Rules and Regulations. Notice of proposed special conditions

45,482 words·~207 min read·/register/2007/11/27/07-5840

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BILLING CODE 3510-22-S 72 227 Tuesday, November 27, 2007 Proposed Rules DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 25 [Docket No. NM385; Notice No. 25-07-17-SC] Special Conditions: Boeing Model 757 Series Airplanes; Seats With Non-Traditional, Large, Non-Metallic Panels AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed special conditions. SUMMARY: This action proposes special conditions for Boeing Model 757 series airplanes.

These airplanes, as modified by Triad International Maintenance Company (TIMCO), will have a novel or unusual design feature(s) associated with seats that include non-traditional, large, non-metallic panels that would affect survivability during a post-crash fire event. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. These proposed special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.

DATES: We must receive your comments by December 12, 2007. ADDRESSES: You must mail two copies of your comments to: Federal Aviation Administration, Transport Airplane Directorate, Attn: Rules Docket (ANM-113), Docket No. NM385, 1601 Lind Avenue, SW., Renton, Washington 98057-3356. You may deliver two copies to the Transport Airplane Directorate at the above address. You must mark your comments: Docket No. NM385. You can inspect comments in the Rules Docket weekdays, except Federal holidays, between 7:30 a.m. and 4 p.m.

FOR FURTHER INFORMATION CONTACT: Dan Jacquet, FAA, Airframe/Cabin Safety Branch, ANM-115, Transport Airplane Directorate, Aircraft Certification Service, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)227-2676; facsimile

(425)227-1232; electronic mail *daniel.jacquet@faa.gov* . SUPPLEMENTARY INFORMATION: Comments Invited We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments. We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning these special conditions. You can inspect the docket before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this preamble between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. We will consider all comments we receive on or before the closing date for comments. We will consider comments filed late if it is possible to do so without incurring expense or delay. We may change these special conditions based on the comments we receive. If you want the FAA to acknowledge receipt of your comments on this proposal, include with your comments a pre-addressed, stamped postcard on which the docket number appears. We will stamp the date on the postcard and mail it back to you. Background On July 31, 2007, Triad International Maintenance Company (TIMCO), 623 Radar Road, Greensboro, North Carolina 27410, applied for a supplemental type certificate for installing seats that include non-traditional, large, non-metallic panels in a Boeing Model 757 series airplane. The Boeing Model 757 series airplanes, currently approved under Type Certificate No. A2NM, are swept-wing, conventional tail, twin-engine, turbofan-powered, single aisle, medium-sized transport category airplanes. The applicable regulations to airplanes currently approved under Type Certificate No. A2NM do not require seats to meet the more stringent flammability standards required of large, non-metallic panels in the cabin interior. At the time the applicable rules were written, seats were designed with a metal frame covered by fabric, not with large, non-metallic panels. Seats also met the then recently adopted standards for flammability of seat cushions. With the seat design being mostly fabric and metal, the contribution to a fire in the cabin had been minimized and was not considered a threat. For these reasons, seats did not need to be tested to heat release and smoke emission requirements. Seat designs have now evolved to occasionally include non-traditional, large, non-metallic panels. Taken in total, the surface area of these panels is on the same order as the sidewall and overhead stowage bin interior panels. To provide the level of passenger protection intended by the airworthiness standards, these non-traditional, large, non-metallic panels in the cabin must meet the standards of Title 14 Code of Federal Regulations (CFR), part 25, Appendix F, parts IV and V, heat release and smoke emission requirements. Type Certification Basis Under the provisions of 14 CFR 21.101, TIMCO must show that the Boeing Model 757 series airplanes, as changed, continue to meet the applicable provisions of the regulations incorporated by reference in Type Certificate No. A2NM, or the applicable regulations in effect on the date of application for the change. The regulations incorporated by reference in the type certificate are commonly referred to as the “original type certification basis.” The regulations incorporated by reference in Type Certificate No. A2NM are as follows: • For Model 757-200 airplanes—part 25, as amended by Amendment 25-1 through Amendment 25-45. In addition, an equivalent safety finding exists with respect to § 25.853(c), Compartment interiors. • For Model 757-300 airplanes—part 25, as amended by Amendment 25-1 through Amendment 25-85 with the exception listed: Section 25.853(d)(3), Compartment interiors, at Amendment 25-72. In addition, the certification basis includes certain special conditions, exemptions, or later amended sections of the applicable part that are not relevant to these proposed special conditions. If the Administrator finds that the applicable airworthiness regulations (i.e., part 25) do not contain adequate or appropriate safety standards for the Boeing Model 757 series airplanes because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16. In addition to the applicable airworthiness regulations and special conditions, the Boeing Model 757 series airplanes must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36. The FAA issues special conditions, as defined in § 11.19, under § 11.38 and they become part of the type certification basis under § 21.101. Special conditions are initially applicable to the model for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model included on the same type certificate to incorporate the same or similar novel or unusual design feature, the special conditions would also apply to the other model under § 21.101. Novel or Unusual Design Features The Boeing Model 757 series airplanes will incorporate the following novel or unusual design features: These models offer interior arrangements that include passenger seats that incorporate non-traditional, large, non-metallic panels in lieu of the traditional metal frame covered by fabric. The flammability properties of these panels have been shown to significantly affect the survivability of the cabin in the case of fire. These seats are considered a novel design for transport category airplanes that include Amendment 25-61 and Amendment 25-66 in the certification basis, and were not considered when those airworthiness standards were established. The existing regulations do not provide adequate or appropriate safety standards for seat designs that incorporate non-traditional, large, non-metallic panels in their designs. In order to provide a level of safety that is equivalent to that afforded to the balance of the cabin, additional airworthiness standards, in the form of special conditions, are necessary. These special conditions supplement § 25.853. The requirements contained in these special conditions consist of applying the identical test conditions required of all other large panels in the cabin, to seats with non-traditional, large, non-metallic panels. Definition of “Non-Traditional, Large, Non-Metallic Panel” A non-traditional, large, non-metallic panel, in this case, is defined as a panel with exposed-surface areas greater than 1.5 square feet installed per seat place. The panel may consist of either a single component or multiple components in a concentrated area. Examples of parts of the seat where these non-traditional panels are installed include, but are not limited to: Seat backs, bottoms and leg/foot rests, kick panels, back shells, credenzas and associated furniture. Examples of traditional exempted parts of the seat include: Arm caps, armrest close-outs such as end bays and armrest-styled center consoles, food trays, video monitors, and shrouds. Clarification of “Exposed” “Exposed” is considered to include panels that are directly exposed to the passenger cabin in the traditional sense, and panels that are enveloped, such as by a dress cover. Traditional fabrics or leathers currently used on seats are excluded from these special conditions. These materials must still comply with § 25.853(a) and § 25.853(c) if used as a covering for a seat cushion, or § 25.853(a) if installed elsewhere on the seat. Non-traditional, large, non-metallic panels covered with traditional fabrics or leathers will be tested without their coverings or covering attachments. Discussion In the early 1980s the FAA conducted extensive research on the effects of post-crash flammability in the passenger cabin. As a result of this research and service experience, we adopted new standards for interior surfaces associated with large surface area parts. Specifically, the rules require measurement of heat release and smoke emission (part 25, Appendix F, parts IV and V) for the affected parts. Heat release has been shown to have a direct correlation with post-crash fire survival time. Materials that comply with the standards (i.e., § 25.853 entitled “Compartment interiors” as amended by Amendment 25-61 and Amendment 25-66) extend survival time by approximately 2 minutes over materials that do not comply. At the time these standards were written the potential application of the requirements of heat release and smoke emission to seats was explored. The seat frame itself was not a concern because it was primarily made of aluminum and there were only small amounts of non-metallic materials. It was determined that the overall effect on survivability was negligible, whether or not the food trays met the heat release and smoke requirements. The requirements therefore did not address seats. The preambles to both the Notice of Proposed Rule Making (NPRM), Notice No. 85-10 (50 FR 15038, April 16, 1985) and the Final Rule at Amendment 25-61 (51 FR 26206, July 21, 1986), specifically note that seats were excluded “because the recently-adopted standards for flammability of seat cushions will greatly inhibit involvement of the seats.” Subsequently, the Final Rule at Amendment 25-83 (60 FR 6615, March 6, 1995) clarified the definition of minimum panel size: “It is not possible to cite a specific size that will apply in all installations; however, as a general rule, components with exposed-surface areas of one square foot or less may be considered small enough that they do not have to meet the new standards. Components with exposed-surface areas greater than two square feet may be considered large enough that they do have to meet the new standards. Those with exposed-surface areas greater than one square foot, but less than two square feet, must be considered in conjunction with the areas of the cabin in which they are installed before a determination could be made.” In the late 1990s, the FAA issued Policy Memorandum 97-112-39, *Guidance for Flammability Testing of Seat/Console Installations* , October 17, 1997 ( *http://rgl.faa.gov* ). That memo was issued when it became clear that seat designs were evolving to include large, non-metallic panels with surface areas that would impact survivability during a cabin fire event, comparable to partitions or galleys. The memo noted that large surface area panels must comply with heat release and smoke emission requirements, even if they were attached to a seat. If the FAA had not issued such policy, seat designs could have been viewed as a loophole to the airworthiness standards that would result in an unacceptable decrease in survivability during a cabin fire event. In October of 2004, an issue was raised regarding the appropriate flammability standards for passenger seats that incorporated non-traditional, large, non-metallic panels in lieu of the traditional metal covered by fabric. The Seattle Aircraft Certification Office and Transport Standards Staff reviewed this design and determined that it represented the kind and quantity of material that should be required to pass the heat release and smoke emissions requirements. We have determined that special conditions would be promulgated to apply the standards defined in § 25.853(d) to seats with large, non-metallic panels in their design. Applicability As discussed above, these special conditions are applicable to Boeing Model 757 series airplanes. It is not our intent, however, to require seats with large, non-metallic panels to meet § 25.853, Appendix F, parts IV and V, if they are installed in cabins of airplanes that otherwise are not required to meet these standards. Because the heat release and smoke testing requirements of § 25.853 per Appendix F, parts IV and V, are not part of the type certification basis of the Model 757, these special conditions are only applicable if the Model 757 series airplanes are in 14 CFR part 121 operations. Section 121.312 requires compliance with the heat release and smoke testing requirements of § 25.853, for certain airplanes, irrespective of the type certification bases of those airplanes. For Model 757 series airplanes, these are the airplanes that would be affected by these special conditions. Should TIMCO apply at a later date for a supplemental type certificate to modify any other model included on Type Certificate No. A2NM to incorporate the same novel or unusual design feature, the special conditions would apply to that model as well. Conclusion This action affects only certain novel or unusual design features on one model series of airplanes. It is not a rule of general applicability and it affects only the applicant who applied to the FAA for approval of these features on the airplane. List of Subjects in 14 CFR Part 25 Aircraft, Aviation safety, Reporting and recordkeeping requirements. The authority citation for these special conditions is as follows: Authority: 49 U.S.C. 106(g), 40113, 44701, 44702, 44704. The Proposed Special Conditions Accordingly, the Federal Aviation Administration

(FAA)proposes the following special conditions as part of the type certification basis for Boeing Model 757 series airplanes modified by TIMCO. 1. Except as provided in paragraph 3 of these special conditions, compliance with Title 14 CFR part 25, Appendix F, parts IV and V, heat release and smoke emission, is required for seats that incorporate non-traditional, large, non-metallic panels that may either be a single component or multiple components in a concentrated area in their design. 2. The applicant may designate up to and including 1.5 square feet of non-traditional, non-metallic panel material per seat place that does not have to comply with special condition Number 1, above. A triple seat assembly may have a total of 4.5 square feet excluded on any portion of the assembly (e.g., outboard seat place 1 square foot, middle 1 square foot, and inboard 2.5 square feet). 3. Seats do not have to meet the test requirements of Title 14 CFR part 25, Appendix F, parts IV and V, when installed in compartments that are not otherwise required to meet these requirements. Examples include: a. Airplanes with passenger capacities of 19 or less, b. Airplanes that do not have § 25.853, Amendment 25-61 or later, in their certification basis and do not need to comply with the requirements of 14 CFR § 121.312, and c. Airplanes exempted from § 25.853, Amendment 25-61 or later. Issued in Renton, Washington, on November 19, 2007. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-23079 Filed 11-26-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2007-0248; Directorate Identifier 2007-CE-084-AD] RIN 2120-AA64 Airworthiness Directives; British Aerospace Aircraft Group, Scottish Division, Model Beagle B.121 Series 1, 2, 3 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (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: The Type Certificate Holder

(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. 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: Taylor Martin, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:

(816)329-4138; fax:

(TCH)has received several reports of failed Rudder torque tube assemblies. The torque tube assemblies are subject to repetitive inspection in accordance Airworthiness Directive 2060 PRE 80. The recent failures occurred in service after the inspections required by AD 2060 PRE 80 had been performed. In the event of such failures, loss of directional control through both the Rudder and Nosewheel Steering may occur. The TCH has also received reports of loose rivets attaching the inboard Anchor Assembly to the Starboard Torque Tube. The MCAI requires the inspection of the rudder torque tube assemblies and hubs for cracking and loose rivets with conditional correction or replacement following de Havilland Support Limited Service Bulletin B121/65, Issue 2, dated August 10, 2005. You may obtain further information by examining the MCAI in the AD docket. Relevant Service Information De Havilland Support Limited has issued Service Bulletin No. B121/65, Issue 2, dated August 10, 2005. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI. FAA's Determination and Requirements of the 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 this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design. Differences Between This Proposed 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 1 product of U.S. registry. We also estimate that it would take about 1 work-hour per product to comply with the basic requirements of this proposed AD. The average labor rate is $80 per work-hour. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $80, or $80 per product. In addition, we estimate that any necessary follow-on actions would take about 12 work-hours and require parts costing $10,000 for a cost of $10,960 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: **British Aerospace (Scotland):** Docket No. FAA-2007-0248; Directorate Identifier 2007-CE-084-AD. Comments Due Date

(a)We must receive comments by December 27, 2007. Affected ADs

(b)None. Applicability

(c)This AD applies to Beagle B.121 Series 1, 2, 3 airplanes, all serial numbers, certificated in any category. Subject

(d)Air Transport Association of America

(ATA)Code 27: Flight Controls. Reason

(e)The mandatory continuing airworthiness information

(MCAI)states: The Type Certificate Holder

(f)Unless already done, do the following actions:

(1)Within 100 hours time-in-service

(TIS)after the effective date of this AD and thereafter at intervals not to exceed 100 hours TIS, inspect the Rudder Torque Tube Assemblies following de Havilland Support Limited Service Bulletin B121/65, Issue 2, dated August 10, 2005.

(2)Before further flight, replace any cracked Rudder Torque Tube Assemblies and correct any loose rivets in the Rudder Torque Tube Assemblies that are found in the inspections required in paragraph (f)(1) of this AD, following de Havilland Support Limited Service Bulletin B121/65, Issue 2, dated August 10, 2005.

(3)After the effective date of this AD, used rudder torque assemblies held as spares for British Aerospace Aircraft Group, Scottish Division, Model Beagle B.121 Series 1, 2, 3 airplanes must be inspected following de Havilland Support Limited Service Bulletin B121/65, Issue 2, dated August 10, 2005, and found free of cracks prior to installation. FAA AD Differences Note: This AD differs from the MCAI and/or service information as follows: No differences. Other FAA AD Provisions

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

(1)*Alternative Methods of Compliance (AMOCs):* The Manager, Standards Office, 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: Taylor Martin, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:

(816)329-4138; fax:

(816)329-4090. 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 (44 U.S.C. 3501 et seq.), 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 United Kingdom Civil Aviation Authority AD No: G-2005-0030, dated October 12, 2005; and de Havilland Support Limited Service Bulletin B121/65, Issue 2, dated August 10, 2005, for related information. Issued in Kansas City, Missouri, on November 20, 2007. Kim Smith, Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-23025 Filed 11-26-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2007-0249; Directorate Identifier 2007-CE-088-AD] RIN 2120-AA64 Airworthiness Directives; Alpha Aviation Design Limited Model R2160 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: We propose to adopt a new airworthiness directive

(AD)for the products listed above that would supersede an existing AD. 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 distortion of the rudder bars due to rudder control forces during aerobatic operation and nose wheel steering reaction forces. Rudder bar distortion could result in reduced control or loss of control. 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 27, 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. 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, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590. 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: Karl Schletzbaum, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:

(816)329-4146; fax:

(816)329-4090. 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-2007-0249; Directorate Identifier 2007-CE-088-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://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 In 1987, we issued AD 87-08-01, Amendment 39-5601, and in 1999, we issued AD 99-01-04, Amendment 39-10971. Those two ADs required actions intended to address an unsafe condition on the products listed above. We since determined that it is necessary to expand the airplane applicability of AD 99-01-04 to require rudder bar replacement on Alpha Aviation Design Limited Model R2160 airplanes, serial numbers 1 through 378. The requirement to replace the rudder bars makes the inspection requirement of AD 87-08-01 no longer necessary. The Civil Aviation Authority, which is the aviation authority for New Zealand, has issued AD DCA/R2000/23B, dated October 25, 2007 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states that rudder control forces during aerobatic operation and nose wheel steering reaction forces may cause rudder bar distortion. Rudder bar distortion could result in reduced control or loss of control. The MCAI requires you to replace the left and right rudder bars with reinforced rudder bars. You may obtain further information by examining the MCAI in the AD docket. Relevant Service Information Alpha Aviation has issued Service Bulletin AA-SB-27-003, dated October 19, 2007. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI. FAA's Determination and Requirements of the 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 this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design. Differences Between This Proposed 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 9 products of U.S. registry. We also estimate that it would take about 3 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 $657 per product. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $8,073, or $897 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 removing Amendment 39-5601 and Amendment 39-10971, and adding the following new AD: **Alpha Aviation Design Limited:** Docket No. FAA-2007-0249; Directorate Identifier 2007-CE-088-AD. Comments Due Date

(a)We must receive comments by December 27, 2007. Affected ADs

(b)This AD supersedes AD 87-08-01, Amendment 39-5601; and AD 99-01-04, Amendment 39-10971. Applicability

(c)This AD applies to Model R2160 airplanes, serial numbers 1 through 378, that:

(1)Are certificated in any category; and

(2)Have not installed the improved design rudder bars part number (P/N) 27.40.31.010 and P/N 27.40.31.020 following either Avions Pierre Robin Service Bulletin No. 143, dated September 8, 1995, or Alpha Aviation Service Bulletin AA-SB-27-003, dated October 19, 2007. Subject

(d)Air Transport Association of America

(ATA)Code 27: Flight Controls. Reason

(e)The mandatory continuing airworthiness information

(MCAI)states that rudder control forces during aerobatic operation and nose wheel steering reaction forces may cause rudder bar distortion. Rudder bar distortion could result in reduced or loss of control. The MCAI requires you to replace the left and right rudder bars with reinforced rudder bars. Restatement of Requirements of AD 99-01-04

(f)For airplanes with serial numbers 250 through 378: Unless already done, within the next 50 hours time-in-service

(TIS)after March 12, 1999 (the effective date of AD 99-01-04) replace the left and right rudder bars, part number (P/N) 27.23.01.010

(left)and P/N 27.23.01.020 (right), with the reinforced rudder bars, P/N 27.40.31.010

(left)and P/N 27.40.31.020 (right) or FAA-equivalent part numbers, following Alpha Aviation Service Bulletin AA-SB-27-003, dated October 19, 2007. New Requirements of This AD: Actions and Compliance

(g)For airplanes with serial numbers 1 through 249: Unless already done, within the next 50 hours TIS after the effective date of this AD or within the next 3 months after the effective date of this AD, whichever occurs first, replace the left and right rudder bars, P/N 27.23.05.010

(left)and P/N 27.23.05.020 (right), with the reinforced rudder bars, P/N 27.40.31.010

(left)and P/N 27.40.31.020 (right) or FAA-equivalent part numbers, following Alpha Aviation Service Bulletin AA-SB-27-003, dated October 19, 2007. FAA AD Differences Note: This AD differs from the MCAI and/or service information as follows: No differences. Other FAA AD Provisions

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

(1)*Alternative Methods of Compliance (AMOCs):* The Manager, Standards Office, 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: Karl Schletzbaum, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:

(816)329-4146; fax:

(816)329-4090. 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.

