson/Coronado Beach (SR 44) Bridge across the Atlantic Intracoastal Waterway, mile 845, at New Smyrna Beach, Volusia County, Florida. This deviation is necessary to expedite repairs to the George C. Musson/Coronado Beach Bridge. This deviation allows the bridge to open on signal, except during daylight hours, during which the bridge will open twice. DATES: This deviation is effective from November 9, 2007 through 4:50 p.m. on December 21, 2007. ADDRESSES: Materials referred to in this document are available for inspection or copying at Commander (dpb), Seventh Coast Guard District, 909 S.E. 1st Avenue, Room 432, Miami, Florida 33131 between 7 a.m. and 4 p.m., Monday through Friday, except Federal holidays. The telephone number is

(305)415-6744. The Seventh Coast Guard District Bridge Administration Branch maintains the public docket for this temporary deviation. FOR FURTHER INFORMATION CONTACT: Mr. Michael Lieberum, Bridge Branch,

(305)415-6744 or e-mail *michael.b.lieberum@uscg.mil.* SUPPLEMENTARY INFORMATION: M&J Construction, on behalf of the bridge owner, has requested a deviation to the regulations published in 33 CFR 117.261(h) which states the Coronado Beach Bridge (SR 44), mile 845, shall open on signal, except that from 7 a.m. until 7 p.m., each day of the week, the draw need only open on the hour, twenty minutes past the hour, and forty minutes past the hour. This deviation is necessary for worker safety and to expedite repairs to the George C. Musson/Coronado Beach (SR 44) Bridge. This deviation will remain in effect from November 9, 2007 through 4:50 p.m. on December 21, 2007. The George C. Musson/Coronado Beach (SR 44) Bridge will open on signal, except that from 7:35 a.m. to 4:50 p.m. the bridge will only open at 10:30 a.m. and 1:30 p.m. Public vessels of the United States and tugs with tows are requested to provide at least two hours advance notice to the bridge tender to request an opening. Vessels in a situation where a delay would endanger life or property will be allowed to pass at any time, upon signal. Due to scaffolding, the vertical clearance of this bridge will be reduced by four feet in the closed position throughout the length of this project. In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35. Dated: October 29, 2007. Greg Shapley, Chief, Bridge Administration, Seventh Coast Guard District. [FR Doc. E7-22067 Filed 11-8-07; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [CGD05-07-109] Drawbridge Operation Regulations; Raccoon Creek, at Bridgeport, NJ AGENCY: Coast Guard, DHS. ACTION: Notice of temporary deviation from regulations. SUMMARY: The Commander, Fifth Coast Guard District, has approved a temporary deviation from the regulations governing the operation of the Consolidated Rail Corporation (CONRAIL) Bridge, at mile 2.0, across Raccoon Creek at Bridgeport, NJ. This deviation allows the drawbridge to remain closed-to-navigation beginning at 7 a.m. on December 3, 2007, until and including 7 p.m. on January 18, 2008 to facilitate mechanical repairs. DATES: This deviation is effective from 7 a.m. on December 3, 2007 to 7 p.m. on January 18, 2008. ADDRESSES: Materials referred to in this document are available for inspection or copying at Commander (dpb), Fifth Coast Guard District, Federal Building, 1st Floor, 431 Crawford Street, Portsmouth, VA 23704-5004 between 8 a.m. and 4 p.m., Monday through Friday, except Federal holidays. The telephone number is

(757)398-6222. Commander (dpb), Fifth Coast Guard District maintains the public docket for this temporary deviation. FOR FURTHER INFORMATION CONTACT: Waverly W. Gregory, Jr., Bridge Administrator, Fifth Coast Guard District, at

(757)398-6222. SUPPLEMENTARY INFORMATION: The CONRAIL Bridge, a swing-type bridge, has a vertical clearance in the closed position to vessels of seven feet, above mean high water. CONRAIL, the bridge owner, has requested a temporary deviation from the current operating regulations set out in 33 CFR Part 117.741 to close the swing bridge to navigation to perform essential mechanical repairs. The repairs will consist of removing and replacing the drive shaft and main pinion gear and repairing the steel which supports the assembly. To facilitate the repairs, the CONRAIL Bridge will be maintained in the closed-to-navigation position beginning at 7 a.m. on December 3, 2007, until and including 7 p.m. on January 18, 2008. In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35. Dated: October 31, 2007. Waverly W. Gregory, Jr., Chief, Bridge Administration Branch, Fifth Coast Guard District. [FR Doc. E7-22068 Filed 11-8-07; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket No. COTP San Francisco Bay 07-051] RIN 1625-AA00 Safety Zone; Alameda County Sheriff's Office Maritime Interdiction Training, San Francisco Bay, CA AGENCY: Coast Guard, DHS. ACTION: Temporary final rule. SUMMARY: The Coast Guard is establishing a temporary safety zone in the navigable waters of San Francisco Bay, during the Alameda County Sheriff's Office Maritime Interdiction Training. This safety zone is established to ensure the safety of participants and the public from dangers associated with the training. Unauthorized persons or vessels are prohibited from entering into, transiting through, or remaining in the safety zone without permission of the Captain of the Port or his designated representative. DATES: This rule is effective from 8 a.m. to 2 p.m. on November 1, 2007, November 8, 2007, and November 15, 2007. ADDRESSES: Documents indicated in this preamble as being available in the docket, are part of the docket COTP San Francisco Bay 07-051 and are available for inspection or copying at Coast Guard Sector San Francisco, 1 Yerba Buena Island, San Francisco, California, 94130, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Ensign Sheral Richardson, U.S. Coast Guard Sector San Francisco, at

(415)399-7436. Regulatory Information We did not publish a notice of proposed rulemaking

(NPRM)for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM. Logistical details surrounding the event were not finalized and presented to the Coast Guard in time to draft and publish an NPRM. As such, the event would occur before the rulemaking process was complete. This safety zone is necessary to provide for the safety of participants, participating vessels, and other vessels transiting the event area. For the safety concerns noted, it is in the public interest to have these regulations in effect during the training. For the same reasons listed in the previous paragraph, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the **Federal Register** . Any delay in the effective date of this rule would expose mariners to the dangers posed by the training. Background and Purpose The Alameda County Sheriff's Office will be hosting Maritime Interdiction training provided by A-T Solutions. The training consists of classroom training and a practical exercise onboard a ship. The course is designed to provide law enforcement personnel with the tools and techniques necessary to identify, intercept, and safely board a non-compliant vessel at sea. Maritime attacks, boarding equipment, and boarding procedures will be covered while onboard the ship. During this event the ship may be anchored, drifting, or underway. The Blue and Gold Fleet Company will provide a ferry to be used as a non-compliant vessel during the training exercises. The practical training on board the Blue and Gold Fleet vessel will take place on November 1, 2007, November 8, 2007, and November 15, 2007, during the hours of 8 a.m. and 2 p.m. Discussion of Rule The Coast Guard is establishing a temporary safety zone in the vicinity of Hunters Point, in San Francisco Bay. The effect of the temporary safety zone will be to restrict general navigation in the vicinity of Hunters Point, while the training is taking place. The safety zone includes all navigable waters from the surface to the seafloor, encompassed by connecting the following points: Beginning at 37°43′45″ N and longitude 122°20′48″ W; latitude 37°43′45″ N and longitude 122°19′33″ W; latitude 37°42′12″ N and longitude 122°20′48″ W; latitude 37°42′12″ N and longitude 122°19′33″ W, and then back to the beginning point. These coordinates are based upon datum: NAD 83. Except for persons or vessels authorized by the Coast Guard Patrol Commander, no person or vessel may enter or remain in the safety zone. This safety zone is necessary to keep the public and vessels a safe distance away from the training to ensure the safety of participants, participating vessels, and transiting vessels. Regulatory Evaluation This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. Although this rule restricts access to the waters encompassed by the safety zone, the effect of this rule will not be significant because the local waterway users will be notified via public Broadcast Notice to Mariners to ensure the safety zone will result in minimum impact. The entities most likely to be affected are pleasure craft engaged in recreational activities. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule is not expected to have a significant economic impact on a substantial number of entities, some of which may be small entities. This rule may affect owners and operators of pleasure craft engaged in recreational activities and sightseeing. This rule will not have a significant economic impact on a substantial number of small entities for several reasons:

(i)Vessel traffic can pass safely around the area,

(ii)vessels engaged in recreational activities and sightseeing have ample space outside of the effected portion of San Francisco Bay to engage in these activities,

(iii)this rule will encompass only a small portion of the waterway for a limited period of time, and

(iv)the maritime public will be advised in advance of this safety zone via Broadcast Notice to Mariners. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offer to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process. If the rule will affect your small business, organization, or government jurisdiction and you have questions concerning its provisions, options for compliance, or assistance in understanding this rule, please contact Ensign Sheral Richardson, U.S. Coast Guard Sector San Francisco, at

(415)399-7436. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). Collection of Information This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble. Taking of Private Property This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. Civil Justice Reform This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. Protection of Children We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children. Indian Tribal Governments This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. Energy Effects We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211. Technical Standards The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this rule under Commandant Instruction M16475.lD and Department of Homeland Security Management Directive 5100.1, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969

(NEPA)(42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation. Paragraph (34)(g) is applicable because this rule establishes a safety zone. A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” will be available in the docket where indicated under ADDRESSES . List of Subjects in 33 CFR Part 165 Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways. For the reasons discussed in the preamble, the Coast Guard amends 33 CFR Part 165 as follows: PART 165—REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 1. The authority citation for part 165 continues to read as follows: Authority: 33 U.S.C. 1226, 1231; 46 U.S.C. Chapter 701; 50 U.S.C. 191, 195; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Pub. L. 107-295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1. 2. Add § 165.T11-254 to read as follows: § 165.T11-254 Safety Zone; Alameda County Sheriff's Office Maritime Interdiction Training, San Francisco Bay, CA.

(a)*Location.* This temporary safety zone is established for the navigable waters of San Francisco Bay in the vicinity of Hunters Point and includes all navigable waters, from the surface to the seafloor, encompassed by connecting the following points: beginning at 37° 43′45″ N and longitude 122° 20′48″ W; latitude 37° 43′45″ N and longitude 122° 19′33″ W; latitude 37° 42′12″ N and longitude 122° 20′48″ W; latitude 37° 42′12″ N and longitude 122° 19′ 33″ W, and then back to the beginning point. These coordinates are based upon datum: NAD 83.

(b)*Enforcement Period.* This safety zone is in effect from 8 a.m. to 2 p.m. on November 1, 2007, November 8, 2007, and November 15, 2007. If the training events conclude prior to their scheduled termination times, the Coast Guard will cease enforcement of this safety zone and will announce that fact via Broadcast Notice to Mariners.

(c)*Regulations.*

(1)In accordance with the general regulations in Sec. 165.23 of this part, entry into, transit through, or anchoring within this safety zone by all vessels and persons is prohibited, unless specifically authorized by the Captain of the Port, San Francisco, or his designated representative.

(2)All persons and vessels shall comply with the instructions of the Captain of the Port, San Francisco, or the designated representative.

(3)Designated representative means any commissioned, warrant, and petty officer of the Coast Guard on board a Coast Guard, Coast Guard Auxiliary, local, state, or federal law enforcement vessel who is authorized to act on behalf of the Captain of the Port, San Francisco.

(4)Upon being hailed by U.S. Coast Guard patrol personnel by siren, radio, flashing light, or other means, the operator of a vessel shall proceed as directed. Persons and vessels may request permission to enter the safety zone on VHF-16 or via telephone at

(415)399-3547.

(5)The U.S. Coast Guard may be assisted in the patrol and enforcement of this safety zone by local law enforcement as necessary. Dated: October 30, 2007. W. J. Uberti, Captain, U.S. Coast Guard, Captain of the Port, San Francisco. [FR Doc. E7-21977 Filed 11-8-07; 8:45 am] BILLING CODE 4910-15-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 82 [EPA-HQ-OAR-2006-5065; FRL-8493-5] RIN 2060-AO32 Protection of Stratospheric Ozone: Revision of Refrigerant Recovery and Recycling Equipment Standards AGENCY: Environmental Protection Agency (EPA). ACTION: Direct final rule. SUMMARY: The Environmental Protection Agency

(EPA)is taking direct final action on motor vehicle refrigerant recovery and recycling equipment standards. Under Clean Air Act Section 609, motor vehicle air-conditioning

(MVAC)refrigerant handling equipment must be certified by the Administrator or an independent organization approved by the Administrator and, at a minimum, must be as stringent as the standards of the Society of Automotive Engineers

(SAE)that are in effect as of the date of the enactment of the Clean Air Act Amendments of 1990. In 1997, EPA promulgated regulations that required the use of SAE Standard J2210, HFC-134a Recycling Equipment for Mobile Air Conditioning Systems for certification of MVAC refrigerant handling equipment. SAE has replaced Standard J2210 with J2788, Recovery/Recycle and Recovery/Recycle/Recharging Equipment for HFC-134a Refrigerant. To avoid confusion with an outdated reference, EPA is updating its reference to the new SAE standards. This action reflects a change in industry standard practice. This action also revises the EPA addresses to send equipment certification forms. DATES: This rule is effective on December 31, 2007 without further notice, unless EPA receives adverse comment or a request for public hearing by December 10, 2007. If we receive adverse comment or a request for a public hearing, we will publish a timely withdrawal in the **Federal Register** informing the public that some or all of the amendments in this rule will not take effect. ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2006-5065, by one of the following methods: • *http://www.regulations.gov:* Follow the on-line instructions for submitting comments. • *E-mail: a-and-r-Docket@epa.gov.* • *Fax:* 202-566-1741. • *Mail:* Environmental Protection Agency, Mailcode 6102T, EPA Docket Center (EPA/DC), 1200 Pennsylvania Avenue, NW., Washington, DC 20460 • *Hand Delivery:* Public Reading Room, Room B102, EPA West Building, 1301 Constitution Avenue, NW., Washington, DC. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information. *Instructions:* Direct your comments to Docket ID No. EPA-HQ-OAR-2006-5065. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at *www.regulations.gov,* including any personal information provided, unless the comment includes information claimed to be Confidential Business Information

(CBI)or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through *www.regulations.gov* or e-mail. The *www.regulations.gov* Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through *www.regulations.gov* your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. *Docket:* All documents in the docket are listed in the *www.regulations.gov* index. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in *www.regulations.gov* or in hard copy at the Air Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington, DC. This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is

(202)566-1744, and the telephone number for the Air Docket is

(202)566-1742. FOR FURTHER INFORMATION CONTACT: Karen Thundiyil, Stratospheric Protection Division, Office of Atmospheric Programs (MC 6205J), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number:

(202)343-9464; fax number:

(202)343-2363; e-mail address: *thundiyil.karen@epa.gov.* SUPPLEMENTARY INFORMATION: EPA is publishing this rule without a prior proposed rule because we view this as a noncontroversial action and anticipate no adverse comment because this action is primarily administrative in nature. However, in the “Proposed Rules” section of today's **Federal Register** , we are publishing a separate document that will serve as the proposed rule to update EPA's reference to an obsolete SAE standard, if adverse comments or a request for public hearing are received on this direct final rule. We will not institute a second comment period on this action. Any parties interested in commenting must do so at this time. For further information about commenting on this rule, see the ADDRESSES section of this document. If EPA receives adverse comment or a request for a public hearing, we will publish a timely withdrawal in the **Federal Register** informing the public that this direct final rule will not take effect. We would address all public comments in any subsequent final rule based on the proposed rule. Existing regulations covering specifications for motor vehicle air conditioning

(MVAC)refrigerant handling equipment reference Society of Automotive Engineers

(SAE)standards that have become outdated because the SAE has issued new updated standards. This action will update existing regulations to reference newly updated SAE standards. This regulatory action is primarily administrative with no significant policy issues. Section 609 of the Clean Air Act requires that EPA regulations be at least as stringent as SAE J1990 standard. J1990 describes refrigerant handling equipment for CFC-12 refrigerant. Since Section 609's conception, the MVAC sector has transitioned from CFC-12, an ozone depleting substance, to HFC-134a, a non-ozone depleting substance. Now HFC-134a is the predominant refrigerant in MVACs in the United States and around the world. At the start of the transition from CFC-12 to HFC-134a, more than 13 years ago, SAE developed standard J2210 on HFC-134a refrigerant handling equipment. J2210 described standards for HFC-134a refrigerant recovery and recycling machines. At the time of transition from CFC-12 to HFC-134a, EPA adopted J2210. Now, SAE has updated the standard on HFC-134a refrigerant handling equipment from J2210 to J2788. This action updates EPA's reference to SAE's new HFC-134a refrigerant handling equipment standards (J2788 in Appendix C to Subpart B of Part 82 in the Code of Federal Regulations). I. Background A. Statutory Authority Title VI of the Clean Air Act

(Act)is designed to protect the stratospheric ozone layer. Section 609 of the Act requires the Administrator to promulgate regulations establishing standards and requirements regarding the servicing of MVACs. The Act requires that the Administrator establish standards for using MVAC refrigerant handling equipment that shall be at least as stringent as the applicable standards of SAE in effect as of the date of enactment (November 15, 1990). B. EPA Section 609 Equipment Certification Program EPA requires that any person repairing or servicing MVACs shall certify to EPA that such person has acquired approved refrigerant handling equipment. An independent standards testing organization, approved by EPA, certifies equipment as meeting the MVAC refrigerant handling equipment standards. At this time, Intertek/ETL and Underwriters Laboratories Inc.

(UL)have been approved by EPA to certify MVAC refrigerant handling equipment. C. SAE Industry Standards EPA refers to the SAE J standards for technical specifications related to MVAC servicing issues. SAE's standards are developed through international participation and cooperation of MVAC experts from motor vehicle manufacturers, MVAC suppliers, chemical manufacturers, refrigerant handling equipment manufacturers and other interested industry stakeholders. SAE standards are internationally recognized, adopted and referenced by all major motor vehicle manufacturers and their suppliers. SAE periodically updates their standards to reflect changes in industry best practices and/or technology improvements. II. New Industry Practice and Updated SAE Standard Test results from the SAE Improved Mobile Air Conditioning Cooperative Research Project, an MVAC industry sponsored research project, indicated that equipment designed to meet SAE standards J2210 did not recover refrigerant from MVAC systems as well as was previously assumed (Docket No. EPA-HQ-OAR-2006-0428-0001). As much as 30% of refrigerant remained in an MVAC system when J2210 recovery equipment indicated all refrigerant had been recovered. MVAC service technicians rely on complete refrigerant recovery to refill MVAC systems according to the motor vehicle manufacturer specification. In light of sub-standard recovery performance, SAE revised their standards to include performance standards that ensure an improved standard of refrigerant recovery and recharge. SAE replaced standard J2210 with standard J2788 in October 2006. J2788 encompasses all of J2210, adds standards on recharging of MVAC systems, and adds performance standards to improve equipment refrigerant recovery performance. Specifically, J2788 sets a recharge accuracy standard of 0.5 ounces and requires 95% recovery of refrigerant from an MVAC system. With this action, EPA is updating its reference to the SAE standards at § 82.36. SAE J2210 will no longer exist effective December 2007, and will be superseded by J2788. In Section 82.36, Approved refrigerant recycling equipment, EPA is updating the reference from J2210 to J2788, for recovery/recycling equipment and for recovery/recycling/recharging equipment. In addition, for purposes of clarity, EPA is adding a clause to Section 82.34 (Prohibitions and required practices), which specifies that equipment manufactured or imported must meet the SAE standards. By updating our reference to SAE's new standard J2788, the Agency avoids confusion on the part of the refrigerant handling equipment manufacturer, service technician or A/C service shop owner who would otherwise face a federal requirement that referenced an obsolete standard that conflicts with the new industry standard practice established with J2788. Currently the regulations under § 82.36 (Approved refrigerant recycling equipment) envisage more than just refrigerant recycling and include refrigerant recovery. Therefore, to more accurately reflect the provisions outlined in that section, EPA is revising the title of § 82.36 from “Approved refrigerant recycling equipment” to “Approved refrigerant handling equipment.” While this action updates EPA's reference to SAE's new J2788 standard, it does not require an immediate replacement of previously certified MVAC recovery and recovery/recycling equipment with new J2788 equipment. Rather, all new MVAC refrigerant handling equipment manufactured after December 31, 2007 must be certified to J2788. Equipment manufactured after December 31, 2007 that is certified to J2210 will not satisfy EPA requirements and cannot be manufactured or imported. See Section III below for a discussion on existing inventory of equipment certified to J2210. A/C service shop owners or technicians may decide to accelerate plans to replace old J2210 equipment with the new J2788 equipment standard because of the expected refrigerant savings that translate into a cost savings. According to the January 2007 Mobile Air Conditioning Society Worldwide

(MACS)Service Report (Docket No. EPA-HQ-OAR-2006-0428-0003), the new J2788 equipment will result in a 30 to 50% refrigerant savings because the equipment will recover more refrigerant from an MVAC system. Recovered refrigerant can be recycled for future use, rather than buying new refrigerant product. III. Effective Date MVAC recovery/recycling equipment and MVAC recovery/recycling/recharging equipment manufactured or imported after December 31, 2007 must be certified by an EPA-approved independent standards testing organization to meet the specifications of Appendix C of 40 Code of Federal Regulations, Part 82, Subpart B. As explained above, Appendix C will now require that such equipment be certified under SAE's updated standard J2788. EPA expects that this date provides sufficient time for production facilities and distributors to transition to the new SAE standards and sell most if not all of their inventory of J2210 equipment, since SAE released the new J2788 standard in October 2006. EPA will allow sales of J2210 equipment stock manufactured before January 1, 2008. Although certification of new equipment under SAE standard J2788 becomes effective for equipment manufactured or imported after December 31, 2007, EPA suggests that equipment manufacturers transition to the new equipment standard as soon as feasible. IV. Revision to Equipment Certification Mailing Address EPA Regional Offices maintain the MVAC refrigerant handling equipment certification forms sent by equipment owners, but the current regulations require equipment purchasers to mail the form to EPA Headquarters. EPA Headquarters then must fax or mail every equipment certification to the appropriate region, based on the equipment owner's place of business. To streamline this process, EPA is amending § 82.42 so that equipment owners may send their certification forms directly to the appropriate EPA region. V. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review This action is not a “significant regulatory action” under the terms of Executive Order

(EO)12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under the EO. B. Paperwork Reduction Act This action does not impose any new information collection burden. The recordkeeping and reporting requirements included in this action are already included in an existing information collection burden. This action does not make any changes that would affect burden. However, the Office of Management and Budget

(OMB)has previously approved the information collection requirements contained in the existing regulations, 40 CFR part 82, under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 *et seq.* and has assigned OMB control number 2060-0247, EPA ICR number 1617.05. A copy of the OMB approved Information Collection Request

(ICR)may be obtained from Susan Auby, Collection Strategies Division; U.S. Environmental Protection Agency (2822T); 1200 Pennsylvania Ave., NW., Washington, DC 20460 or by calling

(202)566-1672. A copy may also BE downloaded from *http://www.regulations.gov.* Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9. C. Regulatory Flexibility Act The RFA generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of today's rule on small entities, small entity is defined as:

(1)A small business as defined by the Small Business Administration's

(SBA)regulations at 13 CFR 121.201;

(2)a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and

(3)a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field. After considering the economic impacts of today's rule on small entities, we certify that this action will not have a significant economic impact on a substantial number of small entities. As MVAC service shop owners replace end-of-life refrigerant handling equipment, owners will purchase equipment certified to the new SAE standard. D. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements. EPA has determined that this rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. Today's rule does not affect State, local, or tribal governments. The impact of this rule on the private sector will be less than $100 million per year. Thus, today's rule is not subject to the requirements of sections 202 and 205 of the UMRA. EPA has determined that this rule contains no regulatory requirements that might significantly or uniquely affect small governments. These changes being made by this action are to update EPA's reference to the new SAE standards. E. Executive Order 13132: Federalism Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” This action does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. The changes being made by this action are to update EPA's reference to the new SAE standards. Thus, Executive Order 13132 does not apply to this rule. F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 6, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This final rule does not have tribal implications, as specified in Executive Order 13175. It does not significantly or uniquely affect the communities of Indian tribal governments, because this regulation applies directly to facilities that use these substances and not to governmental entities. Thus, Executive Order 13175 does not apply to this rule. G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks Executive Order 13045: “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997) applies to any rule that:

(1)Is determined to be “economically significant” as defined under Executive Order 12866, and

(2)concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This rule is not subject to Executive Order 13045 because it is based on technology performance and not on health or safety risks. H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not a significant regulatory action under Executive Order 12866. I. National Technology Transfer and Advancement Act As noted in the proposed rule, Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104-113, Section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This rulemaking explicitly references technical standards; EPA uses the SAE revision versions of J2210. These standards can be obtained from *http://www.sae.org/technical/standards/.* J. Congressional Review Act The Congressional Review Act, 5 U.S.C. 801 *et seq.* , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the **Federal Register** . A Major rule cannot take effect until 60 days after it is published in the **Federal Register** . This action is not a “major rule” as defined by 5 U.S.C. 804(2). This rule will be effective December 31, 2007. List of Subjects in 40 CFR Part 82 Environmental protection, Motor vehicle air-conditioning, Recover/recycle equipment, Recover/recycle/recharge equipment, Reporting and certification requirements, Stratospheric ozone layer. Dated: November 2, 2007. Stephen L. Johnson, Administrator. For the reasons set out in the preamble, 40 CFR Part 82 is amended as follows: PART 82—PROTECTION OF STRATOSPHERIC OZONE 1. The authority citation for part 82 continues to read as follows: Authority: 42 U.S.C. 7414, 7601, 7671-7671q. Subpart B—Servicing of Motor Vehicle Air Conditioners 2. Section 82.34 is amended by adding a new paragraph

(e)to read as follows: § 82.34 Prohibitions and required practices.

(e)Refrigerant handling equipment manufactured or imported for use during the maintenance, service or repair of MVACs for consideration cannot be introduced into interstate commerce unless meeting the requirements of § 82.36. 3. Section 82.36 is amended by revising the section heading and paragraph (a)(4) to read as follows: § 82.36 Approved refrigerant handling equipment.

(a)* * *

(4)Effective January 1, 2008, equipment that recovers and recycles HFC-134a refrigerant and equipment that recovers and recycles HFC-134a refrigerant and recharges systems with HFC-134a refrigerant must meet the standards set forth in Appendix C of this subpart based upon J2788—HFC-134a (R-134a) Recovery/Recycling Equipment and Recovery/Recycling/Recharging for Mobile Air-Conditioning Systems. 4. Section 82.42 is amended by revising paragraph (a)(1)(iii) to read as follows: § 82.42 Certification, recordkeeping and public notification requirements.

(a)* * *

(1)* * *

(iii)The manufacturer name and equipment model number, the date of manufacture, and the serial number of the equipment. The certification must also include a statement that the equipment will be properly used in servicing motor vehicle air conditioners, that each individual authorized by the purchaser to perform service is properly trained and certified in accordance with § 82.40, and that the information given is true and correct.

(A)Owners or lessees of recycling or recovery equipment having their places of business in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont must send their certifications to: CAA section 609 Enforcement Contact; EPA Region I; Mail Code SEA; JFK Federal Building; One Congress Street, Suite 1100; Boston, MA 02114-2023.

(B)Owners or lessees of recycling or recovery equipment having their places of business in New York, New Jersey, Puerto Rico, Virgin Islands must send their certifications to: CAA section 609 Enforcement Contact; EPA Region II (2DECA-AC); 290 Broadway, 21st Floor; New York, NY 10007-1866.

(C)Owners or lessees of recycling or recovery equipment having their places of business in Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia must send their certifications to: CAA section 609 Enforcement Contact; EPA Region III—Wheeling Operations Office; Mail Code 3AP12; 303 Methodist Building; 11th and Chapline Streets; Wheeling, WV 26003.

(D)Owners or lessees of recycling or recovery equipment having their places of business in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee must send their certifications to: CAA section 609 Enforcement Contact; EPA Region IV (APT-AE); Atlanta Federal Center; 61 Forsyth Street, SW.; Atlanta, GA 30303.

(E)Owners or lessees of recycling or recovery equipment having their places of business in Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin must send their certifications to: CAA section 609 Enforcement Contact, EPA Region V (AE17J); 77 West Jackson Blvd.; Chicago, IL 60604-3507.

(F)Owners or lessees of recycling or recovery equipment having their places of business in Arkansas, Louisiana, New Mexico, Oklahoma, Texas must send their certifications to: CAA section 609 Enforcement Contact; EPA Region VI (6EN-AA); 1445 Ross Avenue, Suite 1200; Dallas, Texas 75202.

(G)Owners or lessees of recycling or recovery equipment having their places of business in Iowa, Kansas, Missouri, Nebraska must send their certifications to: CAA section 609 Enforcement Contact; EPA Region VII; Mail Code APCO/ARTD; 901 North 5th Street; Kansas City, KS 66101.

(H)Owners or lessees of recycling or recovery equipment having their places of business in Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming must send their certifications to: CAA section 609 Enforcement Contact, EPA Region VIII, Mail Code 8ENF-T, 999 18th Street, Suite 500, Denver, CO 80202-2466.

(I)Owners or lessees of recycling or recovery equipment having their places of business in American Samoa, Arizona, California, Guam, Hawaii, Nevada must send their certifications to: CAA section 609 Enforcement Contact; EPA Region IX; Mail Code AIR-5; 75 Hawthorne Street; San Francisco, CA 94105.

(J)Owners or lessees of recycling or recovery equipment having their places of business in Alaska, Idaho, Oregon, Washington must send their certifications to: CAA section 609 Enforcement Contact; EPA Region X (OAQ-107); 1200 Sixth Avenue; Seattle, WA 98101. Subpart B—Servicing of Motor Vehicle Air Conditioners 5. Appendix C to Subpart B is revised to read as follows: Appendix C to Subpart B of Part 82—SAE J2788 Standard for Recovery/Recycle and Recovery/Recycle/Recharging Equipment for HFC-134a Refrigerant Foreword This Appendix establishes the specific minimum equipment requirements for the recovery/recycling of HFC-134a that has been directly removed from, and is intended for reuse in, mobile air-conditioning systems and recovery/recycling and system recharging of recycled, reclaimed or virgin HFC-134a. Establishing such specifications will ensure that system operation with recycled HFC-134a will provide the same level of performance and durability as new refrigerant. 1. Scope The purpose of this SAE Standard is to establish the specific minimum equipment performance requirements for recovery and recycling of HFC-134a that has been directly removed from, and is intended for reuse in, mobile air-conditioning (A/C) systems. It also is intended to establish requirements for equipment used to recharge HFC-134a to an accuracy level that meets Section 9 of this document and SAE J2099. The requirements apply to the following types of service equipment and their specific applications. a. Recovery/Recycling Equipment, b. Recovery/Recycling—Refrigerant Charging, c. Refrigerant Recharging Equipment Only. 1.1 Improved refrigerant recovery equipment is required to ensure adequate refrigerant recovery to reduce emissions and provide for accurate recharging of mobile air conditioning systems. Therefore, 12 months following the publication date of this standard, requirements in this standard supplements and supersedes, SAE J2210. 2. References 2.1 Applicable Publications The following publications form a part of this specification to the extent specified herein. Unless otherwise indicated, the latest issue of SAE publications shall apply. 2.1.1 SAE Publications Available from SAE, 400 Commonwealth Drive, Warrendale, PA 15096-0001, Tel: 877-606-7323 (inside USA and Canada) or 724-776-4970 (outside USA), www.sae.org. SAE J2099 Standard of Purity for Recycled HFC-134a (R-134a) for Use in Mobile Air-Conditioning Systems SAE J2196 Service Hoses for Automotive Air-Conditioning SAE J2197 Service Hose Fittings for Automotive Air-Conditioning SAE J2296 Retest of Refrigerant Container 2.1.2 CGA Publications Available from CGA, 4221 Walney Road, 5th Floor, Chantilly VA 20151-2923, Tel: 703-788-2700, *http://www.cganet.com.* CGA Pamphlet S-1.1 Pressure Relief Device Standard Part 1—Cylinders for Compressed Gases 2.1.3 DOT Publications Available from the Superintendent of Documents, U.S. Government Printing Office, Mail Stop: SSOP, Washington, DC 20402-9320. OT Standard, CFR Title 49, Section 173.304 Shippers—General Requirements for Shipments and Packagings 2.1.4 UL Publications Available from Underwriters Laboratories Inc., 333 Pfingsten Road, Northbrook, IL 60062-2096, Tel: 847-272-8800, *http://www.ul.com.* UL 1769 Cylinder Valves UL 1963 Refrigerant Recovery/Recycling Equipment 3. Specification and General Description 3.1 The equipment must be able to remove and process HFC-134a (R-134a) from mobile A/C systems to the purity level specified in SAE J2099. 3.2 The equipment shall be suitable for use in an automotive service garage environment and be capable of continuous operation in ambients from 10 °C to 49 °C (50 °F to 120 °F). If it is designed to recharge a system, and it uses a scale for this purpose, the scale must demonstrate the ability to maintain accuracy per the test in 10.2. 3.3 The equipment must be certified that it meets this specification by an EPA listed certifying laboratory. 3.4 The equipment shall have a label, which states, “Certified by (Certifying Agent) to Meet SAE J2788 superseding SAE J2210” in bold-type letters a minimum of 3 mm ( 1/8 in) in height. 4. Refrigerant Recycling Equipment Requirements 4.1 Moisture and Acid The equipment shall incorporate a desiccant package that must be replaced before saturation with moisture, and whose mineral acid capacity is at least 5% by weight of the dry desiccant. 4.1.1 The equipment shall be provided with a means of indicating when the filter desiccant moisture capacity has reached the allowable limit and desiccant replacement is required. This may include a reliable means of detecting moisture level or an algorithm based on the amount refrigerant recovered. The user must be clearly alerted to replace the filter prior to the full saturation. Warnings shall be displayed on screens and (printed on printouts where applicable). The warnings must explain that the machine is approaching the end of filter life. The manufacturer must incorporate a lockout when the end of filter life is reached. 4.1.2 The manufacturer shall use an identification system to ensure that a new filter has been installed to reset the machine for operation. 4.2 Filter The equipment shall incorporate an in-line filter that will trap particulates of 15 micron spherical diameter or greater. 4.3 Scale (if used) The scale must maintain accuracy when moved, as per the test in Section 10. 4.4 Purging Noncondensable Gases 4.4.1 The equipment shall automatically purge noncondensables (NCGs), which are primarily air, if the acceptable level is exceeded. NCG removal must be part of the normal operation of the equipment and instructions must be provided to enable the task to be accomplished within 30 min (to reach the refrigerant purity level specified in SAE J2099). 4.4.2 Refrigerant loss from noncondensable gas purging during the testing described in Section 8 shall be minimized by a method that initiates a purge when the machine has not been in use for a period long enough for air-refrigerant separation in the tank to have occurred. 4.5 Recharging and Transfer of Recycled Refrigerant Recycled refrigerant for recharging and transfer shall be taken from the liquid phase only. 5. Safety Requirements 5.1 The equipment must comply with applicable federal, state, and local requirements on equipment related to handling HFC-134a material. Safety precautions or notices related to safe operation of the equipment shall be prominently displayed on the equipment and should also state “CAUTION—SHOULD BE OPERATED BY QUALIFIED PERSONNEL.” 5.2 Under NO CIRCUMSTANCES should any equipment be pressure tested or leak tested with air/HFC-134a mixtures. Do not use compressed air (shop air) or leak detection in systems containing HFC-134a. 6. Operating Instructions 6.1 The equipment manufacturer shall provide a warning in the instruction manual regarding the possibility of refrigerant contamination in the mobile A/C system being serviced. 6.1.1 If recovery/recycle equipment has refrigerant identification equipment, the refrigerant identification equipment shall meet the requirements of SAE J1771. 6.1.2 Recovery/recycling equipment not having refrigerant identification capability shall have instructions in the equipment manual covering possible contamination problems to the equipment and the contamination of the existing recycled refrigerant in the container in the equipment. 6.2 The equipment manufacturer must provide operating instructions, including proper attainment of vehicle system vacuum (i.e., when to stop the extraction process), filter/desiccant replacement, and purging of noncondensable gases (air). Also to be included are any other necessary maintenance procedures, source information for replacement parts and, repair and safety precautions. 6.2.1 The manual shall identify the proper maintaining of hose and seals to prevent the addition of excess air, due to leaks, during the recovery process, which would increase the NCG level in the recovered refrigerant. 6.3 The equipment must prominently display the manufacturer's name, address, the type of refrigerant it is designed to recycle, a service telephone number, and the part number for the replacement filter/drier. 7. Functional Description The ability of the equipment to meet the refrigerant recovery and recharge specifications of this section shall be determined by the test procedures of Section 10. 7.1 The equipment must be capable of continuous operation in ambient temperatures of 10 °C (50 °F) to 49 °C (120 °F). Continuous is defined as completing recovery/recycle and recharge (if applicable) operations with no more than a brief reset period between vehicles, and shall not include time delays for allowing a system to outgas (which shall be part of the recovery period provided by this standard). Continuous may include time out for an air purge if necessary, although it is understood that extended equipment-off time is preferred to allow NCG and refrigerant separation in the supply tank for optimum results. 7.1.1 The equipment shall be capable of removing a minimum of 95.0% of the refrigerant from the test system in 30 minutes or less, without external heating, or use of any device (such as shields, reflectors, special lights, etc.) which could heat components of the system. The recovery procedures shall be based on 21 to 24 °C (70 to 75 °F) ambient temperature. The test system for qualifying shall be a 1.4 kg (3.0 lbs) capacity orifice tube/accumulator system in a 2005 Chevrolet Suburban with front and rear A/C, or the test option described in 10.5, and shall be determined by accurately weighing the recovery machine with the resolution and accuracy of within 3 g (.006 lb) in the range of the machine's weight. The laboratory shall maintain records of the vehicle, including its VIN (vehicle identification number). 7.1.2 However, the preceding shall not preclude a brief period of engine operation at fast idle (up to 15 minutes, up to 2000 rpm) to circulate refrigerant and oil, and provide some engine and warm-up of A/C refrigeration components. The laboratory shall monitor coolant temperature per the vehicle engine coolant temperature sensor, and coolant temperature shall not be allowed to exceed 105 °C (221 °F). The time required shall not be included in the total time of 30 minutes set forth in 7.1.1. 7.1.3 The refrigerant that is recovered, following oil separation, shall be measured and the quantity displayed, accurate to within ±30 g (1.0 oz). The equipment must include a provision for checking the accuracy, per the requirements of 9.1. 7.2 During recovery operation, the equipment shall provide overfill protection to assure that the liquid fill of the storage container (which may be integral or external) does not exceed 80% of the tank's rated volume at 21 °C per Department of Transportation