(3)*Reporting Requirements:* For any reporting requirement in this AD, under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), the Office of Management and Budget

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

(i)Refer to New Zealand Civil Aviation Authority AD DCA/R2000/23B, dated October 25, 2007; and Alpha Aviation Service Bulletin AA-SB-27-003, dated October 19, 2007, for related information. Issued in Kansas City, Missouri, on November 20, 2007. Kim Smith, Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-23017 Filed 11-26-07; 8:45 am] BILLING CODE 4910-13-P FEDERAL TRADE COMMISSION 16 CFR Part 260 Guides for the Use of Environmental Marketing Claims AGENCY: Federal Trade Commission. ACTION: Request for public comment; announcement of public meetings. SUMMARY: The Federal Trade Commission (“FTC” or “Commission”) requests public comment on its Guides for the Use of Environmental Marketing Claims (“Green Guides” or “Guides”). The Commission is soliciting comment as part of its systematic review of all current FTC rules and guides. The Commission also is announcing plans to host public meetings to explore developments in environmental and “green energy-related” marketing. DATES: Written comments relating to the Green Guides review must be received by February 11, 2008. The first public meeting, “Carbon Offsets and Renewable Energy Certificates,” will be held on January 8, 2008 in Washington, DC. Details, including location and registration information, are set forth in a separate **Federal Register** notice published concurrently. The Commission plans to announce additional environmental marketing public meetings at later dates. ADDRESSES: Interested parties are invited to submit written comments relating to the Green Guides review. Comments should refer to “Green Guides Regulatory Review, 16 CFR part 260, Comment, Project No. P954501” to facilitate organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/Office of the Secretary, Room H-135 (Annex B), 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing confidential material must be filed in paper form, must be clearly labeled “Confidential”, and must comply with Commission Rule 4.9(c). 1 The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. 1 The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission's General Counsel, consistent with applicable law and the public interest. *See* Commission Rule 4.9(C), 16 CFR 4.9(c). Comments filed in electronic form should be submitted by following the instructions on the web-based form at *https://secure.commentworks.com/ftc-GreenGuidesReview.* To ensure that the Commission considers an electronic comment, you must file it on that web-based form. You may also visit *http://www.regulations.gov* to read this notice, and may file an electronic comment through that Web site. The Commission will consider all comments that *www.regulations.gov* forwards to it. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives, whether filed in paper or electronic form. Comments received will be available to the public on the FTC Web site, to the extent practicable, at *http://www.ftc.gov.* As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. To read our policy on how we handle the information you submit—including routine uses permitted by the Privacy Act—please review the FTC's privacy policy, at *http://www.ftc.gov/ftc/privacy.shtm.* FOR FURTHER INFORMATION CONTACT: Janice Podoll Frankle, Attorney, 202-326-3022, or Laura Koss, Attorney, 202-326-2890, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission. SUPPLEMENTARY INFORMATION: I. Background The Commission issued the Green Guides, 16 CFR part 260, to help marketers avoid making environmental claims that are unfair or deceptive under Section 5 of the FTC Act, 15 U.S.C. 45. 2 Industry guides, such as these, are administrative interpretations of the law. Therefore, they do not have the force and effect of law and are not independently enforceable. The Commission can take action under the FTC Act, however, if a business makes environmental marketing claims inconsistent with the Guides. In any such enforcement action, the Commission must prove that the act or practice at issue is unfair or deceptive. 2 The Commission issued the Green Guides in 1992, 57 FR 36363, and subsequently revised them in 1996 (61 FR 53311) and 1998 (63 FR 24240). The FTC also administers other rules and guides in the environmental and energy areas, pursuant to several federal statutes including the FTC Act. *See* Guide Concerning Fuel Economy Advertising for New Automobiles (16 CFR part 259), Appliance Labeling Rule (16 CFR part 305), Fuel Rating Rule (16 CFR part 306), Alternative Fuel Vehicles Rule (16 CFR part 309), Recycled Oil Rule (16 CFR part 311), and Labeling and Advertising of Home Insulation Rule (the “R-Value” Rule) (16 CFR part 460). The Green Guides outline general principles that apply to all environmental marketing claims and then provide guidance regarding specific environmental claims. For all claims, the Guides advise: That qualifications and disclosures be sufficiently clear and prominent to prevent deception; that marketers make clear whether their claims apply to the product, the package, or a component of either; that claims not overstate an environmental attribute or benefit, expressly or by implication; and that marketers present comparative claims in a manner that makes the basis for the comparison sufficiently clear to avoid consumer deception. The Guides then specifically address: general environmental benefit claims, such as “environmentally friendly”; degradable claims; compostable claims; recyclable claims; recycled content claims; source reduction claims; refillable claims; and ozone safe/ozone friendly claims. For each of these claims, the Green Guides explain how reasonable consumers are likely to interpret them. The Guides also describe the basic elements necessary to substantiate claims within each category and present options for qualifying specific claims to avoid deception. 3 The illustrative qualifications provide “safe harbors” for marketers who want certainty about how to make environmental claims, but do not represent the only permissible approaches to qualifying a claim. 3 The Guides do not, however, establish standards for environmental performance or prescribe testing protocols. II. Regulatory Review of the Green Guides The Commission reviews all of its rules and guides periodically to examine their efficacy, costs, and benefits; and to determine whether to retain, modify, or rescind them. This notice commences the Commission's review of the Green Guides. A. General Areas of Interest for FTC Review As part of its review, the Commission is seeking comment on a number of general issues, including the continuing need for the Guides and their economic impact, the effect of the Guides on the accuracy of various environmental claims, and the interaction of the Guides with other environmental marketing regulations. The Commission believes that this review is important to ensure that the Guides are appropriately responsive to any changes in the marketplace. Since the Commission's last revisions in 1998, sellers and marketers increasingly have publicized the environmental attributes of certain products, packaging, services, and manufacturing processes. Moreover, sellers and marketers are making new green claims, including those regarding renewable energy, carbon offsets, and sustainability, among others, that are not currently covered by the Green Guides. The Commission also seeks to ensure that the Guides are appropriately responsive to any changes in consumer perception of environmental claims. As the Commission recognized in originally issuing the Guides, science and technology in the environmental area are constantly changing and new developments might affect consumer perception. Thus, the Commission solicits specific consumer survey evidence and consumer perception data addressing environmental claims, including claims not currently covered by the Guides. B. Specific Areas of Interest for FTC Review Since the last revisions to the Guides in 1998, the Commission occasionally has received informal input regarding the efficacy of its guidance on specific claims as well as requests for clarification through additional examples. Some of the questions included in this notice, therefore, address claim-specific issues. By including these issues, the Commission intends to facilitate comment, and the inclusion or exclusion of any issue is no indication of the Commission's intent to make any specific modifications to the Guides. III. Issues for Comment The Commission requests written comment on any or all of the following questions. The Commission requests that responses to its questions be as specific as possible, including a reference to the question being answered, and reference to empirical data or other evidence wherever available and appropriate. A. General Issues

(1)Is there a continuing need for the Guides? Why or why not?

(2)What benefits have the Guides provided to consumers? What evidence supports the asserted benefits?

(3)What modifications, if any, should be made to the Guides to increase their benefits to consumers?

(a)What evidence supports your proposed modifications?

(b)How would these modifications affect the costs the Guides impose on businesses, and in particular on small businesses?

(c)How would these modifications affect the benefits to consumers?

(4)What impact have the Guides had on the flow of truthful information to consumers and on the flow of deceptive information to consumers?

(5)What significant costs have the Guides imposed on consumers? What evidence supports the asserted costs?

(6)What modifications, if any, should be made to the Guides to reduce the costs imposed on consumers?

(a)What evidence supports your proposed modifications?

(b)How would these modifications affect the benefits provided by the Guides?

(7)Please provide any evidence that has become available since 1998 concerning consumer perception of environmental claims, including claims not currently covered by the Guides. Does this new information indicate that the Guides should be modified? If so, why, and how? If not, why not?

(8)Please provide any evidence that has become available since 1998 concerning consumer interest in particular environmental issues. Does this new information indicate that the Guides should be modified? If so, why, and how? If not, why not?

(9)What benefits, if any, have the Guides provided to businesses, and in particular to small businesses? What evidence supports the asserted benefits?

(10)What modifications, if any, should be made to the Guides to increase their benefits to businesses, and in particular to small businesses?

(a)What evidence supports your proposed modifications?

(b)How would these modifications affect the costs the Guides impose on businesses, and in particular on small businesses?

(c)How would these modifications affect the benefits to consumers?

(11)What significant costs, including costs of compliance, have the Guides imposed on businesses, and in particular on small businesses? What evidence supports the asserted costs?

(12)What modifications, if any, should be made to the Guides to reduce the costs imposed on businesses, and in particular on small businesses?

(a)What evidence supports your proposed modifications?

(b)How would these modifications affect the benefits provided by the Guides?

(13)What evidence is available concerning the degree of industry compliance with the Guides?

(a)To what extent has there been a reduction in deceptive environmental claims since the Guides were issued? Please provide any supporting evidence. Does this evidence indicate that the Guides should be modified? If so, why, and how? If not, why not?

(b)To what extent have the Guides reduced marketers' uncertainty about which claims might lead to FTC law enforcement actions? Please provide any supporting evidence. Does this evidence indicate that the Guides should be modified? If so, why, and how? If not, why not?

(14)Are there claims addressed in the Guides on which guidance is no longer needed? If so, explain. Please provide supporting evidence.

(15)What potentially unfair or deceptive environmental marketing claims, if any, are not covered by the Guides?

(a)What evidence demonstrates the existence of such claims?

(b)With reference to such claims, should the Guides be modified? If so, why, and how? If not, why not?

(16)What modifications, if any, should be made to the Guides to account for changes in relevant technology or economic conditions? What evidence supports the proposed modifications?

(17)Do the Guides overlap or conflict with other federal, state, or local laws or regulations? If so, how?

(a)What evidence supports the asserted conflicts?

(b)With reference to the asserted conflicts, should the Guides be modified? If so, why, and how? If not, why not?

(c)Is there evidence concerning whether the Guides have assisted in promoting national consistency with respect to the regulation of environmental claims? If so, please provide that evidence.

(18)Are there international laws, regulations, or standards with respect to environmental marketing claims that the Commission should consider as it reviews the Guides, such as the International Organization for Standardization (“ISO”) 14021, Environmental Labels and Declarations—Self-Declared Environmental Claims? If so, what are they? Should the Guides be modified in order to harmonize with these international laws, regulations, or standards? If so, why, and how? If not, why not? B. Specific Issues

(1)Should the Guides be revised to include guidance regarding renewable energy or carbon offset claims? If so, why, and what guidance should be provided? If not, why not?

(a)What evidence supports making your proposed revision(s)?

(b)What evidence is available concerning consumer understanding of the terms “renewable energy” and “carbon offset”?

(c)What evidence constitutes a reasonable basis to support each such claim?

(2)Should the Guides be revised to include guidance regarding “sustainable” claims? If so, why, and what guidance should be provided? If not, why not?

(a)What evidence supports making your proposed revision(s)?

(b)What evidence is available concerning consumer understanding of the term “sustainable”?

(c)What evidence constitutes a reasonable basis to support a “sustainable” claim?

(3)Should the Guides be revised to include guidance regarding “renewable” claims? If so, why, and what guidance should be provided? If not, why not?

(a)What evidence supports making your proposed revision(s)?

(b)What evidence is available concerning consumer understanding of the term “renewable”?

(c)What evidence constitutes a reasonable basis to support a “renewable” claim?

(4)The Guides provide that a recycled content claim may be made only for materials that have been recovered or otherwise diverted from the solid waste stream, either during the manufacturing process or after consumer use. Do the current Guides provide sufficient guidance for recycled content claims for textile products? If so, why? If not, why not, and what guidance should be provided? What evidence supports making your proposed revision(s)?

(5)The Guides suggest that recycled content be calculated on the annual weighted average of a product. Should the Guides be revised to include alternative method(s) of calculating recycled content, *e.g.* , based on the average recycled content within a product line, or an average amount of recycled content used by a manufacturer across many or all of its product lines? If so, why, and what is the appropriate method(s) of calculation? If not, why not? What evidence supports making your proposed revision(s)?

(6)The Guides provide that an unqualified claim that a product or package is degradable, biodegradable or photodegradable should be substantiated by competent and reliable scientific evidence that the entire product or package will completely break down and return to nature within a “reasonably short period of time after customary disposal.” Should the Guides be revised to provide more specificity with respect to the time frame for product decomposition? If so, why, and what should the time frame be? If not, why not? What evidence supports making your proposed revision(s)? IV. Public Meetings Because of the wide-reaching issues involved in environmental marketing, the Commission also believes it would be beneficial to facilitate public dialogue on select issues by hosting public meetings. Commission staff will review and consider information gathered at these meetings in addition to the public comments in formulating its final recommendation to the Commission concerning the Green Guides review. As noted above, the first public meeting, to be held on January 8, 2008, will address carbon offsets and renewable energy certificates. The Commission plans to announce additional public meetings addressing other green topics, such as green labeling and advertising developments and consumer perception of green marketing claims. List of Subjects in 16 CFR Part 260 Advertising, Environmental claims, Labeling, Trade practices. Authority: 15 U.S.C. 41-58. By direction of the Commission. Donald S. Clark, Secretary. [FR Doc. E7-23007 Filed 11-26-07; 8:45 am] BILLING CODE 6750-01-P FEDERAL TRADE COMMISSION 16 CFR Part 260 Guides for the Use of Environmental Marketing Claims; Carbon Offsets and Renewable Energy Certificates; Public Workshop AGENCY: Federal Trade Commission. ACTION: Announcement of public workshop; request for public comment. SUMMARY: The Federal Trade Commission (“FTC” or “Commission”) is planning to host a public workshop on January 8, 2008 to examine the emerging market for carbon offsets ( *i.e.* , greenhouse gas emission reduction products) and renewable energy certificates, and related advertising claims. The workshop is a component of the Commission's regulatory review of the Guides for the Use of Environmental Marketing Claims, which is being announced in a separate **Federal Register** notice published concurrently. DATES: The workshop will be held on Tuesday, January 8, 2008, from 9 a.m. to 5 p.m. at the FTC's Satellite Building Conference Center, located at 601 New Jersey Avenue, NW., Washington, DC. Any written comments related to the workshop must be received by January 25, 2008. ADDRESSES: *Registration Information:* The workshop is open to the public, and there is no fee for attendance. The FTC also plans to make this workshop available via a webcast (see *http://www.ftc.gov/bcp/workshops/carbonoffsets/index.shtml* ). For admittance to the Conference Center, all attendees will be required to show a valid photo identification, such as a driver's license. The FTC will accept pre-registration for this workshop. Pre-registration is not necessary to attend, but is encouraged so that we may better plan this event. To pre-register, please e-mail your name and affiliation to *carbonworkshop@ftc.gov* . When you pre-register, we will collect your name, affiliation, and your e-mail address. This information will be used to estimate how many people will attend. We may use your e-mail address to contact you with information about the workshop. Under the Freedom of Information Act (“FOIA”) or other laws, we may be required to disclose to outside organizations the information you provide. For additional information, including routine uses permitted by the Privacy Act, see the Commission's Privacy Policy at *http://www.ftc.gov/ftc/privacy.htm* . The FTC Act and other laws the Commission administers permit the collection of this contact information to consider and use for the above purposes. *Written and Electronic Comments:* The submission of comments is not required for attendance at the workshop. If you wish to submit written or electronic comments about the topics to be discussed at the workshop, such comments must be received by January 25, 2008. Such comments may be submitted before or after the workshop at the discretion of the commenter. Comments should refer to “Carbon Offset Workshop—Comment, Project No. P074207,” to facilitate organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/Office of the Secretary, Room H-135 (Annex O), 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing confidential material must be filed in paper form; must be clearly labeled “Confidential;” and must comply with Commission Rule 4.9(c). 1 The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments filed in electronic form should be submitted by following the instructions on the web-based form at *http://secure.commentworks.com/ftc-carbonworkshop* . To ensure that the Commission considers an electronic comment, you must file it on that web-based form. You may also visit *http://www.regulations.gov* to read this notice, and may file an electronic comment through that Web site. The Commission will consider all comments that *http://www.regulations.gov* forwards to it. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives, whether filed in paper or electronic form. Comments received will be available to the public on the FTC Web site, to the extent practicable, at *http://www.ftc.gov* . As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. To read our policy on how we handle the information you submit—including routine uses permitted by the Privacy Act—please review the FTC's privacy policy, at *http://www.ftc.gov/ftc/privacy.shtm* . 1 The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission's General Counsel, consistent with applicable law and the public interest. *See* Commission Rule 4.9(c), 16 CFR 4.9(c). FOR FURTHER INFORMATION CONTACT: Hampton Newsome, Attorney, 202-326-2889, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission. SUPPLEMENTARY INFORMATION: I. Introduction The FTC staff is planning to conduct a one-day workshop on January 8, 2008 related to the marketing of greenhouse gas reduction credits (commonly referred to as “carbon offsets”) and renewable energy certificates (“RECs”). The workshop will focus on consumer protection issues in these markets, such as consumer perception of carbon offset and REC advertising claims and substantiation for such claims. This workshop is one component of the Commission's regulatory review of the Guides for the Use of Environmental Marketing Claims (16 CFR Part 260), which the FTC is announcing in a separate, concurrent **Federal Register** notice. 2 The FTC is seeking comment on the issues that will be addressed at this workshop. Comments may be submitted before or after the workshop provided they are received by January 25, 2008 as explained in the “WRITTEN AND ELECTRONIC COMMENTS” section of this notice. 2 The Commission reviews all of its rules and guides periodically. These reviews seek information about the costs and benefits of the Commission's existing rules and guides and their regulatory and economic impact. The information obtained during these reviews assists the Commission in identifying rules and guides that warrant modification or rescission. This notice addresses several issues related to the upcoming workshop. It provides background on carbon offsets and RECs. It briefly discusses the existing regulatory framework in this area, including the FTC's consumer protection authority. In addition, the notice discusses consumer protection issues raised by the marketing of offsets and RECs, as well as marketing and advertising claims based on the purchase of these products. The notice concludes with a short description of possible issues for discussion at the workshop and questions for comment. II. Background A. Carbon Offsets and RECs The market for the sale of carbon offsets in the United States has experienced significant growth in the last two years. 3 The FTC's workshop, therefore, will focus primarily on consumer protection issues involving the newly-emerging carbon offset market. Because the REC market is closely associated with the sale of carbon offsets, the workshop also will address REC marketing. 4 This notice briefly describes these products, as well as the current regulatory framework in which these activities take place. 3 *See, e.g.* , Hamilton, Katherine, *et al.* , “State of the Voluntary Carbon Market 2007: Picking Up Steam,” New Carbon Finance and The Ecosystem Marketplace (July 17, 2007) ( *http://ecosystemmarketplace.com/documents/acrobat/StateoftheVoluntaryCarbonMarket-18July_Final.pdf* ). 4 RECs are known also as green certificates, green tags, or tradable renewable certificates. *Carbon Offsets:* In general, carbon offsets are credits or certificates that represent the right to claim responsibility for greenhouse gas emission reductions. For example, a carbon offset provider might use offset proceeds to pay for landfill methane collection activities or tree planting in an effort to reduce greenhouse gasses. In some cases, carbon offset sellers use the proceeds to purchase RECs (discussed below). By acquiring these greenhouse gas reduction credits, purchasers, including individuals and businesses, seek to reduce their “carbon footprints” or to make themselves “carbon neutral.” For example, a consumer who flies across the country is “responsible” for a percentage of the carbon emitted from the fossil fuel burned by the plane. That consumer can purchase a certificate that funds activities that purport to reduce carbon emissions elsewhere, in quantities equal to all, or a portion, of the carbon for which that consumer is “responsible.” Additionally, some businesses purchase offsets to provide a basis for their advertising claims ( *e.g.* , “our coffee is carbon neutral”). *Renewable Energy Certificates (“RECs”):* Generally, retail electricity customers can support renewable energy 5 through one of two methods: by purchasing renewable electricity or by purchasing renewable energy certificates. 6 Under the first approach, consumers purchase renewable energy through traditional electricity contracts with their local utility or power provider, in areas in which such energy is sold. 7 This energy is often more expensive to produce than conventional energy; consequently, consumers usually pay a premium. 8 Some generators who cannot sell all of their renewable energy at a sufficient premium in their “home” market, therefore, may find it advantageous to split their output into two products: The electricity itself and certificates