(DOT)Standard, CFR Title 49, Section 173.304 and the American Society of Mechanical Engineers. 7.3 Portable refillable tanks or containers used in conjunction with this equipment must be labeled “HFC-134a (R-134a),” meet applicable Department of Transportation

(DOT)or Underwriters Laboratories

(UL)Standards, and shall incorporate fittings per SAE J2197. 7.3.1 The cylinder valve shall comply with the standard for cylinder valves, UL 1769. 7.3.2 The pressure relief device shall comply with the Pressure Relief Device Standard Part 1—Cylinders for Compressed Gases, CGA Pamphlet S-1.1. 7.3.3 The tank assembly shall be marked to indicate the first retest date, which shall be 5 years after the date of manufacture. The marking shall indicate that retest must be performed every subsequent 5 years. SAE J2296 provides an inspection procedure. The marking shall be in letters at least 6 mm ( 1/4 in) high. 7.3.4 ASME tanks as defined in UL-1963 may be used and are exempt from the retest requirements. 7.3.5 If the machine is designed for recharging, and the marketer permits use of a non-refillable refrigerant tank, the machine shall include a way to ensure refrigerant remaining in the tank (called the “heel”) to no more than 2% of tank rated capacity when the tank is indicated to be empty. This may be done by the machine marketer as follows: • Specify a non-venting procedure, to minimize the amount of unused refrigerant remaining in the tank. The machine shall include any devices required for the procedure, other than ordinary service shop tools and supplies, and include in the operator's manual, any instructions. • Provide an automatic or (with instructions in the operator's manual) semi-automatic non-venting procedure with the machine. The laboratory shall test for the 2% capability. For testing purposes it may use a refillable tank, minimum 15 lb capacity (6.8 kg) containing a minimum of 7.5 lbs (3.4 kg) refrigerant. The test is as follows: a. Weigh the tank at the start of the test, on a scale accurate to plus/minus 3 grams, to ensure it contains sufficient refrigerant. b. Operate the machine to remove refrigerant from the tank, charging into a holding container until the tank is indicated to be empty. Continue with the marketer's recommended procedure for the 2% capability. c. Weigh the tank, on a scale accurate to plus/minus 3 grams. d. Using the recovery compressor and/or a vacuum pump, draw the tank into a vacuum of 9 to 10 inches Mercury (225 to 250 mm Mercury). The tank must hold that vacuum with a decay of less than 10% in 10 minutes. If vacuum decays 10% or more, the procedure shall be repeated as necessary to ensure the tank is empty. e. Weigh the tank on a scale accurate to plus/minus 3 grams. The difference in weight from Steps 3 to 5 shall be within 2% of the weight of the amount of refrigerant that is the tanks rated capacity. f. This test may be performed at the conclusion of testing in 10.4 or 10.5. If the machine passes or has passed all other testing in this standard, the marketer may make modifications in procedure and/or machine operation and retest once at a later date, within 90 days. If the machine fails the retest, the machine must be completely retested per this standard, or may be certified per the following alternative. The marketer of the machine may specify use of a non-refillable refrigerant tank that provides for recycling and/or disposal of the residual refrigerant, in either case in a manner that does not vent. Or the marketer may exclude use of a one-way container, in the machine's operating instructions. 7.4 All flexible hoses must comply with SAE J2196. 7.5 Service hoses must have shutoff devices located at the connection point to the system being serviced. Any hoses or lines connected to refrigerant containers on or in the machine also shall have shutoff devices at the connection points, so that the containers may be changed without loss of refrigerant. A tank that is a permanent installation is exempt from this requirement. 7.6 The equipment shall separate oil from the refrigerant, measure the amount accurate to 20 ml (0.7 oz.), so the technician has an accurate basis for adding oil to the system. 7.6.1 This statement shall be predominately identified in the equipment service manual. Note: Use only new lubricant to replace the amount removed during the recycling process. Used lubricant should be discarded per applicable federal, state and local requirements. 8. Testing This test procedure and its requirements are to be used to determine the ability of the recycling equipment to adequately recycle contaminated refrigerant. 8.1 The equipment shall be able to clean the contaminated refrigerant in § 8.3 to the purity level defined in SAE J2099. 8.2 The equipment shall be operated in accordance with the manufacturer's operating instructions. 8.3 Contaminated HFC-134a (R-134a) Sample 8.3.1 The standard contaminated refrigerant shall consist of liquid HFC-134a with 1300 ppm (by weight) moisture (equivalent to saturation at 38 °C, 100 °F), 45000 ppm (by weight) HFC-134a compatible lubricant, and 1000 ppm (by weight) of noncondensable gases (air). 8.3.1.1 The HFC-134a compatible lubricant referred to in 8.3.1, shall be polyalkylene glycol (PAG), ISO 100 such as UCLN or PAG ISO 46-55, such as Idemitsu or equivalent, which shall contain no more than 1000 ppm by weight of moisture. 8.3.1.2 Although the test lubricant is a PAG, to conform to that used in the test vehicle system, the equipment manufacturer also shall ensure that it is compatible with polyol ester lubricant, such as ND 11 as used in electrically driven compressors in some hybrid vehicles. 8.4 Test Cycle 8.4.1 The equipment must be preconditioned by processing 13.6 kg (30 lb) of the standard contaminated HFC-134a at an ambient of 21 to 24 °C (70 to 75 °F) before starting the test cycle. 1.13 kg (2.56 lb) samples are to be processed at 5 min intervals. The test fixture, depicted in Figure 1, shall be operated at 21 to 24 °C (70 to 75 °F). BILLING CODE 6560-50-P ER09NO07.001 BILLING CODE 6560-50-C 8.4.2 Following the preconditioning procedure per 8.4.1, 18.2 kg (40 lb) of standard contaminated HFC-134a are to be processed by the equipment. 8.5 Sample Requirements 8.5.1 Samples of the standard contaminated refrigerant from 8.3.1 shall be processed as required in 8.6 and shall be analyzed after said processing as defined in 8.7, 8.8, and 8.9. Note exception for noncondensable gas determination in 8.9.4. 8.6 Equipment Operating Ambient 8.6.1 The HFC-134a is to be cleaned to the purity level, as defined in SAE J2099, with the equipment operating in a stable ambient of 10, 21, and 49 °C (50, 70 and 120 °F) while processing the samples as defined in 8.4. 8.7 Quantitative Determination of Moisture 8.7.1 The recycled liquid phase sample of HFC-134a shall be analyzed for moisture content via Karl Fischer coulometric titration, or an equivalent method. The Karl Fischer apparatus is an instrument for precise determination of small amounts of water dissolved in liquid and/or gas samples. 8.7.2 In conducting this test, a weighed sample of 30 to 130 g is vaporized directly into the Karl Fischer anolyte. A coulometric titration is conducted and the results are reported as parts per million moisture (weight). 8.8 Determination of Percent Lubricant 8.8.1 The amount of lubricant in the recycled HFC-134a sample shall be determined via gravimetric analysis. The methodology must account for the hygroscopicity of the lubricant. 8.8.2 Following venting of noncondensable gases in accordance with the manufacturer's operating instructions, the refrigerant container shall be shaken for 5 min prior to extracting samples for testing. 8.8.3 A weighed sample of 175 to 225 g of liquid HFC-134a is allowed to evaporate at room temperature. The percent lubricant is calculated from weights of the original sample and the residue remaining after evaporation. 8.9 Noncondensable Gases—Testing for Amount 8.9.1 The amount of noncondensable gases shall be determined by gas chromatography. A sample of vaporized refrigerant liquid shall be separated and analyzed by gas chromatography. A Porapak Q column at 130 °C (266 °F) and a hot wire detector may be used for the analysis. 8.9.2 This test shall be conducted on liquid phase samples of recycled refrigerant taken from a full container as defined in 7.2 within 30 min following the proper venting of noncondensable gases. 8.9.3 The liquid phase samples in 8.9.2 shall be vaporized completely prior to gas chromatographic analysis. 8.9.4 This test shall be conducted at 10 and 49 °C (50 and 120 °F) and may be performed in conjunction with the testing defined in 8.6. The equipment shall process at least 13.6 kg (30 lb) of standard contaminated refrigerant for this test. 8.9.5 The equipment shall be capable of charging refrigerant into systems with various lubrication types and shall deliver less than 1% by weight residual oil during system charge if the machine permits oil charging with refrigerant (due to residual oil in the service hoses and recovery unit refrigerant circuit from prior recovery, diagnostics and oil injection. This shall be determined during SAE J2099 testing.) 9. Recharging the System 9.1 It is the responsibility of the equipment manufacturer to ensure that the vacuum removal performance leaves the system 98% free of NCGs before recharging, following recovery and recycle under the provisions of this document. The equipment must be capable of both indicating and recharging the system to within 15 g (0.50 oz) of vehicle manufacturer's specifications. The laboratory shall test for this capability by choosing a charge amount that is within the range of the vehicle manufacturer's specifications. The equipment must indicate and charge the system with that chosen amount, within ±15 g (0.5 oz). Example: If 500 g is chosen, the actual and indicated charge must be 485 to 515 g, with any difference between actual and indicated charge within the laboratory scale accuracy requirements of this standard. If a scale is used in the machine, the equipment manufacturer shall provide a method or service for the technician to check scale accuracy, and include any necessary accuracy-checking device (such as a calibration weight(s)) with the machine. If a mass flow system is used for charge determination, it must maintain accuracy equal to the 15 g (0.50 oz) specification. The equipment manufacturer shall provide a method for checking accuracy and include any necessary accuracy testing device(s) with the machine. If the accuracy testing device(s) for a scale or mass flow machine includes a consumable, the manufacturer shall include a quantity of replacement or refill devices for five years of periodic testing as recommended. 9.2 If any other system is used for charge determination, such as a positive displacement pump, the equipment manufacturer shall provide a method and any needed device(s) to check accuracy that is/are appropriate for its method of operation, including any temperature-compensating trim if used. 10. Equipment Test Procedure by Laboratory for Recovery/Recycling and Recovery/Recycling/Recharging Machines 10.1 Preliminary: Ambient (in shop) temperature shall be 21 to 24 °C (70 to 75 °F). Test vehicle shall be “overnight cold” (not run for at least eight hours). 10.2 The machine must have a self-contained provision for checking accuracy of the indicated amount of refrigerant recovered in liquid or vapor or mixture form(s) from a vehicle system and (if applicable) charged into a vehicle, and adjusting if necessary, to meet requirements of 9.1, 9.2. Therefore: If the machine uses a scale for that purpose, check the accuracy of that scale and make any adjustment if necessary. If an alternative method of measuring refrigerant is used, follow the equipment manufacturer's procedure for ensuring accuracy. Next, move the machine, such as by rolling it, along the floor, a minimum of 20 feet (6.1 meters) within 10 seconds. Follow with the test procedure in 10.3, then 10.4 or 10.5. 10.3 Test Procedure If desired, this test procedure may be preceded by engine/system operation for up to 15 minutes, up to 2000 rpm. 1. You must start with an empty system, using this method:

(a)Operate machine to recover refrigerant, per equipment manufacturer's instructions.

(b)Deep-vacuum system to a minimum of 710 mm (28 in) of mercury.

(c)Monitor vacuum for decay, checking every 20 minutes. If decay exceeds 75 mm (3 in), deep vacuum the system again. When system holds 710 mm (28 in) +0/-75 mm (3 in) of mercury vacuum for three hours, it is considered empty. 2. Place machine on a platform scale with the capacity to weigh the recovery/recycle/recharge machine, and with the resolution and accuracy of within ±3 g (.006 lb) in the range of the machine's weight. Weight should include the machine's service hoses draped over the machine, and with the machine's oil reservoir removed. If necessary to add oil to vehicle system as a result of a system operation preparatory to the recovery process, inject the needed quantity through the service valve at this time. 3. Record weight of machine in as weight A. 4. Reconnect service hoses to the test vehicle. 5. Follow the equipment manufacturer's specified procedure for charging the vehicle manufacturer's recommended amount of refrigerant into the system. Note: if this does not apply to the machine under test, *i.e.* a recovery/recycling only machine, the use of charging equipment that meets this standard and the platform scale shall be used to verify the accuracy of the charge. 6. Disconnect the service hoses from the test vehicle and drape them on the machine. Check and record the weight of the machine. Record this weight as weight B. The difference between weight A and weight B should be equal to the recommended charge that was installed per the machine's display, within 15 g (0.5 oz). If the difference is greater than 15 g (±3 g), the machine fails the charge accuracy test, and no other tests shall be performed at that time. The manufacturer must document changes made to improve accuracy and furnish them to the laboratory prior to a new test. Exception: If the maximum deviation is no more than a total of 20 g, the calibration of the scale or other measuring system may be rechecked and readjusted once, and the entire test repeated just once. 10.4 Recovery Test Using a Vehicle 1. Following a successful system charge, the system and engine shall be run for 15 minutes at 2000 rpm to circulate oil and refrigerant, following which engine and system shall rest for eight hours. Then the laboratory may begin the recovery test. If the machine manufacturer specifies, operate the engine/system for up to 15 minutes, at up to 2000 rpm, then shut off engine/system. 2. If the machine has an automatic air purge, disable it. Check the weight of the machine with the platform scale (service hoses draped over machine, oil reservoir removed). Record the number as Weight C. Reinstall oil reservoir if it had been removed in the recovery procedure. 3. Start timer. Connect service hoses to system of test vehicle and perform recovery per the equipment manufacturer's instructions. The vehicle system service valves' cores must remain in the fittings for this procedure. 4. When recovery is completed, including from service hoses if that is part of the recommended procedure, disconnect hoses and drape over machine. Stop timer. The elapsed time shall be 30.0 minutes or less. If it is in excess of this time, the machine fails the test and no retest is allowed. The manufacturer must document changes made to the machine to improve its performance before a new test is allowed, and furnish them to the laboratory. 5. If the recovery is completed in no more than the 30.0 minutes, measure the oil level in the reservoir, remove the reservoir and then determine the amount of refrigerant recovered, as detailed in Nos. 6 and 7: As measured by the machine and also by noting the weight of the platform scale, which shall be recorded as Weight D. 6. The platform scale shall indicate that a minimum of 95% of the amount charged into the system has been recovered. If the platform scale indicates a lower percentage has been recovered, the machine fails the recovery test. 7. The machine display shall indicate that a minimum of 95.0% of the amount charged into the system has been recovered, within a tolerance of ±30 g (1 oz) when compared with the platform scale (Weight D minus Weight C). The 30 g (1 oz) tolerance may produce a machine display reading that is below the 95.0% recovery. If a greater difference between machine and platform scale occurs, the machine fails the recovery test. 10.5 Recovery Test Fixture Test Option If an equipment manufacturer chooses, as an alternative to the actual vehicle, it may certify to SAE J2788 with a laboratory fixture that is composed entirely of all the original equipment parts of a single model year for the 3.0 lb capacity front/rear A/C system in the 2005-07 Chevrolet Suburban. All parts must be those OE-specified for one model year system and no parts may be eliminated or bypassed from the chosen system, or reproduced by a non-OE source. No parts may be added and/or relocated from the OE position in the 2005-07 Suburban. No parts may be modified in any way that could affect system performance for testing under this standard, except adding refrigerant line bends and/or loops to make the system more compact. Reducing the total length of the lines, however, is not permitted. The fixture system shall be powered by an electric motor, run at a speed not to exceed 2000 rpm, and for this test option, no system warm-up or equivalent procedure may be used. The certifying laboratory shall maintain records of all parts purchased, including invoices and payments. The assembly of the parts shall, as an outside-the-vehicle package, duplicate the OE system and its routing, including bends, except for permitted additions of bends and/or loops in refrigerant lines. Aside from the absence of engine operation and the limitations posed by the standard and the use of the electric motor, the test shall otherwise be the same as the test on the Suburban, including test temperature. [FR Doc. E7-21943 Filed 11-8-07; 8:45 am] BILLING CODE 6560-50-P FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 27 [DA 07-4378] Amendment of Commission Rules—Competitive Bidding Order; Correction AGENCY: Federal Communications Commission, Wireless Telecommunication Bureau. ACTION: Correcting amendments. SUMMARY: The Wireless Telecommunications Bureau of the Federal Communications Commission is correcting a final rule that appeared in the **Federal Register** of Tuesday, July 9, 2002 (67 FR 45362). That final rule inadvertently removed provisions of § 27.502 of the Federal Communication Commission's rules, regarding bidding credit percentages for eligible designated entities bidding on licenses in the 746-764 MHz and 776-794 MHz Bands. This document corrects the final regulations by restoring the substance of the removed provisions. DATES: Effective on November 9, 2007. FOR FURTHER INFORMATION CONTACT: Erik Salovaara, 202-418-7582. SUPPLEMENTARY INFORMATION: This is a summary of the Wireless Telecommunications Bureau Erratum, DA 07-4378, released on October 24, 2007. The Order that is the subject of these correcting amendments served to eliminate redundant or unnecessary rules from the Code of Federal Regulations. The Order amended the Commission's rules on competitive bidding to further the Bureau's continuing efforts to streamline its procedures in accordance with the Commission's biennial regulatory review obligations set forth at section 11(a) of the Communications Act of 1934, as amended. As published, the amended 47 CFR 27.502, which renumbered original § 27.502(a)(6) as § 27.502(c), inadvertently omitted the substance of the original § 27.502(c), regarding bidding credit percentages. Subsequently, the Commission removed the new § 27.502(c). This correction restores the original § 27.502(c) as § 27.502(b), and renumbers the remaining paragraphs of § 27.502 (i.e., the current paragraphs

(a)and (b)) as §§ 27.502(a)(1) and 27.502(a)(2). In addition, the Commission take this opportunity to update cross-references to 47 CFR 1.2110(e)(2)(ii) and 1.2110(e)(2)(iii) appearing in the original 47 CFR 27.502(c) to reflect the intervening renumbering of the cross-referenced material as 47 CFR 1.2110(f)(2)(ii) and 1.2110(f)(2)(iii). List of Subjects in 47 CFR Part 27 Communications common carriers, Radio. Accordingly, 47 CFR part 27 is corrected by making the following correcting amendments: PART 27—MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES 1. The authority citation for part 27 continues to read as follows: Authority: 47 U.S.C. 154, 301, 302, 303, 307, 309, 336 and 337 unless otherwise noted. 2. Revise § 27.502 to read as follows: § 27.502 Designated entities. Eligibility for small business provisions: (a)(1) A small business is an entity that, together with its controlling interests and affiliates, has average gross revenues not exceeding $40 million for the preceding three years.

(2)A very small business is an entity that, together with its controlling interests and affiliates, has average gross revenues not exceeding $15 million for the preceding three years.

(b)*Bidding credits* . A winning bidder that qualifies as a small business or a consortium of small businesses as defined in this section may use the bidding credit specified in § 1.2110(f)(2)(iii) of this chapter. A winning bidder that qualifies as a very small business or a consortium of very small businesses as defined in this section may use the bidding credit specified in § 1.2110(f)(2)(ii) of this chapter. Federal Communications Commission. Gary D. Michaels, Deputy Chief, Auctions and Spectrum Access Division, WTB. [FR Doc. E7-22046 Filed 11-8-07; 8:45 am] BILLING CODE 6712-01-P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 679 [Docket No. 0612242862-7534-03; I.D. 013006I] RIN 0648-AU93 Fisheries of the Exclusive Economic Zone Off Alaska; Groundfish, Crab, Salmon, and Scallop Fisheries of the Bering Sea and Aleutian Islands Management Area and Gulf of Alaska, Essential Fish Habitat Rule Correction AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Final rule. SUMMARY: NMFS issues a final rule to correct regulations implementing essential fish habitat

(EFH)provisions for Alaska fisheries. This final rule clarifies that portions of EFH management areas in the vicinity of the Aleutian Islands are located in State of Alaska (State) waters. This rule also applies EFH vessel monitoring system

(VMS)and closure requirements to federally permitted vessels operating in State waters adjacent to the Gulf of Alaska

(GOA)and Aleutian Islands subarea. This action is necessary to ensure that federally permitted vessels operating in State waters comply with EFH protection measures. DATES: Effective on December 10, 2007. ADDRESSES: Copies of the maps of EFH and habitat areas of particular concern

(HAPC)management areas, the Environmental Impact Statement for EFH Identification and Conservation (EFH EIS), the Environmental Assessment/Regulatory Impact Review/Initial Regulatory Flexibility Analysis (EA/RIR/IRFA) for HAPCs, the draft EA/RIR/IRFA for Bering Sea Habitat Conservation, and the Final Regulatory Flexibility Analysis

(FRFA)for this action may be obtained from Alaska Region NMFS, P.O. Box 21668, Juneau, AK 99802, or from the Alaska Region NMFS website at *http://www.fakr.noaa.gov* . Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this final rule may be submitted to the NMFS Alaska Region and by e-mail to *David_Rostker@omb.eop.gov* , or fax to

(202)395-7285. FOR FURTHER INFORMATION CONTACT: Melanie Brown, 907-586-7228 or e-mail at *melanie.brown@noaa.gov* . SUPPLEMENTARY INFORMATION: The groundfish, crab, scallop, and salmon fisheries in the exclusive economic zone

(EEZ)off Alaska are managed under their respective fishery management plans (FMPs). The North Pacific Fishery Management Council (Council) prepared the FMPs under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), 16 U.S.C. 1801, *et seq.* Regulations implementing the FMPs appear at 50 CFR parts 679 and 680. General regulations governing U.S. fisheries also appear at 50 CFR part 600. The final rule for the EFH protection measures (71 FR 36694, June 28, 2006) excluded State of Alaska waters under the EFH protection measures by not fully describing the areas where the EFH protection measures apply. This final rule corrects this error by fully describing waters where EFH protection measures apply. Background Background on the EFH provisions of the FMPs and regulatory amendments is in the proposed rule for this action (72 FR 33732, June 19, 2007). Several corrections to the EFH protection measures are necessary to ensure EFH protection measures in State waters apply to federally permitted vessels operating in these waters. These corrections are detailed below. Protection Area Definitions Current regulations at § 679.2 contain definitions for the Aleutian Islands Habitat Conservation Area (AIHCA) and the Aleutian Islands Coral Habitat Protection Areas (AICHPA), which are described by coordinates listed in Tables 23 and 24 to 50 CFR part 679. Each table includes coordinates for locations within State waters, as intended by the Council and described in the EFH FMP amendments. The current regulatory definitions for these management areas conflict with the FMP amendments and Tables 23 and 24 by describing the areas as part of the Aleutian Islands subarea. The Aleutian Islands subarea is limited to waters of the EEZ, which do not include State waters (§ 679.2). To ensure that the definitions are consistent with the Council's intent, the FMP amendments, and Tables 23 and 24, § 679.2 is revised to define the AIHCA and AICHPA as located in reporting areas of the Aleutian Islands, including adjacent State waters. This revision ensures that the AIHCA and AICHPA management measures apply to federally permitted vessels operating in the EEZ and in State waters. VMS Requirements Current regulations at § 679.28(f)(6) require all federally permitted fishing vessels to operate a VMS when operating in the Aleutian Islands subarea or when operating in the GOA with mobile bottom contact gear onboard. The Council intended that the VMS requirements would apply to all federally permitted vessels operating in State or Federal waters. Specifically, the EFH rule should have required VMS operation for all federally permitted vessels operating in Federal waters of the Aleutian Islands subarea or adjacent State waters and operating with mobile bottom contact gear onboard in the GOA or adjacent State waters. This would ensure that activities in or near the EFH management areas could be easily monitored. As described above, the AIHCA and AICHPA include areas in State waters. The EFH protection areas in the GOA are not located in State waters, but some are near State waters. Because preexisting VMS requirements implemented to monitor Steller sea lion protection areas apply to federally permitted vessels in State waters (§ 679.28), and the Council's intent was to build on existing VMS requirements, the EFH protection measures' VMS requirements also should apply in State waters. Regulations at § 679.28(f)(6)(ii) and

(iii)identify the applicable areas for VMS as the Aleutian Islands subarea and the GOA. Under § 679.2, the Aleutian Islands subarea and GOA definitions do not include State waters. This rule revises these paragraphs by requiring VMS operation in reporting areas of the Aleutian Islands subarea and the GOA, including adjacent State waters. This correction ensures that VMS operation is required for federally permitted vessels operating in Federal waters of the Aleutian Islands subarea or adjacent State waters for all gear types and in Federal waters of the GOA or adjacent State waters when mobile bottom contact gear is onboard. This correction improves monitoring of vessel activities near EFH management areas. Comments and Responses NMFS received one letter on the proposed rule (72 FR 33732, June 19, 2007) that contained two separate comments. The following summarizes and responds to these comments. *Comment 1:* We support the actions taken by NMFS and the Council to protect ocean habitat in Alaska and support the comprehensive use of VMS to manage ocean resources. *Response:* Support is noted. *Comment 2:* Monitoring of trawl activities within the EFH protection areas should extend to pollock trawling because pollock trawls are known to contact the sea floor and may negatively affect habitat in these areas. VMS should be required for all pollock trawl vessels and an annual summary of trawl activities should be produced to monitor the health of EFH protected areas and the effectiveness of the EFH protection measures. *Response:* The EFH EIS (see ADDRESSES ) determined that, given the location and use of pelagic trawl gear in the Aleutian Islands subarea and GOA, pelagic trawl gear is not likely to affect sea floor habitats in the EFH protection areas. The EFH protection areas within the Aleutian Islands subarea and GOA are comprised of either very deep waters or rocky substrate that is avoided by fishers using pelagic trawl gear. The EFH EIS and the draft Bering Sea Habitat Conservation EA (see ADDRESSES ) determined that pelagic trawl gear is likely to contact soft bottom substrate that is prevalent in the Bering Sea, but any effects on EFH for FMP managed species is minimal. Thus, the EFH protection measures were designed to ensure that pelagic trawl gear fisheries will not adversely impact protected habitat areas of the Aleutian Islands and GOA in a manner that is more than minimal or temporary. VMS monitoring is required for all federally permitted vessels fishing for pollock in the Bering Sea and Aleutian Islands management area and GOA and adjacent State waters (§ 679.7(a)(18)). NMFS currently has the ability to use VMS data to determine locations of pelagic trawling in and near EFH management areas and to provide this information to managers and scientists. No changes to the final rule from the proposed rule were made in response to this comment. Classification The Administrator, Alaska Region, NMFS, determined that this final rule is necessary for the conservation and management of the groundfish, scallop, crab, and salmon fisheries, and that it is consistent with the Magnuson-Stevens Act and other applicable laws. This final rule has been determined to be not significant for the purposes of Executive Order (E. O.) 12866. This final rule contains no federalism implications as that term is defined in E. O. 13132. Even though the requirements of this rule apply to federally permitted vessels in State waters, this rule does not supplant any State regulatory requirements. A final regulatory flexibility analysis

(FRFA)was prepared. The FRFA incorporates the IRFA, a summary of the significant issues raised by the public comments in response to the IRFA, NMFS' responses to those comments, and a summary of the analyses completed to support the action. A copy of the FRFA is available from NMFS (see ADDRESSES ). The need for and objectives of this rule are detailed in the preamble. No significant issues were raised by the public comments in response to the IRFA during the public comment periods (June 19 through July 19, 2007 (72 FR 33732, June 19, 2007), and August 2 through September 4, 2007 (72 FR 42369, August 2, 2007)). No changes were made from the proposed rule to the final rule. The vessels that are directly regulated by the proposed action are those that are federally permitted and operate in State waters adjacent to the Aleutian Islands subarea or operate with mobile bottom contact fishing gear onboard in State waters adjacent to the GOA. Vessels were considered small, according to the Small Business Administration criteria, if they had estimated 2004 gross revenues less than or equal to $4 million, and were not known to be affiliated with other firms whose combined receipts exceeded $4 million. In the Aleutian Islands reporting areas, an estimated 88 federally permitted vessels are believed to have been operated by small entities during 2004. Forty-three of these appear to have fished within State waters of the Aleutian Islands during at least one month of the year. Thus, an estimated 43 vessels would be directly regulated by this action in the State waters adjacent to the Aleutian Islands subarea. These 43 vessels grossed, on average, about $964,000 from all fisheries, and an average of about $114,000 from their fishing within State waters, within the Aleutian Islands reporting areas. In the GOA, an estimated 60 federally permitted vessels using mobile bottom contact gear appear to have been operated by small entities during 2004. Twenty-seven of these appear to have fished with mobile bottom contact gear within State waters adjacent to the GOA during at least one month of the year. Thus, an estimated 27 vessels operating with mobile bottom contact onboard would be directly regulated by this action. These 27 vessels grossed, on average, about $660,000 from all fisheries, and an average of about $36,000 from their fishing with mobile bottom contact gear within State waters adjacent to the GOA. Based on these cost estimates, the calculated upper bounds for annual transmission and maintenance costs are $10,617 per year, or $247 per small entity. Thus, average annual costs would be 0.03 percent of total annual revenues from all sources, and 0.2 percent of revenues from fishing within State waters adjacent to the Aleutian Islands subarea. In addition, an entity may need to acquire a VMS unit to comply with this regulation. A VMS unit is estimated to cost $2,174, although a portion of this cost is reimbursable by the Pacific States Marine Fisheries Commission (PSMFC). The analysis estimated that about $1,600 of the initial purchase price would be reimbursable. These cost estimates may be upper bounds for several reasons. For example, some of these vessels may already be subject to VMS regulations because of crab requirements imposed since 2004. Moreover, as noted above, vessels buying VMS to comply with this regulation are eligible for a reimbursement of a portion of the initial purchase price from the PSMFC. Some vessels may choose to avoid the VMS requirement by surrendering their federal permit during periods when they expect to operate only in State waters. Based on these statistics, estimates of the upper bound annual transmission and maintenance costs are $3,952 per year, or $146 per small entity. Thus, average annual costs would be 0.02 percent of total annual gross revenues from all sources, and 0.4 percent of gross revenues from fishing within State waters adjacent to the GOA. In addition, two small entities may be required to acquire VMS units to comply with this regulation. The total cost of this is estimated to be $4,348, or $2,174 per vessel, although the current reimbursement program would offset some of this cost. As discussed in the RIR, there are several reasons for believing that these costs are upper bound estimates. For purposes of the VMS requirement, a federally permitted vessel is one required to carry either a Federal fisheries permit or a Federal crab vessel permit. This action would add new reporting requirements for federally permitted vessels fishing in State waters adjacent to the Aleutian Islands subarea, or for federally permitted vessels with mobile bottom contact gear onboard while operating in State waters adjacent to the GOA. These fishing operations would be required to carry VMS units, and to report their locations every half hour while they were in fisheries subject to the requirement. They also would be required to notify NOAA Office of Law Enforcement

(OLE)that their VMS unit was active before it was used for fishing activity, and in the event of a breakdown of the unit. Estimated costs are described above. There are no Federal rules that duplicate, overlap, or conflict with this action. An FRFA must describe any significant alternatives to the action that accomplish the stated objectives of the action, consistent with applicable statutes, and that would minimize any significant economic impact of the final rule on small entities. This action has only the status quo and the preferred alternative. The status quo does not meet the objectives of the action because the current regulations do not apply EFH closures and VMS requirements to certain federally permitted vessels operating in State waters. As noted in Section 3.2 of the FRFA for this action (see ADDRESSES ), the objectives of this action are to

(1)correct erroneous language contained in current regulations to better reflect the original intent of the Council and to ensure consistency with the FMP amendments and Tables 23 and 24 to 50 CFR part 679, and

(2)facilitate enforcement of EFH closure areas within State waters through the use of VMS equipment by federally permitted vessels operating in State waters adjacent to the Aleutian Islands subarea, and by federally permitted vessels operating with mobile bottom contact gear onboard in State waters adjacent to the GOA. In this way, the action provides for the protection of EFH management areas in State waters adjacent to the Aleutian Islands subarea and GOA, as was the Council's purpose in the original action. The purpose of this action is to correct or clarify regulations to make them reflect the original “preferred alternative” chosen by the Council and the Secretary of Commerce under the previous EFH action. The method of describing the application of EFH regulations to vessels operating in State waters is limited to the current method used for the application of other fishing regulations to vessels operating in State waters. No other methods of describing the application of fishing regulations to vessels operating in State waters are known, and the same method as currently used is preferred to provide consistency in the regulations. Therefore, no other identifiable alternatives exist that would accomplish this objective; and no other alternatives were identified, considered, and rejected. Small Entity Compliance Guide Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. As part of this rulemaking process, NMFS Alaska Region has developed a website that provides easy access to details of this final rule, including links to the final rule, maps of closure areas, and frequently asked questions regarding EFH. The relevant information available on the website is the Small Entity Compliance Guide. The website address is *http://www.fakr.noaa.gov/habitat/efh.htm* . Copies of this final rule are available upon request from the NMFS, Alaska Regional Office (see ADDRESSES ). This final rule contains a collection-of-information requirement subject to the Paperwork Reduction Act

(PRA)and which has been approved by OMB under Control Number 0648-0445. Public reporting burden per response are estimated to average: 6 seconds for each VMS transmission, 12 minutes for VMS check-in form, 6 hours for VMS installation, and 4 hours for VMS annual maintenance. The response times include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection-of-information. Send comments regarding these burden estimates or any other aspect of this data collection, including suggestions for reducing the burden, to NMFS (see ADDRESSES ) and by e-mail to *David_Rostker@omb.eop.gov* , or fax to 202-395-7285. Notwithstanding any other provision of the law, no person is required to respond to, and no person shall be subject to penalty for failure to comply with, a collection-of-information subject to the requirements of the PRA, unless that collection-of-information displays a currently valid OMB control number. List of Subjects in 50 CFR Part 679 Alaska, Fisheries, Recordkeeping and reporting requirements. Dated: November 5, 2007. William T. Hogarth Assistant Administrator for Fisheries, National Marine Fisheries Service. For reasons set out in the preamble, NMFS amends 50 CFR part 679 as follows: PART 679—FISHERIES OF THE EXCLUSIVE ECONOMIC ZONE OFF ALASKA 1. The authority citation for part 679 continues to read as follows: Authority: 16 U.S.C. 773 *et seq.* ; 1801 *et seq.* ; 3631 *et seq.* ; and Pub. L. 108 199, 118 Stat. 110. 2. In § 679.2, revise the definitions for “Aleutian Islands Coral Habitat Protection Areas” and “Aleutian Islands Habitat Conservation Area,” to read as follows: § 679.2 Definitions. *Aleutian Islands Coral Habitat Protection Areas* means management areas established for the protection of certain coral garden areas in reporting areas of the Aleutian Islands subarea and adjacent State waters. See Table 23 to this part. *Aleutian Islands Habitat Conservation Area* means a management area established for the protection of fish habitat in reporting areas of the Aleutian Islands subarea and adjacent State waters. See Table 24 to this part. 3. In § 679.28, paragraphs (f)(6)(ii) and

(iii)are revised to read as follows: § 679.28 Equipment and operational requirements.