(RECs)representing the renewable attributes of that electricity. Under this second approach, generators sell their electricity at market prices applicable to conventionally-produced power. Generators then charge for the electricity's renewable attribute separately by selling certificates to individuals and business purchasers across the country who use them to characterize the conventional electricity they buy as renewable. 9 The REC market, therefore, helps renewable energy generators by significantly expanding the number of potential renewable energy purchasers, possibly avoiding transmission costs associated with traditional contracts, and helping to ameliorate supply and demand problems associated with the intermittent operation of some renewable energy facilities ( *e.g.* , solar power facilities). 10 5 Renewable energy, such as wind and solar power, is energy derived from sources that are constantly replenished. *See, e.g.* , *http://www.nrel.gov/learning/re_basics.html* and *http://www.epa.gov/greenpower/whatis/renewableenergy.htm* . 6 Some consumers may also have the option of producing their own electricity. 7 Electricity generated from renewable sources is physically indistinguishable from conventional electricity once it is introduced into the power grid. Therefore, it is impossible for consumers to determine that the electricity that flows into their homes is generated by renewable energy. By purchasing a certain amount of renewable electricity through their utility, consumers simply buy the right to call the electricity they use “renewable” and ensure that an equivalent amount of renewable electricity is supplied to the power grid. 8 While some generators may be able to sell renewable energy at the same price as, or even lower prices than, conventional electricity, they nonetheless may be able to charge premium prices—either through direct sales or the marketing of certificates. 9 The certificate represents a property right in the technological and environmental attributes of renewable energy. The precise nature of the attributes represented by a REC, however, continues to be a matter of discussion. Generally, one REC represents the right to describe one megawatt of electricity as “renewable.” Currently, there is no uniform or mandatory definition of a REC. 10 *See* Holt, Ed and Bird, Lori, “Emerging Markets for Renewable Energy Certificates: Opportunities and Challenges,” National Renewable Energy Laboratory (Jan. 2005) at 8-9. B. Regulatory Framework Offset and REC sales can generally occur in two types of markets:

(1)Markets that facilitate compliance with regulatory targets (so called “mandatory” or “compliance” markets), and

(2)markets unrelated to existing regulatory programs (so called “voluntary” markets). RECs currently play a role in mandatory markets. For example, some states require certain electricity providers to purchase a minimum percentage of their electricity from renewable sources. Purchasing renewable energy directly, however, is not always practical. Thus, some states allow providers to meet their quotas, usually called “renewable portfolio standards,” through the purchase of RECs. Although there are no current mandatory markets for carbon offsets in the United States, there are ongoing efforts at the state level to develop greenhouse gas reduction programs that may impact carbon offset sales in the future. 11 Because the sale of RECs to meet regulatory targets already involves ongoing state oversight, and there are no current, mandatory markets for carbon offsets, the workshop will concentrate on marketing in the voluntary market. 11 * See, e.g.* , Regional Greenhouse Gas Initiative, *http://www.rggi.org/* . Where offsets and RECs are not generated to meet regulatory targets, they are bought and sold in a voluntary market to meet demand. In this voluntary market, no federal agency currently has a comprehensive environmental regulatory program. 12 In the absence of national regulation, voluntary third-party certification programs have arisen, and more are under development, to help reduce inappropriate practices and to provide guidance to marketers through the development of industry standards. 12 The Environmental Protection Agency has established the Green Power Partnership, a voluntary program to encourage organizations in the United States to purchase renewable power through RECs and other renewable energy products ( *http://www.epa.gov/grnpower/* ). The FTC, however, has an important role to play in combating unfair and deceptive practices in this market. In carrying out this mission, the Commission enforces the FTC Act, which states that unfair or deceptive trade practices are unlawful. 13 In interpreting the FTC Act, the Commission has determined that a representation, omission, or practice is deceptive if it is likely to mislead consumers acting reasonably in the circumstances and is material. 14 13 15 U.S.C. 45. An act or practice is unfair if the injury it causes, or is likely to cause, is substantial, not outweighed by other benefits, and not reasonably avoidable. *See* Section 5(n) of the FTC Act, 15 U.S.C. 5(n); *see also* FTC Policy Statement on Unfairness, appended to *International Harvester Co.* , 104 F.T.C. 949, 1070

(1984)( *http://www.ftc.gov/bcp/policystmt/ad-unfair.htm* ). 14 *See* FTC Policy Statement on Deception, appended to *Cliffdale Associates, Inc.* , 103 F.T.C. 110, 174

(1984)( *http://www.ftc.gov/bcp/policystmt/ ad-decept.htm* ). Under the FTC Act, all marketers making express or implied claims about the attributes of their product or service must have a reasonable basis for their claims at the time they make them. In the realm of environmental advertising, a reasonable basis often requires competent and reliable scientific evidence. Such evidence includes tests, research, studies, or other evidence, based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results. In exercising its authority under the FTC Act or other statutes, the FTC has developed a variety of rules and guides related to energy and environmental marketing practices. 15 One of these, the Guides for the Use of Environmental Marketing Claims (“Green Guides”), addresses the application of Section 5 of the FTC Act to environmental advertising and marketing practices. 16 The Green Guides provide information on consumer interpretation of certain environmental marketing claims so that marketers can avoid making false or misleading claims. The Guides focus on the way in which consumers understand environmental claims and not necessarily the technical or scientific definition of various terms. 15 *See* Guide Concerning Fuel Economy Advertising for New Automobiles (16 CFR part 259), Guides for the Use of Environmental Marketing Claims (16 CFR part 260), Appliance Labeling Rule (16 CFR part 305), Fuel Rating Rule (16 CFR part 306), Alternative Fuel Vehicles Rule (16 CFR part 309), Recycled Oil Rule (16 CFR part 311), and Labeling and Advertising of Home Insulation Rule (the “R-Value” Rule) (16 CFR part 460). 16 FTC guides “are administrative interpretations of laws administered by the Commission for the guidance of the public in conducting its affairs in conformity with legal requirements.” 16 CFR part 17. Conduct that is inconsistent with the guides may result in corrective action by the Commission, if after investigation, the Commission has reason to believe that the conduct is unfair or deceptive to consumers. While the FTC has often addressed consumer protection issues related to energy and environmental issues, the FTC does not have the authority or expertise to establish environmental performance standards. Accordingly, we do not plan to develop environmental standards for carbon offsets and RECs. Instead, the FTC's efforts in this area will focus on our traditional consumer protection role, addressing deceptive and unfair practices under the FTC Act. C. Consumer Protection Issues Carbon offset and REC marketing activities raise several consumer protection issues. These issues stem both from claims for offset and REC products themselves and from claims for other products based on offset and REC purchases ( *e.g.* , “our snacks are made with green electricity”). As discussed in more detail below, the nature of these products, consumer understanding of claims, and substantiation of claims all raise consumer protection challenges for offset and REC marketers. The nature of offset and REC claims raises particular challenges because consumers cannot easily verify that they are receiving that for which they paid. For example, most consumers would have great difficulty confirming that their payments actually fund projects that may take place in a distant location. Moreover, even if a consumer could verify a project's existence, it likely would be impossible for the average consumer to determine whether the scientifically complex project actually reduces atmospheric carbon in the amount claimed, or how much the consumer's offset purchase actually contributes to the project. 17 As a result, the potential for deception is greater than with more tangible products for which consumers more easily can confirm most advertising claims. 17 Similarly, it is difficult for consumers to determine for themselves whether the RECs they purchase actually represent the environmental attributes of renewable energy generation. In addition, consumer interpretation of offset and REC-related claims is an essential factor in addressing consumer protection questions in these markets. We are not aware of any research that addresses consumer understanding of advertising claims related to carbon offsets and RECs. As a result, there appear to be many open questions. For example, when consumers buy these products, do they know what they are buying? How do consumers interpret express or implied claims about environmental benefits from offsets and RECs? Do consumers assume that their offset purchases are creating reductions in greenhouse gas emissions beyond what would have otherwise occurred without offset sales? How quickly do they believe reductions occur? Should marketers consider consumer understanding about the incidental benefits of renewable energy, such as air pollutant reductions or regional environmental improvements? Do consumers interpret REC and offset claims to include implied claims of broader (or narrower) environmental benefit? Questions of consumer interpretation are important because marketers must ensure that all reasonable interpretations of their claims are truthful, not misleading, and substantiated. Substantiation in particular can pose challenges in the REC and offset markets. For example, bringing RECs and offsets to market may involve multiple transactions and a large number of entities; consequently, the methods used to track RECs and offsets through the market are often complicated. In addition, efforts to verify the validity of these products can be difficult because the underlying activities may take place in remote locations or over an extended time period. Inadequate tracking and verification systems could lead to substantiation problems, even for marketers acting in good faith, and create opportunities for bad actors to deceive consumers. For example, marketers could inadvertently, or intentionally, sell multiple certificates based on the same carbon reduction or renewable energy activities ( *i.e.* , “double counting”). One carbon offset issue, commonly referred to as “additionality,” has generated significant discussion. 18 “Additionality” addresses whether carbon offset consumers are paying for a project that would have occurred without the offset market. In the view of many involved with this market, 19 offset sellers have a duty to demonstrate that their underlying greenhouse gas reduction projects would not have occurred but for the sale of the offset; otherwise, they argue, sellers are not really reducing greenhouse gas emissions. Under this view, for example, it would not be appropriate to sell offsets based on a project ( *e.g.* , capturing methane from a landfill) implemented to comply with existing environmental regulations because any greenhouse gas reductions would have occurred without the sale of the offsets. The practical application of the “additionality” concept to specific fact scenarios has raised a large number of questions and produced a variety of opinions among industry members and other stakeholders. 18 “Additionality” is a term generally associated with mandatory carbon reduction programs implemented pursuant to the Kyoto Protocol, an international agreement under the United Nations Framework Convention on Climate Change ( *http://unfccc.int/resource/docs/convkp/kpeng.pdf* ). While no such mandatory program exists in the United States, many offset marketers and other interested parties here have looked to the Kyoto framework in developing practices in the voluntary offset market in the United States. 19 *See, e.g.* , “A Consumers' ” Guide to Retail Carbon Offset Providers,” Clean Air-Cool Planet

(2006)( *http://www.cleanair-coolplanet.org/ConsumersGuidetoCarbonOffsets.pdf* ); Kollmus, A., “Voluntary Offsets For Air-Travel Carbon Emissions: Evaluations and Recommendations of Thirteen Offset Companies,” Tufts Climate Initiative (Dec. 2006) ( *http://www.tufts.edu/tie/tci/pdf/TCI_Carbon_Offsets_Paper_April-2-07.pdf* ); and “The Green-e Greenhouse Gas Emission Reduction Product Certification Program Standard,” Center for Resource Solutions (June 2007) ( *http://resource-solutions.org/mv/docs/Ge_GHG_Product_Standard_V1.pdf* ). III. Issues and Questions for Discussion at the Workshop As discussed above, the Commission's public workshop will explore advertising claims for carbon offsets and RECs, as well as advertising claims based on the purchase of those products. We have identified several possible issues for discussion at the workshop:

(1)Trends in marketing carbon offsets and RECs,

(2)the nature of the commodities in question ( *i.e.* , the property rights transferred from seller to buyer through the sale of offsets and RECs),

(3)product marketing based on offset or REC purchases,

(4)consumer perception of carbon offset and REC claims,

(5)potential market problems such as double-counting and other forms of fraud,

(6)third-party certification and other standard-setting programs,

(7)the issue of “additionality” for carbon offsets and its relationship to potential consumer deception,

(8)the use of RECs as a basis for carbon offset claims,

(9)the state of substantiation for offsets and REC claims, and

(10)the need for additional FTC guidance in these areas. In addition to considering these possible topics, the Commission invites written comments on any or all of the following questions regarding the consumer protection aspects of the carbon offset and REC market. The Commission requests that responses to these questions be as specific as possible, including a reference to the question being answered, and reference to empirical data or other evidence wherever available and appropriate.

(1)What express claims are sellers making for carbon offsets and RECs? What claims, if any, are implied by that advertising? How do consumers interpret these claims? Please provide any supporting evidence. What evidence constitutes a reasonable basis to support these claims? What challenges do offset and REC sellers face in substantiating their claims? Is there evidence that any claims in the current marketplace are unsubstantiated or otherwise deceptive?

(2)What express claims are companies making for their products and services based on their purchase of carbon offsets or RECs ( *e.g.* , “our product is made with renewable energy”)? What claims, if any, are implied by that advertising? How do consumers interpret these claims? Please provide any supporting evidence. What evidence constitutes a reasonable basis to support these claims? Is there evidence that any claims in the current marketplace are unsubstantiated or otherwise deceptive?

(3)When consumers purchase carbon offsets or RECs, what property rights do they acquire?

(4)When consumers purchase carbon offsets or RECs, what do they think they are buying? Please provide any supporting evidence.

(5)What impact do consumers believe their carbon offset purchases will have on the future quantities of greenhouse gasses in the atmosphere? Please provide any supporting evidence.

(6)Do consumers understand that some activities supported by carbon offset programs do not result in immediate carbon emission reductions? If so, when do consumers expect such offset programs will have an impact? Please provide any supporting evidence.

(7)What is the relationship between the concept of “additionality” in carbon offset markets and the FTC's standard for deception under the FTC Act?

(8)Please identify state laws that specifically address consumer protection issues in the carbon offset and REC markets. Please explain how the laws address these issues and whether they are effective.

(9)Please identify third-party and self-regulatory programs that address consumer protection issues in the carbon offset and REC markets. Please explain how the programs address these issues and whether they are effective. By direction of the Commission. Donald S. Clark, Secretary. [FR Doc. E7-23006 Filed 11-26-07; 8:45 am] BILLING CODE 6750-01-P COMMODITY FUTURES TRADING COMMISSION 17 CFR Part 150 RIN 3038-AC40 Risk Management Exemption From Federal Speculative Position Limits AGENCY: Commodity Futures Trading Commission. ACTION: Notice of proposed rulemaking. SUMMARY: Section 150.2 of the Commodity Futures Trading Commission's (“Commission”) regulations imposes limits on the size of speculative positions that traders may hold or control in futures and futures equivalent option contracts on certain designated agricultural commodities named therein. Section 150.3 lists certain types of positions that may be exempted from these Federal speculative position limits. The Commission is proposing to provide an additional exemption for “risk management positions.” A risk management position would be defined as a futures or futures equivalent position, held as part of a broadly diversified portfolio of long-only or short-only futures or futures equivalent positions, that is based upon either: A fiduciary obligation to match or track the results of a broadly diversified index that includes the same commodity markets in fundamentally the same proportions as the futures or futures equivalent position; or a portfolio diversification plan that has, among other substantial asset classes, an exposure to a broadly diversified index that includes the same commodity markets in fundamentally the same proportions as the futures or futures equivalent position. The exemption would be subject to conditions, including that the positions must be passively managed, must be unleveraged, and may not be carried into the spot month. DATES: Comments must be received on or before January 28, 2008. ADDRESSES: Comments should be submitted to David Stawick, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. Comments also may be sent by facsimile to

(202)418-5521, or by electronic mail to *secretary@cftc.gov* . Reference should be made to “Proposed Risk Management Exemption from Federal Speculative Position Limits.” Comments may also be submitted by connecting to the Federal eRulemaking Portal at *http://www.regulations.gov* and following comment submission instructions. FOR FURTHER INFORMATION CONTACT: Donald Heitman, Senior Special Counsel, Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581, telephone

(202)418-5041, facsimile number

(202)418-5507, electronic mail *dheitman@cftc.gov* ; or John Fenton, Director of Surveillance, Division of Market Oversight, telephone

(202)418-5298, facsimile number

(202)418-5507, electronic mail *jfenton@cftc.gov* . SUPPLEMENTARY INFORMATION: I. Background A. Statutory Framework Speculative position limits have been a tool for the regulation of the U.S. futures markets since the adoption of the Commodity Exchange Act of 1936. Section 4a(a) of the Commodity Exchange Act (“Act”), 7 U.S.C. 6a(a), states that: Excessive speculation in any commodity under contracts of sale of such commodity for future delivery made on or subject to the rules of contract markets or derivatives transaction execution facilities causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity. Accordingly, section 4a(a) of the Act provides the Commission with the authority to: Fix such limits on the amounts of trading which may be done or positions which may be held by any person under contracts of sale of such commodity for future delivery on or subject to the rules of any contract market or derivatives transaction execution facility as the Commission finds are necessary to diminish, eliminate, or prevent such burden. This longstanding statutory framework providing for Federal speculative position limits was supplemented with the passage of the Futures Trading Act of 1982, which acknowledged the role of exchanges in setting their own speculative position limits. The 1982 legislation also provided, under section 4a(e) of the Act, that limits set by exchanges and approved by the Commission were subject to Commission enforcement. Finally, the Commodity Futures Modernization Act of 2000 (“CFMA”) established designation criteria and core principles with which a designated contract market (“DCM”) must comply to receive and maintain designation. Among these, Core Principle 5 in section 5(d) of the Act states: Position Limitations or Accountability—To reduce the potential threat of market manipulation or congestion, especially during trading in the delivery month, the board of trade shall adopt position limitations or position accountability for speculators, where necessary and appropriate. B. Regulatory Framework The regulatory structure based upon these statutory provisions consists of three elements, the levels of the speculative position limits, certain exemptions from the limits (for hedging, spreading/arbitrage, and other positions), and the policy on aggregating commonly owned or controlled accounts for purposes of applying the limits. This regulatory structure is administered under a two-pronged framework. Under the first prong, the Commission establishes and enforces speculative position limits for futures contracts on a limited group of agricultural commodities. These Federal limits are enumerated in Commission regulation 150.2, and apply to the following futures and option markets: Chicago Board of Trade (“CBOT”) corn, oats, soybeans, wheat, soybean oil, and soybean meal; Minneapolis Grain Exchange (“MGE”) hard red spring wheat and white wheat; ICE Futures U.S. (formerly the New York Board of Trade) cotton No. 2; and Kansas City Board of Trade (“KCBOT”) hard winter wheat. Under the second prong, individual DCMs establish and enforce their own speculative position limits or position accountability provisions (including exemption and aggregation rules), subject to Commission oversight and separate authority to enforce exchange-set speculative position limits approved by the Commission. Thus, responsibility for enforcement of speculative position limits is shared by the Commission and the DCMs. 1 1 Provisions regarding the establishment of exchange-set speculative position limits were originally set forth in CFTC regulation 1.61. In 1999, the Commission simplified and reorganized its rules by relocating the substance of regulation 1.61's requirements to part 150 of the Commission's rules, thereby incorporating within part 150 provisions for both Federal speculative position limits and exchange-set speculative position limits (see 64 FR 24038, May 5, 1999). With the passage of the Commodity Futures Modernization Act in 2000 and the Commission's subsequent adoption of the Part 38 regulations covering DCMs in 2001 (66 FR 42256, August 10, 2001), Part 150's approach to exchange-set speculative position limits was incorporated as an acceptable practice under DCM Core Principle 5—Position Limitations and Accountability. Section 4a(e) provides that a violation of a speculative position limit set by a Commission-approved exchange rule is also a violation of the Act. Thus, the Commission can enforce directly violations of exchange-set speculative position limits as well as those provided under Commission rules. Commission regulation 150.3, “Exemptions,” lists certain types of positions that may be exempted from (and thus may exceed) the Federal speculative position limits. For example, under § 150.3(a)(1), *bona fide* hedging transactions, as defined in § 1.3(z) of the Commission's regulations, may exceed the limits. The Commission has periodically amended the exemptive rules applicable to Federal speculative position limits in response to changing conditions and practices in futures markets. These amendments have included an exemption from speculative position limits for the positions of multi-advisor commodity pools and other similar entities that use independent account controllers, 2 and an amendment to extend the exemption for positions that have a common owner but are independently controlled to include certain commodity trading advisors. 3 In 1987, the Commission also issued an agency interpretation clarifying certain aspects of the hedging definition. 4 The Commission has also issued guidance with respect to exchange speculative limits, including guidelines regarding the exemption of risk-management positions from exchange-set speculative position limits in financial futures contracts. 5 However, the last significant amendment to the Commission's exemptive rules was implemented in 1991. 2 53 FR 41563 (October 24, 1988). 3 56 FR 14308 (April 9, 1991). 4 52 FR 27195 (July 20, 1987). 5 52 FR 34633 (September 14, 1987). C. Changes in Trading Practices The intervening 16 years have seen significant changes in trading patterns and practices in derivatives markets, thus prompting the Commission to reassess its policies regarding exemptions from the Federal speculative position limits. These changes primarily involve trading strategies and programs based on commodity indexes. In particular, pension funds and other investors (including individual investors participating in commodity index-based funds or trading programs) have become interested in taking on commodity price exposure as a way of diversifying portfolios that might otherwise be limited to stocks and interest rate instruments. Financial research has shown that the risk/return performance of a portfolio is improved by acquiring uncorrelated or negatively correlated assets, and commodities (including agricultural commodities) generally perform that role in a portfolio of other financial assets. 6 6 The argument has also been made that commodities act as a general hedge of liability obligations that are linked to inflation. The components of a commodity index-based investment might include energy commodities, metals (both precious metals and industrial metals), agricultural commodities that are subject to exchange limits (including coffee, sugar, cocoa, and orange juice, as well as livestock and meat), and those agricultural commodities named above that are subject to Federal speculative position limits (grains, the soybean complex and cotton). With respect to agricultural commodities subject to Federal limits, the Commission has responded to various instances where index-based positions in such commodities exceed (or might grow to exceed) the Federal speculative position limits. In certain cases, the Commission has granted exemptive or no-action relief from Federal speculative position limits. In granting such relief, the Commission has included conditions to protect the market from the potential for the sudden or unreasonable fluctuations or unwarranted changes in prices that speculative limits are designed to prevent. For example, in 1991, the Commission received a request from a large commodity merchandising firm that engaged in commodity related swaps 7 as a part of a commercial line of business. The firm, through an affiliate, wished to enter into an OTC swap transaction with a qualified counterparty (a large pension fund) involving an index based on the returns afforded by investments in exchange-traded futures contracts on certain non-financial commodities meeting specified criteria. The commodities making up the index included wheat, corn and soybeans, all of which were (and still are) subject to Federal speculative position limits. As a result of the swap, the swap dealing firm would, in effect, be going short the index. In other words, it would be required to make payments to the pension fund counterparty if the value of the index was higher at the end of the swap payment period than at the beginning. In order to hedge itself against this risk, the swap dealer planned to establish a portfolio of long futures positions in the commodities making up the index, in such amounts as would replicate its exposure under the swap transaction. By design, the index did not include contract months that had entered the delivery period and the swap dealer, in replicating the index, stated that it would not maintain futures positions based on index-related swap activity into the spot month (when physical commodity markets are most vulnerable to manipulation and attendant unreasonable price fluctuations). The result of the hedge was that the composite return on the futures portfolio would offset the net payments the swap dealer would be required to make to the pension fund counterparty. 7 A swap is a privately negotiated exchange of one asset or cash flow for another asset or cash flow. In a commodity swap, at least one of the assets or cash flows is related to the price of one or more commodities. Because the futures positions the swap dealer would have to establish to hedge its exposure on the swap transaction would be in excess of the speculative position limits on wheat, corn and soybeans, it requested, and was granted, a hedge exemption for those positions. The swap transaction allowed the pension fund to add commodities exposure to its portfolio indirectly, through the OTC trade with the swap dealer—something it could have done directly, but only in a limited fashion. 8 8 The pension fund would have been limited in its ability to take on this commodities exposure directly, by putting on the long futures position itself, because the pension fund—having no offsetting price risk incidental to commercial cash or spot operations—would not have qualified for a hedge exemption with respect to the position. ( *See* § 1.3(z) of the Commission's regulations.) Similar hedge exemptions were subsequently granted in other cases where the futures positions clearly offset risks related to swaps or similar OTC positions involving both individual commodities and commodity indexes. These non-traditional hedges were all subject to specific limitations to protect the marketplace from potential ill effects. The limitations included:

(1)The futures positions must offset specific price risk;

(2)the dollar value of the futures positions would be no greater than the dollar value of the underlying risk; and

(3)the futures positions would not be carried into the spot month. The Commission's Division of Market Oversight (“Division” or “DMO”) has also recently issued two no-action letters involving another type of index-based trading. 9 Both cases involved trading that offered investors the opportunity to participate in a broadly diversified commodity index-based fund or program (“index fund”). The futures positions of these index funds differed from the futures positions taken by the swap dealers described above. The swap dealer positions were taken to offset OTC swaps exposure that was directly linked to the price of an index. For that reason, the Division granted hedge exemptions to these swap dealer positions. On the other hand, in the index fund positions described in the no-action letters, the price exposure results from a promise or obligation to track an index, rather than from holding an OTC swap position whose value is directly linked to the price of the index. The Division believed that this difference was significant enough that the index fund positions would not qualify for a hedge exemption. Nevertheless, because the index fund positions represented a legitimate and potentially useful investment strategy, the Division granted the index funds no-action relief, subject to certain conditions, described below, that were intended to protect the futures markets from potential ill effects. 9 CFTC Letter 06-09 (April 19, 2006); CFTC Letter 06-19 (September 6, 2006). II. Proposed Amendment A. Introduction In light of the changing trading practices and conditions described above, the Commission is now considering whether to amend its Part 150 regulations to create a new exemption from Federal speculative position limits. In addition to the above-described policy of granting index-based hedge exemptions to swap dealers, which policy would remain in effect, the proposal would create an additional risk management exemption. That exemption would apply to positions held by:

(1)Intermediaries, such as index funds, who pass price risks on to their customers; and

(2)pension funds and other institutional investors seeking to diversify risks in portfolios by including an allocation to commodity exposure. As noted above, pension funds can already benefit from a hedge exemption indirectly, by entering into an OTC position with a swap dealer who, in turn, puts on an offsetting futures position in reliance on the existing hedge exemption policy. The proposed rules would allow a pension fund to receive an exemption directly, by putting on a futures position itself pursuant to the new risk management exemption provision. In determining whether the new risk management exemption proposed herein is appropriate, it is important to recall that the purpose of position limits, as specified in Section 4a(a) of the Act, is to diminish, eliminate, or prevent sudden or unreasonable fluctuations or unwarranted changes in the prices of commodities. Within this constraint, it is appropriate that the Commission (and the exchanges) not unduly restrict trading activity. A position limit is a means to an end, not an end in itself. Accordingly, to the extent that a type of trading activity can be identified that is unlikely to cause sudden or unreasonable fluctuations or unwarranted changes in prices, it is a good candidate to qualify for an exemption from position limits. Commodity index-based trading has characteristics that recommend it on that score:

(1)It is generally passively managed, so that positions tend not to be changed based on market news or short-term price volatility;

(2)it is generally unleveraged, so that financial considerations should not cause rapid liquidation of positions; and

(3)it is inherently diversified, in that futures positions are normally held in many different markets, and its purpose typically is to diversify a portfolio containing assets with different risk profiles. B. Conditions for the Exemption To be eligible for an exemption as a “risk management position” under the proposed amendments to Part 150, a futures position would need to comply with several conditions designed to protect the futures markets from sudden or unreasonable fluctuations or unwarranted changes in prices. First, § 150.3(a) would be amended to add a requirement that all positions subject to the exemptive provisions must be “established and liquidated in an orderly manner.” This requirement already applies to the positions referred to in § 150.3(a)(1), which exempts *bona fide* hedging transactions, by virtue of similar language appearing in the *bona fide* hedging definition ( *see* § 1.3(z)(1)). However, the proposed amendment would clarify that the same requirement would apply not only to the risk management positions to be exempted under proposed new § 150.3(a)(2), but also to the spread or arbitrage positions already exempted under current § 150.3(a)(3) and the positions carried in the separate account of an independent account controller already exempted under current § 150.3(a)(4). Second, the proposed rules would define a “risk management position” as a futures or futures equivalent position, held as part of a broadly diversified portfolio of long-only or short-only 10 futures or futures equivalent 11 positions, that is based upon either:

(1)A fiduciary obligation to match or track the results of a broadly diversified index that includes the same commodity markets in fundamentally the same proportions as the futures or futures equivalent position; or

(2)a portfolio diversification plan that has, among other substantial asset classes, an exposure to a broadly diversified index that includes the same commodity markets in fundamentally the same proportions as the futures or futures equivalent position. The first of these alternatives covers positions held by index funds, such as those that were the subject of the Commission No-action letters discussed above. The second alternative covers positions held directly by pension funds and other institutional investors. 10 The long-only or short-only qualification would limit risk management positions to positions offsetting either a long index or portfolio or a short index or portfolio, and thus would not allow for spread or straddle positions. With respect to short-only positions, it should be noted that all the applications for index-based trading relief received by the Commission to date, whether for hedge exemptions or no-action relief, have involved long-only futures positions. However, the proposed rules would also provide for an entity that might offer investors a “bear market index.” Such an index would require the offeror to be long opposite its customers. It would, therefore, need to offset that exposure with short futures positions. 11 For example, a long call option combined with a short put option is equivalent to a long futures contract. A “broadly diversified index” would be defined to limit the weighting of certain agricultural commodities in the index so that commodities subject to Federal speculative position limits would not comprise a disproportionate share of the index. Thus, a “broadly diversified index” would mean an index based on physical commodities in which:

(1)not more than 15% of the index is composed of any single agricultural commodity named in § 150.2 (for which purposes, wheat shall be regarded as a single commodity, so that positions in all varieties of wheat, on all exchanges, combined, may not exceed 15% of the index, and the soybean complex shall likewise be regarded as a single commodity, so that positions in soybeans, soybean oil and soybean meal, on all exchanges combined, may not exceed 15% of the index); and

(2)not more than 50% of the index as a whole is composed of agricultural commodities named in § 150.2. The Commission believes that a narrowly based index could be used to evade speculative position limits. For example, the grains all tend to have similar risk profiles— *i.e,* they tend to respond similarly to common market factors, such as weather. Therefore, the Commission is concerned that an index composed, for example, of 25% each of corn, wheat, oats and soybeans—rather than constituting a means of portfolio diversification—could operate as a mechanism for evading speculative position limits in one or more of those commodities. Third, the positions subject to the exemption must be passively managed. The proposed rules would define a “passively managed position” as a futures or futures equivalent position that is part of a portfolio that tracks a broadly diversified index, which index is calculated, adjusted, and re-weighted pursuant to an objective, predetermined mathematical formula the application of which allows only limited discretion with respect to trading decisions. This definition contemplates a certain limited amount of discretion in the manner in which the futures position tracks the underlying index. For example, index funds generally provide rules or standards for periodically re-weighting the index to account for price changes in the commodities that make up the index, or readjusting the composition of the index to account for changing economic or market factors. Such discretion would be permissible. However, the definition contemplates that the position holder's discretion would not extend to frequently or arbitrarily changing the composition of the index or the weighting of the commodities in the index. Such actions would indicate that the position was being actively managed with a view to taking advantage of short-term market trends. The definition also contemplates that the position holder could exercise some discretion as to when to roll futures positions forward into the next delivery month without violating the “passively managed” requirement (provided no positions were carried into the spot month). The Commission believes that limited discretion as to when a position must be rolled forward can mitigate the market impact that might otherwise result from large positions being rolled forward on a pre-determined date and, consequently, help to avoid liquidity problems. Fourth, the futures trading undertaken pursuant to the exemption must be unleveraged. An unleveraged position would be defined as a futures or futures equivalent position that is part of a portfolio of futures or futures equivalent positions directly relating to an underlying broadly diversified index, the notional value of which positions does not exceed the sum of the value of:

(1)Cash set aside in an identifiable manner, or unencumbered short-term U.S. Treasury obligations so set aside, plus any funds deposited as margin on such position; and

(2)accrued profits on such position held at the futures commission merchant. Because the futures positions would be fully offset by cash or profits on such positions, financial considerations (e.g., significant price changes) should not cause rapid liquidation of positions, which can cause sudden or unreasonable fluctuations or unwarranted changes in prices. Finally, positions may not be carried into the spot month, a period during which physical commodity markets are particularly vulnerable to manipulations, squeezes and sudden or unreasonable fluctuations or unwarranted changes in prices. Entities intending to hold risk management positions pursuant to the exemption in § 150.3(a)(2) would be required to apply to the Commission and receive Commission approval in order to receive an exemption. The applicant would be required to provide the following information: Application for a Risk Management Exemption as Defined in § 150.1(j) 1. Initial application materials: A. For an exemption related to a “fiduciary obligation”. • A description of the underlying index or group of commodities, including the commodities, the weightings, the method and timing of re-weightings, the selection of futures months, and the timing and criteria for rolling from one futures month to another; • A description of the “fiduciary obligation;” • The actual or anticipated value of the underlying funds to be invested in commodities within the next fiscal or calendar year and the method for calculating that value, as well as the equivalent numbers of futures contracts in each of the § 150.2 markets for which the exemption is sought; • A description of the manner in which the funds to be invested in commodities will be set aside; • A statement certifying that the requirements of this exemption are met and will be observed at all times going forward and that the Commission will be notified promptly of any material changes in this information; and • Such other information as the Commission may request. B. For an exemption based upon a “portfolio diversification plan”. • A description of the investment index or group of commodities, including the commodities, the weightings, the method and timing of re-weightings, the selection of futures months, and the timing and criteria for rolling from one futures month to another; • A description of the entire portfolio, including the total size of the assets, the asset classes making up the portfolio, and a description of the allocation among the asset classes; • The actual or anticipated value of the underlying funds to be invested in commodities and the method for calculating that value, as well as the equivalent numbers of futures contracts in each of the § 150.2 markets for which the exemption is sought; • A description of the manner in which the funds to be invested in commodities will be set aside; • A statement certifying that the requirements of this exemption are met and will be observed at all times going forward and that the Commission will be notified promptly of any material changes in this information; and • Such other information as the Commission may request. 2. Supplemental Material: Whenever the purchases or sales that a person wishes to qualify under this risk management exemption shall exceed the amount provided in the person's most recent filing pursuant to this section, or the amount previously specified by the Commission pursuant to this section, such person shall file with the Commission a statement that updates the information provided in the person's most recent filing and provides the reasons for this change. Such statement shall be filed at least ten business days in advance of the date that such person wishes to exceed those amounts and if the notice filer is not notified otherwise by the Commission within the 10-day period, the exemption will continue to be effective. The Commission may, upon call, obtain such additional materials from the applicant or person availing themselves of this exemption as the Commission deems necessary to exercise due diligence with respect to granting and monitoring this exemption. Entities holding risk management positions pursuant to the exemption in § 150.3(a)(2) would also be required to immediately report to the Commission in the event they know, or have reason to know, 12 that any person holds a greater than 25% interest in such position. The reason for this requirement is to alert the Commission to the possibility that an individual might be attempting to use the exemption as a means of avoiding otherwise applicable speculative position limits. 12 The Commission understands that not every entity that might qualify for this exemption would necessarily know the identities of all of the participants in the position. For example, a fund based on a commodity index may qualify for the exemption but the entity operating the fund may not know the identities of the owners of outstanding shares and, therefore, may not know when any given person had acquired a 25% or more interest in the position held by the fund. C. Questions The Commission would welcome public comments on any aspect of the proposed risk management exemption from Federal speculative position limits. However, the Commission is particularly interested in the views of commenters on the following specific questions:

(1)Are any of the proposed conditions for receiving a risk management exemption unnecessary and, if so, why? Alternatively, should any of the proposed conditions be modified and, if so, why?

(2)Should any other conditions, in addition to those set out in these proposed rules, be imposed as a prerequisite for receiving a risk management exemption? If so, what is the rationale for such additional conditions ( *i.e.* , what potential harm would they address)?

(3)Is there any type of index-based trading that should be covered by the proposed rules, but is not? If so, how should the proposed rules be revised to apply to such trading?

(4)The proposed rules would allow for a risk management exemption in the case of short-only futures or futures equivalent positions used to manage risks in connection with a “bear market index.” Would any of the exemptive rules, as proposed, create potential problems as applied to such an index? For example, in applying the definition of “unleveraged position,” would problems be encountered in comparing the notional value of an unleveraged short futures position to the value of the cash, margins and accrued profits on such position?

(5)Should the proposed rules impose any restrictions or conditions regarding how broad- or narrow-based an index should be if a position based on the index is to qualify for an exemption? For example, with respect to narrow-based indices reflecting specific industry or commodity sectors, should the Commission be concerned that a narrow-based index composed entirely of agricultural commodities—for example, 25% each of corn, wheat, oats and soybeans—could operate as a mechanism for evading speculative position limits in one or more of those commodities?