(f)* * *

(6)* * *

(ii)You operate a vessel required to be federally permitted in reporting areas located in the Aleutian Islands subarea or operate a federally permitted vessel in adjacent State waters;

(iii)You operate a vessel required to be federally permitted with mobile bottom contact gear onboard in reporting areas located in the GOA or operate a federally permitted vessel with mobile bottom contact gear onboard in adjacent State waters; or [FR Doc. E7-22050 Filed 11-8-07; 8:45 am] BILLING CODE 3510-22-S 72 217 Friday, November 9, 2007 Proposed Rules DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2007-0172; Directorate Identifier 2007-NM-225-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Model A300 B4-600, A300 B4-600R, A300 C4-600R, and A300 F4-600R Series Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: We propose to adopt a new airworthiness directive

(AD)for the products listed above. This proposed AD results from mandatory continuing airworthiness information

(MCAI)originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as: [T]he FAA has published SFAR 88 (Special Federal Aviation Regulation 88). * * * Under this regulation, all holders of type certificates for passenger transport aircraft * * * are required to conduct a design review against explosion risks. The replacement of some types of P-clips and improvement of the electrical bonding of the equipment in the fuel tanks are rendered mandatory by this AD. The unsafe condition is damage to wiring in the wing, center, and trim fuel tanks, due to failed P-clips used for retaining the wiring and pipes, which could result in a possible fuel ignition source in the wing, center, or trim fuel tanks. The proposed AD would require actions that are intended to address the unsafe condition described in the MCAI. DATES: We must receive comments on this proposed AD by December 10, 2007. ADDRESSES: You may send comments by any of the following methods: • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov.* Follow the instructions for submitting comments. • *Fax:*

(202)493-2251. • *Mail:* U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590. • *Hand Delivery:* U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-40, 1200 New Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Examining the AD Docket You may examine the AD docket on the Internet at *http://www.regulations.gov;* or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone

(800)647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Tom Stafford, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)227-1622; fax

(425)227-1149. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2007-0172; Directorate Identifier 2007-NM-225-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments. We will post all comments we receive, without change, to *http://www.regulations.gov,* including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD. Discussion The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2007-0233, dated August 27, 2007 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states: [T]he FAA has published SFAR 88 (Special Federal Aviation Regulation 88). In their letters referenced 04/00/02/07/01-L296, dated March 4th, 2002 and 04/00/02/07/03-L024, dated February 3rd, 2003, the JAA (Joint Aviation Authorities) recommended the application of a similar regulation to the National Aviation Authorities (NAA). Under this regulation, all holders of type certificates for passenger transport aircraft with either a passenger capacity of 30 or more, or a payload capacity of 7,500 pounds (3402 kg) or more, which have received their certification since January 1st, 1958, are required to conduct a design review against explosion risks. The replacement of some types of P-clips and improvement of the electrical bonding of the equipment in the fuel tanks are rendered mandatory by this AD. Note: Initially, EASA AD 2006-0325, which addresses the same unsafe condition, also applied to A300-600 aircraft. The approval holder subsequently introduced additional work at revision 1 of SB (service bulletin) A300-28-6064 applicable to A300-600 aircraft. [On September 21, 2007, the FAA issued parallel AD 2007-20-04 for only Airbus Model A300 Airplanes and Model A310 Airplanes, which was published in the **Federal Register** (72 FR 56258, October 3, 2007).] As a result, AD 2006-0325 has been revised to remove A300-600 aircraft from applicability, and this new AD applicable to A300-600 aircraft is issued. The unsafe condition is damage to wiring in the wing, center, and trim fuel tanks, due to failed P-clips used for retaining the wiring and pipes, which could result in a possible fuel ignition source in the wing, center, or trim fuel tanks. The corrective action is checking the electrical bonding points of certain equipment in the center fuel tank for the presence of a blue coat and doing related investigative and corrective actions if necessary. The related investigative action is to measure the electrical resistance between the equipment and structure, if a blue coat is not present. The corrective action is to electrically bond the equipment, if the measured resistance is greater than 10 milliohms. The corrective action also includes installing new bonding leads and electrical bonding points on certain equipment in the left and right wing fuel tanks and center fuel tank. You may obtain further information by examining the MCAI in the AD docket. The FAA has examined the underlying safety issues involved in fuel tank explosions on several large transport airplanes, including the adequacy of existing regulations, the service history of airplanes subject to those regulations, and existing maintenance practices for fuel tank systems. As a result of those findings, we issued a regulation titled “Transport Airplane Fuel Tank System Design Review, Flammability Reduction and Maintenance and Inspection Requirements” (66 FR 23086, May 7, 2001). In addition to new airworthiness standards for transport airplanes and new maintenance requirements, this rule included Special Federal Aviation Regulation No. 88 (“SFAR 88,” Amendment 21-78, and subsequent Amendments 21-82 and 21-83). Among other actions, SFAR 88 requires certain type design (i.e., type certificate

(TC)and supplemental type certificate (STC)) holders to substantiate that their fuel tank systems can prevent ignition sources in the fuel tanks. This requirement applies to type design holders for large turbine-powered transport airplanes and for subsequent modifications to those airplanes. It requires them to perform design reviews and to develop design changes and maintenance procedures if their designs do not meet the new fuel tank safety standards. As explained in the preamble to the rule, we intended to adopt airworthiness directives to mandate any changes found necessary to address unsafe conditions identified as a result of these reviews. In evaluating these design reviews, we have established four criteria intended to define the unsafe conditions associated with fuel tank systems that require corrective actions. The percentage of operating time during which fuel tanks are exposed to flammable conditions is one of these criteria. The other three criteria address the failure types under evaluation: Single failures, single failures in combination with a latent condition(s), and in-service failure experience. For all four criteria, the evaluations included consideration of previous actions taken that may mitigate the need for further action. The JAA has issued a regulation that is similar to SFAR 88. (The JAA is an associated body of the European Civil Aviation Conference

(ECAC)representing the civil aviation regulatory authorities of a number of European States who have agreed to co-operate in developing and implementing common safety regulatory standards and procedures.) Under this regulation, the JAA stated that all members of the ECAC that hold type certificates for transport category airplanes are required to conduct a design review against explosion risks. We have determined that the actions identified in this AD are necessary to reduce the potential of ignition sources inside fuel tanks, which, in combination with flammable fuel vapors, could result in fuel tank explosions and consequent loss of the airplane. Relevant Service Information Airbus has issued Service Bulletins A300-28-6064, Revision 01, dated April 3, 2007; A300-28-6068, dated July 20, 2005; and A300-28-6077, Revision 01, dated October 26, 2006. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI. FAA's Determination and Requirements of This Proposed AD This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design. Differences Between This AD and the MCAI or Service Information We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information. We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a NOTE within the proposed AD. Costs of Compliance Based on the service information, we estimate that this proposed AD would affect about 114 products of U.S. registry. We also estimate that it would take about 632 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $80 per work-hour. Required parts would cost about $6,870 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these costs. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $6,547,020, or $57,430 per product. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify this proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The FAA amends § 39.13 by adding the following new AD: **Airbus:** Docket No. FAA-2007-0172; Directorate Identifier 2007-NM-225-AD. Comments Due Date

(a)We must receive comments by December 10, 2007. Affected ADs

(b)None. Applicability

(c)This AD applies to the airplanes identified in paragraphs (c)(1) and (c)(2) of this AD.

(1)Airbus Model A300 B4-600 series airplanes (without trim tank), all serial numbers, certificated in any category, except airplanes on which Airbus Modifications 12226, 12365, 12490, and 12308 have been incorporated in production, or Airbus Service Bulletin A300-28-6064, Revision 01, dated April 3, 2007; and A300-28-6068, dated July 20, 2005; have been performed in service.

(2)Airbus Model A300 B4-600R, A300 C4-600R, and A300 F4-600R series airplanes (fitted with a trim tank), all serial numbers, certificated in any category, except airplanes on which Airbus Modifications 12226, 12365, 12490, 12308, 12294, and 12476 have been incorporated in production, or on which the service bulletins listed in paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this AD have been performed in service.

(i)Airbus Service Bulletin A300-28-6064, Revision 01, dated April 3, 2007.

(ii)Airbus Service Bulletin A300-28-6068, dated July 20, 2005.

(iii)Airbus Service Bulletin A300-28-6077, dated July 25, 2005; or A300-28-6077, Revision 01, dated October 26, 2006. Subject

(d)Air Transport Association

(ATA)of America Code 28: Fuel. Reason

(e)The mandatory continuing airworthiness information

(MCAI)states: [T]he FAA has published SFAR 88 (Special Federal Aviation Regulation 88). In their letters referenced 04/00/02/07/01-L296, dated March 4th, 2002 and 04/00/02/07/03-L024, dated February 3rd, 2003, the JAA (Joint Aviation Authorities) recommended the application of a similar regulation to the National Aviation Authorities (NAA). Under this regulation, all holders of type certificates for passenger transport aircraft with either a passenger capacity of 30 or more, or a payload capacity of 7,500 pounds (3402 kg) or more, which have received their certification since January 1st, 1958, are required to conduct a design review against explosion risks. The replacement of some types of P-clips and improvement of the electrical bonding of the equipment in the fuel tanks are rendered mandatory by this AD. Note: Initially, EASA AD 2006-0325, which addresses the same unsafe condition, also applied to A300-600 aircraft. The approval holder subsequently introduced additional work at revision 1 of SB (service bulletin) A300-28-6064 applicable to A300-600 aircraft. [On September 21, 2007, the FAA issued parallel AD 2007-20-04 for only Airbus Model A300 Airplanes and Model A310 Airplanes, which was published in the **Federal Register** (72 FR 56258, October 3, 2007).] As a result, AD 2006-0325 has been revised to remove A300-600 aircraft from applicability, and this new AD applicable to A300-600 aircraft is issued. The unsafe condition is damage to wiring in the wing, center, and trim fuel tanks, due to failed P-clips used for retaining the wiring and pipes, which could result in a possible fuel ignition source in the wing, center, or trim fuel tanks. The corrective action is checking the electrical bonding points of certain equipment in the center fuel tank for the presence of a blue coat and doing related investigative and corrective actions if necessary. The related investigative action is to measure the electrical resistance between the equipment and structure, if a blue coat is not present. The corrective action is to electrically bond the equipment, if the measured resistance is greater than 10 milliohms. The corrective action also includes installing new bonding leads and electrical bonding points on certain equipment in the left and right wing fuel tanks and center fuel tank. Actions and Compliance

(f)Within 40 months after the effective date of this AD, unless already done, do the following actions.

(1)Remove NSA5516-XXND or NSA5516-XXNJ type P-clips, used in the wing and center fuel tanks to retain wiring and pipes, and replace them by NSA5516-XXNF type P-clips in accordance with the instructions of Airbus Service Bulletin A300-28-6068, dated July 20, 2005.

(2)Check the electrical bonding points in the center tank and do all applicable related investigative and corrective actions, and install additional bonding leads and electrical bonding points in the wing and center fuel tanks in accordance with the instructions of Airbus Service Bulletin A300-28-6064, Revision 01, dated April 3, 2007. Do all applicable related investigative and corrective actions before further flight.

(3)For airplanes fitted with a trim tank, in addition to the actions defined in paragraphs (f)(1) and (f)(2) of this AD, install bonding leads and electrical bonding points in the trim tanks, in accordance with the instructions of Airbus Service Bulletin A300-28-6077, Revision 01, dated October 26, 2006.

(4)Actions done before the effective date of this AD in accordance with Airbus Service Bulletin A300-28-6064, dated July 28, 2005, for aircraft under configuration 05, as defined in the service bulletin, are considered acceptable for compliance with the requirements of paragraph (f)(2) of this AD.

(5)Actions done before the effective date of this AD in accordance with Airbus Service Bulletin A300-28-6077, dated July 25, 2005, for aircraft under configuration 05, as defined in the service bulletin, are considered acceptable for compliance with the requirements of paragraph (f)(3) of this AD. FAA AD Differences Note: This AD differs from the MCAI and/or service information as follows: The applicability of the MCAI does not address Airbus Modification 12490. We have added this Modification number to the applicability of this AD, as requested by Airbus and coordinated with the European Aviation Safety Agency (EASA). Other FAA AD Provisions

(g)The following provisions also apply to this AD:

(1)Alternative Methods of Compliance (AMOCs): The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. Send information to ATTN: Tom Stafford, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; Telephone

(425)227-1622; Fax

(425)227-1149. Before using any approved AMOC on any airplane to which the AMOC applies, notify your appropriate principal inspector

(PI)in the FAA Flight Standards District Office (FSDO), or lacking a PI, your local FSDO.

(2)Airworthy Product: For any requirement in this AD to obtain corrective actions from a manufacturer or other source, use these actions if they are FAA-approved. Corrective actions are considered FAA-approved if they are approved by the State of Design Authority (or their delegated agent). You are required to assure the product is airworthy before it is returned to service.

(3)Reporting Requirements: For any reporting requirement in this AD, under the provisions of the Paperwork Reduction Act, the Office of Management and Budget

(OMB)has approved the information collection requirements and has assigned OMB Control Number 2120-0056. Related Information

(h)Refer to MCAI EASA Airworthiness Directive 2007-0233, dated August 27, 2007, and the service information listed in Table 1 of this AD, for related information. Table 1.—Service Information Airbus Service Bulletin Revision level Date A300-28-6064 01 April 3, 2007. A300-28-6068 Original July 20, 2005. A300-28-6077 01 October 26, 2006. Issued in Renton, Washington, on November 2, 2007. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-21997 Filed 11-8-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2007-0171; Directorate Identifier 2007-NM-220-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Model A310 Series Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to supersede an existing airworthiness directive

(AD)that applies to certain Airbus Model A310 series airplanes. The existing AD currently requires modification of certain wires in the right-hand

(RH)wing. This proposed AD would require further modification by installing an additional protection sleeve and segregating route 2S in the RH pylon area. This proposed AD results from analysis of wire routing that revealed that route 2S of the fuel electrical circuit, located in the RH wing, does not provide adequate separation of fuel quantity indication wires from wires carrying 115-volt alternating current (AC). We are proposing this AD to ensure that fuel quantity indication wires are properly separated from wires carrying 115-volt AC. Improper separation of such wires, in the event of wire damage, could lead to a short circuit and a possible ignition source, which could result in a fire in the airplane. DATES: We must receive comments on this proposed AD by December 10, 2007. ADDRESSES: You may send comments by any of the following methods: • *Federal eRulemaking Portal* : Go to *http://www.regulations.gov* . Follow the instructions for submitting comments. • *Fax:* 202-493-2251. • *Mail:* U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590. • *Hand Delivery:* U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this AD, contact Airbus, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France. Examining the AD Docket You may examine the AD docket on the Internet at *http://www.regulations.gov* ; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (telephone 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Tom Stafford, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)227-1622; fax

(RH)wing. That AD resulted from analysis of wire routing that revealed that route 2S of the fuel electrical circuit, located in the RH wing, does not provide adequate separation of fuel quantity indication wires from wires carrying 115-volt alternating current (AC). We issued that AD to ensure that fuel quantity indication wires are properly separated from wires carrying 115-volt AC. Improper separation of such wires, in the event of wire damage, could lead to a short circuit and a possible ignition source, which could result in a fire in the airplane. Actions Since Existing AD Was Issued Since we issued AD 2004-15-16, the European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, informed us that additional work is necessary that was not included in the Accomplishment Instructions of Airbus Service Bulletin A310-28-2148, dated January 23, 2002; and Revision 01, dated October 29, 2002. We referred to Airbus Service Bulletin A310-28-2148, Revision 01, dated October 29, 2002, as the appropriate source of service information for doing the modification required by AD 2004-15-16. Relevant Service Information Airbus has issued Service Bulletin A310-28-2148, Revision 02, dated March 9, 2007. Revision 02 of the service bulletin describes essentially the same procedures for doing the modification of certain wires in the RH wing, except that Revision 02 specifies doing further modification by installing additional protection sleeves in the outer wing area near the cadensicon sensor and segregating wire route 2S in the RH pylon area. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. EASA mandated the service information and issued EASA airworthiness directive 2007-0230, dated August 15, 2007, to ensure the continued airworthiness of these airplanes in the European Union. EASA airworthiness directive 2007-0230 supersedes French airworthiness directive 2002-578(B), dated November 27, 2002, which was referenced in AD 2004-15-16 as the parallel French airworthiness directive. FAA's Determination and Requirements of the Proposed AD These airplanes are manufactured in France and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the EASA has kept the FAA informed of the situation described above. We have examined the EASA's findings, evaluated all pertinent information, and determined that AD action is necessary for airplanes of this type design that are certificated for operation in the United States. This proposed AD would supersede AD 2004-15-16 and would retain the requirements of the existing AD. This proposed AD would also require accomplishing the actions specified in Revision 02 of the service bulletin described previously. Change to Existing AD This proposed AD would retain all requirements of AD 2004-15-16. Since AD 2004-15-16 was issued, the AD format has been revised, and certain paragraphs have been rearranged. As a result, the corresponding paragraph identifiers have changed in this proposed AD, as listed in the following table: Revised Paragraph Identifiers Requirement in AD 2004-15-16 Corresponding requirement in this proposed AD Paragraph

(a)Paragraph (f). Paragraph

(b)Paragraph (g). Explanation of Change to Applicability We have revised the applicability of the existing AD to identify affected airplanes in parallel with the applicability of EASA airworthiness directive 2007-0230. No additional airplanes have been added to the applicability of the existing AD. Costs of Compliance The following table provides the estimated costs for U.S. operators to comply with this proposed AD. Estimated Costs Action Work hours Average labor rate per hour Parts Cost per airplane Number of U.S.-registered airplanes Fleet cost Modification (required by AD 2004-15-16) 35 $80 $4,459 $7,259 68 $493,612 Further Modification (new proposed action) 22 80 1,870 3,630 68 246,840 Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The Federal Aviation Administration

(FAA)amends § 39.13 by removing amendment 39-13750 (69 FR 45578, July 30, 2004) and adding the following new airworthiness directive (AD): **Airbus:** Docket No. FAA-2007-0171; Directorate Identifier 2007-NM-220-AD. Comments Due Date

(a)The FAA must receive comments on this AD action by December 10, 2007. Affected ADs

(b)This AD supersedes AD 2004-15-16. Applicability

(c)This AD applies to Model A310 series airplanes, certificated in any category, all certified models, all serial numbers, except airplanes on which Airbus Service Bulletin A310-28-2148, Revision 02, dated March 9, 2007, has been done (Airbus Modifications 12427 and 12435). Unsafe Condition

(d)This AD results from analysis of wire routing that revealed that route 2S of the fuel electrical circuit, located in the right-hand

(RH)wing, does not provide adequate separation of fuel quantity indication wires from wires carrying 115-volt alternating current (AC). We are issuing this AD to ensure that fuel quantity indication wires are properly separated from wires carrying 115-volt AC. Improper separation of such wires, in the event of wire damage, could lead to a short circuit and a possible ignition source, which could result in a fire in the airplane. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Restatement of Requirements of AD 2004-15-16 Modification

(f)Within 4,000 flight hours after September 3, 2004 (the effective date of AD 2004-15-16): Modify the routing of wires in the RH wing by installing cable sleeves, per the Accomplishment Instructions of Airbus Service Bulletin A310-28-2148, Revision 01, dated October 29, 2002; or Revision 02, dated March 9, 2007. As of the effective date of this AD, Revision 02 must be used. Actions Accomplished Previously

(g)Modification of the routing of wires accomplished before September 3, 2004, per Airbus Service Bulletin A310-28-2148, dated January 23, 2002, is acceptable for compliance with the corresponding requirements of paragraph

(f)of this AD. New Requirements of This AD Modification (Additional Work)

(h)For airplanes on which the actions specified in Airbus Service Bulletin A310-28-2148, dated January 23, 2002; or Airbus Service Bulletin A310-28-2148, Revision 01, dated October 29, 2002; have been done before the effective date of this AD: Within 6,000 flight hours or 30 months after the effective date of this AD, whichever occurs first, perform further modification by installing additional protection sleeves in the outer wing area near the cadensicon sensor and segregating wire route 2S in the RH pylon area, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A310-28-2148, Revision 02, dated March 9, 2007. Alternative Methods of Compliance (AMOCs) (i)(1) The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.

(2)To request a different method of compliance or a different compliance time for this AD, follow the procedures in 14 CFR 39.19. Before using any approved AMOC on any airplane to which the AMOC applies, notify your appropriate principal inspector

(PI)in the FAA Flight Standards District Office (FSDO), or lacking a PI, your local FSDO. Related Information

(j)European Aviation Safety Agency airworthiness directive 2007-0230, dated August 15, 2007, also addresses the subject of this AD. Issued in Renton, Washington, on November 2, 2007. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-22002 Filed 11-8-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-24825; Directorate Identifier 2006-NE-17-AD] RIN 2120-AA64 Airworthiness Directives; Rolls-Royce Deutschland Ltd & Co KG

(RRD)Dart 528, 529, 532, 535, 542, and 552 Series Turboprop Engines AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to supersede an existing airworthiness directive

(AD)for

(RRD)Dart 528, 529, 532, 535, 542, and 552 Series turboprop engines. That AD currently requires a dimensional inspection of the intermediate pressure turbine

(IPT)disk or an ultrasonic inspection of the seal arm contact between the high pressure turbine

(HPT)and the IPT disk seal arm and reworking or replacing the IPT disk if worn beyond acceptable limits. This proposed AD would continue to require those actions. This proposed AD results from us including an incorrect engine model and omitting an engine model from the applicability of the existing AD. We are proposing this AD to prevent HPT disk failure, which can result in an uncontained engine failure and damage to the airplane. DATES: We must receive any comments on this proposed AD by January 8, 2008. ADDRESSES: Use one of the following addresses to comment on this proposed AD. • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • *Mail:* Docket Management Facility, U.S. Department of Transportation, 1200 New Jersey Avenue, SE., West Building Ground Floor, Room W12-140, Washington, DC 20590-0001. • *Hand Delivery:* Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. • Fax:

(202)493-2251. Contact Rolls-Royce Deutschland Ltd & Co KG, Eschenweg 11, D-15827 Dahlewitz, Germany; telephone 49

(0)33-7086-1768; fax 49

(0)33-7086-3356 for the service information identified in this proposed AD. FOR FURTHER INFORMATION CONTACT: Jason Yang, Aerospace Engineer, Engine Certification Office, FAA, Engine and Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; telephone

(781)238-7747; fax

(781)238-7199. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments regarding this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2006-24825; Directorate Identifier 2006-NE-17-AD” in the subject line of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://www.regulations.gov,* including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of the Web site, anyone can find and read the comments in any of our dockets, including, if provided, the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78). Examining the AD Docket You may examine the AD docket on the Internet at *http://www.regulations.gov;* or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone

(800)647-5527) is the same as the Mail address provided in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. Discussion On January 12, 2007, the FAA issued AD 2007-02-07, Amendment 39-14894 (72 FR 2610, January 12, 2007). That AD requires a dimensional inspection of the IPT disk or an ultrasonic inspection of the seal arm contact between the HPT and the IPT disk seal arm and reworking or replacing the IPT disk if worn beyond acceptable limits. That AD was the result of reports of a number of HPT disk failures, some of which resulted in released portions of the HPT disk. That condition, if not corrected, could result in HPT disk failure, which can result in an uncontained engine failure and damage to the airplane. Actions Since AD 2007-02-07 Was Issued Since we issued AD 2007-02-07, we found that we listed Dart 555 series turboprop engines, which don't exist, and we omitted Dart 552 series engines from the AD. We are proposing this AD to delete Dart 555 series engines from the applicability paragraph of this proposed AD and to list Dart 552 series turboprop engines in the applicability paragraph of this proposed AD. Relevant Service Information We have reviewed and approved the technical contents of RRD DART Service Bulletin

(SB)Da72-536, Revision 1, dated August 25, 2003, and SB Da72-538, dated June 10, 2005. SB Da72-536 describes procedures for conducting an ultrasonic inspection to determine if a gap exists between the HPT and IPT disk seal arms. SB Da72-538 describes procedures for a dimensional inspection of the IPT disk and rework or replacement of the IPT disk if wear outside acceptable limits is found. The LBA classified this SB as mandatory and issued airworthiness directive D-2005-197, dated June 30, 2005, in order to ensure the airworthiness of these engines in Germany. Differences Between the Proposed AD and the Service Information Because the service information was developed before the proposed AD, the compliance times permitted to conduct the inspections differ. FAA's Determination and Requirements of the Proposed AD We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other products of this same type design. For that reason, we are proposing this AD, which would require a dimensional inspection of the IPT disk or an ultrasonic inspection of seal arm contact between the HPT and the IPT disk seal arm, and rework or replacement of the IPT disk, if wear outside acceptable limits is found. The proposed AD would require you to use the service information described previously to perform these actions. Costs of Compliance We estimate that this proposed AD would affect 30 RRD Dart 528, 529, 532, 535, 542, and 552 series turbofan engines installed on airplanes of U.S. registry. We also estimate that it would take about 50 work-hours per engine to perform the proposed actions, and that the average labor rate is $80 per work-hour. Required parts would cost about $50,000 per IPT disk. We estimate that 25 percent, or eight engines, would require IPT disk replacement. Based on these figures, we estimate the total cost of the proposed AD to U.S. operators to be $500,000. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed AD: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Under the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The FAA amends § 39.13 by removing Amendment 39-14894 (72 FR 2610, January 12, 2007) and by adding a new airworthiness directive to read as follows: **Rolls-Royce Deutschland Ltd & Co KG (formerly Rolls-Royce plc):** Docket No. FAA-2006-24825; Directorate Identifier 2006-NE-17-AD. Comments Due Date

(a)The Federal Aviation Administration

(FAA)must receive comments on this airworthiness directive

(AD)action by January 8, 2008. Affected ADs

(b)This AD supersedes AD 2007-02-17, Amendment 39-14894. Applicability

(c)This AD applies to Rolls-Royce Deutschland Ltd & Co KG

(RRD)Dart 528, 529, 532, 535, 542, and 552 series turboprop engines. These engines are installed on, but not limited to, Hawker Siddeley, Argosy AW.650, Fairchild Hiller F-27, F-27A, F-27B, F-27F, F-27G, F-27J, FH-227, FH-227B, FH-227C, FH-227D, FH-227E, Fokker F.27 all marks; British Aircraft Corporation Viscount 744, 745D and 810; and Gulfstream G-159 airplanes. Unsafe Condition

(d)This AD results from us including an incorrect engine model and omitting an engine model from the applicability of the existing AD. We are issuing this AD to prevent HPT disk failure, which can result in an uncontained engine failure and damage to the airplane. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified unless the actions have already been done. Intermediate Pressure Turbine

(IPT)Disk and High Pressure Turbine (HPT)/IPT Disk Seal Arm Inspections

(f)Within 60 days after the effective date of the AD, do either of the following:

(1)Perform a dimensional inspection of the IPT disk and repair or replace the IPT disk, if necessary using paragraph 3 of the Accomplishment Instructions of RRD service bulletin

(SB)Da72-538, dated June 10, 2005; or

(2)Perform an ultrasonic inspection of the disk seal arm contact between the HPT and the IPT using paragraph 3 of the Accomplishment Instructions of RRD SB Da72-536, Revision 1, dated August 25, 2003.

(i)For RRD Dart 528, 529, 532, 535, 542 series turboprop engines if wear is outside allowable limits, before June 30, 2007, perform a dimensional inspection and repair or replace the IPT disk, if necessary. Use paragraph 3 of the Accomplishment Instructions of RRD SB Da72-538, dated June 10, 2005.

(ii)For RRD Dart 552 series turboprop engines if wear is outside allowable limits, before April 30, 2008, perform a dimensional inspection and repair or replace the IPT disk, if necessary. Use paragraph 3 of the Accomplishment Instructions of RRD SB Da72-538, dated June 10, 2005.

(iii)If wear is within allowable limits, perform a dimensional inspection of the IPT disk at the next engine shop visit or at next overhaul, whichever occurs first and repair or replace the IPT disk, if necessary. Use paragraph 3 of the Accomplishment Instructions of RRD SB Da72-538, dated June 10, 2005. Alternative Methods of Compliance

(g)The Manager, Engine Certification Office, has the authority to approve alternative methods of compliance for this AD if requested using the procedures found in 14 CFR 39.19. Related Information

(h)LBA airworthiness directive D-2005-197, dated June 30, 2005, also addresses the subject of this AD.

(i)Contact Jason Yang, Aerospace Engineer, Engine Certification Office, FAA, Engine and Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; telephone

(781)238-7747, fax

(781)238-7199; e-mail: *jason.yang@faa.gov* , for more information about this AD. Issued in Burlington, Massachusetts, on November 2, 2007. Peter A. White, Assistant Manager, Engine and Propeller Directorate, Aircraft Certification Service. [FR Doc. E7-22003 Filed 11-8-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-23742; Directorate Identifier 2005-NE-53-AD] RIN 2120-AA64 Airworthiness Directives; Pratt & Whitney

(PW)JT9D-7R4 Series Turbofan Engines AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to supersede an existing airworthiness directive

(AD)for PW JT9D-7R4 series turbofan engines. That AD currently requires removing certain reduced cooling flow 2nd stage high pressure turbine

(HPT)vane assemblies installed in certain 2nd stage HPT vane cluster assemblies. It also requires a visual and a fluorescent penetrant inspection

(FPI)of the 2nd stage HPT air seal assembly, P/N 815097. This proposed AD would require a visual and fluorescent penetrant inspection

(FPI)of all part number (P/N) 2nd stage HPT air seal assemblies that were used with reduced cooling flow 2nd stage HPT vane assemblies. This proposed AD results from the manufacturer identifying additional P/N air seal assemblies that are affected by the unsafe condition. We are proposing this AD to prevent uncontained failure of the 2nd stage HPT air seal assembly, leading to engine in-flight shutdown and damage to the airplane. DATES: We must receive any comments on this proposed AD by January 8, 2008. ADDRESSES: Use one of the following addresses to comment on this proposed AD. • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • *Mail:* Docket Management Facility, U.S. Department of Transportation, 1200 New Jersey Avenue, SE., West Building Ground Floor, Room W12-140, Washington, DC 20590-0001. • *Hand Delivery:* Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. • *Fax:*

(202)493-2251. Contact Pratt & Whitney, 400 Main St., East Hartford, CT 06108; telephone

(860)565-8770; fax

(860)565-4503, for the service information identified in this proposed AD. FOR FURTHER INFORMATION CONTACT: Mark Riley, Aerospace Engineer, Engine Certification Office, FAA, Engine and Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; e-mail: *mark.riley@faa.gov;* telephone

(781)238-7758, fax

(781)238-7199. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments regarding this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2006-23742; Directorate Identifier 2005-NE-53-AD” in the subject line of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments. We will post all comments we receive, without change, to *http://www.regulations.gov,* including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of the Web site, anyone can find and read the comments in any of our dockets, including, if provided, the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78). Examining the AD Docket You may examine the AD docket on the Internet at *http://www.regulations.gov;* or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone

(800)647-5527) is the same as the Mail address provided in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. Discussion The FAA proposes to amend 14 CFR part 39 by superseding AD 2007-17-21, Amendment 39-15180 (72 FR 48549, August 24, 2007). That AD requires removing reduced cooling flow 2nd stage HPT vane assemblies. It also requires a visual and an FPI of the 2nd stage HPT air seal assembly. That AD resulted from a report of an uncontained failure of the 2nd stage HPT air seal assembly, caused by the air seal assembly brace disengaging from the air seal, due to insufficient cooling air flow. That condition, if not corrected, could result in uncontained failure of the 2nd stage HPT air seal assembly, leading to engine in-flight shutdown and damage to the airplane. Actions Since AD 2007-17-21 Was Issued Since we issued that AD, we determined that we need to expand the applicability of the AD to include all 2nd stage HPT air seal assemblies that were used with reduced cooling flow 2nd stage HPT vane assemblies, P/Ns 797282, 796972, 800082, 800072, 803182, 803282, and 822582, installed in 2nd stage HPT vane cluster assemblies P/Ns 797592, 797372, 799872, 799782, and 822572. Relevant Service Information We have reviewed and approved the technical contents of Pratt & Whitney Alert Service Bulletin JT9D-7R4-A72-596, dated September 15, 2005, that describes procedures for modifying the reduced cooling flow 2nd stage HPT vane assemblies. FAA's Determination and Requirements of the Proposed AD We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other products of this same type design. For that reason, we are proposing this AD, which would require at the next HPT module exposure: • Removing the reduced cooling flow 2nd stage HPT vane assemblies. • Visual and fluorescent penetrant inspections of the 2nd stage HPT air seal assemblies that have operated in an engine with reduced cooling flow 2nd stage HPT vane assemblies. Costs of Compliance Because this proposed AD is superseding an existing AD to remove the seal assembly P/N, this proposed AD would not add any additional costs beyond the costs included in the original AD. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed AD: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Under the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The FAA amends § 39.13 by removing Amendment 39-15180 (72 FR 48549, August 24, 2007), and by adding a new airworthiness directive to read as follows: **Pratt & Whitney (PW):** Docket No. FAA-2006-23742; Directorate Identifier 2005-NE-53-AD. Comments Due Date

(a)The Federal Aviation Administration

(FAA)must receive comments on this airworthiness directive

(AD)action by January 8, 2008. Affected ADs

(b)This AD supersedes AD 2007-17-21, Amendment 39-15180. Applicability

(c)This AD applies to Pratt & Whitney

(PW)JT9D-7R4G2, -7R4E1, -7R4E4, and -7R4H1 series turbofan engines. These engines are installed on, but not limited to, Boeing 747-200, -300, 767-200, and Airbus A300-600 and A310-300 series airplanes. Unsafe Condition

(d)This AD results from the manufacturer identifying additional part numbers (P/N) air seal assemblies that are affected by the unsafe condition. We are issuing this AD to prevent uncontained failure of the 2nd stage high pressure turbine

(HPT)air seal assembly, leading to engine in-flight shutdown and damage to the airplane. Compliance

(e)You are responsible for having the actions required by this AD performed at the next HPT module exposure after the effective date of this AD, unless the actions have already been done.