(6)The proposed rules list the information that must be provided in an application for a risk management exemption. Are the requirements set out in the proposed rules appropriate? Should the requirements be revised and, if so, how? III. Related Matters A. Cost Benefit Analysis Section 15(a) of the Act requires the Commission to consider the costs and benefits of its action before issuing a new regulation under the Act. By its terms, section 15(a) does not require the Commission to quantify the costs and benefits of a new regulation or to determine whether the benefits of the proposed regulation outweigh its costs. Rather, section 15(a) requires the Commission to “consider the costs and benefits” of the subject rule. Section 15(a) further specifies that the costs and benefits of the proposed rule shall be evaluated in light of five broad areas of market and public concern:

(1)Protection of market participants and the public;

(2)efficiency, competitiveness, and financial integrity of futures markets;

(3)price discovery;

(4)sound risk management practices; and

(5)other public interest considerations. The Commission may, in its discretion, give greater weight to any one of the five enumerated areas of concern and may, in its discretion, determine that, notwithstanding its costs, a particular rule is necessary or appropriate to protect the public interest or to effectuate any of the provisions or to accomplish any of the purposes of the Act. The proposed rules would provide for a risk management exemption from the Federal speculative position limits applicable to certain agricultural commodities, thus giving entities such as index funds and pension funds an opportunity to more effectively manage risks for their investors through greater diversification of their portfolios. The rules would seek to protect the futures markets from potential ill effects of such risk management positions by imposing conditions on the exemption and creating an application process (including a requirement to file updates as necessary) to assure those conditions are met. The Commission, in proposing these rules, has endeavored to impose the minimum requirements necessary consistent with its mandate to protect the markets and the public from ill effects. The Commission specifically invites public comment on its application of the cost benefits criteria of the Act. Commenters are also invited to submit any quantifiable data that they may have concerning the costs and benefits of the proposed rules with their comment letter. B. Regulatory Flexibility Act The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601 *et seq.* , requires Federal agencies, in proposing rules, to consider the impact of those rules on small businesses. The Commission believes that the proposed rule amendments to implement a new exemption from Federal speculative position limits would only affect large traders. The Commission has previously determined that large traders are not small entities for the purposes of the RFA. 13 Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the action taken herein will not have a significant economic impact on a substantial number of small entities. 13 47 FR 18618 (April 30, 1982). C. Paperwork Reduction Act When publishing proposed rules, the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) imposes certain requirements on Federal agencies (including the Commission) in connection with their conducting or sponsoring any collection of information as defined by the Paperwork Reduction Act. In compliance with the Act, the Commission, through this rule proposal, solicits comment to:

(1)Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including the validity of the methodology and assumptions used;

(2)evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information including the validity of the methodology and assumptions used;

(3)enhance the quality, utility and clarity of the information to be collected; and

(4)minimize the burden of the collection of the information on those who are to respond through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. The Commission has submitted the proposed rule and its associated information collection requirements to the Office of Management and Budget (“OMB”) for its review. *Collection of Information:* Rules Establishing Risk Management Exemption From Federal Speculative Position Limits, OMB Control Number. The estimated burden was calculated as follows: *Estimated number of respondents:* 6. *Annual responses by each respondent:* 1. *Total annual responses:* 6. *Estimated average hours per response:* 10. *Annual reporting burden:* 60 hours. List of Subjects in 17 CFR Part 150 Agricultural commodities, Bona fide hedge positions, Position limits, Spread exemptions. In consideration of the foregoing, pursuant to the authority contained in the Commodity Exchange Act, the Commission hereby proposes to amend part 150 of chapter I of title 17 of the Code of Federal Regulations as follows: PART 150—LIMITS ON POSITIONS 1. The authority citation for part 150 is revised to read as follows: Authority: 7 U.S.C. 6a, 6c, and 12a(5), as amended by the Commodity Futures Modernization Act of 2000, Appendix E of Pub. L. 106-554, 114 Stat. 2763 (2000). 2. Section 150.1 is amended by adding new paragraphs

(j)through

(m)to read as follows: § 150.1 Definitions.

(j)*Risk management position* , for the purposes of an exemption under § 150.3(a)(2), means a futures or futures equivalent position, held as part of a broadly diversified portfolio of long-only or short-only futures or futures equivalent positions, that is based upon either:

(2)A portfolio diversification plan that has, among other substantial asset classes, an exposure to a broadly diversified index that includes the same commodity markets in fundamentally the same proportions as the futures or futures equivalent position.

(k)*Broadly diversified index* means an index based on physical commodities in which:

(1)Not more than 15% of the index is composed of any single agricultural commodity named in § 150.2 (for which purposes, wheat shall be regarded as a single commodity, so that positions in all varieties of wheat, on all exchanges combined, may not exceed 15% of the index, and the soybean complex shall be regarded as a single commodity, so that positions in soybeans, soybean oil and soybean meal, on all exchanges combined, may not exceed 15% of the index); and

(2)Not more than 50% of the index as a whole is composed of agricultural commodities named in § 150.2.

(l)*Passively managed position* means a futures or futures equivalent position that is part of a portfolio that tracks a broadly diversified index, which index is calculated, adjusted, and re-weighted pursuant to an objective, predetermined mathematical formula the application of which allows only limited discretion with respect to trading decisions.

(m)*Unleveraged position* means:

(1)A futures or futures equivalent position that is part of a portfolio of futures or futures equivalent positions directly relating to an underlying broadly diversified index, the notional value of which positions does not exceed the sum of the value of:

(i)Cash set aside in an identifiable manner, or unencumbered short-term U.S. Treasury obligations so set aside, plus any funds deposited as margin on such position; and

(ii)Accrued profits on such position held at the futures commission merchant.

(2)[Reserved] 3. Section 150.3 is amended by revising paragraph

(a)introductory text, adding a new paragraph (a)(2), and adding a new paragraph

(c)to read as follows: § 150.3 Exemptions.

(a)*Positions which may exceed limits* . The position limits set forth in § 150.2 of this part may be exceeded to the extent such positions are established and liquidated in an orderly manner and are:

(2)Risk management positions, as defined in § 150.1(j), that fulfill the following requirements:

(i)Such risk management positions must comply with the following conditions:

(A)The positions must be passively managed;

(B)The positions must be unleveraged; and

(C)The positions must not be carried into the spot month.

(ii)Entities intending to hold risk management positions pursuant to the exemption in § 150.3(a)(2) must apply to the Commission and receive Commission approval. Such applications must include the following information:

(A)In the case of an exemption based on a fiduciary obligation, as described in § 150.1(j)(1), an application must include: ( *1* ) A description of the underlying index or group of commodities, including the commodities, the weightings, the method and timing of re-weightings, the selection of futures months, and the timing and criteria for rolling from one futures month to another; ( *2* ) A description of the “fiduciary obligation;” ( *3* ) The actual or anticipated value of the underlying funds to be invested in commodities within the next fiscal or calendar year and the method for calculating that value, as well as the equivalent numbers of futures contracts in each of the § 150.2 markets for which the exemption is sought; ( *4* ) A description of the manner in which the funds to be invested in commodities will be set aside; ( *5* ) A statement certifying that the requirements of this exemption are met and will be observed at all times going forward and that the Commission will be notified promptly of any material changes in this information; and ( *6* ) Such other information as the Commission may request.

(B)In the case of an exemption based on a portfolio diversification plan, as described in § 150.1(j)(2), an application must include: ( *1* ) A description of the investment index or group of commodities, including the commodities, the weightings, the method and timing of re-weightings, the selection of futures months, and the timing and criteria for rolling from one futures month to another; ( *2* ) A description of the entire portfolio, including the total size of the assets, the asset classes making up the portfolio, and a description of the allocation among the asset classes; ( *3* ) The actual or anticipated value of the underlying funds to be invested in commodities and the method for calculating that value, as well as the equivalent numbers of futures contracts in each of the § 150.2 markets for which the exemption is sought; ( *4* ) A description of the manner in which the funds to be invested in commodities will be set aside; ( *5* ) A statement certifying that the requirements of this exemption are met and will be observed at all times going forward and that the Commission will be notified promptly of any material changes in this information; and ( *6* ) Such other information as the Commission may request.

(iii)Whenever the purchases or sales that a person wishes to qualify under this risk management exemption shall exceed the amount provided in the person's most recent filing pursuant to this section, or the amount previously specified by the Commission pursuant to this section, such person shall file with the Commission a statement that updates the information provided in the person's most recent filing and provides the reasons for this change. Such statement shall be filed at least ten business days in advance of the date that such person wishes to exceed those amounts and if the notice filer is not notified otherwise by the Commission within the 10-day period, the exemption will continue to be effective. The Commission may, upon call, obtain such additional materials from the applicant or person availing themselves of this exemption as the Commission deems necessary to exercise due diligence with respect to granting and monitoring this exemption.

(iv)Entities holding risk management positions pursuant to the exemption in § 150.3(a)(2) shall immediately report to the Commission in the event that they know, or have reason to know, that any person holds a greater than 25% interest in such position.

(c)The Commission hereby delegates, until such time as the Commission orders otherwise, to the Director of the Division of Market Oversight, or the Director's designee, the functions reserved to the Commission in § 150.3(a)(2) of this chapter. Issued by the Commission this 20th day of November, 2007, in Washington, DC. David Stawick, Secretary of the Commission. [FR Doc. E7-22992 Filed 11-26-07; 8:45 am] BILLING CODE 6351-01-P DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Part 101 [Docket Nos. 2004N-0217, 2005P-0189, and 2006P-0137] RIN No. 0910-ZA28 Food Labeling: Nutrient Content Claims; Alpha-Linolenic Acid, Eicosapentaenoic Acid, and Docosahexaenoic Acid Omega-3 Fatty Acids AGENCY: Food and Drug Administration, HHS. ACTION: Notice of proposed rulemaking. SUMMARY: The Food and Drug Administration

(FDA)proposes to issue this rule finding that certain nutrient content claims for foods, including conventional foods and dietary supplements, that contain omega-3 fatty acids, do not meet the requirements of the Federal Food, Drug, and Cosmetic Act (the act) and may not appear in food labeling. This rule is being proposed in response to three notifications submitted to FDA under the act. One notification concerning nutrient content claims for alpha-linolenic acid (ALA), docosahexaenoic acid (DHA), and eicosapentaenoic acid

(EPA)was submitted collectively by Alaska General Seafoods, Ocean Beauty Seafoods, Inc., and Trans-Ocean Products, Inc. (the seafood processors notification); a second notification concerning nutrient content claims for ALA, DHA, and EPA was submitted by Martek Biosciences Corp. (the Martek notification); and a third notification concerning nutrient content claims for DHA and EPA was submitted by Ocean Nutrition Canada, Ltd. (the Ocean Nutrition notification). FDA has reviewed the information included in the three notifications and is proposing to prohibit the nutrient content claims for DHA and EPA set forth in the three notifications because they are not based on an authoritative statement that identifies a nutrient level to which the claims refer, as required by the controlling statutory authority. FDA is also proposing to prohibit the nutrient content claims for ALA set forth in the seafood processors notification because they are based on a daily value that was determined by a different method than daily values already established for other nutrients. Because of the different methodology used to set the daily value, the ALA claims set forth in the seafood processors notification do not enable the public to comprehend the information provided in the claims and to understand the relative significance of such information in the context of the daily diet, as required by the controlling statutory authority. FDA is proposing to take no regulatory action with respect to the nutrient content claims for ALA set forth in the Martek notification. Therefore, if this proposed rule is finalized without change, these claims will be allowed to remain on the market. DATES: Submit written or electronic comments by February 11, 2008. ADDRESSES: You may submit comments, identified by Docket Nos. 2004N-0217, 2005P-0189, and 2006P-0137 by any of the following methods: *Electronic Submissions* Submit electronic comments in the following ways: • Federal eRulemaking Portal: *http://www.regulations.gov* . Follow the instructions for submitting comments. • Agency Web site: *http://www.fda.gov/dockets/ecomments* . Follow the instructions for submitting comments on the agency Web site. *Written Submissions* Submit written submissions in the following ways: • FAX: 301-827-6870. • Mail/Hand delivery/Courier [For paper, disk, or CD-ROM submissions]: Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852. To ensure more timely processing of comments, FDA is no longer accepting comments submitted to the agency by e-mail. FDA encourages you to continue to submit electronic comments by using the Federal eRulemaking Portal or the agency Web site, as described in the *Electronic Submissions* portion of this paragraph. *Instructions* : All submissions received must include the agency name and Docket No(s). and Regulatory Information Number

(RIN)(if a RIN number has been assigned) for this rulemaking. All comments received may be posted without change to *http://www.fda.gov/ohrms/dockets/default.htm* , including any personal information provided. For additional information on submitting comments, see the “Comments” heading of the SUPPLEMENTARY INFORMATION section of this document. *Docket* : For access to the docket to read background documents or comments received, go to *http://www.fda.gov/ohrms/dockets/default.htm* and insert the docket number(s), found in brackets in the heading of this document, into the “Search” box and follow the prompts and/or go to the Division of Dockets Management, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852. FOR FURTHER INFORMATION CONTACT: Vincent de Jesus, Center for Food Safety and Applied Nutrition (HFS-830), Food and Drug Administration, 5100 Paint Branch Pkwy., College Park, MD 20740-3835, 301-436-1450. SUPPLEMENTARY INFORMATION: I. Background A. Section 403(r) of the Act On November 8, 1990, President George H.W. Bush signed into law the Nutrition Labeling and Education Act of 1990 (the 1990 amendments) (Public Law 101-535), which amended the act. Section 403(r)(1)(A) of the act (21 U.S.C. 343(r)(1)(A)), which was added by the 1990 amendments, states that a food for human consumption is misbranded if a claim is made in its label or labeling that expressly or implicitly characterizes the level of any nutrient of the type required to be declared in nutrition labeling, unless such claim uses terms defined in regulations by FDA under section 403(r)(2)(A) of the act. 1 1 The requirements in section 403(r)(2) of the act for nutrient content claims, apply to foods and food labeling unless an exemption applies for the food or the claim under section 403(r)(2) of the act, another section of the act, or FDA regulations. In 1993, FDA established regulations that implemented the 1990 amendments (58 FR 2066 to 2941, January 6, 1993). Among these regulations, § 101.13 (21 CFR 101.13) sets forth general principles for nutrient content claims (see 58 FR 2302, January 6, 1993). Other sections in part 101, subpart D (21 CFR part 101, subpart D), define specific nutrient content claims, such as “high,” “good source,” and “more,” and provide that claims such as these must be made in relation to reference values set out in regulations by FDA. For example, to bear the claim “high in fiber” in its label or labeling, a food must contain 20 percent or more of the reference value for fiber set out in 21 CFR 101.9(c)(9). Other provisions set forth the procedures whereby a person who wishes to make a nutrient content claim not already defined by regulation may petition the agency to authorize that claim under section 403(r)(4) of the act (see 21 CFR 101.69). A petitioner bears the burden of establishing the scientific basis for a proposed nutrient content claim. On November 21, 1997, President William J. Clinton signed the Food and Drug Administration Modernization Act (FDAMA) into law (Public Law 105-115), which, among other things, added new sections (r)(2)(G) and (r)(2)(H) to the act. These sections provide for the filing of notifications as an alternative to the petition process in section 403(r)(4) of the act. Under the notification process, the scientific basis for a nutrient content claim or health claim is established through reliance on an authoritative statement. Section 403(r)(2)(G) of the act requires that a notification of the prospective nutrient content claim be submitted to FDA at least 120 days before a food bearing the claim may be introduced into interstate commerce. The notification must contain specific information including the following:

(1)The exact wording of the prospective nutrient content claim;

(2)a concise description of the basis upon which the notifier relied for determining that the requirements for an authoritative statement in section 403(r)(2)(G)(i) have been satisfied;

(3)a copy of the authoritative statement that serves as the basis for the claim; and

(4)a balanced representation of the scientific literature relating to the nutrient level for a prospective nutrient content claim. An authoritative statement must have been published by a scientific body of the U.S. Government that has official responsibility for public health protection or research directly relating to human nutrition or the National Academy of Sciences

(NAS)or any of its subdivisions. In addition, an authoritative statement must identify the nutrient level to which the claim refers and must be currently in effect. Thus, the requirements of 403(r)(2)(G) of the act are not met by a statement that does not identify the nutrient level to which the claim refers. FDA considers the term “nutrient level” as used in section 403(r)(2)(G) of the act to mean a reference value that is similar to a label reference value for use in nutrition labeling. To date, FDA has established by regulation two sets of label reference values: Reference Daily Intakes

(RDIs)and Daily Reference Values

(DRVs)(see 21 CFR 101.9(c)(8)(iv) and 101.9(c)(9), respectively). FDA based its RDIs on Recommended Daily Allowances

(RDAs)and Estimated Safe and Adequate Daily Dietary Intakes (ESADDIs) established by NAS. FDA based its DRVs on recommendations in the NAS Diet and Health Report, the Surgeon General's Report on Nutrition and Health, and the 1990 Dietary Guidelines for Americans. FDA uses RDIs and DRVs as Daily Values

(DVs)for purposes of nutrition labeling. Thus, FDA considers DVs to be a specific set of reference values established by regulation (58 FR 2079 at 2125, January 6, 1993). A DV for a particular nutrient is used to calculate the percent DV that a serving of food provides for that nutrient, based on the assumption of a 2,000 calorie per day diet. The percent DV is listed in the Nutrition Facts and Supplement Facts boxes in nutrition labeling and provides consumers with an overall reference value for the nutrient. DVs are intended to help consumers understand the relative significance of information about the amount of certain nutrients in a food in the context of a total daily diet, and to help consumers compare the nutritional values of food products. In the preamble to one of its regulations implementing the 1990 amendments (1990 preamble), FDA drew a distinction between the term “Daily Value,” or “DV,” used as a proper noun, and the term “daily value,” used in a more generic sense. As noted above, DVs are established by regulation. By contrast, “daily values” are alternate values that are not established by regulation, such as those based on alternate daily caloric requirements (i.e., 2,500 calories per day) (58 FR 2079 at 2125, January 6, 1993). Notwithstanding this distinction between “Daily Values” or “DVs” and “daily values,” FDA and industry have occasionally used the term “Daily Value” or “DV” to refer to alternate values that are not established by regulation, such as the quantity of a nutrient that has been proposed for use in nutrition labeling, or that is the basis for the use of a claim with respect to which FDA has taken no regulatory action under section 403(r)(2)(H) of the act (21 U.S.C. 343(r)(2)(H)). 2 2 See, e.g., FDA's statement titled “Nutrient Content Claims Notification for Choline Containing Foods,” August 30, 2001, and also the notifications addressed by this rulemaking. FDA intends to maintain the distinction between “Daily Values” or “DVs” and “daily values” that it articulated in its 1990 preamble. FDA has not established by regulation any DV for ALA, DHA, or EPA. Therefore, this proposal uses the term “daily value” when referring to the quantity of ALA, DHA, and EPA on which the nutrient content claims at issue are based, unless the proposal is quoting a claim submitted by one of the notifiers. Under section 403(r)(2)(H) of the act, a nutrient content claim authorized under section 403(r)(2)(G) may be made beginning 120 days after submission of the notification until the following occurs:

(1)FDA issues an effective regulation that prohibits or modifies the claim;

(2)the agency issues a regulation finding that the requirements under section 403(r)(2)(G) have not been met; or

(3)a district court of the United States in an enforcement proceeding under chapter III of the act has determined that the requirements under section 403(r)(2)(G) have not been met. B. The IOM Final Report In 2005, the Food and Nutrition Board of the Institute of Medicine

(IOM)of the National Academy of Sciences published a report titled “Dietary Reference Intakes for Energy, Carbohydrate, Fiber, Fat, Fatty Acids, Cholesterol, Protein, and Amino Acids” (IOM Final Report, Ref. 1). The report is one in a series that presents a comprehensive set of reference values for nutrient intakes for healthy U.S. and Canadian individuals and populations. Publication of the IOM Final Report was preceded by release in 2002 of a prepublication copy under the same title (IOM Prepublication Report, Ref. 2). In relevant part, the IOM Final Report establishes Dietary Reference Intakes