(f)At the next HPT module exposure, remove reduced cooling flow 2nd stage HPT vane assemblies P/Ns: 797282, 796972, 800082, 800072, 803182, 803282, and 822582, installed in 2nd stage HPT vane cluster assemblies: P/Ns 797592, 797372, 799872, 799782, and 822572.

(g)For 2nd stage HPT air seals that have operated in an engine with reduced cooling flow HPT vane assemblies, at the next HPT module exposure do the following:

(1)Perform a onetime visual inspection of the 2nd stage HPT air seal assembly. The JT9D-7R4 engine manual, Section 72-51-22, Inspection/Check-01, paragraphs 1.D.(1), 1.D.(4), and 1.D.(6) contains instructions for the visual inspection.

(2)Perform a fluorescent penetrant inspection

(FPI)of the 2nd stage HPT air seal assembly for cracks. The JT9D-7R4 engine manual, Section 72-51-00, Inspection/Check-03, contains instructions for the FPI. Definition

(h)For the purpose of this AD, we define an HPT module exposure as removing the 1st stage HPT rotor or the 2nd stage HPT rotor from the HPT case. Alternative Methods of Compliance

(i)The Manager, Engine Certification Office, has the authority to approve alternative methods of compliance for this AD if requested using the procedures found in 14 CFR 39.19. Related Information

(j)Pratt & Whitney Alert Service Bulletin JT9D-7R4-A72-596, dated September 15, 2005, contains information for modifying the reduced cooling flow 2nd stage HPT vane assemblies.

(k)Contact Mark Riley, Aerospace Engineer, Engine Certification Office, FAA, Engine and Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; e-mail: *mark.riley@faa.gov;* telephone

(781)238-7758, fax

(781)238-7199, for more information about this AD. Issued in Burlington, Massachusetts, on November 2, 2007. Peter A. White, Assistant Manager, Engine and Propeller Directorate, Aircraft Certification Service. [FR Doc. E7-22005 Filed 11-8-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2007-0175; Directorate Identifier 2007-NM-184-AD] RIN 2120-AA64 Airworthiness Directives; Boeing Model 757 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FAA proposes to adopt a new airworthiness directive

(AD)for certain Boeing Model 757 airplanes. This proposed AD would require changing the wiring of the fuel boost pump and doing other specified actions. This proposed AD results from reports of short circuits in an electrical connector at the wing-to-body electrical disconnect panel. We are proposing this AD to prevent a short circuit of the electrical connector for the fuel boost pump, which could cause the instruments for fuel, flap, slat, and aileron systems to malfunction and create a potential ignition source inside the fuel tanks. A potential ignition source inside the fuel tank in combination with flammable fuel vapors could result in a fuel tank explosion and consequent loss of the airplane. DATES: We must receive comments on this proposed AD by December 24, 2007. ADDRESSES: You may send comments by any of the following methods: • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov.* Follow the instructions for submitting comments. • *Fax:* 202-493-2251. • *Mail:* U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590. • *Hand Delivery:* U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this AD, contact Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-2207. Examining the AD Docket You may examine the AD docket on the Internet at *http://www.regulations.gov;* or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (telephone 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Philip Sheridan, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)917-6441; fax

(425)917-6590. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2007-0175; Directorate Identifier 2007-NM-184-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments. We will post all comments we receive, without change, to *http://www.regulations.gov,* including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD. Discussion We have received reports indicating that short circuits occurred in an electrical connector at the wing-to-body electrical disconnect panel, on three Boeing Model 757 airplanes. The airplanes had accumulated between 27,040 and 50,735 total flight hours. On two of the airplanes, the short circuit damaged the fuel quantity indicating system

(FQIS)wiring. Wires for some of the fuel boost pumps for the main tank use the same electrical connectors as wires for the FQIS and densitometer circuits. Contamination in these electrical circuits could cause a short circuit from the fuel boost pump wiring to the FQIS and densitometer wiring. A short circuit can put a high-energy electrical transient into the fuel tanks that can act as a potential ignition source. The high-energy electrical transients could also cause the instruments for the fuel, flap, slat, and aileron systems to malfunction. A potential ignition source inside the fuel tank in combination with flammable fuel vapors, if not corrected, could result in a fuel tank explosion and consequent loss of the airplane. Relevant Service Information We have reviewed Boeing Special Attention Service Bulletin 757-28-0095, dated June 18, 2007, for Model 757-200, -200PF, and -200CB series airplanes; and Boeing Special Attention Service Bulletin 757-28-0096, dated June 18, 2007, for Model 757-300 series airplanes. The service bulletins describe procedures for changing the wiring of the fuel boost pump and doing other specified actions. The other specified actions include doing functional tests of the affected airplane systems. Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition. FAA's Determination and Requirements of the Proposed AD We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other airplanes of this same type design. For this reason, we are proposing this AD, which would require accomplishing the actions specified in the service information described previously. Costs of Compliance There are about 1,697 airplanes of the affected design in the worldwide fleet. This proposed AD would affect about 673 airplanes of U.S. registry. The proposed actions would take up to 12 work hours per airplane, at an average labor rate of $80 per work hour. Based on these figures, the estimated cost of the proposed AD for U.S. operators is $646,080, or $960 per airplane. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that the proposed regulation: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The Federal Aviation Administration

(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **Airbus:** Docket No. FAA-2007-0175; Directorate Identifier 2007-NM-184-AD. Comments Due Date

(a)The FAA must receive comments on this AD action by December 24, 2007. Affected ADs

(b)None. Applicability

(c)This AD applies to the airplanes identified in paragraphs (c)(1) and (c)(2) of this AD, certificated in any category.

(1)Boeing Model 757-200, -200PF, and -200CB series airplanes, as identified in Boeing Special Attention Service Bulletin 757-28-0095, dated June 18, 2007.

(2)Boeing Model 757-300 series airplanes, as identified in Boeing Special Attention Service Bulletin 757-28-0096, dated June 18, 2007. Unsafe Condition

(d)This AD results from reports of short circuits in an electrical connector at the wing-to-body electrical disconnect panel. We are issuing this AD to prevent a short circuit of the electrical connector for the fuel boost pump, which could cause the instruments for the fuel, flap, slat, and aileron systems to malfunction and create a potential ignition source inside the fuel tank. A potential ignition source inside the fuel tank in combination with flammable fuel vapors could result in a fuel tank explosion and consequent loss of the airplane. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Fuel Boost Pump Wiring Change

(f)Within 60 months after the effective date of this AD, change the wiring of the fuel boost pump and do all other specified actions as applicable, by accomplishing all of the applicable actions specified in the Accomplishment Instructions of Boeing Special Attention Service Bulletin 757-28-0095, dated June 18, 2007 (for Model 757-200, -200PF, and -200CB series airplanes); or Boeing Special Attention Service Bulletin 757-28-0096, dated June 18, 2007 (for Model 757-300 series airplanes); as applicable. The other specified actions must be done before further flight after changing the fuel boost pump wiring. Alternative Methods of Compliance (AMOCs) (g)(1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.

(PI)in the FAA Flight Standards District Office (FSDO), or lacking a PI, your local FSDO. Issued in Renton, Washington, on November 2, 2007. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-22009 Filed 11-8-07; 8:45 am] BILLING CODE 4910-13-P SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 232 and 270 [Release Nos. 33-8859; 34-56732; IC-28042 File No. S7-25-07] RIN 3235-AJ81 Rulemaking for EDGAR System; Mandatory Electronic Submission of Applications for Orders Under the Investment Company Act and Filings Made Pursuant to Regulation E AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: We propose several amendments to rules regarding our Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Specifically, we propose to amend our rules to make mandatory the electronic submission on EDGAR of applications for orders under any section of the Investment Company Act of 1940 (“Investment Company Act”) and Regulation E filings of small business investment companies and business development companies. We also propose to amend the electronic filing rules to make the temporary hardship exemption unavailable for submission of applications under the Investment Company Act. Finally, we propose amendments to Rule 0-2 under the Investment Company Act that would eliminate the requirement that certain documents accompanying an application be notarized and the requirement that applicants submit a draft notice as an exhibit to an application. DATES: Comments should be submitted on or before December 14, 2007. ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/proposed* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number S7-25-07 on the subject line; or • Use the Federal eRulemaking Portal ( *http://www.regulations.gov* ). Follow the instructions for submitting comments. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number S7-25-07. This file number should be included on the subject line if e-mail is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/proposed.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: If you have questions about the proposed rules, please contact one of the following members of our staff in the Division of Investment Management, at the Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-0506: In the Office of Legal and Disclosure, Ruth Armfield Sanders, Senior Special Counsel (EDGAR), at

(202)551-6989; in the Office of Investment Company Regulation, Nadya Roytblat, Assistant Director, at

(202)551-6821; or, in the Office of Insurance Products, Keith Carpenter, Senior Special Counsel, at

(202)551-6766; for technical questions relating to the EDGAR system, in the Office of Information Technology, Richard D. Heroux, EDGAR Program Manager, at

(202)551-8168. SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission (“Commission”) is proposing for comment amendments to Rules 101 and 201 of Regulation S-T 1 relating to electronic filing on the EDGAR system and to Rule 0-2 under the Investment Company Act. 2 1 17 CFR 232.101 and 232.201. 2 17 CFR 270.0-2. I. Background Recently, we initiated a series of amendments to keep EDGAR current technologically and to make it more useful to the investing public and Commission staff. In April 2000, we adopted rule and form amendments in connection with the modernization of EDGAR. 3 In the modernization proposing release, we noted that, as the use of electronic databases grows, it becomes increasingly important for members of the public to have electronic access to our filings. We also stated that we were contemplating future rulemaking to bring more of our filings into the EDGAR system on a mandatory basis. In May 2002, we adopted rules requiring foreign private issuers and foreign governments to file most of their documents electronically. 4 In May 2003, we adopted rules requiring electronic filing of beneficial ownership reports filed by officers, directors and principal security holders under Section 16(a) 5 of the Securities Exchange Act of 1934 (“Exchange Act”). 6 In July 2005, we adopted rules requiring certain open-end management investment companies and insurance company separate accounts to identify in their EDGAR submissions information relating to their series and classes (or contracts, in the case of separate accounts) and mandating that fidelity bonds filed under Section 17(g) 7 and sales literature filed with us under Section 24(b) 8 be made by electronic submission on the EDGAR system. 9 In December 2006, we adopted amendments to the rules and forms under Section 7A of the Exchange Act requiring that the forms filed with respect to transfer agent registration, annual reporting, and withdrawal from registration be filed with the Commission electronically on EDGAR. 10 3 *See* Rulemaking for EDGAR System, Release No. 33-7855 (Apr. 27, 2000) [65 FR 24788] (the modernization adopting release). *See also* Release No. 33-7803 (Mar. 3, 2000) [65 FR 11507] (the modernization proposing release). 4 *See* Mandated EDGAR Filing for Foreign Issuers, Release No. 33-8099 (May 14, 2002) [67 FR 36678]. 5 15 U.S.C. 78p(a). 6 *See* Mandated EDGAR Filing and Web Site Posting for Forms 3, 4 and 5, Release No. 33-8230 (May 7, 2003) [68 FR 25788] (the EDGAR Section 16 release). 7 15 U.S.C. 80a-17(g). 8 15 U.S.C. 80a-24(b). 9 *See* Rulemaking for EDGAR System, Release No. 33-8590 (July 18, 2005) [70 FR 43558 (July 27, 2005)]. 10 *See* Electronic Filing of Transfer Agent Forms, Release No. 34-54864 (Dec. 4, 2006) [71 FR 74698 (Dec. 12, 2006)]. Today, we propose to require that applicants submit electronically on the EDGAR system their applications for orders under any section of the Investment Company Act (“applications”). We make this proposal to facilitate the efficient submission of applications by applicants, to enable the public to access them more quickly and search them more easily, and to improve the Commission's ability to track and process such applications. We also propose to make revisions to Rule 0-2 and related amendments to Regulation S-T, our electronic filing rules. In addition, we are proposing to add Regulation E filings to the list of those that must be filed electronically through EDGAR. II. Proposed Mandatory Electronic Submission of Investment Company Applications The rules under Regulation S-T currently provide that submissions for exemptive relief under any section of the Investment Company Act shall not be made in electronic format. 11 The only applications under the Investment Company Act that are currently mandatory EDGAR submissions are applications for deregistration filed by investment companies. 12 Applicants for orders under the Investment Company Act can include registered investment companies, affiliated persons of registered investment companies, and issuers seeking to avoid investment company status, among other entities. 13 These applications are submitted in paper and currently are available only from the Commission's public reference room or electronically from private services. Private services usually charge fees for electronic copies of applications; also, there is a delay of about thirty days between the submission of applications to the Commission and their electronic availability from the private sources. 11 Current Rule 101(a)(1)(iv) and (c)(11) of Regulation S-T [17 CFR 232.101(a)(1)(iv) and (c)(11)]. 12 These include applications and amendments submitted on Form N-8F [17 CFR 274.218] (EDGAR submission types N-8F and N-8F/A) and those submitted pursuant to Investment Company Act Rule 0-2 [17 CFR 270.0-2] (EDGAR submission types 40-8F-2 and 40-8F-2/A). *See* Release No. IC-23786 (Apr. 15, 1999) [76 19469 (Apr. 21, 1999)]. 13 There are several sections of the Investment Company Act pursuant to which entities may make applications for relief. For example, Section 6(c) [15 U.S.C. 80a-6(c)] provides the Commission with authority to exempt persons, securities or transactions from any provision of the Investment Company Act, or the regulations thereunder, if and to the extent that such exemption is in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Investment Company Act. We propose to amend certain provisions of Regulation S-T and Investment Company Act Rule 0-2 14 to require electronic filing on EDGAR for the submission of applications pursuant to Rule 0-2 under the Investment Company Act. We propose to amend Rule 101(a)(1)(iv) of Regulation S-T to include within its mandatory electronic provisions any application for an order under any section of the Investment Company Act. 15 14 Rule 0-2 is the Investment Company Act rule under which applications are submitted. 15 *See* proposed amendment to Rule 101(a)(1)(iv) under Regulation S-T. Paragraph

(11)of Rule 101(c) currently provides that filings under Section 6(c) of the Investment Company Act, i.e., applications for orders, be submitted in paper format only. We also propose to remove and reserve this paragraph. Regulation S-T requires the electronic filing of any amendments and related correspondence and supplemental information pertaining to a document that is the subject of mandated EDGAR submission. 16 These requirements would also apply to persons who submit applications. 17 16 Regulation S-T Rule 101(a)(1) [17 CFR 232.101(a)(1)]. 17 *See* proposed amendments to paragraphs (a)(2) and

(3)of Rule 101 of Regulation S-T. Related correspondence and supplemental information are not automatically disseminated publicly through the EDGAR system but are immediately available to the Commission staff. We make this proposal, in light of the primary goals of the EDGAR system, to facilitate the rapid dissemination of financial and business information in connection with filings, including filings by investment companies. Requiring these applications to be submitted electronically would benefit members of the investing public and the financial community by making information contained in these filings readily available to them and more easily searchable. 18 In this age of information, we believe that filings and applications made with the Commission are more valuable to investors if they are available in electronic form and that adding applications to the EDGAR database would provide a more complete picture for the investing public. We believe that the proposals would benefit the public by making the EDGAR page of our Web site a more comprehensive resource for most information on file with us related to the operation of investment companies. 18 From time to time, an applicant may wish to submit an application for exemption under both the Investment Company Act and under the Investment Advisers Act [15 U.S.C. 80b-1 *et seq.* ]. We are not proposing to require that Investment Advisers Act submissions be made on EDGAR. Under our proposal, any document that is intended as an application for an order under both the Investment Company Act and the Investment Advisers Act would need to be submitted separately under each Act. As with other entities that make submissions on EDGAR, applicants would be subject to the provisions of Regulation S-T 19 and the EDGAR Filer Manual. Regulation S-T includes detailed rules concerning mandatory and permissive electronic EDGAR submissions; it also makes clear that requests for confidential treatment must be made in paper format. 20 The regulation also covers such matters as providing for the override of formatting requirements applicable to paper submissions. 21 The EDGAR Filer Manual contains detailed technical specifications concerning EDGAR submissions. The Manual also provides technical guidance concerning how to commence submissions on EDGAR by submitting Form ID to obtain a CIK 22 and confidential access codes and how to maintain and update company data, *e.g.* , how to change company names and contact information. 23 19 For a comprehensive discussion of Regulation S-T and electronic filing, *see* “Electronic Filing and the EDGAR System: A Regulatory Overview,” available on the Commission's Web site. 20 *See* Rule 101 of Regulation S-T [17 CFR 232.101]. 21 The paper formatting requirements continue to be applicable to paper submissions made pursuant to temporary and continuing hardship exemptions under Rules 201 and 202 of Regulation S-T [17 CFR 232.201 and 202]. 22 A filer's CIK (or “central index key”) is a ten-digit number uniquely identifying that filer. 23 We remind filers that, in the case of name changes, the changes must be made via the EDGAR filing Web site in advance; the new name would be reflected in the next EDGAR submission. The name on past submissions would not change. The CIK and file number(s) of the company would provide a link to filings under the old name. One technical specification that the EDGAR Filer Manual includes is the electronic “submission type” for each submission made on EDGAR. We expect that the EDGAR electronic submission types for applications would be designed to facilitate and expedite the review of these applications. Currently, the applications submitted in paper typically reference the provisions of the Investment Company Act and of the rules and regulations under which the application is made. 24 Based on this information, our filer support staff assign a paper “submission type” for our internal recordkeeping of the paper application on the EDGAR system. We also disseminate this paper submission type, which indicates that the paper application has been filed with us. The current paper submission types for applications are the following: 40-APP, 40-6B, and 40-6C. We usually record paper applications under submission types 40-APP or 40-6C, except for those submitted by employees' securities companies, for which we use submission type 40-6B. 24 *See* paragraph

(e)of Investment Company Act Rule 0-2 [17 CFR 270.0-2]. Consistent with our proposal, we expect that the EDGAR Filer Manual and the EDGARLink software would provide for three EDGAR electronic submission types for applications: 40-APP, 40-OIP, and 40-6B. Submission type 40-APP would be used for submissions typically processed by the Division's Office of Investment Company Regulation; a new submission type 40-OIP would be used for submissions typically processed by the Division's Office of Insurance Products. We also would plan to use submission type 40-6B for employees' securities company applications (also processed by the Office of Investment Company Regulation), since we have historically kept records for these applicants separately. We would discontinue use of the paper submission type 40-6C; applications formerly recorded under this submission type would be submitted as either 40-APP or 40-OIP, as appropriate. We anticipate that the EDGAR Filer Manual would provide guidance for applicants in choosing the correct submission type. Most applications would be submitted under EDGAR submission type 40-APP, the submission type designated for the Office of Investment Company Regulation. But, the following categories of applications would be transmitted under EDGAR submission type 40-OIP, the submission type for the Office of Insurance Products:

(1)Applications with regard to mixed and shared funding filed under Section 6(c) of the Investment Company Act, for exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the Investment Company Act, 25 and Rules 6e-2(b)(15) and 6e-3(T)(b)(15); 26 25 15 U.S.C. 80a-9(a), 80a-13(a), 80a-15(a), 80a-15(b). 26 17 CFR 270.6e-2(b)(15), 270.6e-3(T)(b)(15).

(2)Applications relating to the recapture of bonus credits filed under Section 6(c) of the Investment Company Act for exemptions from the provisions of Sections 2(a)(32) and 27(i)(2)(A) of the Investment Company Act 27 and Rule 22c-1 28 ; 27 15 U.S.C. 80a-2(a)(32), 80a-27(i)(2)(A). 28 17 CFR 270.22c-1.

(3)Applications relating to the substitution of securities held by a variable insurance separate account filed under Section 26(c) of the Investment Company Act; 29 and 29 15 U.S.C. 80a-26(c).

(4)Applications for approval of the terms of an exchange offer involving variable insurance contracts filed under Section 11(a) of the Investment Company Act. 30 30 15 U.S.C. 80a-11(a). We believe that these three submission types would facilitate and expedite the review of submissions. Our internal system will be able to quickly route the application to the appropriate office. If applicants have any questions as to the appropriate EDGAR submission type, we would encourage them to verify in advance the correct submission type so that the application can be routed automatically to the appropriate Office. We would provide contact information in the EDGAR Filer Manual and on the Commission's Web site so that, in case of doubt, applicants may contact the staff. We request comment on whether these EDGAR submission types would be sufficient or whether other or additional submission types would be helpful to applicants or the public in connection with the submission of applications. For applications with multiple co-applicants, the applicants would be able to submit the application with all co-applicants included in one submission. The applicants would choose one applicant to list first as the “primary” co-applicant. Then, they would include in the EDGAR template the information for all other co-applicants, *i.e.* , the CIK of each co-applicant and, for amendments, file number of each co-applicant. Applicants could be dropped from or added to an application with each amendment submission. 31 31 As is the case currently with paper applications, for each application, an applicant would receive a unique file number which would begin with the prefix “812,” or “813” in the case of applications made by employees' securities companies. As also is currently the case with paper filings, each co-applicant's file number would be composed of the primary applicant's file number with an appended two-digit suffix unique to that co-applicant. Each applicant or co-applicant would include this file number, in addition to its CIK, in the EDGAR template of all amendments to the application, which would also be required electronic submissions. We expect that the internal EDGAR system would be enhanced to allow for the upload and public dissemination via the EDGAR system of notices and orders in connection with specific applications. We request comment on the impact of our making the submission of requests for orders under the Investment Company Act mandatory electronic submissions. Should we implement this rule? We request comment on whether it would be burdensome for us to require applicants to submit applications electronically. To which applications should the rule apply? We ask commenters to address the issue of what the transition period should be for investment companies and other applicants to prepare for the mandatory electronic submission of these applications. We ask commenters to provide detailed information on any difficulties and considerations unique to these proposed requirements. In the event commenters believe that any aspect of the proposed requirements would be burdensome, we ask for specific details and alternative approaches. III. Proposed Amendments to Rule 0-2 and to Temporary Hardship Exemption of Regulation S-T Rule 0-2 currently requires that every application for an order for which a form is not specifically prescribed and which is executed by a corporation, partnership or other company and filed with the Commission contain a statement of the applicable provisions of the articles of incorporation, bylaws or similar documents, relating to the right of the person signing and filing such application to take such action on behalf of the applicant, and a statement that all such requirements have been complied with and that the person signing and filing the application is fully authorized to do so. If such authorization is dependent on resolutions of stockholders, directors, or other bodies, such resolutions must be attached as an exhibit to or quoted in the application. Any amendment to the application must contain a similar statement as to the applicability of the original statement of authorization. When any application or amendment is signed by an agent or attorney, Rule 0-2 requires that the power of attorney evidencing his authority to sign shall state the basis for the agent's authority and shall be filed with the Commission. Every application subject to Rule 0-2 must be verified by the person executing the application by providing a notarized signature in substantially the form specified in the rule. Each application subject to Rule 0-2 must state the reasons why the applicant is deemed to be entitled to the action requested, the name and address of each applicant, and the name and address of any person to whom any questions regarding the application should be directed. Rule 0-2 requires that a proposed notice of the proceeding initiated by the filing of the application accompany each application as an exhibit and, if necessary, be modified to reflect any amendment to the application. We are proposing three amendments to Rule 0-2 governing the form of applications under the Investment Company Act. First, we propose to eliminate the requirement to have verifications of applications and statements of facts made in connection with applications notarized. 32 We believe that this requirement is unnecessary in the context of an electronic filing. 33 Second, we propose to eliminate the requirement that applicants include draft notices as exhibits to applications. 34 The staff has found these exhibits to be of limited value because the staff prefers to draft its own notices of applications. Finally, we also propose to amend Rule 0-2 to remove the last sentence of paragraph (b), 35 which was added in the initial EDGAR rulemaking and would be inconsistent with mandatory electronic submission of applications on EDGAR. 36 We request comment on these proposed amendments. Is there any reason we should retain the notary and draft notice requirements? 32 *See* Rule 0-2(d). 33 Regulation S-T requires that each signatory to an electronic filing manually sign a signature page or other document authenticating, acknowledging or otherwise adopting his or her signature that appears in typed form in the electronic filing. This document must be executed before or at the time the electronic filing is made, must be retained by the filer for a period of five years, and must be made available to the Commission upon request. *See* Rule 302(b) of Regulation S-T [17 CFR 232.302(b)]. We believe that this requirement provides sufficient assurance of the legitimacy of signatures contained in the electronic filings so that notarization is unnecessary. 34 *See* Rule 0-2(g). 35 The last sentence of Rule 0-2(b) currently reads as follows: “Every application for an order under any provision of the Act and every amendment to such application shall be submitted to the Commission in paper only, whether or not the applicant is otherwise required to file in electronic format, unless instructions for electronic filing are included on the form, if any, prescribed for such application.” 36 *See* Rulemaking for EDGAR System—Investment Companies and Institutional Investment Managers, Release No. 33-6978 (Feb. 23, 1993) [58 FR 14848 (Mar. 18, 1993)]. We are also proposing an amendment to Rule 201 of Regulation S-T. Rules 201 and 202 37 of Regulation S-T address hardship exemptions from EDGAR filing requirements, and Rule 13(b) of Regulation S-T 38 addresses the related issue of filing date adjustments. 37 17 CFR 232.202. 38 17 CFR 232.13(b). A filer may obtain a temporary hardship exemption under Rule 201 if it experiences unanticipated technical difficulties that prevent the timely preparation and submission of an electronic filing by filing a properly legended paper copy 39 of the filing under cover of Form TH. 40 This process is self-executing. A filer who files in paper under the temporary hardship exemption must submit an electronic format copy of the filed paper document within six business days of the filing of the paper format document. 41 39 *See* 17 CFR 232.201(a). 40 17 CFR 239.65, 249.447, 269.10,and 274.404. 41 *See* 17 CFR 232.201(b). A filer may apply for a continuing hardship exemption under Rule 202 if it cannot file all or part of a filing without undue burden or expense. 42 In contrast to the self-executing temporary hardship exemption process, a filer can obtain a continuing hardship exemption only by submitting a written application, upon which the Commission, or Commission staff pursuant to delegated authority, must then act. 42 *See* 17 CFR 232.202(a). We are proposing to make the temporary hardship exemption unavailable for submission of applications under the Investment Company Act. 43 We are proposing to amend Rule 201(a) of Regulation S-T to make temporary hardship exemptions unavailable for these submissions, since there is generally no submission exigency or submission deadline associated with these submissions. An applicant would continue to have the ability to apply for a continuing hardship exemption under Rule 202 if it cannot submit all or part of an application without undue burden or expense. Also, while we would expect the circumstances and exercise to be rare, the staff could use its delegated authority to grant a filing date adjustment pursuant to Rule 13(b) of Regulation S-T [17 CFR 232.13(b)]. While we would not expect an applicant to need a filing date adjustment in the context of an application, it would be available in the unlikely event it were needed. We ask for comment on making the temporary hardship exemption unavailable for submission of applications for orders under the Investment Company Act. 43 *See* proposed amendment to rule 201(a) of Regulation S-T. We have previously made unavailable the ability for filers to use the temporary hardship exemption for EDGAR submissions of beneficial ownership reports filed by officers, directors and principal security holders under Section 16(a) of the Exchange Act [15 U.S.C. 78p(a)]. *See* Mandated EDGAR Filing and Web site Posting for Forms 3, 4 and 5, Release No. 33-8230 (May 7, 2003) [68 FR 25788]. IV. Proposed Amendments To Mandate That Certain Filings of Small Business Investment Companies and Business Development Companies Be Made Electronically Regulation E 44 provides for the exemption from registration of securities issued by small business investment companies registered under the Investment Company Act and business development companies regulated under that Act, subject to the terms and conditions of the regulation. Rule 604 45 of Regulation E requires the filing of notification on Form 1-E 46 of sales of securities under Regulation E. Rule 607 47 of Regulation E requires the filing of sales material used in connection with the offering. Rule 609 48 of Regulation E requires the filing of reports of sales on Form 2-E. 49 44 17 CFR 230.601 to 610a. 45 17 CFR 230.604. 46 17 CFR 239.200. 47 17 CFR 230.607. 48 17 CFR 230.609. 49 17 CFR 239.201. Currently, these companies must make most of their filings electronically on the EDGAR system. However, they must make their Regulation E 50 filings in paper. Since these filers are already EDGAR filers and most would have available electronic copies of their Form 1-E (and any related sales material) 51 and Form 2-E, we believe that making these filings electronically on EDGAR would impose very little burden or cost on these companies. We are therefore proposing to make these filings mandatory electronic submissions. 52 We request comment on any burdens or costs that would result. Is there any reason not to require that these submissions be made electronically on the EDGAR system? 50 17 CFR 230.601 to 610a. 51 Requiring electronic filing on EDGAR of Rule 607 sales literature would be consistent with the current requirement to file electronically on EDGAR omitting prospectuses under Rule 482 of the Securities Act of 1933 (“Securities Act”) (referred to as “482 ads”) and sales literature under Section 24(b) of the Investment Company Act. 52 *See* proposed amendments to paragraphs (a)(1)(v) and (c)(6) of Rule 101 of Regulation S-T. V. General Request for Comment You are invited to submit written comments relating to the rule proposals set forth in this release. We request comment not only on the specific issues we discuss in this release, but on any other approaches or issues that we should consider in connection with the submission of applications for orders and Regulation E filings on the EDGAR system. We seek comment from any interested person, including those required to file information with us on the EDGAR system, as well as investors, disseminators of EDGAR data, EDGAR filing agents, and other members of the public who have access to and use information from the EDGAR system. VI. Cost-Benefit Analysis We are sensitive to the costs and burdens of our rules. The rules we are proposing today would reflect the addition of applications under the Investment Company Act as mandatory electronic submissions on EDGAR. In addition, the proposals would amend Rule 0-2 and make unavailable to applicants Regulation S-T's provision for temporary hardship exemptions. In addition, the proposals would add Regulation E filings to the list of those that must be filed electronically through EDGAR. A. Expected Benefits We expect that the addition of applications under the Investment Company Act as mandatory electronic submissions on EDGAR would result in considerable benefits to the securities markets, investors, and other members of the public, by expanding the accessibility of information, and increasing the types of information, filed and made available for public review through the EDGAR system. The primary goal of the EDGAR system since its inception has been to facilitate the rapid dissemination of financial and business information in connection with filings, including filings by investment companies. The proposed amendments would benefit investors, financial analysts and others by increasing the efficiency of retrieving and disseminating these applications. The mandated electronic transmission of these documents would enable the public to access them more quickly and search them more easily. Instead of having to come in person or through an agent to the Commission's public reference room to conduct a search for a particular submission that is in paper or microfiche, the public would be able to find and review the application on any computer with an Internet connection by accessing the EDGAR system through the Commission's Web site or through a third party Web site that links to EDGAR. The proposals would benefit the public by making the EDGAR page of our Web site a more comprehensive resource for most information on file with us related to the operation of investment companies. A further benefit would be to ensure that all applications are available to the public free of charge on our Web site without the cost of paying a third party for a copy. Persons who may consider requesting a hearing on an application on the basis of a notice would be able to more easily obtain the actual application so that they could better understand the legal issues. We believe this would be a significant improvement in the applications process. We also expect that applicants would benefit from the increased efficiencies in the filing process for these submissions resulting from the proposed amendments. By electronically transmitting these documents directly to the Commission, applicants would avoid the uncertainties and delays that can occur with the manual delivery of paper documents; we believe that it would be a simpler and more efficient means to submit applications. Applicants also would benefit from no longer having to submit multiple copies of paper documents to the Commission. Because the Commission's staff would be able to retrieve and analyze information contained in these submissions more readily than under our current paper system, mandated electronic submission of these documents should facilitate the staff's retrieval and review of a particular document. Applicants and investors should benefit from increased efficiencies in the Commission's storage, retrieval, and analysis of these submissions which would result from the proposed amendments. We believe the proposal to amend Rule 0-2 would benefit applicants. Removing the notarization requirement would remove a requirement from filers that is unnecessary, and removing the requirement to include a draft notice as an exhibit will result in a cost-savings to applicants. And, we believe that making unavailable to applicants Regulation S-T's Rule 201 provision for temporary hardship exemptions would benefit applicants because applicants would not bear the cost of both submitting an application in paper and in electronic form as a confirming copy within 6 business days as required by the temporary hardship exemption rule. This is true in light of the fact that there is no deadline for the submission of an application. We also expect that the addition of Regulation E filings as mandatory electronic submissions on EDGAR would result in benefits to the securities markets, investors, and other members of the public, by expanding the accessibility of information, and increasing the types of information, filed and made available for public review through the EDGAR system. Requiring these Regulation E filings to be submitted on EDGAR would benefit members of the investing public and the financial community by making information contained in these Commission filings more easily searchable and readily available to them. The proposals would result in the benefit to the public of the EDGAR page of our Web site being a comprehensive source from which to find filings of small business investment companies and business development companies. We also expect that Regulation E filers would benefit from the increased efficiencies in the filing process for these submissions resulting from the proposed amendments. By electronically transmitting these documents directly to the Commission, these filers would avoid the uncertainties and delays that can occur with the manual delivery of paper documents; we believe that it would be a simpler and more efficient means to submit these Regulation E filings. Regulation E filers also would benefit from no longer having to submit multiple copies of paper documents to the Commission. The proposed amendments would benefit investors, financial analysts and others by increasing the efficiency of retrieving and disseminating these filings. The mandated electronic transmission of these documents would enable the public to access them more quickly. Instead of having to come in person or through an agent to the Commission's public reference room to conduct a search for a particular submission that is in paper or microfiche, the public would be able to find and review the filing on any computer with an Internet connection by accessing the EDGAR system through the Commission's Web site or through a third party Web site that links to EDGAR. The proposed amendments would also enable financial analysts and others to retrieve, analyze and disseminate more rapidly this information. An investor would be able to more efficiently gather information of interest about Regulation E filers. Also, Regulation E filers and investors should benefit from increased efficiencies in the Commission's storage, retrieval, and analysis of these submissions which would result from the proposed amendments. Mandated EDGAR submission of these documents would result in their addition to the Commission's central electronic repository of filings that is free to anyone who has access to a computer linked to the Internet. Because the Commission's staff would be able to retrieve and analyze information contained in these Regulation E submissions more readily than under our current paper system, mandated electronic submission of these documents should facilitate the staff's retrieval and review of a particular document. In the Paperwork Reduction Act section, we estimate that, if the proposed amendments are adopted, the total reduction in the burden would be approximately $52,550. B. Expected Costs We expect that, if adopted, the proposed amendments would result in some initial and ongoing costs to applicants. We also expect, however, that many applicants would not bear the full range of costs that would result from the amendments for the reasons described below. Initial costs are those associated with filing a Form ID in order to obtain the access codes needed to submit an application electronically and otherwise preparing to make an application submission. 53 In order to file a Form ID, an applicant would need to learn the related electronic filing requirements, obtain access to a computer and the Internet, use the computer to access the Commission's EDGAR Filer Management Web site, respond to Form ID's information requirements and fax to the Commission a notarized authenticating document. 53 Applicants that already have EDGAR access codes would not need to file a Form ID. As further discussed in Part IX, however, we assume that a small number of applicants per year would not already have the codes. Ongoing costs are those associated with maintaining the framework developed through the initial costs (for example, updating information required by Form ID) and additional costs arising from each subsequent submission of an application. We expect that the vast majority of applicants would need to incur few, if any, additional costs related to obtaining computer and Internet access. We believe that the vast majority of applicants already would have access to a computer and the Internet. 54 54 An applicant that did not already own a computer with Internet access could, for example, go to a public library to use its computer and obtain Internet access. We expect no additional costs to applicants from our proposal to amend Rule 0-2. We request comment on whether our proposed amendments to Rule 0-2 to remove the current requirements for notarization of the application and provision of a draft notice as an exhibit would result in any additional costs. We expect no additional costs to applicants from our proposal to make unavailable to applicants Regulation S-T's Rule 201 provision for temporary hardship exemption. An applicant would still be able to request a continuing hardship exemption under Regulation S-T Rule 202 under appropriate circumstances. We believe that mandatory EDGAR submission of Regulation E filings would result in minimal cost to these filers. For the following reasons, we also expect that Regulation E filers would not bear the full range of costs frequently associated with new electronic filing requirements. Initial costs are those associated with the purchase of compatible computer equipment and software, including EDGAR software if obtained from a third-party vendor and not from the Commission's Web site. Initial costs also include those resulting from the training of existing employees to be EDGAR proficient or the hiring of additional employees or agents that are already skilled in EDGAR processing. Initial costs further include those associated with the formatting and transmission of an applicant's first document submitted on EDGAR. These transmission costs may include those related to subscribing to an Internet service provider. Regulation E filers already file on EDGAR and would have minimal or no initial costs. Ongoing costs are those associated with the electronic formatting and transmission of subsequent EDGAR filings. Regulation E filers may also incur future costs resulting from the training or hiring of employees regarding updated EDGAR filing requirements. The magnitude of these costs would depend on the filers' levels of technological proficiency and their previous familiarity with EDGAR filing requirements. Regulation E filers would incur the ongoing costs associated with formatting and transmitting their subsequent EDGAR filings. Consequently, the mandated EDGAR requirements should result only in costs related primarily to the electronic formatting of these documents in a format compatible with EDGAR, and transmission of the EDGAR formatted documents to the Commission. In any event, we believe that any costs for transmission, formatting, and education would be comparable to savings from not having to incur similar costs related to paper submissions. C. Comment Solicited We solicit comment on the costs and benefits of the proposed amendments. We request your views on the costs and benefits described above as well as on any other costs and benefits that could result from adoption of these proposals. Please identify any costs or benefits associated with the rule proposal for the mandatory electronic submission of applications (and related proposed amendments to Investment Company Act Rule 0-2 and Rule 201 of Regulation S-T) and Regulation E filings and any impact that the rule proposals may have on the ease of locating and using EDGAR data. How much, if any, expense would be avoided with the removal of the notary and draft notice requirements? What are the benefits that investors, financial analysts, other members of the financial community, applicants, and small business investment company and business development company Regulation E filers should realize from these proposals? Would the proposed amendments help an investor to gather information about an applicant and its operations? What are the likely expected initial and ongoing costs of these added categories of mandated EDGAR submissions? Are there costs in addition to those discussed above? Are there unidentified costs associated with any of the proposed amendments and, if so, what are they? We encourage commenters to identify any costs or benefits associated with the rule proposals. We also request data to quantify the costs and the benefits identified. VII. Burden on Competition; Promotion of Efficiency, Competition, and Capital Formation Section 23(a)(2) of the Exchange Act requires us, in adopting rules under the Exchange Act, to consider the anti-competitive effects of any rules that we adopt thereunder. Furthermore, Section 2(b) of the Securities Act, 55 Section 3(f) of the Exchange Act, 56 and Section 2(c) 57 of the Investment Company Act require us, when engaging in rulemaking, and considering or determining whether an action is necessary or appropriate in the public interest, to consider whether the action would promote efficiency, competition, and capital formation. In compliance with our responsibilities under these sections, we request comment on whether the proposals, if adopted, would burden competition and whether they would promote efficiency, competition, and capital formation. We encourage commenters to provide empirical data or other facts to support their views. 55 15 U.S.C. 77b(b). 56 15 U.S.C. 78c(f). 57 15 U.S.C. 80a-2(c). The proposed amendments regarding mandated electronic filing of applications and the related amendments to Rule 0-2 and Regulation S-T's Rule 201 are intended to simplify the requirements for submitting applications and facilitate more efficient transmission, analysis, storage and retrieval of information. This should improve the accessibility and usefulness of information available to all applicants and the public, including those wishing to request a hearing on an application. It may make the investment products offered by applicants more competitive, since all applicants would have ready access to the applications of others. The proposed rules would also improve the accessibility of information available to the public about the operation of investment companies and improve investors' ability to make informed investment decisions. We believe the proposed amendments would not impose a burden on competition and would not have an adverse impact on capital formation. The proposed amendments regarding mandated electronic filings under Regulation E by small business investment companies and business development companies are intended to facilitate more efficient transmission, analysis, storage and retrieval of information. This should improve the accessibility and usefulness of information available for use by filers, investors, and the public. It may make the investment products offered by filers more competitive, since all filers would have immediate online access to Regulation E filings of their competitors. We believe that the proposed rules would also improve the accessibility of information available to the public about the operation of small business investment companies and business development companies and thereby improve investors' ability to make informed investment decisions. We believe the proposed amendments would not impose a burden on competition and would not have an adverse impact on capital formation. We request comment on the impact the proposed rule would have on efficiency, competition and capital formation. We request comment on whether the proposed amendments, if adopted, would impose a burden on competition and whether they would promote efficiency, competition, and capital formation. We also request commenters to provide empirical data and other factual support for their views if possible. VIII. Initial Regulatory Flexibility Act Analysis This Initial Regulatory Flexibility Act Analysis (Analysis) has been prepared in accordance with 5 U.S.C. 603. It relates to our proposed amendments to add applications for orders under the Investment Company Act to the list of submissions that must be made electronically, including proposals to amend Rule 0-2 and make unavailable to applicants the provision for temporary hardship exemptions in Rule 201 of Regulation S-T, and to add Regulation E filings to the list of those that must be filed electronically through EDGAR. A. Reasons for, and Objectives of, Proposed Amendments The proposals would require applications for orders under any section of the Investment Company Act to be submitted electronically on EDGAR. The proposed amendments to Rule 0-2 would remove the requirements for notarization and provision of a draft notice, and the proposed amendments to Rule 201 of Regulation S-T would make applications ineligible for temporary hardship exemptions. We make these proposals because the absence of an electronic system for submitting applications for orders limits the usefulness of the information collected. The proposals would add Regulation E filings made by small business investment companies and business development companies to the list of those that must be filed electronically through EDGAR. We also make this proposal because the absence of an electronic system for submitting Regulation E filings limits the usefulness of the information collected. B. Legal Basis We are proposing amendments to Rules 101, and 201 of Regulation S-T and Rule 0-2 under the Investment Company Act pursuant to authority set forth in Sections 6, 7, 8, 10 and 19(a) of the Securities Act [15 U.S.C. 77f, 77g, 77h, 77j, and 77s(a)], Sections 3, 12, 13, 14, 15(d), 23(a) and 35A of the Exchange Act [15 U.S.C. 78c, 78l, 78m, 78n, 78o(d), 78w(a), and 78ll], and Sections 8, 30, 31 and 38 of the Investment Company Act [15 U.S.C. 80a-8, 80a-29, 80a-30, and 80a-37]. C. Small Entities Subject to the Rule For purposes of the Regulatory Flexibility Act, an investment company is a small entity if it, together with other investment companies in the same group of related investment companies, has net assets of $50 million or less as of the end of its most recent fiscal year. 58 Approximately 164 registered investment companies meet this definition. 59 Approximately 51 business development companies may be considered small entities. 60 We estimate that few, if any, separate accounts registered on Form N-3, N-4, or N-6 are small entities. 61 58 Rule 0-10(a) under the Investment Company Act [17 CFR 240.0-10(a)]. 59 The estimated number of reporting investment companies that may be considered small entities is based on December 2006 data from the Commission's EDGAR database and a third-party data provider. 60 This estimate is based on analysis by the Division of Investment Management staff of information from databases compiled by third-party information providers, including Morningstar, Inc. and Lipper Inc. 61 This estimate is based on figures compiled by the Division of Investment Management staff regarding separate accounts registered on Forms N-3, N-4, and N-6. In determining whether an insurance company separate account is a small entity for purposes of the Regulatory Flexibility Act, the assets of insurance company separate accounts are aggregated with the assets of their sponsoring insurance companies. Rule 0-10(b) under the Investment Company Act [17 CFR 270.0-10(b)]. D. Reporting, Recordkeeping, and Other Compliance Requirements The proposed amendments would require applicants to submit requests for orders and small business investment companies and business development companies to submit Regulation E filings electronically on the EDGAR system. The Commission estimates some one-time formatting and ongoing burdens that would be imposed on all applicants and Regulation E filers, including those that are small entities. We note, however, that all Regulation E filers and many applicants currently make other filings on EDGAR. Furthermore, we believe that non-investment company applicants would have no greater burden than that of those filers of Section 16 reports or Schedules 13D and 13G 62 who would not otherwise make EDGAR filings and that the electronic submission should create only a de minimis burden. 62 17 CFR 240.13d-101 and 13d-102. There would be no change in reporting or recordkeeping requirements. The proposed amendments to Rule 0-2 would reduce compliance requirements to the extent that they would remove the requirements for notarization of the application and provision of a draft notice with the application. We solicit comment on the effect the proposed amendments would have on small entities. E. Duplicative, Overlapping or Conflicting Federal Rules The Commission believes that there are no rules that duplicate, overlap, or conflict with the proposed amendments. F. Significant Alternatives The Regulatory Flexibility Act directs us to consider significant alternatives that would accomplish our stated objectives, while minimizing any significant adverse impact on small entities. In connection with the proposed amendments, the Commission considered the following alternatives:

(i)The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities;

(ii)the clarification, consolidation, or simplification of compliance and reporting requirements under the proposed amendments for small entities;

(iii)the use of performance rather than design standards; and

(iv)an exemption from coverage of the proposed amendments, or any part thereof, for small entities. The Commission believes at the present time that special compliance or reporting requirements for small entities, or an exemption from coverage for small entities, would not be appropriate or consistent with investor protection. Different requirements for applicants or Regulation E filers that are small entities could make it more difficult for the public to locate Commission filings and disclosure documents for these applicants. We believe it is important that the benefits resulting from the proposal be provided to the public for all applications and Regulation E filings, not just the ones from those that are not considered small entities. We have endeavored throughout the proposed amendments to minimize the regulatory burden on all applicants and Regulation E filers, including small entities, while meeting our regulatory objectives. Small entities should benefit from the Commission's reasoned approach to the proposed amendments to the same degree as others. The Commission preliminarily believes that further clarification, consolidation, or simplification of the proposals for those that are small entities would be inconsistent with the Commission's concern for investor protection. Further clarification, consolidation, or simplification of the proposals for those that are small entities would result in less information available for them. Similarly, we preliminarily conclude that using performance rather than design standards would not be consistent with our statutory mandate of investor protection. We believe that the standard provided in the proposal (EDGAR filing) is already sufficiently clear and appropriately simple. A major goal of making these mandatory EDGAR submissions is a more complete and searchable EDGAR database of filings; we do not believe that there is a comparable performance standard that would achieve this goal. G. Solicitation of Comments The Commission encourages the submission of written comments with respect to any aspect of this analysis. Comment is specifically requested on the number of small entities that would be affected by the proposed amendments and the likely impact of the proposals on small entities. Commenters are asked to describe the nature of any impact and provide empirical data supporting the extent of the impact. These comments will be considered in the preparation of the Final Regulatory Flexibility Act Analysis if the proposed rule amendments are adopted, and will be placed in the same public file as comments on the proposal. IX. Paperwork Reduction Act The proposed rule amendments contain “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”). 63 We are submitting the proposed collection of information to the Office of Management and Budget (“OMB”) for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. 63 44 U.S.C. 3501 *et seq* . A. Rule 0-2 The title for the collection of information is “General Requirements of Papers and Applications.” 64 Provision of information under the rule is necessary to obtain a benefit. The information is not kept confidential. Respondents to the collection are applying for orders of the Commission under the Investment Company Act. Applicants for orders under the Investment Company Act can include registered investment companies, affiliated persons of registered investment companies, and issuers seeking to avoid investment company status, among other entities. 65 The Commission uses the information required by rule 0-2 to decide whether the applicant should be deemed to be entitled to the action requested by the application. The proposed amendments to rule 0-2 would eliminate the requirement to have verifications of applications and statements of facts made in connection with applications notarized 66 and would eliminate the requirement that applicants include draft notices as exhibits to applications. 67 64 Rule 0-2 is a collection of information currently in use without a control number. We are submitting the rule to OMB for approval under the PRA. 65 There are several sections of the Investment Company Act pursuant to which entities may make applications for relief. Section 6(c) provides the Commission with authority to exempt persons, securities or transactions from any provision of the Investment Company Act, or the regulations thereunder, if and to the extent that such exemption is in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Investment Company Act. 66 See Rule 0-2(d). 67 See Rule 0-2(g). Burden Estimate for Rule 0-2 Applicants file applications as they deem necessary. The Commission receives approximately 125 applications per year under the Investment Company Act of 1940. Although each application typically is submitted on behalf of multiple entities, the entities in the vast majority of cases are related companies and are treated as a single applicant for purposes of this analysis. Much of the work of preparing an application is performed by outside counsel. The cost outside counsel charges applicants depends on the complexity of the issues covered by the application and the time required for preparation. Based on conversations with applicants and attorneys, the cost ranges from approximately $7,000 for preparing a well-precedented, routine application to approximately $80,000 to prepare a complex and/or novel application. We estimate that the Commission receives 20 of the most time-consuming applications annually, 80 applications of medium difficulty, and 25 of the least difficult applications. This distribution gives a total estimated annual cost burden to applicants of filing all applications of $5,255,000 [(20 × $80,000) + (80 × $43,500) + (25 × $7,000)]. In addition, based on conversations with applicants, we estimate that in-house counsel would spend from ten to fifty hours helping to draft and review an application. We estimate a total annual hour burden to all respondents of 3,650 hours (50 hours × 20 applications) + (30 hours × 80 applications) + (10 hours × 25 applications). We are proposing to decrease the burden associated with the existing collection of information for Rule 0-2 to reflect the proposed amendments. The proposed amendments to Rule 0-2 would, if adopted, eliminate the requirement to have verifications of applications and statements of facts made in connection with applications notarized. The notary service would be provided by a secretary or similar administrative employee of the applicant or the outside counsel preparing the application and would represent a negligible cost or hour burden to the applicant, so elimination of the notarization requirement would not be likely to decrease the burden measurably. The proposed amendments would also eliminate the requirement that applicants include proposed notices as exhibits to applications. A proposed notice is merely a summary of the statements in the application. We estimate that preparation of the proposed notice by outside counsel represents approximately 1% of the cost of preparing an application. Elimination of this requirement would reduce the estimated cost burden by approximately $52,550 (1% of $5,255,000). The proposed amendments will not change the hour burden. If the proposed amendments are adopted, we estimate the total reduction in the burden would be approximately $52,550. B. Regulation S-T The title for the collection of information is “General Rules and Regulations for Electronic Filing.” (OMB Control No. 3235-0424). The purpose of Regulation S-T is to implement the Commission's EDGAR system. The EDGAR system enables the Commission to receive, store, process and disseminate information filed with the Commission under the provisions of the federal securities laws. The Commission's forms and rules require filings that make information available to the investing public and that permit the Commission to verify compliance with the federal securities laws. Electronic filing improves the availability to the public and to the Commission of information filed with the Commission. Regulation S-T specifies the requirements that govern the electronic submission of documents to the Commission. Provision of the information required by the Regulation is mandatory. Responses are not kept confidential. Burden Estimate for Regulation S-T The proposed amendments to Regulation S-T would revise rule 101 under Regulation S-T to require electronic filing of applications for orders of the Commission under the Investment Company Act and of forms required by Regulation E under the Securities Act of 1933. The burden associated with the filing of applications under rule 0-2, as proposed to be amended, will be reflected in the collection of information entitled “General Requirements of Papers and Applications.” We are not proposing to amend Regulation E. The burden associated with the filing of documents required by Regulation E is reflected in the collections of information required by Regulation E, and will not change as a result of the proposed amendments to Regulation S-T. We are also proposing to amend rule 201 under Regulation S-T, which governs temporary hardship exemptions from electronic filing. Rule 201 is part of Regulation S-T and does not impose any burden on respondents separate from Regulation S-T. The proposed amendments to rule 201 will not change the burden of Regulation S-T. The Paperwork Reduction Act requires that we obtain OMB approval for a collection of information, whether the collection has a burden or not. Regulation S-T is a collection of information with no burden to respondents. OMB requires us to assign a burden of one hour to Regulation S-T and to indicate that the Regulation has one respondent so the automated OMB system will be able to handle approval of the Regulation. OMB has already approved a burden of one hour for one respondent to the Regulation. C. Form ID The Commission estimates that each year a small number of applicants would need to file a Form ID (OMB Control Number 3235-0328) with the Commission in order to gain access to EDGAR. Form ID is used to request the assignment of access codes to file on EDGAR. Most applicants would not need to file a Form ID because any applicant that has made at least one filing with the Commission since 2002 has been entered into the EDGAR system by the Commission and would not need to file Form ID to file electronically on EDGAR. However, applicants that have never made a filing with the Commission would need to file Form ID. The Commission estimates that it would receive approximately 10 Form IDs a year under the proposed amendments. This number fits within the current number of respondents that file a Form IDs each year because the actual number of Forms ID the Commission receives is less than the current estimate. D. Request for Comments Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments as to:

(i)Whether the proposed collections of information are necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

(ii)the accuracy of the Commission's estimate of the burden of the proposed collections of information;

(iii)whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and

(iv)whether there are ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology. The Commission has submitted the proposed collections of information to OMB for approval. Persons submitting comments on the collection of information requirements should direct them to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and should also send a copy of their comments to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-0609, with reference to File No. S7-25-07. Requests for materials submitted to OMB by the Commission with regard to these collections of information should be in writing, refer to File No. S7-25-07, and be submitted to the Securities and Exchange Commission, Public Reference Room, 100 F Street, NE., Washington, DC 20549. As OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication. X. Consideration of Impact on the Economy For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, 68 a rule is “major” if it results or is likely to result in: 68 Pub. L. 104-21, title II, 110 Stat. 857 (1996). • An annual effect on the economy of $100 million or more; • A major increase in costs or prices for consumers or individual industries; or • Significant adverse effects on competition, investment, or innovation. We request comment on and information regarding the potential impact of the proposed amendments on the economy on an annual basis. In particular, comments should address whether the proposed changes, if adopted, would have a $100,000,000 annual effect on the economy, cause a major increase in costs or prices, or have a significant adverse effect on competition, investment, or innovation. We request that commenters provide empirical data to support their views. XI. Statutory Basis We propose the rule amendments outlined above under Sections 6, 7, 8, 10 and 19(a) of the Securities Act [15 U.S.C. 77f, 77g, 77h, 77j, and 77s(a)], Sections 3, 12, 13, 14, 15(d), 23(a) and 35A of the Exchange Act [15 U.S.C. 78c, 78 *l* , 78m, 78n, 78o(d), 78w(a), and 78 *ll* ], and Sections 8, 30, 31 and 38 of the Investment Company Act [15 U.S.C. 80a-8, 80a-29, 80a-30, and 80a-37]. List of Subjects 17 CFR Part 232 Reporting and recordkeeping requirements, Securities. 17 CFR Part 270 Investment companies, Reporting and recordkeeping requirements, Securities. Text of the Proposed Rule Amendments In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows. PART 232—REGULATION S-T—GENERAL RULES AND REGULATIONS FOR ELECTRONIC FILINGS 1. The authority citation for part 232 continues to read, in part, as follows: Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 80a-8, 80a-29, 80a-30, 80a-37, and 7201 *et seq.* ; and 18 U.S.C. 1350. 2. Section 232.101 is amended by: a. Revising paragraphs (a)(1)(iv) and (v), the introductory text of paragraph (a)(2), paragraph (a)(2)(i), the first sentence of paragraph (a)(3), and paragraph (c)(6); and b. Removing and reserving paragraph (c)(11). The revisions read as follows: § 232.101 Mandated electronic submissions and exceptions.

(a)* * *

(1)* * *

(iv)Documents filed with the Commission pursuant to sections 8, 17, 20, 23(c), 24(b), 24(e), 24(f), and 30 of the Investment Company Act (15 U.S.C. 80a-8, 80a-17, 80a-20, 80a-23(c), 80a-24(b), 80a-24(e), 80a-24(f), and 80a-29) and any application for an order under any section of the Investment Company Act (15 U.S. C. 80a-1 *et seq.* );

(v)Documents relating to offerings exempt from registration under the Securities Act filed with the Commission pursuant to Regulation E (§§ 230.601-230.610a of this chapter);

(2)The following amendments to filings and applications, including any related correspondence and supplemental information except as otherwise provided, shall be submitted as follows:

(i)Any amendment to a filing or application submitted by or relating to a registrant or an applicant that is required to file electronically, including any amendment to a paper filing or application, shall be submitted in electronic format;

(3)Supplemental information, including documents related to applications under any section of the Investment Company Act, shall be submitted in electronic format except as provided in paragraph (c)(2) of this section. * * *

(c)* * *

(6)Except as provided in paragraph (a)(1)(v) of this section, filings relating to offerings exempt from registration under the Securities Act, including filings made pursuant to Regulation A (§§ 230.251-230.263 of this chapter) and Regulation D (§§ 230.501-230.506 of this chapter), as well as filings on Form 144 (§§ 239.144 of this chapter) where the issuer of the securities is not subject to the reporting requirements of section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or 78o(d), respectively); 3. Amend § 232.201 by revising paragraph

(a)introductory text. § 232.201 Temporary hardship exemption.

(a)If an electronic filer experiences unanticipated technical difficulties preventing the timely preparation and submission of an electronic filing other than a Form 3 (§ 249.103 of this chapter), a Form 4 (§ 249.104 of this chapter), a Form 5 (§ 249.105 of this chapter), a Form ID (§§ 239.63, 249.446, 269.7 and 274.402 of this chapter), a Form TA-1 (§ 249.100 of this chapter), a Form TA-2 (§ 249.102 of this chapter), a Form TA-W (§ 249.101 of this chapter), or an application for an order under any section of the Investment Company Act (15 U.S.C. 80a-1 *et seq.* ), the electronic filer may file the subject filing, under cover of Form TH (§§ 239.65, 249.447, 269.10 and 274.404 of this chapter), in paper format no later than one business day after the date on which the filing was to be made. PART 270—RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940 4. The authority citation for part 270 continues to read in part as follows: Authority: 15 U.S.C. 80a-1 *et seq.* , 80a-34(d), 80a-37, and 80a-39, unless otherwise noted. 5. Amend § 270.0-2 by: a. Removing the last sentence in paragraph (b); b. Revising paragraph (d); c. Removing paragraph (g); d. Redesignating paragraph

(h)as paragraph (g); and e. Removing the authority citation following the section. The revision reads as follows: § 270.0-2 General requirements of papers and applications.

(d)*Verification of applications and statements of fact.* Every application for an order under any provision of the Act, for which a form with instructions is not specifically prescribed and every amendment to such application, and every statement of fact formally filed in support of, or in opposition to, any application or declaration shall be verified by the person executing the same. An instrument executed on behalf of a corporation shall be verified in substantially the following form, but suitable changes may be made in such form for other kinds of companies and for individuals: The undersigned states that he or she has duly executed the attached ____ dated ___, 20___ for and on behalf of (name of company); that he or she is (title of officer) of such company; and that all action by stockholders, directors, and other bodies necessary to authorize the undersigned to execute and file such instrument has been taken. The undersigned further states that he or she is familiar with such instrument, and the contents thereof, and that the facts therein set forth are true to the best of his or her knowledge, information and belief. (Signature) By the Commission. Dated: November 1, 2007. Florence E. Harmon, Deputy Secretary. [FR Doc. E7-21911 Filed 11-8-07; 8:45 am] BILLING CODE 8011-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-127770-07] RIN 1545-BG77 Modifications of Commercial Mortgage Loans Held by a Real Estate Mortgage Investment Conduit (REMIC) AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: This document contains proposed regulations that would expand the list of permitted loan modifications to include certain modifications of commercial mortgages. Changes to the regulations are necessary to better accommodate evolving commercial mortgage industry practices. These changes will affect lenders, borrowers, servicers, and sponsors of securitizations of mortgages in REMICs. DATES: Written or electronic comments and requests for a public hearing must be received by February 7, 2008. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-127770-07), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-127770-07), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at *www.regulations.gov* (IRS REG-127770-07). FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Diana Imholtz or Susan Thompson Baker,

(202)622-3930; concerning submissions of comments and requests for a public hearing, Kelly D. Banks,

(202)622-7180 (not toll free numbers). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by January 8, 2008. Comments are specifically requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Internal Revenue Service, including whether the information will have practical utility; The accuracy of the estimated burden associated with the proposed collection of information; How the quality, utility, and clarity of the information to be collected may be enhanced; How the burden of complying with the proposed collections of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of service to provide information. The collection of information in this proposed regulation is in § 1.860G-2(b)(7). This information is required in order to show that modifications to mortgages permitted by the proposed regulation will not cause the modified mortgage to cease to be a qualified mortgage. The collection of information is voluntary to obtain a benefit. The likely respondents are businesses or other for-profit institutions. *Estimated total annual reporting burden:* 3000 hours. *Estimated average annual burden hours per respondent:* 8. *Estimated annual frequency of responses:* 1. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background This document contains proposed amendments to 26 CFR part 1 under section 860G of the Internal Revenue Code (Code). The REMIC provisions under sections 860A through 860G provide for a pass-through vehicle that issues multiple classes of interests in pools of residential and commercial mortgage loans. All income from the mortgage loans in the REMIC is taxed to the holders of the regular and residual interests in the REMIC. Among the requirements for qualification are that the mortgage loans held by the REMIC must consist of “qualified mortgages” that are principally secured by an interest in real property. All loans must be acquired on the startup day of the REMIC or within three months thereafter, except that the REMIC may exchange a defective loan for a “qualified replacement mortgage” for up to two years. Section 1.860G-2(b)(1) of the Income tax regulations (the regulations) provides that, subject to certain exceptions described in § 1.860G-2(b)(3), if an obligation is significantly modified, then the modified obligation is treated as one that was newly issued in exchange for the unmodified obligation that it replaced. If such a significant modification occurs after the obligation has been contributed to the REMIC and the modified obligation is not a qualified replacement mortgage, the modified obligation will not be a qualified mortgage and the deemed disposition of the unmodified obligation will be a prohibited transaction under section 860F(a)(2). Section 1.860G-2(b)(2) defines a “significant modification” as any change in the terms of an obligation that would be treated as an exchange of obligations under section 1001 and the related regulations. The treatment of specific loan modifications as deemed exchanges is addressed in § 1.1001-3. Section 1.1001-3 defines a loan modification and provides that a modification that is significant will be treated as a deemed exchange of the original loan for a new loan. Section 1.860G-2(b)(3) of the regulations sets forth four types of loan modifications that are expressly permitted without regard to the section 1001 modification rules. The four permitted modifications are:

(i)Changes in the terms of the obligation occasioned by default or a reasonably foreseeable default;

(ii)assumption of the obligation;

(iii)waiver of a due-on-sale clause or a due on encumbrance clause; and

(iv)conversion of an interest rate by a mortgagor pursuant to the terms of a convertible mortgage. The present REMIC regulations were adopted in 1992 at a time when the mortgage-backed securities market involved primarily residential mortgage loans. Since that time, the securitization of commercial mortgage loans has become more common. The four types of modifications that are expressly permitted without regard to the section 1001 modification rules cover the most common changes affecting residential mortgage loans, but may not cover the range of likely changes in commercial mortgage loans. In Notice 2007-17, IRB 2007-12, the IRS and Treasury Department solicited input on whether the present REMIC regulations should be amended to permit additional types of modifications incurred in connection with the commercial mortgage loans. In response to Notice 2007-17, the IRS and Treasury Department received three comments. See § 601.601(d)(2)(ii)( *b* ). The first comment set forth a proposal to add six new types of permissible modifications:

(1)A modification that releases, adds, substitutes or otherwise alters any portion of the collateral for, a guarantee of, or other form of credit enhancement for the obligation, whether recourse or nonrecourse (other than an alteration that causes the obligation not to be principally secured by an interest in real property);

(2)a change in the obligation from recourse (or substantially all recourse) to nonrecourse (or substantially all nonrecourse), or vice versa;

(3)a change in the date on which the obligation may be prepaid or defeased in whole or in part, or addition of a defeasance provision;

(4)substitution of a new obligor or addition or deletion of a co-obligor on the obligation;

(5)imposition or waiver of a prepayment penalty or other fee; and

(6)a change of the principal payment schedule of a loan following a voluntary or involuntary prepayment of principal. The second comment set forth a proposal to add two new types of permissible modifications relating to changes in collateral and defeasance that are substantially similar to proposals

(1)and

(3)of the first comment. In addition, the second comment set forth a proposal to revise the existing exception for assumptions of the obligation to include any substitution of a guarantor for a guarantee on, or other form of credit enhancement for, an obligation. The first and second comments also set forth examples of the most common changes to commercial loans requested by commercial borrowers to assist the IRS and Treasury Department in understanding the particular business need served by each proposed modification. Finally, the third comment requested that the IRS and Treasury Department consider a prior proposal advocating a new standard to measure materiality for modifications to loans held by a REMIC. Rather than adding specific types of loan modifications to the list of permitted modifications, the prior proposal recommended that the REMIC regulations be revised to provide that any change in the terms of a qualified mortgage will not cause it to cease to be a qualified mortgage so long as the change does not increase the principal amount or extend the maturity of the mortgage. IRS and Treasury Department personnel, including personnel from Large & Mid-Size Business