(DRIs)for a number of nutrients that are essential 3 in the human diet (e.g., linoleic acid) or provide a beneficial role in human health (e.g., total fiber). According to the IOM Final Report, DRIs “comprise a set of reference values for specific nutrients, each category of which has special uses.” These reference values “include the Estimated Average Requirement (EAR), Recommended Daily Allowance (RDA), AI, and Tolerable Upper Intake Level (UL).” 4 3 The criteria for essentiality of a nutrient are that absence of the nutrient from the diet results in characteristic signs of a deficiency disease and these signs are prevented only by the nutrient itself or a specific precursor of it. (Ref. 3 Carpenter and Harper, Modern Nutrition in Health and Disease). 4 The IOM Final Report also establishes Acceptable Macronutrient Distribution Ranges (AMDRs) for some nutrients. AMDRs are ranges of macronutrient intakes that are associated with reduced risk of chronic disease, while providing recommended intakes of other essential nutrients. AMDRs are not considered to be a type of DRI. An RDA is an estimate of the minimum daily average dietary intake level that meets the nutrient requirements of nearly all (97 to 98 percent) healthy individuals in a particular life stage and gender group. The setting of an RDA is contingent on there being sufficient scientific evidence to establish an EAR, which is the average daily nutrient intake level estimated to meet the requirement of half the healthy individuals in a particular life stage and gender group. If there is insufficient scientific evidence to establish an EAR, then an AI is established instead of an RDA (assuming there is sufficient data to support establishment of an AI). An AI is the recommended average daily intake level that is assumed to be adequate based on observed or experimentally determined approximations or estimates of nutrient intake by a group (or groups) of apparently healthy people. Among other nutrients, the IOM Final Report addresses omega-3 fatty acids, including ALA, EPA, and DHA. These fatty acids are also called *n* -3 fatty acids because the first double bond is located at the third carbon from the methyl end of the molecule (Ref. 4). For ALA, the IOM Final Report does not establish a DRI in the form of an RDA because there is insufficient scientific evidence to establish an EAR. As noted, if there is insufficient scientific evidence to establish an EAR, then no RDA is established. Instead, the IOM Final Report establishes AIs for different life stage groups (e.g., girls ages 9 through 13, boys ages 14 through 18). Those AIs are based on median intakes in the United States, where an omega-3 fatty acid deficiency is nonexistent in healthy individuals. The IOM Final Report does not establish a DRI in any form for either EPA or DHA. II. The Three Notifications Submitted to FDA A. The Seafood Processors Notification On January 16, 2004, FDA received a nutrient content claim notification for foods, including conventional foods and dietary supplements, containing ALA, EPA, and DHA omega-3 fatty acids submitted jointly in the seafood processors notification under section 403(r)(2)(G) of the act (Ref. 5). The notification stated that the nutrient content claims it proposed were based upon authoritative statements made in the IOM Prepublication Report (Ref. 2). As of May 16, 2004, it has been permissible to make the nutrient content claims set forth in the notification. The notification proposed “high,” “good source,” and “more” claims for ALA, and “high” claims for DHA and EPA. With respect to specific authoritative statements that identify a nutrient level for ALA, the seafood processors notification referenced the following age-gender group specific AIs identified in the IOM Prepublication Report: 0.9 grams/day (g/day) for males and females age 4 to 8 years; 1.2 g/day for males age 9 to 13 years; 1.0 g/day for females age 9 to 13 years; 1.6 g/day for males 14 and more years of age; and 1.1 g/day for females 14 and more years of age. Also, the notification quoted the following as authoritative statements that identify a nutrient level for ALA, EPA, and DHA: “Because of a lack of evidence for determining the requirement for *n* -3 fatty acids, an AI [for ALA] is set based on the highest median intake of [ALA] by adults in the United States where a deficiency is basically nonexistent in free-living populations * * * and rounding. Small amounts of EPA and DHA can contribute towards reversing an *n* -3 fatty acid deficiency * * * EPA and DHA can contribute up to 10 percent of the total *n* -3 fatty acid intake and therefore up to this percent can contribute toward the AI for [ALA] * * *” (Ref. 2, p. 8 to 38). In calculating a qualifying level for the basis of the “high,” “good source,” and “more” claims for ALA, the seafood processors notification set 1.3 g as a daily value for ALA and applied the specific percentages of this value as qualifying levels for the three ALA nutrient content claims as outlined in 21 CFR 101.54. 5 The value of 1.3 g was a result of computing a population-weighted average of age and gender-specific AIs for ALA, using 2005 projected U.S. census data. The notification acknowledged that there is currently in effect a nutrient content claim for choline that is based on the highest age and gender-specific AI for that nutrient (Refs. 6 and 7). Nonetheless, the notification set a daily value for ALA using a population-weighted average because a recent report from the IOM, titled “Dietary Reference Intakes: Guiding Principles for Nutrition Labeling and Fortification” (IOM Guiding Principles Report, Ref. 8), recommended setting new DVs based on this method, rather than on the highest age and gender-specific AI. 5 For a “high” claim, the food must contain 20 percent or more of the reference value per reference amount customarily consumed. For a “good source” claim, the food must contain 10 to 19 percent of the reference value per reference amount customarily consumed. For a “more” claim, the food must contain at least 10 percent more of the reference value per reference amount customarily consumed than an appropriate reference food. In setting a qualifying level for the “high” claim for EPA or DHA, the seafood processors notification set 130 milligrams

(mg)as the daily value for EPA or DHA (i.e., 10 percent of the daily value for ALA) and set 130 mg (i.e., equal to the daily value) as the qualifying level for the “high” claim. The notification did not request “good source” or “more” claims for EPA or DHA. Also, the seafood processors notification specified accompanying statements for the above claims. The “high” and “good source” claims would include one of the following statements:

(1)“Contains ___ mg of [DHA/EPA/ALA] per serving, which is ___ % of the Daily Value for [DHA/EPA (130 mg) or {ALA (1.3 g)}].”

(2)“Contains ___ % of the Daily Value for [DHA/EPA/ALA] per serving. The Daily Value for [{DHA/EPA is 130 mg} or [ALA is 1.3 g]].” For “more” claims, the notification specified that the claims would be accompanied by statements such as: “___ % [10 % or greater] more of the Daily Value for ALA per serving than [reference food]. This product contains ___ mg ALA omega-3 per serving, which is ___ % of the Daily Value for ALA omega-3 (1.3 g). [Reference food] contains ___ mg ALA omega-3 per serving.” To qualify for “high” claims for ALA, the product would need to contain at least 260 mg of ALA per reference amount customarily consumed (RACC). To qualify for “good source” claims for ALA, the product would need to contain at least 130 mg of ALA per RACC. To qualify for “more” claims for ALA, the product would need to contain at least 130 mg or more of ALA per RACC than the reference food. To qualify for “high” claims for EPA or DHA, the product would need to contain at least 130 mg of EPA or DHA per RACC. B. The Martek Notification On January 21, 2005, FDA received a notification of nutrient content claims for foods, including conventional foods and dietary supplements, containing ALA and DHA omega-3 fatty acids in the Martek Notification, under section 403(r)(2)(G) of the act (Ref. 9). The notification stated that the nutrient content claims were based upon authoritative statements made in the IOM Prepublication Report (Ref. 2). As of May 22, 2005, it has been permissible to make the nutrient content claims set forth in the notification. The notification proposed “high,” “good source,” and “more” claims for ALA, and “high” claims for DHA. With respect to specific authoritative statements that identify a nutrient level for ALA, the Martek notification cited AIs for ALA identified in the IOM Prepublication Report (i.e., 1.6 grams per (g)/ day for adult men and 1.1 g/day for adult women, specifically) and cited the following sentence: “While intake levels much lower than the AI occur in the United States without the presence of a deficiency, the AI can provide the beneficial health effects associated with the consumption of *n* -3 fatty acids” (Ref. 2, p. 8-2). As authoritative statements that identify a nutrient level for DHA, the notification cited the following statements from the IOM Prepublication Report the following:

(1)“EPA and DHA can contribute up to 10 percent of the total *n* -3 fatty acid intake and therefore up to this percent can contribute towards the AI for alpha-linolenic acid;”

(2)“The AMDR for [ALA] is set at 0.6 to 1.2 percent of energy. Up to 10 percent of this range can be consumed as [EPA] and/or [DHA];” and

(3)“A growing body of literature suggests that higher intakes of [ALA], [EPA] and [DHA] may afford some degree of protection against CHD. Because the physiological potency of EPA and DHA is much greater than that for [ALA] acid, it is not possible to estimate one AMDR for all *n* -3 fatty acids. Up to 10 percent of the AMDR can be consumed as EPA and/or DHA.” In determining nutrient qualifying levels for the proposed “excellent,” “good source,” and “more” claims for ALA, the Martek notification set 1.6 g as the daily value for ALA and applied specific percentages of this value as qualifying levels for these claims as outlined in § 101.54. The Martek notification based the daily value for ALA on the AI of 1.6 g identified for adult males in the IOM Prepublication Report, making no adjustments for intakes based on population-weighted averages. The Martek notification took issue with the seafood processors notification because that notification set a daily value for ALA based on a population-weighted method rather than the historically used highest age and gender-specific reference value. In determining a qualifying level of nutrient for the proposed “excellent” claim for DHA, the Martek notification set 160 mg as the daily value for DHA (i.e., 10 percent of the daily value for ALA) and applied 32 mg or more (i.e., 20 percent of the daily value for DHA) as a qualifying level for the claim. The Martek notification proposed the following exact words for the claims:

(1)“ ‘Excellent source of ALA.’ (‘High in ALA,’ ‘Rich in ALA’) Contains ___ mg of ALA per serving, which is ___ % of the 1.6 g Daily Value for ALA.” [Products would need to contain at least 320 mg of ALA per RACC to qualify for the claim.]

(2)“ ‘Good source of ALA.’ (‘Contains ALA,’ ‘Provides ALA’) Contains ___ mg of ALA per serving, which is ___ % of the 1.6 g Daily Value for ALA” [Products would need to contain at least 160 mg of ALA per RACC to qualify for the claim.]

(3)“ ‘More ALA.’ (‘Fortified with ALA,’ ‘Enriched with ALA,’ ‘Added ALA,’ ‘Extra ALA,’ ‘Plus ALA’) Contains ___ % more of the Daily Value for ALA per serving than [reference food]. This product contains ___ mg of ALA which is ___ % of the Daily Value for ALA (1.6 g).” [Products would need to contain at least 160 mg or more ALA per RACC than an appropriate reference food and would comply with the requirements for relative claims found at 21 CFR 101.13(j).]

(4)“ ‘Excellent source of DHA.’ (‘High in DHA,’ ‘Rich in DHA’) Contains ___ mg of DHA per serving, which is ___ % of the 160 mg Daily Value for DHA.” [Products would need to contain at least 32 mg of DHA per RACC to qualify for the claim.] C. The Ocean Nutrition Notification On December 9, 2005, FDA received a notification of nutrient content claims for foods, including conventional foods and dietary supplements, containing both EPA and DHA omega-3 fatty acids in the Ocean Nutrition notification, under section 403(r)(2)(G) of the act (Ref. 10). The notification stated that the nutrient content claims were based upon authoritative statements made in the IOM prepublication report (Ref. 2). As of April 9, 2006, it has been permissible to make the nutrient content claims set forth in the notification. The Ocean Nutrition notification proposed “high” claims for EPA and DHA combined. With respect to specific authoritative statements that identify the nutrient level for EPA and DHA combined, the Ocean Nutrition notification referenced the AI for adult males of 1.6 g per day of ALA identified in the IOM Prepublication Report (Ref. 2). In addition, the notification referenced the following statements from the IOM Prepublication Report (Ref. 2):

(1)“EPA and DHA can contribute up to 10 percent of the total *n* -3 fatty acid intake and therefore up to this percent can contribute towards the AI for [ALA],” and

(2)“The AMDR for [ALA] is set at 0.6 to 1.2 percent of energy. Up to 10 percent of this range can be consumed as [EPA] and/or [DHA].” The notification contended that a combination of EPA and DHA is the most appropriate basis for establishing nutrient content claims derived from the IOM Prepublication Report. In calculating a nutrient qualifying level for the proposed “excellent source” claim for the combination of EPA and DHA, the Ocean Nutrition notification set 1.6 g as a daily value for ALA and 160 mg as a daily value for the combination of EPA and DHA (i.e., 10 percent of the daily value for ALA), and used 32 mg or more (i.e., 20 percent of the daily value for the combination of EPA and DHA) as a qualifying level for the “excellent source” claim. The Ocean Nutrition notification proposed the following exact words for the claims: “ ‘Excellent source of Omega-3 EPA and DHA.’ (‘High in Omega-3 EPA and DHA;’ ‘Rich in Omega-3 EPA and DHA’). Contains ___mg of EPA and DHA combined per serving, which is ___% of the 160 mg EPA and DHA combined per serving, which is ___% of the 160 mg Daily Value for a combination of EPA and DHA.” III. Basis for the Proposed Action FDA has reviewed the three notifications submitted in support of the claims for ALA, EPA, and DHA. With respect to the claims for ALA in the Martek notification, FDA proposes to take no regulatory action at this time. FDA expresses no opinion as to whether those claims are supported by a statement that satisfies the requirements of section 403(r)(2)(G) of the act for authoritative statements. In the November 2, 2007, **Federal Register** (72 FR 62149), we have published an Advance Notice of Proposed Rulemaking (ANPRM) soliciting comment on how daily values for nutrients should be calculated, including the appropriateness of using an AI to set a DV. 6 6 In one other instance, FDA has taken no regulatory action with respect to a notification that proposed a nutrient content claim based on an AI. The nutrient content claim for choline (Ref. 7) was based upon a reference value that the notifier set using the AIs established by the IOM in 1998 for that nutrient (Ref. 8). Choline is essential in the human diet and the AIs for that nutrient were established based upon experimental data demonstrating prevention of alanine aminotransferase abnormalities in healthy men. With respect to the claims for ALA in the seafood processors notification, FDA proposes to prohibit those claims because they are based on a population-weighted average of the AIs for ALA. The population-weighted average approach to determining DVs for nutrients is different from the “population coverage” approach that FDA has used to date and continues to use, pending any possible rulemaking based on the issuance of the agency's ANPRM on DV issues. 7 The concurrent use of two different methods to set daily values on which nutrient content claims in food labeling are based creates an inconsistency that could lead to consumer confusion about such claims, as discussed more fully below. Therefore, FDA proposes to conclude that the ALA claims set forth in the seafood processors notification do not enable the public to comprehend the information provided and to understand the relative significance of such information in the context of the daily diet, as required by section 403(r)(2)(G)(iv) of the act. A claim that does not meet the requirements of section 403(r)(2)(G) of the act may not be made on the label or labeling of food. 7 FDA seeks comment in the ANPRM on whether the agency should continue to use the population-coverage approach or switch to the population-weighted average approach to setting DVs. The agency's reasons for adopting the population-coverage approach to set DVs in 1993 are discussed in the final rule entitled “Reference Daily Intakes and Daily Reference Values” (see 58 FR 2206 at 2211, January 6, 1993). With respect to claims for EPA and DHA, whether singly or in combination, FDA proposes to conclude that the IOM statements submitted as the basis of the claims do not meet the requirements of section 403(r)(2)(G) of the act in two respects. First, none of the statements identify the nutrient level to which the claims refer (i.e., daily values for EPA and DHA that can serve as the basis for the requested nutrient content claims) (see section 403(r)(2)(G)(i) of the act). Second, in the absence of a nutrient level for EPA and DHA derived from the authoritative statement of a scientific body defined in 403(r)(2)(G)(i) of the act, the requested claims do not convey meaningful information about EPA and DHA content because they lack an adequate scientific basis. Thus, the claims do not enable the public to comprehend the information provided and to understand the relative significance of such information in the context of the daily diet, as required by section 403(r)(2)(G)(iv) of the act. In this regard, FDA notes that the setting of daily values and qualifying levels for claims in food labeling on the basis of statements that do not identify the nutrient level to which the claims refer can result in inconsistent and conflicting claims that confuse consumers. The requirement in section 403(r)(2)(G) of the act that an authoritative statement identify the nutrient level to which the claim refers helps to ensure consistency in the use of a particular nutrient content claim among different products from different manufacturers. The notification process in section 403(r)(2)(G) of the act provides a mechanism for authorizing a new nutrient content claim based on an authoritative statement by a scientific body of the United States government with official responsibility for public health protection or research directly relating to human nutrition, or by the National Academy of Sciences or any of its subdivisions. Under this expedited process, the scientific basis for a nutrient content claim is established through reliance on an authoritative statement of one of the scientific bodies designated in section 403(r)(2)(G), which has already reviewed the relevant scientific evidence. Therefore, when FDA is reviewing a notification under section 403(r)(2)(G) , the agency does not conduct an independent review of the body of scientific evidence associated with the proposed nutrient content claim. Rather, FDA's review is limited to considering whether the authoritative statement and the proposed nutrient content claim meet the requirements of section 403(r)(2)(G) of the act. (In contrast, the agency will conduct its own review of the scientific evidence for the proposed claim when a nutrient content claim petition is submitted under section 403(r)(4) of the act (see 21 CFR 101.69).) FDA notes that all of the notifications at issue in this rulemaking relied on statements made in the IOM Prepublication Report. For purposes of this proposed rule, FDA has evaluated the claims in the notifications in light of relevant statements made in the IOM Final Report. Unless stated otherwise, those statements may be presumed to be identical to statements made in the IOM Prepublication Report. A. ALA The following statement in the IOM Final Report is pertinent to this proposed rule and is identical to a statement made in the IOM Prepublication Report that was cited by all three of the notifications: “The AI for [ALA] is 1.6 and 1.1 g/day for men and women, respectively.” (Ref. 1, Summary, p. 9). ALA is essential in the human diet. The IOM established AIs for ALA based upon the median intake of ALA by different gender and life stage groups in the United States, where a deficiency is basically nonexistent in free-living populations (see pages 427, 469 to 472, 1051 to 1051) (Ref. 1). At this time, FDA proposes to take no regulatory action with respect to the nutrient content claims for ALA in the Martek notification. FDA notes that those claims are based on a daily value that the notifier set using the highest gender and life-stage AI (i.e., 1.6 g/day of ALA for men ages 19 years and older). Assuming, without deciding the issue, that it is appropriate to use an AI to set a DV, the population-coverage approach used by Martek in this notification ensures that the nutritional needs of almost all segments of the population are covered. This approach is consistent with the method that FDA has used in determining DVs to date (see 58 FR 2206 at 2211, January 6, 1993). In contrast, FDA proposes to prohibit the claims for ALA in the seafood processors notification because those claims are based on a daily value that the notifier set using a population-weighted average of AI reference values (1.3 g/day). 8 A daily intake level based on a population-weighted average of AI values may not be adequate for some segments of the population (e.g., men ages 19 and over). Use of the population-weighted average approach in the seafood processors notification also results in a daily value for ALA that is inconsistent with the daily value for ALA claims based on the population-coverage approach used in the Martek ALA notification. As discussed in the preceding paragraph, FDA is proposing no regulatory action concerning nutrient content claims for ALA based on the Martek ALA notification, which means that such claims will continue to be permitted on food labels if this rule is finalized as proposed. 8 FDA's proposal to prohibit the claims for ALA in the seafood processors notification should not be read as an endorsement of the use of an AI to set a DV. As previously noted, FDA has published an ANPRM to seek comment on the appropriateness of using an AI to set a DV, among other issues. The inconsistency between the population-weighted average method used to set the daily value for ALA in the seafood processors notification and the population coverage method used for that purpose in the Martek notification is likely to result in inconsistent and conflicting nutrient content claims on food labels.. For example, a food labeled as a “good source” of ALA must contain at least 160 mg of ALA per RACC under the criteria in the Martek notification, while another food containing only 130 mg ALA per RACC would also be able to bear the same “good source” claim under the criteria in the seafood processors notification. Such inconsistencies make meaningful product-to-product comparisons of ALA content based on label claims impossible. To enable the public to comprehend the information provided in nutrient content claims and understand the relative significance of that information in the context of the daily diet, as required by section 403(r)(2)(G)(iv) of the act, qualifying ALA levels for nutrient content claims in food labeling must be based on a single daily value determined using the same method as the DVs for other nutrients. FDA recognizes that the IOM Guiding Principles Report recommends setting new DVs based on a population-weighted average of reference values. However, that report disclaims any intent to make regulatory recommendations; rather, the guiding principles it provides are recommendations that FDA may accept or reject as appropriate to its activities. As previously noted, in the November 2, 2007, **Federal Register** (72 FR 62149), we have published an ANPRM that seeks comment on the appropriateness of using a population-weighted average, as opposed to a population-coverage approach, to set a DV. In the interim, FDA's position continues to be that the population-coverage approach should be used, for the reasons discussed in the 1993 final rule on DVs (58 FR 2206 at 2211) and for consistency with the manner in which FDA has determined DVs for nutrients to date. Therefore, FDA is proposing to find that the nutrient content claims for ALA set forth in the seafood processors notification do not meet the requirements of the act. B. EPA and DHA The following statements about EPA and DHA in the IOM Final Report are pertinent to this proposed rule and are essentially similar to statements made in the IOM Prepublication Report that were cited by one or more of the notifications: “[EPA] and [DHA] contribute approximately 10 percent of the total *n* -3 fatty acid intake and therefore this percent contributes toward the AI for [ALA].” “Small amounts of EPA and DHA can contribute towards reversing an *n* -3 fatty acid deficiency * * * and can therefore contribute toward the AI for [ALA]. EPA and DHA contribute approximately 10 percent of the total *n* -3 fatty acid intake and therefore this percent contributes toward the AI for [ALA].” “The AMDR for [ALA] is set at 0.6 to 1.2 percent of energy. Ten percent of this range can be consumed as [EPA] and/or [DHA].” “Approximately 10 percent of the AMDR for *n* -3 fatty acids ([ALA]) can be consumed as EPA and/or DHA (0.06 to 0.12 percent of energy).” 9 9 Generally, in place of “approximately 10 percent” and “this percent,” the IOM Prepublication Report stated “up to 10 percent” and “up to this percent.” FDA proposes to conclude that these statements do not identify a nutrient level, or reference value, for EPA and/or DHA that FDA could use to establish by regulation a label reference value for use in nutrition labeling. As noted, the IOM Final Report establishes reference values in the form of DRIs for a number of nutrients. DRIs include the EAR, RDA, AI, and UL. The IOM Final Report does not establish an EAR, RDA, AI, or UL for EPA or DHA. The “approximately 10 percent” statements in the IOM Final Report are not reference values. They do not reflect a recommended or defined intake level of EPA and/or DHA that could serve as a basis for setting a DV that could be used to characterize a given level of EPA and/or DHA for purposes of nutrition labeling. In summary, FDA proposes to conclude that the statements cited by the three notifications and the essentially similar statements in the IOM Final Report do not identify a nutrient level to which the EPA and DHA claims refer, and therefore do not meet the requirements of section 403(r)(2)(G) of the act for authoritative statements. In the absence of an authoritative statement that identifies the nutrient level to which a claim refers, the requirements of section 403(r)(2)(G) of the act are not met. Therefore, FDA proposes to find that any nutrient content claim pertaining to EPA or DHA that is made on the label or labeling of a food renders that food misbranded under section 403(r) of the act. FDA recognizes that consumption of EPA and/or DHA may provide health benefits and that industry may wish to alert consumers to those benefits. There are numerous lawful means of doing so. Under 21 CFR 101.13(i)(3), the label or labeling of a food may contain a statement about the amount or percentage of a nutrient if the statement does not in any way implicitly characterize the level of the nutrient in the food and is not false or misleading in any respect. For example, a conventional food or a dietary supplement may bear a statement such as “Contains x mg of EPA and DHA omega-3 fatty acids per serving.” Also, under 21 CFR 101.13(q)(3)(ii)(A), dietary supplements are permitted to bear simple percentage claims (e.g., 40 percent EPA and DHA omega-3 fatty acids), and under 21 CFR 101.14(q)(3)(ii)(B), they are permitted to bear comparative percentage claims (e.g., “four times the EPA and DHA omega-3 fatty acids per capsule (80 mg) as in 100 mg of menhaden oil (20 mg)”). In addition, the potential health benefits of consuming EPA and DHA can be communicated to consumers by using the qualified health claim about the relationship between EPA and DHA and reduced risk of CHD (Refs. 11 and 12). IV. Environmental Impact We have carefully considered the potential environmental effects of this action. FDA has determined under 21 CFR 25.30(k) that this action is of a type that does not have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required. V. Analysis of Impacts FDA has examined the impacts of the proposed rule under Executive Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). FDA has determined that this proposed rule is not a significant regulatory action as defined by the Executive order. The Regulatory Flexibility Act requires agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Based on FDA's review of the labels in the marketplace, FDA does not believe that a substantial number of small entities will be significantly affected. The agency requests comment on whether this rule will have a significant economic impact on a substantial number of small entities. Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $127 million, using the most current