(LMSB)and LMSB Division Counsel, reviewed all comments and met with certain of the submitting parties to explore the proposals and the analysis supporting those proposals. After consideration of all comments received, the IRS and Treasury Department believe that it is appropriate at this time to propose amendments to the REMIC regulations to permit certain additional types of modifications to commercial mortgages. Explanation of Provisions 1. General The proposed regulations are intended to address the concerns raised by the commercial real estate industry that the existing REMIC regulations do not adequately accommodate legitimate business practices existing in the commercial mortgage securitization market. Submitting parties have indicated that the real property that secures a commercial mortgage loan is typically an active, income-generating, business property of the commercial loan borrower. Thus, in contrast to residential mortgage loans, there is a greater need to make ongoing changes to the terms of a commercial mortgage loan. For example, a borrower may request a release of a parcel of land from the lien of the mortgage to either sell or develop the land. Although the mortgage continues to be principally secured by an interest in real property following the release, such a change under the existing REMIC regulations might cause the mortgage to cease to be a qualified mortgage. The legislative history indicates that REMICs “should be flexible enough to accommodate most legitimate business concerns while preserving the desired certainty of income tax treatment.” S. Rep. No. 99-313, 99th Cong., 2d Sess., at 792. The legislative history also indicates that a REMIC, to preserve its tax status, must consist of a substantially fixed pool of real estate mortgages and related assets and have “no powers to vary the composition of its mortgage assets.” S. Rep. No. 99-313, 99th Cong., 2d Sess., at 791-792. Accordingly, the proposed regulations are intended to strike a balance between accommodating the legitimate business concerns of the commercial real estate industry with the requirement that a REMIC remain a substantially fixed pool of mortgages and not be engaged in an active lending business. In weighing the business needs of the industry against Congressional intent that a REMIC consist of a fixed pool of qualified mortgages that are principally secured by real property and whose income can be accurately calculated as of the startup day, the IRS and Treasury Department applied four core concepts to each of the proposed modifications. First, to minimize changes to REMIC cash flows after the startup day, the IRS and Treasury Department analyzed whether a particular modification would be likely to produce any significant gain or loss to the REMIC. Second, the IRS and Treasury Department considered whether a mortgage loan, if permitted to be modified as requested by submitting parties, would remain principally secured by real property after the modification. Third, the IRS and Treasury Department examined the ability of the IRS to review and administer compliance with the requirements of a particular modification. Finally, the IRS and Treasury Department considered the business needs indicated by the industry for a borrower requesting a particular modification to the terms of the loan and whether that business need was adequately addressed by the current regulations. 2. Proposed Modifications In applying the four core concepts, the IRS and Treasury Department determined that proposals relating to changes in collateral, guarantees and credit enhancement of an obligation and changes to the recourse nature of an obligation should be added to the list of permitted exceptions under section 860G to the section 1001 modification rules. These changes would be permitted so long as the obligation continues to be principally secured by an interest in real property. The proposed regulations also would clarify that a release of a lien on real property collateral securing a mortgage does not disqualify a mortgage so long as the mortgage continues to be principally secured by an interest in real property after giving effect to any releases, substitutions, additions or other alterations to the collateral. Section 1.860G-2(a)(1) of the current regulations provides that an obligation is principally secured by an interest in real property if the fair market value of the real property that secures the obligation equals at least 80 percent of the adjusted issue price of the obligation. The current regulations require the 80-percent test to be satisfied either at the time the obligation was originated or at the time the sponsor contributes the obligation to the REMIC. To ensure that a modified mortgage loan continues to be principally secured by an interest in real property, the proposed regulations require the 80-percent test to be satisfied at the time the mortgage loan is modified as determined by an appraisal performed by an independent appraiser. To support their proposals, commentators provided examples of loan modification requests that arise with some frequency in commercial mortgage loan securitizations. The majority of those examples involved requests to change the security or credit enhancement of an obligation. Accordingly, the IRS and Treasury Department expect that, by permitting changes to collateral and changes to the recourse nature of an obligation without regard to the section 1001 modification rules, the proposed regulations will resolve many of the industry's business concerns arising from borrower requests to modify commercial mortgage loans. 3. Other Modifications In balancing the competing interests noted in the preceding discussion, however, the IRS and Treasury Department determined that the remainder of the changes requested by commentators to accommodate business needs of the industry could not be adopted in the proposed regulations. First, commentators set forth a proposal to permit changes to the date on which a commercial mortgage loan may be defeased and to permit the addition of a defeasance provision where the original terms of the mortgage loan do not otherwise provide. By defeasing a commercial mortgage loan, the borrower replaces the underlying real property collateral securing the mortgage with government securities whose payments match the mortgage's payments. Section 1.860G-2(a)(8) of the current regulations permits defeasance of a mortgage loan, under certain conditions, including the condition that the defeasance not occur within 2 years of the startup date of the REMIC. These conditions are intended to ensure that the defeasance transaction is undertaken as part of a customary commercial transaction and not as part of an arrangement to collateralize a REMIC with obligations that are not real estate mortgages. Commentators indicated that while defeasance is currently the preferred means by which a borrower can obtain an early release from liability on a commercial mortgage, the original terms of commercial loan documents do not always satisfy the current defeasance exception. Submitting parties maintain that expanding the borrower's ability to defease does not violate the policy against replacing real property securing a commercial mortgage with other collateral so long as the defeasance does not occur within two years of the startup date. The IRS and Treasury Department believe, however, that the current defeasance exception already adequately accommodates the legitimate business need of providing borrowers with the ability to defease a mortgage loan if certain conditions are met. Expanding the defeasance exception is not warranted given Congress' intent that REMICs consist of a substantially fixed pool of real estate mortgages and related assets. Second, commentators set forth a proposal to expand the existing exception for assumptions of the obligation such that any changes to the obligor on a commercial mortgage loan, including the addition or deletion of a co-obligor, would be permitted. In general, a change to the obligor on a nonrecourse debt instrument is not a significant modification for purposes of the section 1001 modification rules. The submitting parties indicated that the vast majority of commercial mortgage loans are nonrecourse. As a result, permitting a borrower to make changes to the obligor on a commercial mortgage would not generally cause the mortgage to cease to be a qualified mortgage. For this reason, the IRS and Treasury Department do not believe that expanding the existing exception for assumptions of the obligation is necessary to address a business need of the industry that was not already addressed by the current regulations. Third, the commentators set forth a proposal to allow for the imposition or waiver of a prepayment penalty. The imposition or waiver of a prepayment penalty generally results in a change in yield on an obligation and can further result in a significant modification under § 1.1001-3(e)(2) of the regulations if the annual yield of the modified obligation varies from the unmodified obligation by more than the greater of 25 basis points or 5 percent of the yield of the unmodified instrument. Commentators indicated that although there is an administrative burden imposed on the servicer because the yield change computations are complicated and are performed frequently due to borrower requests, the change in yield resulting from an imposition or waiver of a prepayment penalty does not generally cause a significant modification and does not cause the mortgage to cease to be a qualified mortgage. Accordingly, the IRS and Treasury Department do not believe that adoption of this proposal is necessary to address a business need of the industry that was not already addressed by the current regulations. Fourth, commentators set forth a proposal to permit changes in the principal payment schedule following a partial prepayment of a mortgage. Commentators indicated that loan documents do not always provide for a reamortization or other adjustment of a principal payment schedule after a partial principal payment on a loan. In general, a material deferral of scheduled principal payments is a significant modification under the section 1001 modification rules. Section 1.1001-3(e)(3)(ii) of the regulations, however, provides a safe harbor period that begins on the original due date of the first deferred payment and extends for a period equal to the lesser of 5 years or 50 percent of the original term of the obligation. In addition, a pro rata prepayment of all of the remaining payments on an obligation does not result in a modification of the portion of the obligation that remains outstanding. In light of the safe harbor and the rule for pro rata prepayments, it is not clear to the IRS and Treasury Department whether permitting changes to the timing of principal payments is necessary. In addition, it is not clear whether a change in the principal payment schedule of a commercial mortgage loan could result in a change in yield more than the greater of 25 basis points or 5 percent of the yield of the unmodified loan. Finally, one commentator advocated a new standard to measure materiality for modifications to loans held by a REMIC that departs from the standards set forth under section 1001. The IRS and Treasury Department continue to believe that the section 1001 standard should generally govern modifications of mortgage loans held by a REMIC. The IRS and Treasury Department further believe that adding to the list of exceptions expressly permitted without regard to the section 1001 modifications strikes the appropriate balance between accommodating the business needs of the industry with the requirement that a REMIC remain a substantially fixed pool of mortgages. 4. Interaction With Section 1001 The additional types of modifications permitted by the proposed regulations will exempt the modified obligation from deemed exchange treatment for purposes of § 1.860G-2(b)(1) of the regulations only. For example, a commercial mortgage loan that is modified from nonrecourse to recourse and continues to be principally secured by an interest in real property will continue to be a qualified mortgage and will not be subject to the prohibited transaction tax under section 860F(a)(2). Such a modification, however, is significant under § 1.1001-3 and will be treated as a deemed exchange of the original mortgage loan for a new mortgage loan for purposes of section 1001. Accordingly, any resulting gain or loss under section 1001 must be included in the computation of the REMIC's taxable income. Effective Date These regulations are proposed to apply to modifications made to the terms of an obligation on or after publication of this document in the **Federal Register** as a Treasury decision. Special Analyses It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation. It is hereby certified that the collection of information requirement in this regulation will not have a significant economic impact on a substantial number of small business entities. This certification is based on the fact that the REMICs affected by this regulation will not be classified as small business entities. According to the Small Business Administration definition of a “small business,” 13 CFR 121.201, a REMIC is classified under Sector 52 (Finance and Insurance), Subsector 525 (Funds, Trusts and Other Financial Vehicles) under the category “Other Financial Vehicle”, NAICS code 525990, and is only considered a small business entity if it accumulates less than 6.5 million dollars in annual receipts. REMICs affected by this regulation generally hold pools of commercial mortgage loans with an average loan size of 18.1 million dollars, and have greater than 6.5 million dollars in annual receipts. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Comments and Requests for Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and 8 copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the **Federal Register** . Drafting Information The principal author of these proposed regulations is Diana Imholtz of the Office of Associate Chief Counsel (Financial Institutions and Products). Other personnel from the IRS and Treasury Department participated, however, in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 is amended by adding entries in numerical order to read in part as follows: Authority: 26 U.S.C. 7805 * * * Section 1.860A-0 also issued under 26 U.S.C. 860G(e). Section 1.860A-1 also issued under 26 U.S.C. 860G(e). Section 1.860G-2 also issued under 26 U.S.C. 860G(e). * * * **Par. 2.** Section 1.860A-0 is amended by adding an entry for § 1.860G-2(b)(7) to read as follows: § 1.860A-0 Outline of REMIC provisions. § 1.860G-2 Other rules.

(b)* * *

(7)Principally secured test; appraisal requirement. **Par. 3.** Section 1.860A-1 is amended by adding paragraph (b)(6) to read as follows: § 1.860A-1 Effective dates and transition rules.

(b)* * *

(6)*Exceptions for certain modified obligations.* Paragraphs (b)(3)(v), (b)(3)(vi) and (b)(7) of § 1.860G-2 apply to modifications made to the terms of an obligation on or after the date of publication of this document in the **Federal Register** as a Treasury decision. **Par. 4.** Section 1.860G-2 is amended by: 1. Revising paragraphs (a)(8), (b)(3)(iii) and (b)(3)(iv). 2. Adding paragraphs (b)(3)(v), (b)(3)(vi) and (b)(7). *The additions and revisions read as follows:* § 1.860G-2 Other rules.

(a)* * *

(8)*Release of interest in real property securing a qualified mortgage; defeasance.* If a REMIC releases its lien on real property that secures a qualified mortgage, that mortgage ceases to be a qualified mortgage on the date the lien is released unless—

(i)The REMIC releases its lien pursuant to a modification described in paragraph (b)(3)(v) of this section addressing changes to the collateral for, guarantees on, or other form of credit enhancement on a mortgage; or

(ii)The mortgage is defeased in the following manner—

(A)The mortgagor pledges substitute collateral that consists solely of government securities (as defined in section 2(a)(16) of the Investment Company Act of 1940 as amended ( *15 U.S.C. 80a-1* ));

(B)The mortgage documents allow such a substitution;

(C)The lien is released to facilitate the disposition of the property or any other customary commercial transaction, and not as part of an arrangement to collateralize a REMIC offering with obligations that are not real estate mortgages; and

(D)The release is not within 2 years of the startup day.

(b)* * *

(3)* * *

(iii)Waiver of a due-on-sale clause or a due on encumbrance clause;

(iv)Conversion of an interest rate by a mortgagor pursuant to the terms of a convertible mortgage;

(v)A modification that releases, substitutes, adds or otherwise alters a substantial amount of the collateral for, a guarantee on, or other form of credit enhancement for a recourse or nonrecourse obligation, so long as the obligation continues to be principally secured by an interest in real property following such release, substitution, addition or other alteration; and

(vi)A change in the nature of the obligation from recourse (or substantially all recourse) to nonrecourse (or substantially all nonrecourse), so long as the obligation continues to be principally secured by an interest in real property following such a change.

(7)*Principally secured test; appraisal requirement.* For purposes of paragraph (b)(3)(v) and

(vi)of this section, in determining whether an obligation continues to be principally secured by an interest in real property, the fair market value of the interest in real property securing the obligation, determined as of the date of the modification, must be equal to at least 80 percent of the adjusted issue price of the modified obligation, determined as of the date of the modification. For purposes of this test, the fair market value of the interest in real property securing the obligation must be determined by an appraisal performed by an independent appraiser. Linda E. Stiff, Deputy Commissioner for Services and Enforcement. [FR Doc. E7-21987 Filed 11-8-07; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-113891-07] RIN 1545-BG72 Benefit Restrictions for Underfunded Pension Plans; Correction AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correction to notice of proposed rulemaking. SUMMARY: This document contains corrections to a notice of proposed rulemaking (REG-113891-07) that was published in the **Federal Register** on Friday, August 31, 2007 (72 FR 50544) providing guidance regarding the use of certain funding balances maintained for defined benefit pension plans and regarding benefit restrictions for certain underfunded defined benefit pension plans. These regulations affect sponsors, administrators, participants, and beneficiaries of single employer defined benefit pension plans. FOR FURTHER INFORMATION CONTACT: Lauson C. Green or Linda S.F. Marshall at

(202)622-6090 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The correction notice that is the subject of this document is under sections 430(f) and 436 of the Internal Revenue Code. Need for Correction As published, the notice of proposed rulemaking (REG-113891-07) contains errors that may prove to be misleading and are in need of clarification. Correction of Publication Accordingly, the publication of proposed rulemaking (REG-113891-07), which was the subject of FR Doc. 07-4262, is corrected as follows: 1. On page 50544, column 3, in the preamble, under the paragraph heading “Background”, second line of the footnote number 1 at the bottom of the column, the language “Security Act of 1974, as amended (ERISA) sets forth” is corrected to read “Security Act of 1974, as amended (ERISA), sets forth”. 2. On page 50547, column 3, in the preamble, under the paragraph heading “F. Elections Under Section 430(f)”, twelfth line from the bottom of the column, the language “the plan year, before the last day of the” is corrected to read “the plan year, on or before the last day of the”. 3. On page 50548, column 1, in the preamble, under the paragraph heading “F. Elections Under Section 430(f)”, tenth line of the first paragraph of the column, the language “Form 5500 (with extensions) while an” is corrected to read “Form 5500 (with extensions), while an”. 4. On page 50549, column 2, in the preamble, under the paragraph heading “B. Limitation on Plant Shutdown and Other Unpredictable Contingent Event Benefits”, second line from the bottom of the first paragraph, the language “436(b)(2), as described in paragraph F in” is corrected to read “436(b)(2), as described in paragraph II. F in”. 5. On page 50549, column 2, in the preamble, under the paragraph heading “B. Limitation on Plant Shutdown and Other Unpredictable Contingent Event Benefits”, first and second lines of footnote number 4, the language “See also Notice 2007-14, IRB 501, (see § 601.601(d)(2) of this chapter) requesting” is corrected to read “See also Notice 2007-14, 2007-7 IRB 501 (see § 601.601(d)(2) of this chapter), requesting”. 6. On page 50550, column 1, in the preamble, under the paragraph heading “C. Limitation on Plan Amendments Increasing Liability for Benefits”, second line from the bottom of the first paragraph, the language “described in paragraph F of this” is corrected to read “described in paragraph II. F of this”. 7. On page 50551, column 2, in the preamble, under the subparagraph heading “5. *Prohibited payment* .”, second line of the paragraph (c), the language “on a retroactive annuity starting date,” is corrected to read “under a retroactive annuity starting date,”. 8. On page 50551, column 2, in the preamble, under the subparagraph heading “5. Prohibited payment.”, lines third and fourth to last of the paragraph (d), the language “from an insurer to pay benefits under plan.” is corrected to read “from an insurer to pay benefits under the plan.”. 9. On page 50551, column 2, in the preamble, under the paragraph heading “E. Limitation on Benefit Accruals”, second line from the bottom of the paragraph, the language “436(e)(2), as described in paragraph F of” is corrected to read “436(e)(2), as described in paragraph II. F of”. 10. On page 50552, column 2, in the preamble, under the paragraph heading “G. Presumed Underfunding for Purposes of Benefit Limitations”, tenth line of the second paragraph of the column, the language “percent but less than 90 percent, then” is corrected to read “percent but less than 90 percent (or, if that preceding plan year is the pre-effective plan year, was certified to be less than 90 percent), then”. 11. On page 50553, column 2, in the preamble, under the paragraph heading “G. Presumed Underfunding for Purposes of Benefit Limitations”, eleventh line of the third paragraph of the column, the language “prior certification applied, then the plan” is corrected to read “prior certification applied, the plan”. 12. On page 50554, column 1, in the preamble, under the subparagraph heading “3. *Periods prior to certification—special rules for unpredictable contingent event benefits and plan amendments that increase liability* .”, ninth line from the bottom of the first paragraph, the language “a funding standard account carryover” is corrected to read “a funding standard carryover”. § 1.430(f)-1 [Corrected] 13. On page 50559, column 2, § 1.430(f)-1(g) *Example 1* .(i), ninth line of the paragraph, the language “of the funding standard account carryover” is corrected to read “of the funding standard carryover”. 14. On page 50559, column 2, § 1.430(f)-1(g) *Example 1* .(i), thirteenth line of the paragraph, the language “effective interest rate in 2008 for plan P is” is corrected to read “effective interest rate in 2008 for Plan P is”. 15. On page 50559, column 2, § 1.430(f)-1(g) *Example 1* .(iv), seventh line of the paragraph, the language “standard account balance as of January 1,” is corrected to read “standard carryover balance as of January 1,”. 16. On page 50559, column 3, § 1.430(f)-1(g) *Example 5* .(i), ninth line of the paragraph, the language “actual rate of return on plan Q's assets in” is corrected to read “actual rate of return on Plan Q's assets in”. 17. On page 50560, column 1, § 1.430(f)-1(g) *Example 5* .(iii), first line of the column, the language “makes a contribution to Plan T of $190,000” is corrected to read “makes a contribution to Plan Q of $190,000”. § 1.436-1 [Corrected] 18. On page 50560, column 3, § 1.436-1(a)(3)(ii), eighth line of the paragraph, the language “this section 436 could apply differently” is corrected to read “section 436 and this section could apply differently”. 19. On page 50564, column 3, § 1.436-1(d)(5)(ii)(C), second line of the paragraph, the language “on a retroactive annuity starting date,” is corrected to read “under a retroactive annuity starting date,”. 20. On page 50565, column 3, § 1.436-1(f)(2)(iv), last line of the paragraph, the language “amendment under 436(c)—” is corrected to read “amendment under section 436(c)—”. 21. On page 50566, column 1, § 1.436-1(f)(3)(ii)(A), lines third, fourth, and fifth of the paragraph, the language “surety for purposes of section 412 of the Employee Retirement Income Security Act of 1974, as amended; or” is corrected to read “surety for purposes of section 412 of ERISA; or”. 22. On page 50566, column 2, § 1.436-1(f)(4) *Example 1* .(ii), fifth line of the paragraph, the language “the increase in funding target due to this” is corrected to read “the increase in the funding target due to this”. 23. On page 50567, column 1, § 1.436-1(f)(4) *Example 3* .(iii), seventh line of the paragraph, the language “section (f)(2)(iv)(A) apply, and the amount of” is corrected to read “paragraph (f)(2)(iv)(A) of this section apply, and the amount of”. 24. On page 50570, column 1, § 1.436-1(g)(7) *Example 2* ., paragraphs

(i)through

(v)are removed and [Reserved]. is inserted in its place. 25. On page 50570, column 2, § 1.436-1(g)(7) *Example 3.* (i), second line of the paragraph, the language “ *Example 2.* On July 1, 2011, the enrolled” is corrected to read “ *Example 1.* On July 1, 2011, the enrolled”. 26. On page 50571, column 3, § 1.436-1(h)(1)(iii)(A), sixth line from the bottom of the paragraph, the language “under paragraph (h)(1)(iii)(B) of this” is corrected to read “under paragraph (h)(1)(iii)(B) or (h)(2)(iii) of this”. 27. On page 50571, column 3, § 1.436-1(h)(2)(i), twelfth line of the paragraph, the language “less than 90 percent, and where the” is corrected to read “less than 90 percent (or, if that prior plan year is the pre-effective plan year, was certified to be less than 90 percent), and where the”. 28. On page 50572, column 1, § 1.436-1(h)(3)(i), third line from the bottom of the paragraph, the language “the plan year, then that first day is” is corrected to read “the plan year, that first day is”. 29. On page 50573, column 1, § 1.436-1(h)(4)(iii)(C)(1 ** ), eleventh line from the bottom of the paragraph, the language “applied, then the plan will not have” is corrected to read “applied, the plan will not have”. 30. On page 50573, column 2, § 1.436-1(h)(6), eighth line from the bottom of the paragraph, the language “carryforward balance as of any of the” is corrected to read “prefunding balance as of any of the”. 31. On page 50574, column 1, § 1.436-1(h)(6) *Example 4* .(ii), third line from the bottom of the paragraph, the language “distributions in paragraph (d)(1) and the” is corrected to read “distributions in paragraph (d)(1) of this section and the”. 32. On page 50574, column 1, § 1.436-1(h)(6) *Example 5.* (iii), third line from the bottom of the column, the language “paragraph (h)(2)(iii) of this section apply” is corrected to read “paragraph (h)(1)(iii) of this section apply”. 33. On page 50574, column 2, § 1.436-1(h)(6) *Example 5.* (iv), seventh line of the paragraph, the language “(h)(2)(ii) of this section apply. Accordingly,” is corrected to read “(h)(2)(iii) of this section apply. Accordingly,”. 34. On page 50574, column 2, § 1.436-1(h)(6) *Example 6.* (v), last line of the column, the language “2011, would be able to elect a new starting” is corrected to read “2011, would be able to elect a new annuity starting”. 35. On page 50576, column 1, § 1.436-1(j)(3)(iv), third line from the bottom of the paragraph, the language “percentage for the plan has been” is corrected to read “attainment percentage for the plan has been”. 36. On page 50577, column 2, § 1.436-1(k)(5), fifth line from the bottom of the column, the language “plan year beginning before the first” is corrected to read “plan year beginning before the”. LaNita Van Dyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. E7-21964 Filed 11-8-07; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF LABOR Mine Safety and Health Administration 30 CFR Part 49 RIN 1219-AB56 Mine Rescue Team Equipment AGENCY: Mine Safety and Health Administration, Labor. ACTION: Extension of comment period. SUMMARY: The Mine Safety and Health Administration

(MSHA)is extending the comment period for the Proposed Rule on Mine Rescue Team Equipment for underground coal and metal and nonmetal mines published on September 6, 2007 (72 FR 51338). This extension gives commenters additional time to review recently posted transcripts on MSHA's Web site. DATES: The comment period will close midnight, November 16, 2007, Eastern Standard Time. ADDRESSES: Comments must be clearly identified and may be submitted by any of the following methods:

(1)*Federal Rulemaking Portal:* *http://www.regulations.gov.* Follow the instructions for submitting comments.

(2)*Electronic mail: zzMSHA-Comments@dol.gov* . Include “RIN 1219-AB56” in the subject line of the message.

(3)*Telefax:*

(202)693-9441. Include “RIN 1219-AB56” in the subject.

(4)*Regular Mail:* MSHA, Office of Standards, Regulations, and Variances, 1100 Wilson Blvd., Room 2350, Arlington, Virginia, 22209-3939.

(5)*Hand Delivery or Courier:* MSHA, Office of Standards, Regulations, and Variances, 1100 Wilson Blvd., Room 2350, Arlington, Virginia 22209-3939. Sign in at the receptionist's desk on the 21st floor.

(6)*Docket:* Comments can be accessed electronically at *http://www.msha.gov* under the “Rules and Regs” link. MSHA will post all comments on the Internet without change, including any personal information provided. Comments may also be reviewed at the Office of Standards, Regulations, and Variances, 1100 Wilson Blvd., Room 2350, Arlington, Virginia. Sign in at the receptionist's desk on the 21st floor. MSHA maintains a listserve that enables subscribers to receive e-mail notification when rulemaking documents are published in the **Federal Register** . To subscribe to the listserve, go to *http://www.msha.gov/subscriptions/subscribe.aspx.* FOR FURTHER INFORMATION CONTACT: Patricia W. Silvey, Director, Office of Standards, Regulations, and Variances, MSHA, 1100 Wilson Boulevard, Room 2350, Arlington, Virginia 22209-3939. Ms. Silvey can be reached at (Internet E-mail),

(202)693-9440 (voice), or

(202)693-9441 (facsimile). This notice is available on the Internet at *http://www.msha.gov/REGSINFO.HTM.* SUPPLEMENTARY INFORMATION: MSHA issued a Proposed Rule on Mine Rescue Team Equipment for underground coal and metal mines on September 6, 2007 (72 FR 51338). The proposal provided notice of four public hearings which were held on October 23, October 25, October 30, and November 1, 2007 and required that all comments be submitted by November 9, 2007. On November 5, 2007 the National Mining Association requested that the comment period be extended for 30 days to allow additional time to review and comment on the transcripts of the public hearings. MSHA is extending the comment period to November 16, 2007. This action allows commenters sufficient time to review the posted transcripts and submit comments. All comments and other appropriate data must be submitted by midnight, November 16, 2007, Eastern Standard Time. Dated: November 6, 2007. Richard E. Stickler, Assistant Secretary for Mine Safety and Health. [FR Doc. E7-22089 Filed 11-8-07; 8:45 am] BILLING CODE 4510-43-P DEPARTMENT OF LABOR Mine Safety and Health Administration 30 CFR Parts 49 and 75 RIN 1219-AB53 Mine Rescue Teams AGENCY: Mine Safety and Health Administration, Labor. ACTION: Extension of comment period. SUMMARY: The Mine Safety and Health Administration

(MSHA)is extending the comment period for the Proposed Rule on Mine Rescue Teams for underground coal mines published on September 6, 2007 (72 FR 51320). This extension gives commenters additional time to review recently posted transcripts on MSHA's Web site. DATES: The comment period will close midnight, November 16, 2007, Eastern Standard Time. ADDRESSES: Comments must be clearly identified and may be submitted by any of the following methods:

(1)Federal Rulemaking Portal: *http://www.regulations.gov.* Follow the instructions for submitting comments.

(2)Electronic mail: *zzMSHA-Comments@dol.gov.* Include “RIN 1219-AB53” in the subject line of the message.

(3)Telefax:

(202)693-9441. Include “RIN 1219-AB53” in the subject.

(4)Regular Mail: MSHA, Office of Standards, Regulations, and Variances, 1100 Wilson Blvd., Room 2350, Arlington, Virginia, 22209-3939.

(5)Hand Delivery or Courier: MSHA, Office of Standards, Regulations, and Variances, 1100 Wilson Blvd., Room 2350, Arlington, Virginia 22209-3939. Sign in at the receptionist's desk on the 21st floor.

(6)Docket: Comments can be accessed electronically at *http://www.msha.gov* under the “Rules and Regs” link. MSHA will post all comments on the Internet without change, including any personal information provided. Comments may also be reviewed at the Office of Standards, Regulations, and Variances, 1100 Wilson Blvd., Room 2350, Arlington, Virginia. Sign in at the receptionist's desk on the 21st floor. MSHA maintains a listserve that enables subscribers to receive e-mail notification when rulemaking documents are published in the **Federal Register** . To subscribe to the listserve, go to *http://www.msha.gov/subscriptions/subscribe.aspx.* FOR FURTHER INFORMATION CONTACT: Patricia W. Silvey, Director, Office of Standards, Regulations, and Variances, MSHA, 1100 Wilson Boulevard, Room 2350, Arlington, Virginia 22209-3939. Ms. Silvey can be reached at *Silvey.Patricia@dol.gov* (Internet E-mail),

(202)693-9440 (voice), or

(202)693-9441 (facsimile). This notice is available on the Internet at *http://www.msha.gov/REGSINFO.HTM.* SUPPLEMENTARY INFORMATION: MSHA issued a Proposed Rule on Mine Rescue Teams for underground coal mines on September 6, 2007 (72 FR 51320). The proposal provided notice of four public hearings which were held on October 23, October 25, October 30, and November 1, 2007 and required that all comments be submitted by November 9, 2007. On November 5, 2007 the National Mining Association requested that the comment period be extended for 30 days to allow additional time to review and comment on the transcripts of the public hearings. MSHA is extending the comment period to November 16, 2007. This action allows commenters sufficient time to review the posted transcripts and submit comments. All comments and other appropriate data must be submitted by midnight, November 16, 2007, Eastern Standard Time. Dated: November 6, 2007. Richard E. Stickler, Assistant Secretary for Mine Safety and Health. [FR Doc. E7-22088 Filed 11-8-07; 8:45 am] BILLING CODE 4510-43-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [CGD08-07-033] RIN 1625-AA09 Drawbridge Operation Regulations; Bonfouca Bayou, Slidell, LA AGENCY: Coast Guard, DHS. ACTION: Notice of proposed rulemaking. SUMMARY: The Coast Guard proposes to change the regulation governing the operation of the State Route 433

(S433)swing span bridge across Bonfouca Bayou, mile 7.0, at Slidell, St. Tammany Parish, Louisiana. The Louisiana Department of Transportation and Development has requested changes to the present drawbridge operating regulations to make more efficient use of operating resources and to enhance the flow of vehicles across the bridge during peak traffic hours. DATES: Comments and related material must reach the Coast Guard on or before January 8, 2008. ADDRESSES: You may mail comments and related material to Commander (dpb), Eighth Coast Guard District, 500 Poydras Street, New Orleans, Louisiana 70130-3310. The Commander, Eighth Coast Guard District, Bridge Administration Branch maintains the public docket for this rulemaking. Comments and material received from the public, as well as documents indicated in this preamble as being available in the docket, will become part of this docket and will be available for inspection or copying at the Bridge Administration office between 7 a.m. and 3 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Phil Johnson, Bridge Administration Branch, telephone

(504)671-2128. SUPPLEMENTARY INFORMATION: Request for Comments We encourage you to participate in this rulemaking by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this rulemaking [CGD08-07-033], indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this proposed rule in view of them. Public Meeting We do not now plan to hold a public meeting. You may submit a request for a meeting by writing to Commander, Eighth Coast Guard District, Bridge Administration Branch at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the **Federal Register** . Background and Purpose The Louisiana Department of Transportation and Development has requested that the operating regulation of the S433 swing span bridge be changed in order to make more efficient use of operating resources. Currently 33 CFR 117.433 reads: The draw of the S433 bridge, mile 7.0, at Slidell shall operated as follows:

(a)The draw need not open for passage of vessels from 7 a.m. to 8 a.m. and from 1:45 p.m. to 2:45 p.m., Monday through Friday except federal holidays.

(b)The draw need open only on the hour and half-hour from 6 a.m. to 7 a.m. and from 3 p.m. to 6 p.m., Monday through Friday except federal holidays.

(c)The draw shall open on signal from 9 p.m. to 5 a.m., if at least four hours notice is given to the Louisiana Department of Transportation and Development Security Service at

(504)375-0100.

(d)At all other times the draw shall open on signal. The bridge owner has requested that the operating regulation be changed to read as follows: The draw of the S433 Bridge, mile 7.0 at Slidell, shall open on signal, except that from 6 p.m. to 6 a.m., the draw shall open on signal if at least two hours notice is given. On Monday through Friday, except Federal holidays, the draw need not open for the passage of vessels from 7 a.m. to 8 a.m. and from 1:45 p.m. to 2:45 p.m. Traffic counts indicate that the majority of vehicular traffic crosses the bridge between 7 a.m. and 8 a.m. and between 1:45 p.m. and 2:45 p.m., rush hours for commuters and school busses. The Louisiana Department of Transportation and Development believes that the proposed operating regulation will accommodate most vehicular traffic, and that the needs of navigation will also be met, while making the best use of available personnel to operate the bridge. Most of the vessels that request openings are commercial vessels consisting of small tugboats with one or two barges, shrimp trawlers and large recreational powerboats and sailboats that routinely transit this waterway and are able to give advance notice. Concurrent with the publication of the Notice of Proposed Rulemaking, a Test Deviation [CGD08-07-034], has been issued to allow the Louisiana Department of Transportation and Development to test the proposed schedule and to obtain data and public comments. The test period will be in effect during the entire Notice of Proposed Rulemaking comment period. The Coast Guard will review the logs of the drawbridge and evaluate public comments from this Notice of Proposed Rulemaking and the above referenced Temporary Deviation to determine if a permanent special drawbridge operating regulation is warranted. The Test Deviation allows the draw of the S433 Bridge to operate as follows: The draw of the S433 Bridge, mile 7.0 at Slidell, shall open on signal, except that from 6 p.m. to 6 a.m., the draw shall open on signal if at least two hours notice is given. On Monday through Friday, except Federal holidays, the draw need not open for the passage of vessels from 7 a.m. to 8 a.m. and from 1:45 p.m. to 2:45 p.m. Discussion of Proposed Rule The proposed rule change to 33 CFR 117.433 would reduce the hours that the bridge must be manned during the period between 6 p.m. and 6 a.m., making more efficient use of operating resources. The proposed rule change will also delete the incorrect area code and the telephone number provided in subpart

(c)of the regulation, which is not necessary since the telephone number is required to be posted on the bridge. Regulatory Evaluation This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. We expect the economic impact of this proposed rule to be so minimal that a full Regulatory Evaluation is unnecessary. The existing special operating regulation has been in place since March, 1997 and the Coast Guard has not received complaints regarding the drawbridge operating schedule. The current and historical waterway traffic is very minimal with an average of 2.5 signals to open a day. Most signals come from commercial vessels and recreational craft that are able to schedule an opening in advance. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. This proposed rule would affect a limited number of small entities. These entities include operators of tug boats and trawlers using the waterway. This proposed rule will have no impact on any small entities because they are able to give notice prior to transiting through this bridge, and most vessel operators that require an opening are currently providing advance notice. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule would economically affect it. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the Eighth Coast Guard District Bridge Administration Branch at the address above. The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. Collection of Information This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.). Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this proposed rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. Taking of Private Property This proposed rule would not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. Civil Justice Reform This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. Protection of Children We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children. Indian Tribal Governments This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. Energy Effects We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211. Technical Standards The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( *e.g.* , specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this proposed rule under Commandant Instruction M16475.lD and Department of Homeland Security Management Directive 5100.1, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f), and have made a preliminary determination that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, we believe that this rule should be categorically excluded, under figure 2-1, (32)(e), of the Instruction, from further environmental documentation. Under figure 2-1, paragraph (32)(e), an “Environmental Analysis Check List” or “Categorical Exclusion Determination” is not required for this rule. Comments on this section will be considered before we make the final decision on whether to categorically exclude this rule from further environmental review. List of Subjects in 33 CFR Part 117 Bridges. For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows: PART 117—DRAWBRIDGE OPERATION REGULATIONS 1. The authority citation for part 117 continues to read as follows: Authority: 33 U.S.C. 499; 33 CFR 1.05-1(g); Department of Homeland Security Delegation No. 0170.1. 2. § 117.433 is revised to read as follows: § 117.433 Bonfouca Bayou. The draw of the S433 Bridge, mile 7.0, at Slidell, shall open on signal, except that from 6 p.m. to 6 a.m., the draw shall open on signal if at least 2 hours notice is given. On Monday through Friday, except Federal holidays, the draw need not open for the passage of vessels from 7 a.m. to 8 a.m. and from 1:45 p.m. to 2:45 p.m. Dated: October 29, 2007. Joel R. Whitehead, Rear Admiral, U.S. Coast Guard Commander, Eighth Coast Guard District. [FR Doc. E7-21884 Filed 11-8-07; 8:45 am] BILLING CODE 4910-15-P LIBRARY OF CONGRESS Copyright Royalty Board 37 CFR Part 383 [Docket No. 2005-5 CRB DTNSRA] Digital Performance Right in Sound Recordings and Ephemeral Recordings for a New Subscription Service AGENCY: Copyright Royalty Board, Library of Congress. ACTION: Notice of proposed rulemaking. SUMMARY: The Copyright Royalty Judges are publishing for comment proposed regulations that set the rates and terms for the use of sound recordings in transmissions made by new subscription services and for the making of ephemeral recordings necessary for the facilitation of such transmissions for the period commencing from the inception of the new subscription service through December 31, 2010. DATES: Comments and objections, if any, are due no later than December 10, 2007. ADDRESSES: Comments and objections may be sent electronically to *crb@loc.gov.* In the alternative, send an original, five copies and an electronic copy on a CD either by mail or hand delivery. Please do not use multiple means of transmission. Comments and objections may not be delivered by an overnight delivery service other than the U.S. Postal Service Express Mail. If by mail (including overnight delivery), comments and objections must be addressed to: Copyright Royalty Board, P.O. Box 70977, Washington, DC 20024-0977. If hand delivered by a private party, comments and objections must be brought to the Copyright Office Public Information Office, Library of Congress, James Madison Memorial Building, Room LM-401, 101 Independence Avenue, SE., Washington, DC 20559-6000. If delivered by a commercial courier, comments and objections must be delivered between 8:30 a.m. and 4 p.m. to the Congressional Courier Acceptance Site located at 2nd and D Street, NE., Washington, DC, and the envelope must be addressed to: Copyright Royalty Board, Library of Congress, James Madison Memorial Building, LM-403, 101 Independence Avenue, SE., Washington, DC 20559-6000. FOR FURTHER INFORMATION CONTACT: Richard Strasser, Senior Attorney, or Gina Giuffreda, Attorney-Advisor, by telephone at

(202)707-7658 or e-mail at *crb@loc.gov.* SUPPLEMENTARY INFORMATION: Background In 1995, Congress enacted the Digital Performance Right in Sound Recordings Act of 1995 (“DPRA”), Public Law 104-39, which created an exclusive right for copyright owners of sound recordings, subject to certain limitations, to perform publicly the sound recordings by means of certain digital audio transmissions. Among the limitations on the performance right was the creation of a new compulsory license for nonexempt noninteractive digital subscription transmissions. 17 U.S.C. 114(f). Section 114 was later amended with the passage of the Digital Millennium Copyright Act of 1998 (“DMCA” or “the Act”), Public Law 105-304, to cover additional digital audio transmissions. These include transmissions made by “new subscription services.” For purposes of the section 114 license, a “new subscription service” is “a service that performs sound recordings by means of noninteractive subscription digital audio transmissions and that is not a preexisting subscription service or a preexisting satellite digital audio radio service.” 17 U.S.C. 114(j)(8). In addition to expanding the current section 114 license, the DMCA also created a new statutory license to allow for the making of ephemeral reproductions for the purpose of facilitating certain digital audio transmissions, including those made by new subscription services. 17 U.S.C. 112(e). To initiate a proceeding to establish rates and terms for those transmissions made by a new subscription service, either a copyright owner of sound recordings or a new subscription service must file a petition with the Copyright Royalty Judges (“Judges”). The petition must indicate that a new subscription service on which sound recordings are performed is or is about to become operational, for the purpose of determining reasonable terms and rates of royalty payments for the new subscription service for the period commencing with the inception of such new subscription service and ending on the date on which the most recent royalty rates and terms for preexisting subscription digital audio transmission services or preexisting satellite digital audio radio services expire or such other period as the parties may agree. 17 U.S.C. 114(f)(2)(C). On October 31, 2005, pursuant to section 114(f)(2)(C), XM Satellite Radio, Inc. (“XM”) filed with the Judges a Petition to Initiate and Schedule Proceeding for a New Type of Subscription Service for a “new type of subscription service [which] performs sound recordings on digital audio channels programmed by the licensee for transmission by a satellite television distribution service to its residential customers, where the audio channels are bundled with television channels as part of a `basic' package of service and not for a separate fee.” XM Petition at 1. The petition noted that this new subscription service was to commence on or about November 15, 2005. *Id.* On December 5, 2005, pursuant to 17 U.S.C. 804(b)(3)(C)(ii), the Copyright Royalty Judges published a notice in the **Federal Register** announcing commencement of the proceeding to set rates and terms for royalty payments under sections 114 and 112 for the activities of the new subscription service described in the XM Petition and requesting interested parties to submit their petitions to participate. 70 FR 72471 (December 5, 2005). Petitions to participate in this proceeding were received from Sirius Satellite Radio, Inc. (“Sirius”), XM, MTV Networks (“MTV”), and SoundExchange, Inc. The Judges set the schedule for the proceeding for both the direct and rebuttal phases of the proceeding, including the dates for the filing of the written statements and the dates for oral testimony for each phase. Subsequent to the presentation of the direct phase of their case and the filing of their written rebuttal statements, but prior to the oral presentation of their rebuttal witnesses, the parties informed the Judges that they had “reached full agreement on all issues in this litigation” and that “there are no more issues to try.” Transcript of September 10, 2007, at p. 5. They also stated that the settlement agreement would be submitted to the Judges for approval and adoption pursuant to 17 U.S.C. 801(b)(7)(A). *Id.* at 6. The proposed rates and terms codifying the settlement agreement were filed on October 30, 2007. Section 801(b)(7)(A) allows for the adoption of rates and terms negotiated by “some or all of the participants in a proceeding at any time during the proceeding” provided they are submitted to the Copyright Royalty Judges for approval. This section provides that in such event:

(i)the Copyright Royalty Judges shall provide to those that would be bound by the terms, rates, or other determination set by any agreement in a proceeding to determine royalty rates an opportunity to comment on the agreement and shall provide to participants in the proceeding under section 803(b)(2) that would be bound by the terms, rates, or other determination set by the agreement an opportunity to comment on the agreement and object to its adoption as a basis for statutory terms and rates; and

(ii)the Copyright Royalty Judges may decline to adopt the agreement as a basis for statutory terms and rates for participants that are not parties to the agreement, if any participant described in clause

(i)objects to the agreement and the Copyright Royalty Judges conclude, based on the record before them if one exists, that the agreement does not provide a reasonable basis for setting statutory terms or rates. 17 U.S.C. 801(b)(7)(A). Rates and terms adopted pursuant to this provision are binding on all copyright owners of sound recordings and new subscription services performing the sound recordings on digital audio channels programmed by the licensee for transmission by a satellite television distribution service to its residential customers where the audio channels are bundled with television channels as part of a “basic” package of service and not for a separate fee. The parties have agreed and proposed that the terms governing the activities of a new subscription service under sections 114 and 112 as described herein shall be the same, unless otherwise specified, as those to be determined by the Judges in the current proceeding to set rates and terms for the subscription transmissions and the reproduction of ephemeral recordings by preexisting satellite digital audio radio services, Docket No. 2006-1 CRB DSTRA. The Judges will render their determination in that proceeding by mid-December. The parties proposing the fee structure and fees set forth herein have agreed that the fee structure and fees shall not be offered into evidence, relied upon, considered as precedent, or otherwise taken into account in

(i)the proceeding in Docket No. 2006-1 CRB DSTRA to set rates and fees for the public performance of sound recordings or the reproduction of ephemeral phonorecords via preexisting satellite digital audio radio services, or

(ii)in the immediately following proceeding to adopt successor rates and terms for preexisting satellite digital audio radio services. As discussed above, the public may comment and object to any or all of the proposed regulations contained in this notice of proposed rulemaking. Those who do comment and object, however, must be prepared to participate in further proceedings in this docket to establish rates and terms for the activities of the new subscription services described herein under the section 112 and 114 licenses. List of Subject in 37 CFR Part 383 Copyright, Digital audio transmissions, Performance right, Sound recordings. Proposed Regulations For the reasons set forth in the preamble, the Copyright Royalty Judges propose to add part 383 to Chapter III of title 37 of the Code of Federal Regulations to read as follows: PART 383—RATES AND TERMS FOR SUBSCRIPTION TRANSMISSIONS AND THE REPRODUCTION OF EPHEMERAL RECORDINGS BY NEW SUBSCRIPTION SERVICES Sec. 383.1 General. 383.2 Definitions. 383.3 Royalty fees for public performance of sound recordings and the making of ephemeral recordings. 383.4 Terms for making payment of royalty fees. Authority: 17 U.S.C. 112(e), 114, and 801(b)(1). § 383.1 General.

(a)*Scope.* This part 383 establishes rates and terms of royalty payments for the public performance of sound recordings in certain digital transmissions by Licensees in accordance with the provisions of 17 U.S.C. 114, and the making of certain ephemeral recordings by Licensees in accordance with the provisions of 17 U.S.C. 112(e), during the period commencing from the inception of the Licensees' Services and continuing through December 31, 2010.

(b)*Legal compliance.* Licensees relying upon the statutory licenses set forth in 17 U.S.C. 112 and 114 shall comply with the requirements of those sections and the rates and terms of this part.

(c)*Relationship to voluntary agreements.* Notwithstanding the royalty rates and terms established in this part, the rates and terms of any license agreements entered into by Copyright Owners and Licensees shall apply in lieu of the rates and terms of this part to transmissions within the scope of such agreements. § 383.2 Definitions. For purposes of this part, the following definitions shall apply:

(a)*Applicable Period* is the period for which a particular payment to the designated collection and distribution organization is due.

(b)*Bundled Contracts* means contracts between the Licensee and a Provider in which the Service is not the only content licensed by the Licensee to the Provider.

(c)*Copyright Owner* is a sound recording copyright owner who is entitled to receive royalty payments under 17 U.S.C. 112(e) or 114(g).

(d)*License Period* means the period commencing from the inception of the Licensees' Services and continuing through December 31, 2010.

(e)*Licensee* is a person that has obtained statutory licenses under 17 U.S.C. 112 and 114, and the implementing regulations, to make digital audio transmissions as part of a Service (as defined in paragraph

(h)of this section), and ephemeral recordings for use in facilitating such transmissions.

(f)*Provider* means a “multichannel video programming distributor” as that term is defined in 47 CFR 76.1000(e); notwithstanding such definition, for purposes of this part, a Provider shall include only a distributor of programming to televisions, such as a cable or satellite television provider.

(g)*Revenue.*

(1)“Revenue” means all monies and other considerations, paid or payable, recognizable during the Applicable Period as revenue by the Licensee consistent with Generally Accepted Accounting Principles (“GAAP”) and the Licensee's past practices, which is derived by the Licensee from the operation of the Service and shall be comprised of the following:

(i)Revenues recognizable by Licensee from Licensee's Providers and directly from residential U.S. subscribers for Licensee's Service;

(ii)Licensee's advertising revenues recognizable from the Service (as billed), or other monies received from sponsors of the Service if any, less advertising agency commissions not to exceed 15% of those fees incurred to a recognized advertising agency not owned or controlled by Licensee;

(iii)Revenues recognizable for the provision of time on the Service to any third party;

(iv)Revenues recognizable from the sale of time to Providers of paid programming, such as infomercials, on the Service;

(v)Where merchandise, service, or anything of value is receivable by Licensee in lieu of cash consideration for the use of Licensee's Service, the fair market value thereof or Licensee's prevailing published rate, whichever is less;

(vi)Monies or other consideration recognizable as revenue by Licensee from Licensee's Providers, but not including revenues recognizable by Licensee's Providers from others and not accounted for by Licensee's Providers to Licensee, for the provision of hardware for the Service by anyone and used in connection with the Service;

(vii)Monies or other consideration recognizable as revenue for any references to or inclusion of any product or service on the Service; and

(viii)Bad debts recovered regarding paragraphs (g)(1)(i) through

(vii)of this section.

(2)“Revenue” shall include such payments as set forth in paragraphs (g)(1)(i) through

(viii)of this section to which Licensee is entitled but which are paid or payable to a parent, subsidiary, division, or affiliate of Licensee, in lieu of payment to Licensee but not including payments to Licensee's Providers for the Service. Licensee shall be allowed a deduction from “Revenue” as defined in paragraph (g)(1) of this section for bad debts actually written off during the reporting period.

(h)*A Service* is a non-interactive (consistent with the definition of “interactive service” in 17 U.S.C. 114(j)(7)) audio-only subscription service (including accompanying information and graphics related to the audio) that is transmitted to residential subscribers of a television service through a Provider which is marketed as and is in fact primarily a video service where

(1)Subscribers do not pay a separate fee for audio channels,

(2)The audio channels are delivered by digital audio transmissions through a technology that is incapable of tracking the individual sound recordings received by any particular consumer.

(3)However, paragraph (h)(2) of this section shall not apply to the Licensee's current contracts with Providers that are in effect as of the effective date of this part if such Providers become capable in the future of tracking the individual sound recordings received by any particular consumer, provided that the audio channels continued to be delivered to Subscribers by digital audio transmissions and the Licensee remains incapable of tracking the individual sound recordings received by any particular consumer.

(i)*Subscriber* means every residential subscriber to the underlying service of the Provider who receives Licensee's Service in the United States for all or any part of a month; provided, however, that for any Licensee that is not able to track the number of subscribers on a per-day basis, “Subscribers” shall be calculated based on the average of the number of subscribers on the last day of the preceding month and the last day of the applicable month, unless the Service is paid by the Provider based on end-of-month numbers, in which event “Subscribers” shall be counted based on end-of-month data.

(j)*Stand-Alone Contracts* means contracts between the Licensee and a Provider in which the only content licensed to the Provider is the Service. § 383.3 Royalty fees for public performances of sound recordings and the making of ephemeral recordings.

(a)*Royalty rates.* Royalty rates for the public performance of sound recordings by eligible digital transmissions made over a Service pursuant to 17 U.S.C. 114, and for ephemeral recordings of sound recordings made pursuant to 17 U.S.C. 112 to facilitate such transmissions, are as follows. Each Licensee will pay, with respect to content covered by the License that is provided via the Service of each such Licensee:

(1)For Stand-Alone Contracts, the greater of:

(i)15% of Revenue, or

(ii)The following monthly minimum payment per Subscriber to the Service of such Licensee—

(A)From inception through 2006: $0.0075

(B)2007: $0.0075

(D)2009: $0.0125

(E)2010: $0.0150 and

(2)For Bundled Contracts, the greater of:

(i)15% of Revenue allocated to reflect the objective value of the Licensee's Service, or

(ii)The following monthly minimum payment per Subscriber to the Service of such Licensee:

(A)From inception through 2006: $0.0220

(B)2007: $0.0220

(D)2009: $0.0220

(E)2010: $0.0250

(b)*Minimum fee.* Each Licensee will pay an annual, non-refundable minimum fee of one hundred thousand dollars ($100,000), payable on January 31 of each calendar year in which the Service is provided pursuant to the section 112 and 114 statutory licenses, but payable pursuant to the applicable regulations for all years 2007 and earlier. Such fee shall be recoupable and credited against royalties due in the calendar year in which it is paid. § 383.4 Terms for making payment of royalty fees.

(a)Subject to the provisions of this section, terms governing timing and due dates of royalty payments, late fees, statements of account, audit and verification of royalty payments and distributions, cost of audit and verification, record retention requirements, treatment of Licensees' confidential information, distribution of royalties, unclaimed funds, designation and definition of the collection and distribution organization, and any definitions for applicable terms not defined herein and not otherwise inapplicable shall be those adopted by the Copyright Royalty Judges for subscription transmissions and the reproduction of ephemeral recordings by preexisting satellite digital audio radio services in Docket No. 2006-1 CRB DSTRA (“the SDARS Proceeding”).

(b)Without prejudice to any applicable notice and recordkeeping provisions, statements of account shall not require reports of performances.

(c)If the Copyright Royalty Judges adopt reports of use regulations in the SDARS Proceeding, those regulations, if any, shall govern Licensees' obligations to report sound recordings used pursuant to this part, except that Licensees also shall report to SoundExchange which channels are transmitted by their respective Providers for all past, current and future periods. In the event that the Copyright Royalty Judges do not adopt reports of use regulations in the SDARS Proceeding, then reports of use provided by XM Satellite Radio Inc. (“XM”) and Sirius Satellite Radio Inc. (“Sirius”) for their use of sound recordings on their preexisting satellite digital audio radio services (as defined in 17 U.S.C. 114(j)(10)) shall be deemed to satisfy XM's and Sirius' obligations to report sound recordings used pursuant to this part, and MTV Networks shall provide census reporting, retroactive to the inception of its Service. Dated: November 6, 2007. James Scott Sledge, Chief Copyright Royalty Judge. [FR Doc. E7-22044 Filed 11-8-07; 8:45 am] BILLING CODE 1410-72-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 82 [EPA-HQ-OAR-2006-5065; FRL-8493-4] RIN 2060-AO32 Protection of Stratospheric Ozone: Revision of Refrigerant Recovery and Recycling Equipment Standards AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: The Environmental Protection Agency

(EPA)is proposing to update motor vehicle refrigerant recovery and recycling equipment standards. Under Clean Air Act Section 609, motor vehicle air-conditioning

(SAE)in effect as of the date of the enactment of the Clean Air Act Amendments of 1990. In 1997, EPA promulgated regulations that required the use of SAE Standard J2210, HFC-134a Recycling Equipment for Mobile Air Conditioning Systems for certification of MVAC refrigerant handling equipment. SAE has replaced Standard J2210 with J2788, Recovery/Recycle and Recovery/Recycle/Recharging Equipment for HFC-134a Refrigerant. To avoid confusion, EPA is updating its reference to include the new SAE standards. This action reflects a change in industry standard practice. This action proposes to revise the EPA addresses to send equipment certification forms. DATES: Written comments or a request for a public hearing must be received by December 10, 2007. ADDRESSES: Submit your comments, identified by Docket ID No EPA-HQ-OAR-2006-5065, by mail to Environmental Protection Agency, Mailcode 6102T, EPA Docket Center (EPA/DC), 1200 Pennsylvania Avenue, NW., Washington, DC 20460. Comments may also be submitted electronically or through hand delivery/courier by following the detailed instructions in the ADDRESSES section of the direct final rule located in the rules section of this **Federal Register** . FOR FURTHER INFORMATION CONTACT: Karen Thundiyil, Stratospheric Protection Division, Office of Atmospheric Programs (MC 6205J), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number:

(202)343-9464; fax number

(202)343-2363; e-mail address: *thundiyil.karen@epa.gov.* SUPPLEMENTARY INFORMATION: In the “Rules and Regulations” Section of this **Federal Register** , we are updating the existing motor vehicle refrigerant recovery and recycling equipment standards, as a direct final rule without a prior proposed rule. If we receive no adverse comment or a request for a public hearing, we will not take further action on this proposed rule. I. Why is EPA Issuing This Proposed Rule? This document proposes to take action on motor vehicle air-conditioning refrigerant recovery and recycling equipment standards. We have published a direct final rule updating EPA's motor vehicle refrigerant recovery and recycling equipment standards in the “Rules and Regulations” section of this **Federal Register** because we view this as a noncontroversial action and anticipate no adverse comment. We have explained our reasons for this action in the preamble to the direct final rule. If we receive no adverse comment or a request for a public hearing, we will not take further action on this proposed rule. If we receive adverse comment or request, we will withdraw the direct final rule and it will not take effect. We would address all public comments in any subsequent final rule based on this proposed rule. We do not intend to institute a second comment period on this action. Any parties interested in commenting must do so at this time. For further information, please see the information provided in the ADDRESSES section of this document. II. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review This action is not a “significant regulatory action” under the terms of Executive Order

(ICR)may be obtained from Susan Auby, Collection Strategies Division; U.S. Environmental Protection Agency (2822T); 1200 Pennsylvania Ave., NW., Washington, DC 20460 or by calling

(202)566-1672. A copy may also downloaded from *http://www.regulations.gov.* Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9. C. Regulatory Flexibility Act The RFA generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of today's rule on small entities, small entity is defined as:

(1)A small business as defined by the Small Business Administration's

(SBA)regulations at 13 CFR 121.201;

(2)a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and

(3)a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field. After considering the economic impacts of today's rule on small entities, we certify that this action will not have a significant economic impact on a substantial number of small entities. The requirements of today's rule do not mandate a switch to the new SAE equipment standards. Rather, as MVAC service shop owners replace end-of-life refrigerant handling equipment, owners will purchase equipment certified to the new SAE standard. D. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements. EPA has determined that this rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. Today's rule does not affect State, local, or tribal governments. The impact of this rule on the private sector will be less than $100 million per year. Thus, today's rule is not subject to the requirements of sections 202 and 205 of the UMRA. EPA has determined that this rule contains no regulatory requirements that might significantly or uniquely affect small governments. This regulation does not apply to governmental entities. E. Executive Order 13132: Federalism Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” This action does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This regulation applies directly to facilities that use these substances and not to governmental entities. Thus, Executive Order 13132 does not apply to this rule. F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 6, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This final rule does not have tribal implications, as specified in Executive Order 13175. It does not significantly or uniquely affect the communities of Indian tribal governments, because this regulation applies directly to facilities that use these substances and not to governmental entities. Thus, Executive Order 13175 does not apply to this rule. G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks Executive Order 13045: “Protection of Children From Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997) applies to any rule that:

(1)Is determined to be “economically significant” as defined under Executive Order 12866, and

(2)concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This rule is not subject to Executive Order 13045 because it is based on technology performance and not on health or safety risks. H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not a significant regulatory action under Executive Order 12866. I. National Technology Transfer and Advancement Act As noted in the proposed rule, Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104-113, Section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This rulemaking explicitly references technical standards; EPA uses the SAE revision versions of J2210. These standards can be obtained from *http://www.sae.org/technical/standards/.* List of Subjects in 40 CFR Part 82 Environmental protection, Motor vehicle air-conditioning, Recover/recycle equipment, Recover/recycle/recharge equipment, Reporting and certification requirements, Stratospheric ozone layer. Dated: November 2, 2007. Stephen L. Johnson, Administrator. [FR Doc. E7-21941 Filed 11-8-07; 8:45 am] BILLING CODE 6560-50-P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 223 [Docket No. 071030628-7631-01] RIN 0648-AV84 Endangered and Threatened Wildlife; Sea Turtle Conservation AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Proposed rule; request for comments. SUMMARY: In 2006, the National Marine Fisheries Service

(NMFS)issued regulations requiring the use of chain mat modified dredges in the Atlantic sea scallop fishery south of 41° 9.0′ North latitude from May 1 through November 30 each year. The existing requirements resulted from two final rules: one issued in August 2006 after prior public notice and opportunity for comment (August 25, 2006); and an emergency rule issued in November 2006 for which prior notice and opportunity for comment was waived for good cause (November 15, 2006). These actions were necessary to help reduce mortality and injury to endangered and threatened sea turtles captured in scallop dredge gear and to conserve sea turtles listed under the Endangered Species Act (ESA). This action re-proposes the chain mat requirements, with some modifications. This proposed action would clarify the regulatory text regarding the chain-mat modified gear, add a transiting provision, and address a procedural error regarding the timing of the signing of the National Environmental Policy Act

(NEPA)document during the issuance of the August 2006 final rule. Any incidental take of threatened sea turtles in sea scallop dredge gear in compliance with the gear modification requirements and all other applicable requirements will be exempted from the ESA prohibition against takes. DATES: Comments on the proposed rule must be received by 5 p.m. EST on December 10, 2007. ADDRESSES: Written comments on this action, identified by RIN 0648-AV84, may be submitted by any one of the following methods: • Electronic submissions: Submit all electronic public comments via the Federal eRulemaking portal at *http://www.regulations.gov* . • Fax: 978-281-9394, ATTN: Sea Turtle Conservation Measures, Proposed Rule. • Mail: Mary A. Colligan, Assistant Regional Administrator for Protected Resources, NMFS, Northeast Region, One Blackburn Drive, Gloucester, MA 01930, ATTN: Sea Turtle Conservation Measures, Proposed Rule. Copies of the Draft Environmental Assessment/Regulatory Impact Review can be obtained from *http://www.nero.noaa.gov/nero/regs/com.html* listed under the Electronic Access portion of this document or by writing to Ellen Keane, NMFS, Northeast Region, One Blackburn Drive, Gloucester, MA 01930. FOR FURTHER INFORMATION CONTACT: Ellen Keane (ph. 978-281-9300 x6526, fax 978-281-9394, email *ellen.keane@noaa.gov* ) or Barbara Schroeder (ph. 301-713-2322, fax 301-427-2522, email *barbara.schroeder@noaa.gov* ). SUPPLEMENTARY INFORMATION: Background All sea turtles that occur in U.S. waters are listed as either endangered or threatened under the Endangered Species Act of 1973 (ESA). The Kemp's ridley ( *Lepidochelys kempii* ), leatherback ( *Dermochelys coriacea* ), and hawksbill ( *Eretmochelys imbricata* ) sea turtles are listed as endangered. The loggerhead ( *Caretta caretta* ) and green ( *Chelonia mydas* ) sea turtles are listed as threatened, except for breeding populations of green turtles in Florida and on the Pacific coast of Mexico that are listed as endangered. Kemp's ridley, hawksbill, loggerhead, and green sea turtles are hard-shelled sea turtles. Under the ESA and its implementing regulations, taking sea turtles under NMFS' jurisdiction, even incidentally, is prohibited, with exceptions identified in 50 CFR 223.206. The term “take” means to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect or to attempt to engage in such conduct. The incidental take of endangered species may only legally be exempted by an incidental take statement or an incidental take permit issued pursuant to section 7 or 10 of the ESA, respectively. Existing sea turtle conservation regulations at 50 CFR 223.206(d) exempt fishing activities and scientific research from the prohibition on takes of threatened sea turtles under certain conditions. The incidental take, both lethal and non-lethal, of loggerhead and unidentified hard-shelled sea turtles as a result of scallop dredging has been observed in the sea scallop dredge fishery (Northeast Fisheries Science Center (NEFSC) Fisheries Sampling Branch (FSB), Observer Database). In addition, non-lethal takes of a green and a Kemp's ridley sea turtle have been observed in this fishery (NEFSC FSB, Observer Database) and one unconfirmed take of a leatherback sea turtle was reported during the experimental fishery to test the chain-mat modified gear (DuPaul *et al.* , 2004a). This rule is being proposed under the ESA provisions authorizing the issuance of regulations to conserve threatened species and for enforcement purposes (sections 4 and 11, respectively). This rule re-proposes the existing chain mat regulations, with some modifications that apply to dredges in the Atlantic sea scallop fishery. The proposed rule, if implemented, would

(1)clarify the requirements related to the use of chain mats in the Atlantic sea scallop dredge fishery,

(2)add a transiting provision, and

(3)address a procedural error in the August 2006 rulemaking (71 FR 50361, August 25, 2006) that required the use of chain mats in the Atlantic sea scallop dredge fishery. In addition, NMFS is seeking public comment on the decision not to include in this proposed rule the configuration option for the chain-mat modified gear that was removed from the existing regulations by the November 2006 emergency action (71 FR 66466, November 15, 2006). Sea Turtle Bycatch in the Sea Scallop Dredge Fishery Sea turtles have been observed taken in the Atlantic sea scallop dredge fishery. “Observed” or “observed take” means seen and documented by a NMFS approved observer while on-watch. The majority of the takes have occurred in the mid-Atlantic; while one take occurred on southern Georges Bank. During 1996 through June 2007, 62 takes were observed in the sea scallop dredge fishery while an observer was on-watch (excluding the experimental fishery described later): 1 each in 1996, 1997, and 1999; 11 in 2001; 17 in 2002; 22 in 2003; 8 in 2004; and 1 in 2006 (NEFSC FSB, Observer Database). In addition, during this period, 14 sea turtles were reported taken while the observer was off-watch (when an observer is on the vessel but not on duty) or on an unobserved haul (when an observer is on duty but unable to collect all information on a haul) (NEFSC, FSB, Observer Database), 2 turtles, neither observed, were reported during the preliminary testing of the chain-mat modified gear, and 8 turtles, 6 of which were observed, were captured during the course of the experimental fishery to test the chain-mat modified gear (DuPaul *et al.* , 2004a). Of the 62 observed takes, 44 were identified as loggerhead sea turtles, 1 was identified as a green sea turtle, and the remaining animals were hard-shelled sea turtles that could not be positively identified (NEFSC FSB, Observer Database). A single take of a Kemp's ridley sea turtle was documented in this fishery during an off-watch haul in 2005 (NEFSC, FSB, Observer Database) and an unconfirmed take of a leatherback sea turtle was reported during the experimental fishery (DuPaul *et al.* , 2004a). Of the 62 turtles, 4 were fresh dead upon retrieval or died on the vessel, 1 was alive but required resuscitation, 26 were alive but injured, 19 were alive with no apparent injuries, and 12 were listed as alive but condition unknown. The NEFSC has completed an assessment of sea turtle bycatch in the Atlantic sea scallop dredge fishery in the mid-Atlantic for fishing years

(FY)2003, 2004, and 2005. The estimated total bycatch of loggerhead sea turtles in this fishery was 749 (C.V. = 0.28) in FY2003 (Murray, 2004a), 180 (C.V. = 0.37) in FY2004 (Murray, 2005), and 0 in FY2005 (Murray, 2007). It should be noted that although no turtles were estimated to have been captured in sea scallop dredge gear in FY2005, there were three interactions documented by observers who were off-watch at the time of the take. One turtle was identified as a Kemp's ridley; two were identified as loggerheads. The species was confirmed for all three interactions. As the observer was off-watch at the time of the takes, there was insufficient data associated with these events to allow the interactions to be used in the estimation of total turtle bycatch in the fishery (Murray, 2007). Although the estimate provided by the NEFSC is 0, NMFS recognizes that the actual take of sea turtles in the 2005 fishing year was greater. The NEFSC has attempted to identify a variable for predicting sea turtle bycatch in the dredge component of the scallop fishery (Murray, 2004a, 2004b, 2005). Using a modeling approach, sea surface temperature (SST), depth, time-of-day, and tow time were identified as variables affecting observed bycatch rates of sea turtles with scallop dredge gear (Murray, 2004a, 2004b, 2005). However, the variable(s) associated with the highest bycatch rates changed from one year to another (e.g., SST, depth) or could not be further analyzed (e.g., time-of-day and tow time) because the information is not collected for the entire fishery (Murray, 2004a, 2004b, 2005). Therefore, a set of variables has not yet been found for forecasting sea turtle bycatch with scallop dredge gear. Risks to sea turtles from capture in dredge gear include forced submergence and injury. Sea turtles forcibly submerged in any type of restrictive gear would eventually suffer fatal consequences from prolonged anoxia and/or seawater infiltration of the lung (Lutcavage *et al.* , 1997). Sea turtles caught in scallop dredge gear often suffer injuries. The most commonly observed injury is damage to the carapace. The causes of these injuries are unknown, but the most likely appear to be from being struck by the dredge (during a tow or upon emptying the dredge bag), crushed by debris (e.g., large rocks) that collects in the dredge bag, or as a result of a fall during hauling gear. Under typical fishing operations, the dredge is hauled to the surface, lifted above the deck of the vessel, and emptied by turning the bag over. Under such conditions, a turtle caught in the bag may fall many feet to the deck of the vessel and could suffer cracks to the carapace or other injuries as a result of the fall. After the bag is dumped, the dredge frame is often dropped on top of it. Thus, dumping the catch and lowering the gear onto deck are actions during which turtles could be injured. Additional information on sea turtle bycatch in the Atlantic sea scallop dredge fishery can be found in the draft Environmental Assessment for this action. Experimental Fishery to Test the Modified Gear In response to information on the take of sea turtles in the sea scallop dredge fishery, NMFS worked with the scallop fishing industry and the Virginia Institute of Marine Science to investigate the use of a modified sea scallop dredge to keep sea turtles out of the dredge bag. The modified dredge has a chain mat hung over the opening of the bag, preventing sea turtles from entering the bag itself, and injuries that result from such capture. An experimental fishery to test the chain mat gear was conducted from July 17, 2003 October 9, 2004 (DuPaul *et al.* , 2004a), with preliminary trials conducted from October 2002 through January 2003 (letter from Dr. W. DuPaul to M. Colligan, August 21, 2007). During the preliminary trials, two turtles were reported captured. DuPaul *et al.* (2004a) reported that one turtle was taken in the unmodified dredge; the other turtle was reported on the chain mat, subsequently swimming away as the gear was hauled. The experimental fishery to test the chain mat configuration was conducted on 11-foot (3.35-m), 14-foot (4.27-m), and 15-foot (4.57-m) dredges. The final report on the experimental fishery (DuPaul *et al.* , 2004a) and the draft Environmental Assessment for this action provide additional detail. During field trials of the chain mats, eight turtles (six of which were observed) were captured in the unmodified dredge; no turtles were captured in the modified dredge equipped with a chain mat. The six observed interactions were with loggerhead sea turtles. One of the unobserved interactions was reported by the fisherman as a loggerhead sea turtle; the second was reported by the fisherman as a leatherback sea turtle. The principal investigators did interview the captain and determined, based on the captain's description of the turtle, that it was likely the turtle was a leatherback. Thus, the turtle was reported as such in the final report on the experiment (DuPaul *et al.* , 2004a). With respect to the catch of sea scallops, the dredge modified with the chain mat caught 6.71 percent less scallops than the unmodified dredge (DuPaul *et al.* , 2004). The study shows that the chain mats can be effective in preventing the capture of sea turtles in the dredge bag without substantial reductions in the harvest of sea scallops. Requirements for the Chain-mat Modified Dredge On August 25, 2006, NMFS issued a final rule to require the use of chain-mat modified dredges in the Atlantic sea scallop fishery south of 41° 9.0′ N. latitude from May 1 through November 30 each year (71 FR 50361). The chain mat regulation became effective on September 25, 2006. The specific purpose of requiring the use of a chain mat is to keep sea turtles from being captured inside the dredge bag and to prevent the injury and mortality associated with such capture. As described previously, sea turtles captured in the dredge bag may suffer injury or mortality due to being struck by the dredge upon emptying the dredge bag, crushed by debris (e.g., large rocks) that collects in the dredge bag, or as a result of a fall while fishermen empty the bag. The August 2006 final rule included two options for configuring the gear. The first option specified a number of chains by dredge width. The second option required that each side of the opening created by the intersecting chains be 14 inches (35.5 cm) or less. Shortly after the rule's effective date, NMFS became aware of a discrepancy between the two options for configuring the chain mat in the August 2006 final rule. NMFS believed that both configurations would create a chain mat with openings of 14 inches (35.5 cm) or less per side. However, NMFS discovered that was not the case, and the configuration specifying a number of chains by dredge width resulted in some openings greater than 14 inches (35.5 cm); therefore, NMFS proceeded with rulemaking to correct the discrepancy to ensure that sea turtles are protected to the extent intended by the August 2006 final rule. On November 15, 2006, NMFS published an emergency rule that removed the option that allowed the gear to be configured by dredge width (71 FR 66466). The emergency rule, which is currently in place and does not have an expiration date, requires Atlantic sea scallop dredge vessels to configure the chains such that the length of each side of the squares or rectangles formed by the chain is less than or equal to 14 inches (35.5 cm). Re-proposal of the Chain Mat Requirements The proposed chain mat requirement is based on the results of the experimental fishery and is independently supported by information gathered by observers on sea scallop vessels that captured turtles. As described previously, the experimental fishery showed that the chain mat prevents sea turtles from entering the dredge bag while not substantially affecting the catch of sea scallops. The spacing of the chains based on dredge width included in the August 2006 final rule was intended to be based on an experimental fishery to test the chain mat gear. In total, a series of 22 experimental cruises were carried out on commercial vessels using 11-foot (3.35-m), 14-foot (4.27-m), and 15-ft (4.57-m) dredges. During the experimental fishery, 9 vertical chains were used for the 11-ft (3.35-m) dredge and 11 vertical and 6 horizontal chains were used for the 14-foot (4.27-m) and 15-ft (4.57-m) dredges (DuPaul *et al.* , 2004a). The report does not explicitly state the number of horizontal chains used on the 11-ft (3.35-m) dredge, but the researchers have stated that 5 or 6 chains were used. As indicated in the final report, the number of chains in and of itself is not what drove the configuration tested. Rather it was the target size of the openings that drove the number of chains to be used, and thus, the overall configuration. The openings were designed to prevent sea turtles of greater than 24 inches (60.96 cm) in length from entering the dredge bag (DuPaul *et al.* , 2004a). Even though the size of the openings created by the intersecting chains used in the experimental fishery was not included in the final report on the experiment, information was provided that supports the 14 inch (35.5 cm) maximum opening. During the pilot study in 2002, the chain mat was rigged so that a grid of 12-inch (30.5 cm) squares was formed (DuPaul and Smolowitz, 2003). A placard, produced by Fisheries Survival Fund and Virginia Sea Grant, was included in the final report on the experiment to provide a full description and picture of the gear. The placard states that the number of chains used during the experimental fishery, spaced evenly on a normal sweep arrangement, should result in approximately a 12- to 13-inch (30.5 to 33 cm) square pattern. The experimental fishery showed that the use of a chain mat with the size openings used in the experiment prevented sea turtles from entering the dredge bag and incurring injuries from such capture. The requirement that the openings in the chain mat be 14 inches (35.5 cm) or less will reduce the severity of sea turtle-gear interactions given the size of sea turtles observed taken in the fishery. Fisheries observers collect information on the length and width of sea turtles observed taken. When it is not possible to collect measurements, the length and width can be estimated by the observer. For example, a turtle observed taken in 2004 in the sea scallop dredge fishery was estimated by the observer to be 170 cm (66.9 in) in length. The precision and accuracy of these estimated values is not known and may vary between observers. Therefore, only turtles for which measured values are available will be described here. Loggerhead sea turtles observed captured ranged in length from 62.2 107 cm (24.5 42.1 in) from notch to tip (curved carapace length (CCL)) (NEFSC FSB, Observer Database). When converted to straight carapace length

(SCL)based on the formula for loggerheads provided in Teas (1993), the size range of the loggerhead sea turtles observed captured in the fishery is 57.5-100 cm (22.6 39.4 in) SCL (NMFS, 2006). Loggerhead sea turtles observed captured in the scallop dredge fishery ranged in carapace width (curved) from 45.0 to 99 cm (17.7 - 39 in; NEFSC, FSB, Observer Database). When converted to straight carapace width based on the formula from Coles (1999), the width of loggerheads observed captured in this fishery ranged from 37.9-78.1 cm (14.9-30.7 in). The only Kemp's ridley sea turtle observed captured in scallop dredge gear to date measured 24.3 cm (9.6 in) from notch to tip (curved carapace length; NMFS, 2006) and 26.0 cm (10.2 in) curved carapace width (NEFSC FSB, Observer Database). Using the formula for Kemp's ridley sea turtles provided in Teas (1993), this is a straight carapace length of 23 cm (9.1 in; NMFS, 2006). When converted to straight carapace width based on the formula from Coles (1999), this is a straight width of 22.1 cm (8.7 in). The single green sea turtle observed captured in scallop dredge gear was estimated by the observer to be about 70 cm (27.6 in) in length (NMFS, 2006). Given that only one green and one Kemp's ridley sea turtle were observed in the scallop dredge fishery from 1996 to 2005, it is likely that interactions with these species are relatively unique events on an individual haul basis (NMFS, 2006). Based on the experimental fishery and the size and identification of sea turtles captured by the scallop fishery, chain mats with openings measuring equal to or less than 14 inches (35.5 cm) per side will prevent most sea turtles from entering the dredge bag and injury and mortality resulting from such capture. The chain-mat modification is an important step following the chain mat experiments in the process to reduce sea turtle bycatch and the effects of that bycatch in the Atlantic sea scallop fishery. The NEFSC estimated that, in the 2003-fishing year, there were 749 sea turtles taken in the mid-Atlantic sea scallop fishery (Murray, 2004a). In the September 2006 Biological Opinion, NMFS anticipated that up to 749 loggerhead sea turtles will be captured each year and up to 479 of these (approximately 64 percent) will result in serious injury (as defined in the NMFS Northeast Region “Serious Injury Determinations for Sea Turtles Taken in Scallop Dredge Gear - Working Guidance”) or mortality (NMFS, 2006). The September 2006 Biological Opinion recognized that the use of the chain mats on scallop dredges will

(1)reduce the likelihood that turtles that encounter the gear on the bottom will enter the dredge bag and be at further risk of injury or death, and

(2)reduce the likelihood that turtles that encounter the gear in the water column will enter the dredge bag and be subsequently injured or killed. For these reasons, NMFS believes that the serious injury and mortality rate of sea turtles interacting with scallop dredge gear will be less than that calculated for the Biological Opinion since fewer turtles will be subject to injuries occurring within the dredge bag or as a result of dumping the dredge bag on deck (NMFS, 2006). However, the reduction in mortality rate can not be quantified. With the chain mat installed over the opening to the dredge bag, it is reasonable to assume that sea turtles that would otherwise enter the dredge bag will come into contact with the chain mat (at least) and be prevented from entering the dredge bag. Installing a chain mat over the opening of the dredge bag will not increase takes in this fishery and is expected to reduce capture in the bag and associated subsequent injury and mortality. Data do not exist on the percentage of sea turtles interacting with the chain-mat modified gear that will be unharmed, sustain minor injuries, or sustain serious injuries that would result in death or failure to reproduce. However, there are several assumptions that can be made to help estimate the degree of interaction. The first assumption is that sea turtles likely interact with scallop dredge gear both on the sea floor as the gear is being fished and in the water column as the gear is hauled back to the vessel. This is a reasonable assumption, because sea turtles have been observed in the area in which scallop gear operates and they have been seen near scallop vessels when they are fishing or hauling gear. In addition, sea turtles generally are known to forage and rest on the sea floor as part of their normal behavior. The condition of sea turtles observed taken in the sea scallop dredge fishery ranges from alive with no apparent injuries to alive and injured to fresh dead. NMFS believes that interactions between sea turtles and sea scallop dredge gear that occur on the bottom are likely to result in serious injury to the sea turtle. Based on this assumption, NMFS believes that the unharmed/slightly injured turtles observed captured in the sea scallop dredge bag follow an interaction with sea scallop dredge gear in the water column. The second assumption relates to the apportionment of the seriousness of the interaction between sea turtles and the modified gear. Taking one of two extremes, one could assume all of the sea turtles that would come in contact with the modified gear and the chain mat (up to 749) would be unharmed. However, this assumption is not reasonable given that, in the case of a bottom interaction, the frame and cutting bar may pass over any sea turtles on the bottom, and the sea turtles would still be run over by the dredge bag since entry into the dredge bag would be prevented by the chain mat. A standard 15 ft (4.57 m) dredge frame weighs about 2500 lbs (1134 kg); the dredge bag with chains and club stick weighs another 2000 lbs (907 kg). Variations in materials may affect this weight by approximately plus or minus 15 percent (Henry Milliken, NEFSC, pers. comm.). A sea turtle being run over by the gear would bear a significant amount of weight. At the other extreme, one could assume that all of the sea turtles that would come into contact with the modified gear and with the chain mat (up to 749) would sustain serious injuries leading to death or failure to reproduce. This assumption is also unreasonable, given that some of the interactions are likely in the water column during haul back (or possibly during setting the gear). The haul back speed when the dredge is moving across the bottom ranges from 4 to 7 miles per hour. (6.4 to 11.3 km per hour). Once the dredge is off bottom and traveling up to the surface, the speed ranges from 1 to 4 miles per hour (1.6 to 6.4 km per hour). As the gear is hauled through the water column, all turtles hitting the chain mat in this situation probably are not going to sustain serious injury leading to death or failure to reproduce because of the slow speed during haul back. The proper apportionment of the seriousness of interactions between sea turtles and the modified gear falls in between these two extremes. To arrive at a reasonable apportionment, we start with the assumption that interactions with scallop gear occur both on the bottom and in the water column, the assumption that up to 749 sea turtles will still interact with the chain-mat modified gear, and the estimate that up to 479 sea turtles will be seriously injured/killed and 270 will be unharmed/slightly injured without the chain mat. There are two scenarios in which sea turtles may sustain serious injuries that lead to death or failure to reproduce interactions on the sea floor or interactions in the water column. As the dredge is fished on the bottom, sea turtles may be passed over with the dredge frame and cutting bar, which weigh thousands of pounds. Without the chain mat modification, the sea turtle could be swept into the dredge bag, forcibly submerged for the remainder of the tow, and at risk of further injury due to being tumbled around or hit by debris inside the bag or being crushed when the catch is dumped on the vessel's deck. Tows are often close to or over one hour in length, a duration known to cause physiological stress that may lead to drowning. While the mid-Atlantic scalloping areas consist more of sand substrates than New England's rougher bottom, gravel or larger rocks do enter the dredge bag even in the mid-Atlantic and may strike any turtles caught inside. Finally, as the dredge bag is hauled out of the water, it is suspended at a significant height above the deck and then its contents, including any turtles, are dumped on the vessel's deck. The gear is often dropped on the pile. Any sea turtles caught in the bag may be crushed by the contents of the bag as it is dumped or by the gear as it is dropped on top of the pile. Given the nature of the interaction on the bottom and during the tow once a turtle is caught in the bag, a conservative assumption is that no turtles taken from the sea floor are only seriously injured after they have entered the dredge bag. Therefore, a portion of the 479 sea turtles are conservatively assumed to sustain serious injuries leading to death or failure to reproduce due to bottom interactions with unmodified gear. With the chain mat in place, it is reasonable to assume that the sea turtles on the sea floor would still interact with the gear, but that the nature of the interaction would be different. With the modified gear, the sea turtles may still be hit by the leading edge of the frame and cutting bar and would likely be forced down to the sea floor rather then swept into the dredge bag. The dredge rides on the sea floor on shoes, which are part of the frame. The cutting bar, a thin steel edge, rides off the bottom from just above the sea floor to approximately 8 inches (20.3 cm). Since the turtles are not swept into the bag, they would be run over by the dredge bag and club stick. The dredge bag constitutes a substantial weight. Sea turtles that interact on the sea floor with the chain-mat modified dredge would probably fare just as poorly as those that interact with the unmodified dredge due to the substantial weight of the dredge frame and bag. Given the nature of the bottom interaction without the chain mat, NMFS believes that the same portion of the 479 sea turtles would still experience serious injuries that lead to mortality or failure to reproduce with the chain mat in place as without it. In 2005 and 2006, NMFS worked with industry to test a dredge with a modified cutting bar and bail designed to minimize impacts to turtles that may be encountered on the bottom (NMFS, 2005; Milliken *et al.* , 2007). Dredges used in the experiments were equipped with the chain mat configuration, although the purpose of the trials was not to test the chain mats. The project used turtle carcasses and model turtles to simulate a worse case scenario of a dredge overtaking a sea turtle lying motionless on the bottom. During the 2005 study, the turtle carcasses were observed lodged in front of the cutting bar and pushed along, eventually going under the cutting bar and getting caught on the chain mat. During the study in 2006, no carcasses were observed going under the cutting bar (Milliken *et al.* , 2007) and, therefore, no carcasses interacted with the chain mat. It is important to note that the project was limited in that behavioral responses of a live turtle encountering a dredge could not be assessed. Any injuries to sea turtles taken in the water column are likely to be non-serious because sea turtles would hit the chain mat in the water column during haul back. Once off the bottom, the gear is hauled back through the water column at a slow speed (1 4 miles per hour (1.6 to 6.4 km per hour)). Any turtle hitting the chain mat in the water column would not be hit with great force and would likely be able to swim away. During the preliminary trials of the chain main configuration, one of the turtles was observed “hanging onto” to the chain mat, perhaps held by water pressure, and subsequently swimming away. NMFS has no indication that this type of interaction would result in serious injury. NMFS believes that in this type of interaction the animal is being held against the gear by water pressure as the gear moves through the water. Once, the gear stops moving and the pressure is relieved, the animal would be able to swim away. Some of the 479 seriously injured sea turtles probably obtained those injuries after being caught in the water column by unmodified gear, because the turtle were captured in the dredge bag. The chain mat would prevent these serious injuries, since the turtles would not be able to get into the dredge bag and, therefore, would not be crushed by debris in the bag, dumped on the deck from height, or crushed by falling gear. We also assume that the 270 unharmed/slightly injured sea turtles are taken in the water column. These turtles would come into contact with the chain mat and would either swim away unharmed or with injuries that are not likely to result in death or failure to reproduce. The gear is hauled back to the vessel at a slow speed, so any turtle hitting the chain mat would not be hit with great force and would likely be able to swim away. Based on this analysis, some of the 270 interactions would result in contact with the chain mat, but this contact is not likely to result in serious injury. To summarize, NMFS believes the chain mat will prevent serious injury leading to death or failure to reproduce caused by crushing from debris in the dredge bag, dumping of turtles on the vessel's deck, and crushing them by the falling gear following an interaction in the water column. The chain mat would also prevent serious injuries from debris in the dredge bag or dumping/crushing on deck of sea turtles following an interaction on the sea floor. However, NMFS has made the conservative assumption that a turtle in a bottom interaction sustains serious injuries on the bottom, so, under this conservative assumption, there would not be a benefit from the chain mat for bottom interactions. This assumption, however, may be too conservative in that it is possible (although not likely) that bottom interactions cause only minor injuries. In the unlikely scenario of a turtle receiving only minor injuries following a bottom interaction, the chain mat modification would prevent additional injuries, that may be serious, resulting from capture in the dredge bag (i.e., injuries from debris in the bag, drowning from forced submergence, dropping on deck, or crushing by the dredge). Clarification to the Regulatory Language The existing regulations require that any vessel with a sea scallop dredge and required to have an Atlantic sea scallop fishery permit, present in waters south of 41° 9.0′ North latitude from May 1 through November 30, have each dredge configured with a chain mat. The chain mat must be composed of horizontal and vertical chains that are configured such that the length of each side of the square or rectangle formed by the intersecting chains is less than or equal to 14 inches (35.5 cm) (50 CFR 223.206(d)(11)(i)). In addition, any vessel that harvests sea scallops in or from the waters described and required to have a Federal Atlantic sea scallop fishery permit must have the chain mat configuration installed on all dredges for the duration of the trip (50 CFR 223.206(d)(11)(ii)). NMFS is proposing three clarifications to this regulatory language. First, NMFS is proposing to change the language in § 223.206(d)(11)(ii) that states “...such that each side of the square or rectangle formed by the intersecting chains is less than or equal to 14 inches (35.5 cm).” The openings formed by the horizontal and vertical chains and the sweep may, in some cases, result in openings with three sides rather than four. To clarify that all sides of the openings, regardless of whether the opening is three- or four-sided, must be less than or equal to 14 inches (35.5 cm), NMFS would modify this text to read “...such that the openings formed by the intersecting chains have no more than 4 sides. The length of each side of the openings created by the intersecting chains, including the sweep, must be less than or equal to 14 inches (35.5 cm).” Second, NMFS proposes to change the text in § 223.206(d)(11)(ii) that reads, “Any vessel that *harvests sea scallops in or from* the waters...” to read, “Any *vessel that enters* the waters....” This revision would clarify that once a vessel has entered the waters described, it must comply with the requirement to have the chain mat affixed to the dredge for the duration of the trip regardless of whether the vessel is still in those waters. Third, NMFS would also revise the text in paragraph (d)(11)(i) that reads, “...any vessel...present in waters...” to “...any vessel...that enters waters...” This change would be made so that this subparagraph uses the same terminology as § 223.206(d)(11)(ii). The regulations apply to all vessels required to have a Federal Atlantic sea scallop fishery permit and with sea scallop dredge gear entering waters south of 41° 9.0′ N. latitude from May 1 through November 30 each year. Transiting Provision This action, if implemented, would add a transiting provision to the regulations regarding the use of chain mats in the Atlantic sea scallop dredge fishery. With the proposed change to the regulatory language, vessels that transit through areas south of the 41° 9.0' N. latitude line would be required to use chain mats when fishing north of the line. This is not the intent of the regulation as sea turtle interactions north of that line are unlikely. To address this issue, NMFS is proposing a transiting provision. Vessels would be exempted from the chain-mat requirements provided that the vessel has no scallops on-board and that the gear is stowed and not available for immediate use. Gear that is not available for immediate use is gear that is stowed in conformance with the methods described at 50 CFR 648.23(b)(2). For scallop dredges, the gear must conform to one of the following:

(1)the towing wire is detached from the scallop dredge, the towing wire is completely reeled up onto the winch, the dredge is secured and the dredge or the winch is covered so that it is rendered unusable for fishing; or

(2)the towing wire is detached from the dredge and attached to a bright-colored poly ball no less than 24 inches (60.9 cm) in diameter, with the towing wire left in its normal operating position (through the various blocks) and either is wound back to the first block (in the gallows) or is suspended at the end of the lifting block where its retrieval does not present a hazard to the crew and where it is readily visible from above. Procedural Error This action is also necessary to address a procedural error in the rulemaking that required chain mats on dredges in the Atlantic sea scallop fisehry. NMFS prepared an Environmental Assessment

(EA)that analyzed the impacts on the human environment, and a Finding of No Significant Impact (FONSI) for the chain mat regulation. While the draft EA and FONSI circulated for review during the decision-making process at the proposed and final rule stages, due to an oversight, the FONSI was not signed concurrent with the decision to issue the final rule (memo from Patricia A. Kurkul to William T. Hogarth, October 19, 2006). However, the EA was reconsidered and the FONSI was signed as soon as the mistake was discovered. This rulemaking would further address this procedural oversight by ensuring that NMFS follows all of the National Environmental Policy Act procedures in the proper sequence. Request for Comments While NMFS encourages public comment on any aspect of this proposed action, NMFS is specifically requesting comments on a number of issues, including the lack of a proposal to define the configuration by dredge width and the number of horizontal and vertical chains (an option removed by the November 2006 emergency rule), the replacement cost of the gear, and the northern extent of the regulations. As described previously, the chain mat regulations originally allowed two options for configuring the gear that NMFS believed achieved openings of less than or equal to 14 inches (35.5 cm) per side. However, subsequent to the rule's effective date, NMFS learned that, in some cases, the configurations specified by dredge width resulted in openings that were larger than expected and desired. NMFS corrected this discrepancy by removing the option that allowed the gear to be configured by dredge width in an emergency rulemaking (71 FR 66466, November 15, 2006). Prior notice and comment and most of the 30-day delay in effective date were waived for good cause. As there was no comment period during this emergency rulemaking, NMFS is, at this time, specifically requesting comment on the removal of the option that allowed a specified number of chains by dredge width. Some have asked NMFS to define the configuration required by a table identifying the number of horizontal and vertical chains by dredge width as in the original chain mat rule. However, the size of the opening created by the chains is the important factor in preventing sea turtles from entering the dredge bag, not the number of chains. NMFS investigated whether it would be feasible to specify a number of chains by dredge width that would achieve the desired spacing of 14 inches (35.5 cm). NMFS has limited information on the distance between the cutting bar and the sweep, but this information does show that this distance can vary by up to 1.7 ft (0.52 m) for certain dredge widths (NMFS, 2007). Given the limited information available and the high degree of variability in this distance, it would be difficult to specify a number of horizontal chains that would achieve the desired spacing. As a result, NMFS is not defining the configuration based on a specified number of chains, but by the desired size opening, which is the important factor for sea turtle conservation. However, NMFS is requesting public comments on this issue to see if there are other factors to be considered, to obtain information on the possible variations in the rigging (e.g., the sweep), and to solicit suggestions on whether or how variations can be accounted for in a configuration table. NMFS recognizes that as the chains and links/shackles wear, they will need to be replaced. NMFS anticipates that a high quality chain such as that used in the experimental fishery should last for a fishing season. Therefore, the estimated cost to purchase the materials for the chain mat would be an annual cost. To achieve a configuration of 14 inches (35.5 cm), the cost of materials is estimated at approximately $150 for a 10-ft (3.05-m) dredge to $410 for a 15-ft (4.57-m) dredge. However, NMFS recognizes that the longevity of the chain and the links/shackles depends on a number of factors including the type of chain installed, the rigging of the chain, the dredge configuration, area fished and other factors that may increase or decrease average wear. Due to the high number of variables, NMFS is requesting comment on this issue in order to better assess the costs associated with this replacement. Specifically, NMFS is requesting information on the size, type, and longevity of the chain used to configure the chain-mat in modified sea scallop dredge gear. As described in the EA, the chain-mat modification is required in the mid-Atlantic and on the southern portion of Georges Bank. Since the regulation's effective date (September 25, 2006; 71 FR 50361, August 25, 2006), some have expressed concern that the chains should not be required on vessels fishing on Georges Bank as it is less likely that sea turtles will be captured in the gear in that area. Prior to 2005, no sea turtle takes had been observed in the sea scallop dredge fishery outside the mid-Atlantic region. In the 1999 and 2000 scallop fishing years, relatively high levels of observer coverage (22 percent - 51 percent) occurred in portions of the Georges Bank Multispecies Closed Areas that were conditionally opened to scallop fishing. Despite this high level of observer coverage and operation of scallop dredge vessels in the area during June to October, no sea turtles were observed captured in scallop dredge gear. From 2001 through 2004, observer coverage was low in the Georges Bank region (<1 percent in 2001, 2002, and 2003; <2 percent from September through November 2004 with most of the coverage occurring in November) (Murray, 2004a, 2005). In August 2005, a Kemp's ridley was taken at approximately 40° 58′ N. lat./67° 16′ W. long. by a dredge vessel operating on southern Georges Bank indicating that takes in this area are possible. In addition, the take of sea turtles in other fisheries has been documented along this southern edge. Based on

(1)the known distribution of sea turtles,

(2)sea scallop dredge fishing effort, and

(3)the observed take of sea turtles in this fishery, NMFS expects the take of sea turtles by dredge vessels operating over Georges Bank to be rare. However, as described in the EA, sea turtles are known to be present on the southern portion of Georges, and the chain mats would prevent the capture of sea turtles in the dredge bag in this area. Therefore, NMFS is proposing to maintain the northern boundary of 41° 9.0′ N. lat. However, NMFS is specifically requesting comment on this boundary. Classification This action has been determined to be not significant under Executive Order 12866. NMFS has prepared an initial regulatory flexibility analysis that described the economic impact this proposed rule, if adopted, would have on small entities. A description of the action, why it is being considered, and the legal basis for this action are contained in the preamble. No reporting, record keeping, or other compliance requirements are proposed. No duplicative, overlapping, or conflicting Federal rules have been identified. A summary of the analysis follows. The fishery affected by this proposed rule is the Atlantic sea scallop dredge fishery. The proposed action requires all vessels, regardless of the dredge size or vessel permit category, that enter waters south of 41° 9.0′ N. lat. from the shoreline to the EEZ to modify their dredge gear from May 1 through November 30 each year. The proposed gear modification is fairly inexpensive. Therefore, NMFS assumes that vessels will convert their gear and continue fishing in the area. According to the Vessel Trip Report

(VTR)data for 2003, 314 vessels fished south of 41° 9.0′ N. lat. From May 1 through November 30. Of these, 277 were limited access vessels and 37 were general category vessels. In 2003, the 314 affected vessels earned approximately 221.4 million dollars in revenues using a total of 40,888 days at sea. The 277 limited access vessels earned approximately 98 percent of the total industry revenues and 95 percent of the industry revenues were earned using scallop dredge gear. On average, limited access vessels earned between $441,800 and $895,100 per year and general category vessels earned between $46,700 and $162,000 per year. This analysis estimates the costs of the initial requirement to use chain-mat modified gear in the Atlantic sea scallop dredge fishery outlined in the table provided in the August 2006. The table specified 11 vertical and 6 horizontal chains for dredges with a frame width greater than 13 ft (3.96 m), 9 vertical and 5 horizontal chains for dredges of 11 ft (3.35 m)to 13 ft (3.96 m), 7 vertical and 4 horizontal chains for dredges of 10 ft (3.05 m) to less than 11 ft (3.35 m), and 5 vertical and 3 horizontal chains for dredges of less than 10 ft (3.05 m). Some vessels with different dredge configurations may incur additional costs due to the requirement for 14 inches (35.5 cm) or less, if they had based their configuration on the table and it did not produce 14 inch (35.5 cm) openings, but these costs are expected to be minimal and will not significantly affect the analysis. Using the materials recommended in DuPaul *et al.* (2004a) and average costs for labor, the cost for modifying a scallop dredge ranges from $177.37 for a dredge less than 10 ft (3.05 m) to $389.22 for a dredge greater than 13 ft (3.96 m). The second cost to the industry is the loss of catch with the modified dredge. This cost will not be affected by the requirement of 14-inch (35.5-cm) openings as these openings are similar in size to those used during the experimental fishery. During the 2003-2004 field trials, the modified dredge caught, on average, 6.71 percent less scallops than the unmodified dredge (DuPaul *et al.* , 2004a). This is slightly less than the loss of 6.76 percent reported in the draft final report on the experiment (DuPaul *et al.* , 2004b). The economic analysis assumes a loss of 6.76 percent, as reported in the draft report on the experiment. Therefore, the analysis slightly overestimated the economic impacts. If fishermen do not increase their effort to offset this loss, they will experience a reduction in revenues. Assuming that the fishermen do not minimize this loss by increasing effort, revenue for a limited access vessel may be reduced between a low of $18,800 to a high of $38,700; while revenue for a general category vessel may be reduced between $1,300 and $5,600. The total impact of the cost to modify the gear and loss of revenue due to reduction in catch may reduce a vessel's annual revenues on average between 3 percent and 7.8 percent. Of the 314 affected vessels, 193 vessels may have their revenues reduced by 5 percent or less, 116 vessels may have their revenues reduced between 5 and 10 percent, and 5 vessels may have their revenues reduced by greater than 10 percent. Of the 121 vessels that may have revenue reductions exceeding 5 percent, 27, 29, 29, and 22 of the vessels are registered to the states of Massachusetts, New Jersey, Virginia, and North Carolina, respectively. Annual industry revenues would be reduced by 4.3 percent ($9.6 million/$221.4 million x 100). There is also a cost associated with maintaining the gear. This cost depends on a number of factors including the type and grade of chain utilized, the configuration and rigging of the gear, and the area fished. Based on the use of a high quality chain, NMFS anticipates that the chain mat would need to be replaced each fishing season. It is unlikely that the replacement of chains will occur at a single point during the season as chains may break during fishing operations or may wear at different rates. Nevertheless, it is expected that the entire chain mat would be replaced over the course of a fishing season. Therefore, fishermen will incur the costs associated with purchasing the chains and shackles to configure the gear each year. Other potential costs are those due to increased drag, weight, and tow times, as well as increased fuel consumption, which will result from adding chains to the dredge. The NEFSC provided information on the weight of a standard scallop dredge for the August 2006 rule. The total weight (+/- 15 percent) of a sea scallop dredge with a width of 15 ft (4.57 m) is approximately 2,500 pounds (1134 kg) for the dredge frame and another 2,000 pounds (907 kg) for the chain bag with chains and club sticks. The weight of the chain mat is estimated to be between 56 pounds (25 kg) for a 10-ft (3.05-m) dredge and 147 pounds (66.7 kg) for a 15-ft (4.57-m) dredge. Assuming 20 percent additional chains and shackles would be required for some vessels to comply with the 14 inch (35.5 cm) requirement (a conservative overestimate), the range of weights would increase by 11 lbs (5 kg) for a 10-ft (3.05-m) dredge to 29 lbs (13 kg) for a 15-ft (4.57-m) dredge. The weight of the chain-mat modified dredge is not considerably different from the unmodified dredge. The additional chain that some vessels may have added to comply with the requirement for a 14-inch (35.5-cm) opening is a fraction of the chain required for the chain mat as a whole, and the addition of this chain is not expected to substantially increase the weight of the gear. Therefore, NMFS does not anticipate that the additional chain will substantially impact the efficiency of the dredge and does not anticipate any significant costs resulting from extra weight on the gear. There are some additional costs for vessels that need to reconfigure the gear to comply with the requirement to have openings measuring 14 inches (35.5 cm) or less per side. The costs due to a loss of catch evaluated here are based on the scallop loss observed during the experimental fishery (6.7 percent). Given that the openings in the gear used in the experimental fishery are of similar size to the openings required by the proposed regulation and that the analysis uses the loss of catch estimated in the experimental fishery, the impacts due to a loss of catch included in the analysis for the original chain mat regulation (described previously) apply to this proposed action as well. Therefore, the only difference is in the cost to reconfigure the gear. As described previously, there are two costs associated with reconfiguring the gear - the cost of materials and the cost of labor. Vessels will have already purchased the majority of the chain needed to configure the chain mat. There will be a slight additional cost for some vessels for the purchase of additional chain in order to achieve openings equal to or less than 14 inches (35.5 cm). However, the amount of additional chain needed will be less than that already purchased. If you assume 20 percent additional chains and shackles would be required to comply with the 14 inch (35.5 cm) requirement (a conservative overestimate), the additional costs for a 10-foot (3.05-m) dredge would be approximately $26 and the costs for a 15-foot (4.57-m) dredge would be approximately $68. This estimate uses the same costs for materials considered in the analysis described previously. Some additional welding would be required to reconfigure the gear to meet the 14 inch (35.5 cm) requirement. However, it is unlikely that this cost would exceed the cost of initially configuring the gear. The cost to the industry of reconfiguring the gear to meet the 14 inch (35.5 cm) or less requirement cannot be quantified at this time as it is unknown how many vessels would need to reconfigure their gear. However, these impacts are expected to be minimal given that:

(1)some vessels had already configured their gear according to this option;

(2)the use of the table resulted in openings meeting this requirement in certain cases; and

(3)the cost to reconfigure the gear is less than the cost to initially configure the gear. Three alternatives were evaluated for this action. Under the No Action Alternative, vessels would be required to comply with the existing chain mat requirements. That is, any vessels with a Federal Atlantic sea scallop fishery permit and a sea scallop dredge, regardless of dredge size or vessel permit category, present in waters south of 41° 9.0′ N. lat., from the shoreline to the outer boundary of the EEZ must have each dredge configured with a chain mat from May 1 through November 30 each year. Vessels that harvest sea scallop in or from these waters must have the chain mat configuration installed on all dredges for the duration of the trip. The Preferred Alternative is the same as the No Action; with minor modifications to the regulatory text to clarify the regulatory requirements and the addition of a transiting provision. Alternative 1 would remove the existing requirements for chain-mat modified dredges in the Atlantic sea scallop fishery. This alternative is necessary to provide for a comparative analysis of the alternatives. All business entities participating in the sea scallop dredge fisheries are considered small business entities. The Preferred Alternative and the No Action Alternative have the same economic impact; while Alternative 1 will have a lesser impact. Under the Preferred Alternative and the No Action Alternative, 314 vessels are affected and industry revenues are reduced by 4.3 percent. The Preferred Alternative and the No Action Alternative provide the most protection to sea turtles; while Alternative 1 leaves sea turtles vulnerable to capture, injury, and mortality that result from such capture, in the sea scallop dredge bag. Literature Cited Coles, W.C. 1999. Aspects of the biology of sea turtles in the mid-Atlantic bight. Unpublished dissertation, The College of William and Mary in Virginia. 149 pp. DuPaul, W. D. and R. J. Smolowitz. 2003. The development of a modified sea scallop dredge. Final Contract Report. February 14, 2003. VIMS Marine Resources Report, No. 2003-1. 9 pp. DuPaul, W. D., D. B. Rudders, and R. J. Smolowitz. 2004a. Industry trials of a modified sea scallop dredge to minimize the catch of sea turtles. Final Report. November 2004. VIMS Marine Resources Report, No. 2004-12. 35 pp. DuPaul, W. D., D. B. Rudders, and R. J. Smolowitz. 2004b. Industry trials of a modified sea scallop dredge to minimize the catch of sea turtles. Draft Final Report. August 2004. Contract Number PO#EA 133F-03-SE-0235. 11 pp. Milliken, H. O., L. Belskis, W. DuPaul, J. Gearhart, H. Haas, J. Mitchell, R. Smolowitz, and W. Teas. 2007. Evaluation of a modified scallop dredge's ability to reduce the likelihood of damage to loggerhead sea turtle carcasses. U.S. Dep Commer., Northeast Fisheries Science Center Reference Document 07-07. Northeast Fisheries Science Center. Woods Hole, MA. 30 pp. Available at *http://www.nefsc.noaa.gov/nefsc/publications/* Murray, K. T. 2004a. Bycatch of sea turtles in the Mid-Atlantic sea scallop (Placopecten magellanicus) dredge fishery during 2003. 2nd ed. U.S. Dep Commer., Northeast Fisheries Science Center Reference Document 04-11. Northeast Fisheries Science Center. Woods Hole, MA. 25 pp. Available at *http://www.nefsc.noaa.gov/nefsc/publications/* Murray, K. T. 2004b. Magnitude and distribution of sea turtle bycatch in the sea scallop (Placopecten magellanicus) dredge fishery in two areas in the northwestern Atlantic Ocean, 2001-2002. Fish. Bull. 102:671-681. Murray, K. T. 2005. Total bycatch estimate of loggerhead turtles (Caretta caretta) in the 2004 Atlantic sea scallop (Placopecten magellanicus) dredge fishery. U.S. Dep Commer., Northeast Fisheries Science Center Reference Document 05-12. Northeast Fisheries Science Center. Woods Hole, MA. 22 pp. Available at *http://www.nefsc.noaa.gov/nefsc/publications/* Murray, K. T. 2007. Estimated bycatch of loggerhead turtles (Caretta caretta) in U.S. mid-Atlantic scallop trawl gear, 2004-2005, and in sea scallop dredge gear, 2005. U.S. Dep Commer. Northeast Fisheries Science Center Reference Document 07-04. Northeast Fisheries Science Center. Woods Hole, MA. 30 pp. Available at *http://www.nefsc.noaa.gov/nefsc/publications/* NMFS (National Marine Fisheries Service). 2005. Scallop dredge evaluations. F/V Capt. Wick, Panama City FL. 6/18/05-6/23/05. Report and Video. NOAA, National Marine Fisheries Service, Southeast Fisheries Science Center. Harvesting Systems and Engineering Branch. Received 7/12/2005. 8 pp. NMFS (National Marine Fisheries Service) 2006. Endangered Species Act section 7 consultation on the Atlantic sea scallop fishery management. Biological Opinion. Sep. 2006. NOAA, National Marine Fisheries Service Northeast Regional Office. Gloucester, MA. 104 pp. plus appendices. Teas, W. G. 1993. Species composition and size class distribution of marine turtle strandings on the Gulf of Mexico and southeast United States coasts, 1985-1991. NOAA Tech. Memo. NMFS-SEFSC-315. 43 pp. List of Subjects in 50 CFR Part 223 Endangered and threatened species, Exports, Reporting and recordkeeping requirements, Transportation. Dated: November 6, 2007. William T. Hogarth, Assistant Administrator for Fisheries, National Marine Fisheries Service. For the reasons set forth in the preamble, 50 CFR part 223 is proposed to be amended as follows: PART 223—THREATENED MARINE AND ANADROMOUS SPECIES 1. The authority citation for part 223 continues to read as follows: Authority: 16 U.S.C. 1531-1543; subpart B, § 223.12 also issued under 16 U.S.C. 1361 et. seq.; 16 U.S.C. 5503(d) for § 223.206(d)(9). In § 223.206, paragraph (d)(11) is revised to read as follows: § 223.206 Exemptions to prohibitions relating to sea turtles.

(d)* * *

(11)*Restrictions applicable to sea scallop dredges in the mid-Atlantic* —(i) *Gear Modification.* During the time period of May 1 through November 30, any vessel with a sea scallop dredge and required to have a Federal Atlantic sea scallop fishery permit, regardless of dredge size or vessel permit category, that enters waters south of 41° 9.0′ N. latitude, from the shoreline to the outer boundary of the Exclusive Economic Zone must have on each dredge a chain mat described as follows. The chain mat must be composed of horizontal (“tickler”) chains and vertical (“up-and-down”) chains that are configured such that the openings formed by the intersecting chains have no more than 4 sides. The length of each side of the openings formed by the intersecting chains, including the sweep, must be less than or equal to 14 inches (35.5 cm). The chains must be connected to each other with a shackle or link at each intersection point. The measurement must be taken along the chain, with the chain held taut, and include one shackle or link at the intersection point and all links in the chain up to, but excluding, the shackle or link at the other intersection point.

(ii)Any vessel that enters the waters described in (d)(11)(i) and that is required to have a Federal Atlantic sea scallop fishery permit must have the chain mat configuration installed on all dredges for the duration of the trip.

(iii)Vessels subject to the requirements in (d)(11)(i) and (d)(11)(ii) transiting waters south of 41° 9.0′ N. latitude, from the shoreline to the outer boundary of the Exclusive Economic Zone, will be exempted from the chain-mat requirements provided the dredge gear is stowed in accordance with § 648.23(b) and there are no scallops on-board. [FR Doc. E7-22073 Filed 11-8-07; 8:45 am] BILLING CODE 3510-22-S 72 217 Friday, November 9, 2007 Notices AFRICAN DEVELOPMENT FOUNDATION Board of Directors Meeting MEETING: African Development Foundation, Board of Directors Meeting. TIME: Tuesday, November 13, 2007, 10 a.m. to 12 p.m. PLACE: African Development Foundation, Conference Room, 1400 I Street, NW., Suite 1000, Washington, DC 20005. DATES: Tuesday, November 13, 2007. STATUS: Closed session, November 13, 2007, 10 a.m. to 12 p.m. As this meeting will be a closed, executive session, the meeting will not be open to the public. Should you have any questions, please contact Doris Martin, General Counsel, at

(202)673-3916 or *mrivard@usadf.gov* . Lloyd O. Pierson, President. [FR Doc. 07-5628 Filed 11-7-07; 12:07 pm]

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