(2006)Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this proposed rule to result in any 1-year expenditure that would meet or exceed this amount. *Benefit-Cost Analysis* 1. The Need for This Regulation We discussed the legal and regulatory need for this proposed rule in section III of this document. 2. Options We analyzed two regulatory options:

(1)Take no new regulatory action; and

(2)prohibit the EPA and DHA claims and the ALA claims based on a daily value of 1.3 grams, but allow the ALA claims based on a daily value of 1.6 grams. *Option 1: Take No New Regulatory Action* This option would result in no change to the current situation, and so would result in no costs or benefits. This is not a viable option under FDA's current statutory and regulatory framework, as we discussed earlier in this preamble. However, we use this option as the basis for comparing the costs and benefits of other regulatory options. *Option 2: Take the Regulatory Actions as Described in the Proposed Rule* FDA received the first notification from the seafood processors on January 16, 2004. Because FDA did not issue a regulation prohibiting the use of these nutrient content claims within 120 days, “high” claims for ALA, EPA, and DHA, as well as “good source” and “more” claims for ALA have been permissible since May 16, 2004. A second notification, from Martek, received on January 21, 2005, notified FDA of “high” claims for ALA and DHA, as well “good source”, and “more” claims for ALA. A third notification, from Ocean Nutrition, received on December 9, 2005, notified FDA of a “high” claim and an “excellent source” claim for EPA and DHA combined. All of these claims became permissible 120 days after the FDA received the respective notifications because the agency did not issue a regulation prohibiting them. A cost of this rule will be label changes for products bearing claims that are prohibited. These costs may be lower if producers can schedule regulatory label changes to coincide with their scheduled label changes. *Number of Labels Affected* FDA does not have data on the number of products bearing an ALA, EPA, DHA, or EPA plus DHA nutrient content claim on the label. Therefore, we attempt to estimate a range for the number of products that may bear an affected nutrient content claim. Products whose eligibility will be affected by this rule: • Have levels of DHA greater than 32 mg.; • Have levels of EPA greater than 130 mg.; • Have levels of EPA and DHA combined of greater than 32 mg.; • Have levels of ALA greater than 130 mg and less than 160 mg for “good source” or “more” claim; and • Have levels of ALA greater than 260 mg and less than 320 mg for “high” claim. In this analysis, we distinguish between levels of DHA greater than 32 mg and less than 130 mg and levels greater than 130 mg, because FDA received the notification for “high” claims for foods with more than 32 mg of DHA in January of 2005 and the notification for “high” claims for foods with more than 130 mg of DHA in January of 2004. The longer a claim has been in effect, the more likely that it is in use by manufacturers. More time allows manufacturers to integrate the label change with other packaging changes. Also, if a food is reformulated to meet claim requirements, it may take more time to test the new formulation and put it into the marketplace. In addition to label changes due to loss of claims, products that refer to the ALA daily value of 1.3 g have to alter their packaging to refer to the revised daily value of 1.6 g. FDA was not able to undertake a comprehensive review of labels in the marketplace to determine how many products currently have labels with an affected nutrient content claim. Instead, FDA went through a multi-step process to estimate the likely number of claims in the marketplace. 1. We determined which products are eligible to make a nutrient content claim. 2. We conducted an informal review of these products in local groceries and online groceries to determine if any were making an affected nutrient content claim. 3. We determined how many labels there were in the marketplace for each of the products eligible to make an affected nutrient content claim. 4. We estimated the number of products likely to make an affected claim based on the number of products in the marketplace, the results of the informal review, and the length of time the claim had been in effect. EPA and DHA occur naturally in some fish, with higher levels in fattier fish. Many dietary supplements, particularly fish oils, contain EPA and DHA. ALA is present in some nuts and nut oils, flaxseeds and flaxseed oil, vegetable oils, and in many prepared foods that include flaxseeds, nuts, or oils as an ingredient. We searched an online grocer for all packaged fish and seafood products and expanded this list by a review of all canned, frozen, and refrigerated fish and seafood products in the 1999 Infoscan supermarket scanner data collected by Information Resources, Inc.

(IRI)(Ref. 13). The IRI Infoscan supermarket scanner data provide very specific information on individual food items. Infoscan store tracking is based primarily on all-store, census scanner data, which are collected weekly from more than 32,000 supermarket, drug, and mass merchandiser outlets across the United States. For these products, we determined the average serving size for each product type, for example, 2 ounces

(oz)for canned tuna. We then used the United States Department of Agriculture

(USDA)National Nutrient Database for Standard Reference (Ref. 14) to determine the levels of EPA and/or DHA in a serving size of that food. USDA updates this database frequently. We used the most current version available when we calculated these numbers. However, we have not recalculated the numbers with each subsequent update because we do not expect that doing so would affect our estimates to any significant degree. Therefore, the benefit of recalculating the numbers would probably not justify the time and cost of doing so. We classified all products whose levels of EPA and/or DHA exceeded the threshold for a nutrient content claim as potential claim losers. Tables 1 and 2 of this document show the products and their levels of EPA and/or DHA. Table 2 reflects a 3-oz serving size for cooked fish. **Table 1.—DHA and/or EPA Levels of Canned Seafood and Fish** Canned Foods Serving Size DHA

(mg)EPA

(mg)EPA or DHA Eligible ≥ 130 mg DHA Eligible ≥ 32 mg EPA plus DHA Eligible ≥ 32 mg Herring 2 oz 668 550 Yes Yes Yes Mackerel 2 oz 452 246 Yes Yes Yes Caviar .5 oz 539 389 Yes Yes Yes Salmon 2 oz 459 481 Yes Yes Yes White Tuna in water 2 oz 358 133 Yes Yes Yes Sardines 2 oz 288 268 Yes Yes Yes Anchovies .5 oz 123 73 No Yes Yes Shrimp, mixed species 2 oz 126 146 Yes Yes Yes Oyster 2 oz 130 120 Yes Yes Yes Canned shrimp 3 oz 249 214 Yes Yes Yes Light Tuna in water 2 oz 127 27 No Yes Yes Crabmeat 2 oz 71 81 No Yes Yes White Tuna in oil 2 oz 101 38 No Yes Yes Light Tuna in oil 2 oz 58 15 No Yes Yes Gefiltefish 1.5 oz 19 32 No No Yes **Table 2.—DHA and/or EPA Levels of Frozen and Refrigerated Seafood and Fish** Frozen and Refrigerated Serving Size DHA

(mg)EPA

(mg)EPA or DHA Eligible ≥ 130 mg DHA Eligible ≥ 32 mg EPA plus DHA Eligible ≥ 32 mg Salmon 3 oz 1099 525 Yes Yes Yes Mackerel 3 oz 1016 555 Yes Yes Yes Tuna 3 oz 757 241 Yes Yes Yes Herring 3 oz 733 603 Yes Yes Yes Albacore Tuna 3 oz 535 198 Yes Yes Yes Trout 3 oz 449 172 Yes Yes Yes Sardines 3 oz 433 402 Yes Yes Yes Mussels 3 oz 430 235 Yes Yes Yes Pollock 3 oz 383 77 Yes Yes Yes Squid 3 oz 323 138 Yes Yes Yes Other (fish sticks) 6 sticks 216 144 Yes Yes Yes Halibut 3 oz 248 60 Yes Yes Yes Oyster 3 oz 245 225 Yes Yes Yes Sole/Flounder 3 oz 219 207 Yes Yes Yes Whiting 3 oz 200 241 Yes Yes Yes Shrimp 3 oz 189 219 Yes Yes Yes Grouper 3 oz 187 23 Yes Yes Yes Perch 3 oz 179 68 Yes Yes Yes Yellowfin Tuna 3 oz 154 31 Yes Yes Yes Haddock 3 oz 138 65 Yes Yes Yes Cod 3 oz 131 3 Yes Yes Yes Clams 3 oz 124 117 No Yes Yes Lobster 3 oz 118 290 Yes Yes Yes Catfish 3 oz 109 42 No Yes Yes Crab 3 oz 96 239 Yes Yes Yes Scallop 3 oz 92 76 No Yes Yes Octopus 3 oz 69 65 No Yes Yes Snapper 3 oz 43 3 No Yes Yes Gefiltefish/Whitefish/Pike 3 oz 38 63 No Yes Yes Crawfish 3 oz 23 99 No No Yes Orange Roughy 3 oz 2 2 No No No FDA was not able to carry out a similar systematic review of foods for ALA claims, because a much wider range of foods may meet the ALA claim. However, only a small proportion of foods have ALA levels between 130 and 160 mg (for “good source” and “more” claims) and ALA levels between 260 and 320 mg (for “high” claim), and therefore will lose their eligibility. In addition to foods that naturally contain these fatty acids, some manufacturers have been increasing the levels of ALA, EPA, or DHA in their products. Foods, such as eggs and milk, can be enriched with ALA, EPA, or DHA by manipulating the diet of chickens and cows, respectively. Also, manufacturers can add ALA to their products by including ingredients like flaxseed oil or ground flaxseed. To find ALA-, EPA-, or DHA-enriched foods, we searched the Internet using keyword searches and in local grocery stores. FDA searched three local grocery stores for products bearing claims involving ALA, EPA, or DHA. FDA found one new line of products making an ALA claim: pasta with ground flaxseeds to increase the ALA content. This product meets the level of ALA needed to make a “good source” ALA claim under both the 130 and 160 mg levels. FDA did not find any products making a “high” claim. However, the labels refer to an ALA daily value of 1.3 g, so they will have to be changed to reflect the 1.6 g daily value. FDA also searched the Internet to find food products that are likely to include a nutrient content claim. FDA found several brands of eggs, one with added DHA and many with added ALA. FDA reviewed 12 Web sites for ALA- or DHA-enriched eggs. In many cases the Web sites provided a picture of the egg carton, but did not give the full label information. For the ALA eggs, nutrition information on the Web site always emphasized the omega-3 content (which is appropriate on the label or in the labeling of the product as long as the statement does not in any way implicitly characterize the level of the nutrient in the food and it is not false or misleading in any respect (e.g., “100 mg omega-3 fatty acids per serving”) (21 CFR 101.13(i)(3)), not the specific ALA content. However, the Web site for the DHA-enriched eggs emphasized the DHA content and the DHA daily value established under the seafood processors notification. Based on the Internet review, FDA thinks it unlikely that any of the ALA-enriched eggs would be making an affected claim and likely that the DHA-enriched egg would make an affected claim. The DHA-enriched eggs included processed and shell eggs and were sold in six different packages. FDA also searched a major online drugstore that compiles dietary supplements sold by many other online retailers. This Web site also provided all the labeling information in the dietary supplement package. FDA searched for dietary supplements using the keywords EPA, DHA, fish oil, and ALA. The searches resulted in 53 hits for EPA, 49 hits for DHA, 55 hits for fish oil, and 48 hits for ALA. Many of the products in the searches overlapped. In reviewing these products, FDA found two dietary supplements making affected claims. Overall, these searches were limited and ad hoc and do not constitute a representative sample of the marketplace. Table 3 of this document presents the affected stock keeping units (SKUs). Every product and package size combination represents an SKU. Therefore, the number of SKUs corresponds to the number of product labels. **Table 3.—Claims Found in the Marketplace** Product Number of Manufacturers Number of SKUs Dietary supplements 2 2 Eggs 1 6 Pasta 1 6 Because FDA is unsure about whether the egg product that we identified actually makes a claim, the actual number of SKUs may be slightly lower than FDA indicates in Table 3 of this document. However, because our searches were not representative and we did not perform a comprehensive review of food labels, there are likely to be more claims in the marketplace than we were able to identify using the ad-hoc search procedure we discussed above. For the categories of food FDA was able to identify as containing more than the qualifying levels of EPA and/or DHA, FDA counted the number of SKUs in the 1999 IRI database by downloading all canned, frozen, and refrigerated seafood and fish from the database, then further breaking down these categories into types of seafood and fish using the information provided in each record. FDA only counted branded products, because private label brands make claims infrequently. In the IRI data, the type of fish is usually represented by an abbreviation in the product name, like “abtn” for albacore tuna. So, we counted the number of each type of fish using the abbreviations in the name provided by IRI. For some products, we were not able to identify the fish or we could not find data on the EPA and/or DHA contents. Most of the foods in the IRI data that did not specify the type of fish were breaded fish fillets or fish sticks. Therefore, for the “other” category of fish we assigned the usual serving size and EPA and DHA levels for fish sticks. Some fish and seafood had multiple levels of EPA and DHA in the USDA Nutrient Laboratory database, depending on the specific variety. If we were not able to determine the relevant type of fish or seafood, we used the median value in the database for the type of fish or seafood. Because 1999 is the most recent IRI data available to us, we needed to correct for changes in the marketplace since 1999. To do so, we used the USDA food disappearance data to estimate changes in the availability of seafood on the market between 1999 and 2003 (the most recent year for which data is available) (Ref. 15). FDA then adjusted the 1999 IRI data by the growth in the relevant seafood category. FDA made an additional adjustment to the count of potentially affected products based on the usual frequency of scheduled label changes. Table 4 of this document presents the proportion of branded SKUs that are typically redesigned within a given period of time. Therefore, FDA estimates that 67 percent of labels would have been redesigned in the timeframe since the seafood processors notification went into effect, 33 percent of the labels would have been redesigned since the Martek notification went into effect, and 5 percent of the labels would have been redesigned since the Ocean Nutrition notification went into effect. In tables 5 and 6 of this document, FDA presents an estimate of the number of labels

(SKUs)in the market currently eligible to make an EPA and/or DHA claim. Because foods eligible to make ALA claims include nuts and nut oils and flaxseed and flaxseed oils, as well as foods that include one of these sources as an ingredient, FDA was not able to estimate the number of foods eligible to make an ALA claim. However, only foods with between 130 mg and 160 mg of ALA or foods with between 260 mg and 320 mg of ALA will have a change in their eligibility status, which should be a relatively small number of the total number of eligible foods. Also, we do not count the number of packages of enriched foods because we did not have a comprehensive, up-to-date database of foods enriched with ALA, EPA, or DHA. **Table 4.—Frequency of Label Redesigns** Time period Proportion of SKUs 6-month 5 percent 12-month 33 percent 24-month 67 percent 36-month 100 percent **Table 5.—Number of Canned Foods Eligible to Make an EPA and/or DHA Claim** Canned Foods EPA or DHA Eligible at 130 mg DHA Eligible at 32 mg EPA plus DHA Eligible at 32 mg Adjusted SKUs Salmon Yes Yes Yes 335 Sardines Yes Yes Yes 282 Gefiltefish No No Yes 161 Light Tuna in water No Yes Yes 130 Shrimp, mixed species Yes Yes Yes 146 Anchovies No Yes Yes 116 Oyster Yes Yes Yes 111 Shrimp Yes Yes Yes 104 Crabmeat No Yes Yes 93 Herring Yes Yes Yes 93 Light Tuna in oil No Yes Yes 76 Mackerel Yes Yes Yes 84 White Tuna in water Yes Yes Yes 58 Caviar Yes Yes Yes 33 White Tuna in oil No Yes Yes 9 Number of SKUs eligible 1,246 1,540 1,701 Adjusted for time since eligibility 835 508 85 **Table 6.—Number of Frozen and Refrigerated Seafood and Fish Eligible to Make an EPA and/or DHA Claim** Frozen and Refrigerated EPA or DHA Eligible at 130 mg DHA Eligible at 32 mg EPA plus DHA Eligible at 32 mg Adjusted SKUs Shrimp Yes Yes Yes 1,272 Salmon Yes Yes Yes 329 Other Yes Yes Yes 116 Tuna Yes Yes Yes 249 Herring Yes Yes Yes 242 Oyster Yes Yes Yes 228 Crab Yes Yes Yes 155 Octopus No Yes Yes 160 Cod Yes Yes Yes 95 Lobster Yes Yes Yes 126 Scallop No Yes Yes 101 Whiting Yes Yes Yes 82 Clams No Yes Yes 75 Crawfish No No Yes 80 Albacore Tuna Yes Yes Yes 78 Sole/Flounder Yes Yes Yes 61 Catfish No Yes Yes 55 Haddock Yes Yes Yes 37 Squid Yes Yes Yes 43 Pollock Yes Yes Yes 31 Mussels Yes Yes Yes 39 Orange Roughy No No No 30 Gefiltefish/Whitefish/Pike No Yes Yes 19 Halibut Yes Yes Yes 17 Trout Yes Yes Yes 19 Perch Yes Yes Yes 18 Yellowfin Tuna Yes Yes Yes 7 Mackerel Yes Yes Yes 9 Snapper No Yes Yes 7 Grouper Yes Yes Yes 3 Sardines Yes Yes Yes 4 Number of SKUs eligible 3,335 3,677 3,757 Adjusted for time since eligibility 2,234 1,213 188 *Cost of Label Changes* Producers who will be affected by this rule are likely to go through several steps to modify their labels to come into compliance with the proposed requirements. The producers will do the following:

(1)Conduct administrative activities,

(2)alter the graphic design,

(3)conduct prepress activities, engrave plates or cylinders, and

(4)print and manufacture labels. Producers incur costs associated with each step of the process. The first step requires that producers read and develop a strategy to comply with the proposed requirements. Second, they will develop a new graphic design for the label that complies with the proposed requirements. Third, a prepress operator will convert the new design into printing plates or cylinders. Fourth, the new labels will be printed. The costs associated with label changes will also vary depending on whether the label change can be coordinated with a scheduled label change. There may be an additional inventory cost to producers if they have to dispose of already printed labels. FDA contracted with RTI International to estimate the costs of label changes to producers (Ref. 16). RTI estimated the costs associated with each of these steps, as well as the cost of discarded inventory of unused labels. Manufacturers regularly redesign their labels, so RTI only estimated a cost associated with the label change if the regulatory label change could not be done with a regularly scheduled label change. The estimated schedule for label changes is presented in table 4 of this table. Tables 7 and 8 present estimates of per SKU cost of a label change. **Table 7.—Cost of Label Change (per SKU) for Seafood and Pasta (in 2005 Dollars)** Canned Seafood Frozen Seafood Refrigerated Seafood Pasta Administrative $200 $200 $400 $500 Graphic $800 $900 $1,400 $1,600 Prepress $1,200 $500 $800 $900 Engraving $2,900 $700 $1,100 $1,300 Inventory $0 $0 $0 $0 Total $5,100 $2,300 $3,700 $4,300 **Table 8.—Cost of Label Change (per SKU) for Dietary Supplements and Eggs (in 2005 Dollars)** Dietary Supplement Liquid Dietary Supplement Pills Processed Eggs Shell Eggs Administrative $900 $900 $500 $500 Graphic $3,300 $2,200 $1,600 $1,600 Prepress $2,100 $2,100 $1,100 $1,100 Engraving $2,100 $2,100 $900 $900 Inventory $0 $100 $0 $500 Total $8,400 $7,400 $4,100 $4,600 Based on our ad hoc searching, it is clear that not all products eligible to make an affected claim are making a claim. Overall, we estimate that at least 14 product labels will have to be changed as a result of this rule. Table 9 of this document presents an estimate of the cost associated with known label changes. This is probably an underestimate of the labeling cost because FDA has not conducted a comprehensive review of food labels to identify the number of products bearing these claims and we have probably underestimated the number of such claims. However, we are uncertain about the true number of existing claims. **Table 9.—Lower Bound Estimate of Total Costs from Labeling Changes** Product Number of SKUs Cost of Label Change * Dietary supplements 2 $5,200 Eggs 6 $8,600 Pasta 6 $8,500 Total 14 $22,300 * Assumes 67 percent of label changes can be made with regularly scheduled label changes. To determine the number of dietary supplements that qualify for a nutrient content claim, FDA counted the number of dietary supplements that have fish oil, ALA, EPA, or DHA as an ingredient in the Dietary Supplement Sales Information database (Ref. 17). The Dietary Supplement Sales Information database is a survey of the ingredients in 3,000 dietary supplements. Based on a total count of 113 qualifying dietary supplements in the database, FDA estimates that the Internet review of dietary supplements covered approximately half of the qualifying dietary supplements, and so a likely estimate is that four dietary supplements would have to change their labels. In the search of local grocery stores, we reviewed approximately 200 fish and seafood packages. None of the labels we reviewed included an affected claim. However, it seems likely that each of the five companies that participated in notifications to FDA may make some nutrient content claim. Therefore, FDA estimates that it is likely that a label change would be required for six SKUs for each of the five manufacturers. FDA estimated 6 SKUs per manufacturer because the product lines identified for eggs and pasta that were making an affected nutrient content claim both included 6 SKUS. Finally, for the other two types of products we found that made a label claim, we estimate that, similar to dietary supplements, there are twice as many affected claims in the market. Table 10 of this document presents an estimate of the likely total cost of label changes. **Table 10.—Likely Estimate of Total Costs From Labeling Changes** Product Number of SKUs Cost of Label Change * Dietary supplements 4 $10,400 Notifiers 30 $39,200 Eggs 12 $17,200 Pasta 12 $17,000 Total 58 $83,800 * Assumes 67 percent of label changes can be made with regularly scheduled label changes *Health Effects* Benefits from a labeling rule typically arise from changes in consumption of nutrients, either increases in consumption of beneficial nutrients or decreases in consumption of detrimental nutrients. Consumption changes because the behavior of producers or consumers changes. Product reformulation, in which producers alter the composition of their product to qualify for a positive label claim or avoid a negative label statement, may lead to substantial changes in the consumption of certain beneficial nutrients. There may also be direct changes in consumer choices, if consumers purchase healthier food based on information they see on the label. Several studies have linked label use to improved diet (Refs. 18 and 19). The removal of nutrient content claims for EPA and/or DHA may result in reduced consumption of EPA and DHA under two scenarios. First, consumption of these nutrients may be reduced if consumers choose not to purchase and consume products because they do not have the prohibited nutrient content claims on the label. Second, producers might face reduced incentives to increase levels of EPA and DHA in products, which might lead some producers to a decision not to reformulate. A review of the literature on product reformulation in a report on modeling manufacturers' decision to reformulate finds evidence that increased provision of nutrition information on labels leads manufacturers to reformulate to make healthier products or to attempt to market new healthier products (Ref. 20). If the continued availability of nutrient content claims for EPA and/or DHA would have encouraged producers to increase levels of EPA and/or DHA, there may be additional reductions in consumption of EPA and/or DHA due to lower levels in the food supply. However, because the agency has yet to conduct a review of the scientific evidence concerning the health effects of consuming EPA and DHA at different levels, we cannot determine whether the loss of these claims would have any impact on consumer health, either beneficial or detrimental. Furthermore, FDA wishes to emphasize that this ruling does not affect the continuing availability of a qualified health claim that states, “Supportive but not conclusive research shows that consumption of EPA and DHA omega-3 fatty acids may reduce the risk of CHD. One serving of [Name of the food] provides [ ] gram of EPA and DHA omega-3 fatty acids. [See nutrition information for total fat, saturated fat, and cholesterol content.].” To make the qualified health claim, the product must contain EPA and DHA, and meet limits for cholesterol, saturated fat, total fat, and sodium and meet the 10 percent nutrient content requirement for vitamin C, vitamin A, iron, calcium, protein, or fiber (Ref. 21). Producers may opt to reformulate their products to use the qualified health claim. Therefore, FDA estimates the quantitative costs of this rule to be $83,800 due entirely to projected labeling changes, and potential non-quantified costs associated with a potential forgone decrease in risk of CHD resulting from a possible decrease in the consumption of EPA and/or DHA. *Benefits* This option would prevent consumers from mistakenly interpreting “high,” “good source,” and “more” claims relating to the level of EPA and/or DHA in food to imply that an authoritative scientific body has determined that consumers should consume a particular level of EPA and/or DHA per day. This, in turn, might prevent some consumers from forming an incorrect assessment of the relationship of the levels of EPA and/or DHA in particular foods to such recommended levels. This could generate a health benefit because if consumers base their consumption patterns on an incorrect assessment of the significance of the amount of EPA and/or DHA in particular foods, then they might change their consumption patterns in ways that could be detrimental to their health. For example, some consumers might believe they would not receive any additional benefit from consuming additional food containing EPA and/or DHA after eating a food that is labeled as being “high” in those nutrients even though they might actually benefit significantly from additional amounts of those nutrients. Alternatively, some consumers might believe that it is worthwhile to forgo a certain level of other nutrients in order to consume a food that is “high” level of EPA and/or DHA when, in fact, they could obtain nearly the same benefit from a food with less EPA and/or DHA. FDA does not have sufficient information to quantify this potential benefit. VI. The Paperwork Reduction Act of 1995 FDA tentatively concludes that this proposed rule contains no collection of information. Therefore clearance by OMB under the Paperwork Reduction Act of 1995 is not required. VII. Federalism Analysis FDA has analyzed this proposed rule in accordance with the principles set forth in Executive Order 13132. FDA has determined that the proposed rule, if finalized as proposed, would have a preemptive effect on State law. Section 4(a) of the Executive order requires agencies to “construe * * * a Federal Statute to preempt State law only where the statute contains an express preemption provision, there is some other clear evidence that the Congress intended preemption of State law, or where the exercise of State authority conflicts with the exercise of Federal authority under the Federal statute.” Section 403A of the act (21 U.S.C. 343-1) is an express preemption provision. In relevant part, section 403A(a)(5) of the act (21 U.S.C. 343-1(a)(5)) provides that: “* * * no State or political subdivision of a State may directly or indirectly establish under any authority or continue in effect as to any food in interstate commerce— * * *

(5)any requirement respecting any claim of the type described in section 403(r)(1) made in the label or labeling of food that is not identical to the requirement of section 403(r) * * *”. Currently, this provision operates to preempt States from imposing nutrient content claim labeling requirements concerning ALA, EPA, DHA, and EPA and DHA combined because no such requirements have been imposed by FDA under section 403(r) of the act. Under FDA's authority under section 403(r)(2)(H) of the act, the agency proposes to find that the requirements of section 403(r)(2)(G) have not been met with respect to the nutrient content claims for EPA and DHA in the seafood processors notification, the nutrient content claim for DHA in the Martek notification, and the nutrient content claim for EPA and DHA in the Ocean Nutrition notification. FDA also proposes to prohibit the nutrient content claims for ALA in the seafood processors notification. Although this proposed rule, if finalized as proposed, would have preemptive effect in that it would preclude States from promulgating any nutrient content claim labeling requirements for ALA, EPA, DHA, and EPA and DHA combined that are not identical to those required by this proposed rule, this preemptive effect would be consistent with what Congress set forth in section 403A of the act. Section 403A(a)(5) of the act displaces both state legislative requirements and state common law duties. *Medtronic* v. *Lohr, 518 U.S. 470, 503 (1996)* (Breyer, J., concurring in part and concurring in judgment); *id. at 510* (O'Connor, J., joined by Rehnquist, C.J., Scalia, J., and Thomas, J., concurring in part and dissenting in part); *Cipollone* v. *Liggett Group, Inc., 505 U.S. 504, 521 (1992)* (plurality opinion); *id. at 548-49* (Scalia, J., joined by Thomas, J., concurring in judgment in part and dissenting in part). FDA believes that the preemptive effect of the proposed rule, if finalized as a proposed, would be consistent with Executive Order 13132. Section 4(e) of the Executive order provides that “when an agency proposes to act through adjudication or rulemaking to preempt State law, the agency shall provide all affected State and local officials notice and an opportunity for appropriate participation in the proceedings.” FDA's Division of Federal and State Relations is inviting the States' participation in this rulemaking by providing notice via fax and e-mail transmission to State health commissioners, State agriculture commissioners, food program directors, and drug program directors as well as FDA field personnel of FDA's publication of the proposed rule prohibiting the nutrient content claims for ALA, EPA, DHA, and EPA and DHA combined set forth in the three FDAMA notifications received by FDA. The notice provides the States with further opportunity for input on the rule. It advises the States of FDA's publication of the proposed rule and encourages the States and local governments to review the notice of proposed rulemaking and to provide any comments to the docket (Docket No. 2004N-0217, 2005P-0189, or 2006P-0137). In conclusion, FDA has determined that the preemptive effects of this proposed rule, if finalized as proposed, are consistent with Executive Order 13132. VIII. Effective Date FDA is proposing to make this regulation effective on the uniform compliance date for food labeling regulations established by the agency that is applicable to the publication date of the final rule. IX. Comments Interested persons may submit to the Division of Dockets Management (see ADDRESSES ) written or electronic comments regarding this document. Submit a single copy of electronic comments or two paper copies of any mailed comments, except that individuals may submit one paper copy. Comments are to be identified with the docket number found in brackets in the heading of this document. Received comments may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday. Please note that in January 2008, the FDA Web site is expected to transition to the Federal Dockets Management System (FDMS). FDMS is a Government-wide, electronic docket management system. After the transition date, electronic submissions will be accepted by FDA through the FDMS only. When the exact date of the transition to FDMS is known, FDA will publish a **Federal Register** notice announcing that date. X. References The following references have been placed on display in the Division of Dockets Management (see ADDRESSES ) and may be seen between 9 a.m. and 4 p.m., Monday through Friday, except on Federal Government holidays. (FDA has verified the Web site addresses, but is not responsible for any subsequent changes to the Web sites after this document publishes in the **Federal Register** .) 1. Institute of Medicine of the National Academies, “Dietary Reference Intakes for Energy, Carbohydrate, Fiber, Fat, Fatty Acids, Cholesterol, Protein, and Amino Acids,” Summary, Chapter 8, and Chapter 11, the National Academies Press, Washington, DC, 2005. 2. Institute of Medicine of the National Academies, Prepublication Copy, “Dietary Reference Intakes for Energy, Carbohydrate, Fiber, Fat, Fatty Acids, Cholesterol, Protein, and Amino Acids,” Summary, Chapter 8, and Chapter 11, the National Academies Press, Washington, DC, 2002. 3. Carpenter, K.J. and A.E. Harper, “Evolution of Knowledge of Essential Nutrients,” in *Modern Nutrition in Health and Disease* , Eds. M.E. Shils, M. Shike, A.C. Ross, B. Caballero, and R.J. Cousins, Philadelphia, P.A.: Lippincott Williams & Wilkins, p. 7, 2006. 4. Stryer, L., *Biochemistry* , Fourth Edition, New York: W.H. Freeman and Co., p. 604, 1995. 5. Alaska General Seafoods, Ocean Beauty Seafoods, Inc., and Trans-Ocean Products, Inc. “Notification for a Nutrient Content Claim Based on an Authoritative Statement,” Item CP1, Docket No. 2004N-0217, Division of Dockets Management, May 15, 2004. 6. U.S. Food and Drug Administration, “Nutrient Content Claims Notification for Choline Containing Foods,” ( *http://www.cfsan.fda.gov/~dms/flcholin.html* ) August 30, 2001. 7. Institute of Medicine of the National Academies, “Dietary Reference Intakes for Thiamin, Riboflavin, Niacin, Vitamin B6, Folate, Vitamin B12, Pantothenic Acid, Biotin, and Choline,” the National Academies Press, Washington, DC, pp. 390 to 422, 1998. 8. Institute of Medicine of the National Academies, “Dietary Reference Intakes: Guiding Principles for Nutrition Labeling and Fortification,” the National Academies Press, Washington, DC, pp. 82 to 95, 2003. 9. Martek Biosciences Corporation, “Notification for a Nutrient Content Claim Based on an Authoritative Statement,” Item CP1, Docket 2005P-0189, Division of Dockets Management, May 23, 2005. 10. Ocean Nutrition Canada, “Notification for a Nutrient Content Claim Based on an Authoritative Statement,” Item CP1, Docket No. 2006P-0137, Division of Dockets Management, December 9, 2005. 11. A letter from William K. Hubbard, FDA to Jonathan W. Emord, Esq., Emord & Associates, P.C., ( *http://www.cfsan.fda.gov/~dms/ds-ltr38.html* ), September 8, 2004. 12. A letter from William K. Hubbard, FDA to Martin J. Hahn, Esq., Hogan & Hartson, L.L.P., ( *http://www.cfsan.fda.gov/~dms/ds-ltr37.html* ), September 8, 2004. 13. Information Resources, Inc., (IRI), download, ( *http://www.infores.com/public/us/content/infoscan/fooddrugmass.htm* ), 1999. 14. U.S. Department of Agriculture, Agricultural Research Service, USDA National Nutrient Database for Standard Reference, Release 17, Nutrient Data Laboratory Home Page (http://www.nal.usda.gov/fnic/foodcomp), 2004. 15. U.S. Department of Agriculture Economic Research Service, Food Consumption Data System (http://www.ers.usda.gov/data/foodconsumption/Index.htm), 2005. 16. RTI International, “FDA Labeling Cost Model,” Prepared for FDA, January, 2003. 17. RTI International, “Dietary Supplement Sales Information,” Prepared for FDA, October 1999. 18. Neuhouser, M.L., A.R. Kristal, and R.E. Patterson, “Use of Food Nutrition Labels Associated with Lower Fat Intake,” *Journal of the American Dietetic Association* , vol. 53, pp. 45 to 50, 53, 1999. 19. Kim, S., R.M. Nayga, Jr., and O. Capps, Jr., “The Effect of Food Label Use on Nutrient Intakes: An Endogenous Switching Regression Analysis,” *Journal of Agricultural and Resource Economics* , vol. 25, pp. 215 to 231, 2000. 20. RTI International, “Modeling the Decision to Reformulate Food and Cosmetics,” Prepared for FDA, October 2003. 21. U.S. Food and Drug Administration, “Summary of Qualified Health Claims Permitted,” Accessed at *http://www.cfsan.fda.gov/~dms/qhc-sum.html#omega3* on September 26, 2005. Dated: November 19, 2007. Jeffrey Shuren, Assistant Commissioner for Policy. [FR Doc. E7-22991 Filed 11-26-07; 8:45 am] BILLING CODE 4160-01-S DEPARTMENT OF JUSTICE Drug Enforcement Administration 21 CFR PART 1305 [Docket No. DEA—303P] RIN 1117-AB15 New Single-Sheet Format for U.S. Official Order Form for Schedule I and II Controlled Substances (DEA Form 222) AGENCY: Drug Enforcement Administration (DEA), Department of Justice. ACTION: Notice of proposed rulemaking. SUMMARY: The Drug Enforcement Administration

(DEA)is proposing to amend its regulations to implement a new format for order forms (DEA Form 222) which are issued by DEA to DEA registrants to allow them to order schedule I and/or II controlled substances. The present format utilizes a three-part, carbon-copy form with Copies 2 and 3 replicating Copy 1. The proposed format will employ a single-sheet form. The new form will have enhanced security features and will be easier for DEA registrants to use. DATES: Written comments must be postmarked, and electronic comments must be sent, on or before January 28, 2008. ADDRESSES: To ensure proper handling of comments, please reference “Docket No. DEA-303P” on all written and electronic correspondence. Written comments being sent via regular mail should be sent to the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, Washington, DC 20537, *Attention:* DEA Federal Register Representative/ODL. Written comments sent via express mail should be sent to DEA Headquarters, *Attention:* DEA Federal Register Representative/ODL, 8701 Morrissette Drive, Springfield, VA 22152. Comments may be sent directly to DEA electronically by sending an electronic message to *dea.diversion.policy@usdoj.gov* . Comments may also be sent electronically through *http://www.regulations.gov* using the electronic comment form provided on that site. An electronic copy of this document is also available at the *http://www.regulations.gov* Web site. DEA will accept electronic comments containing MS Word, WordPerfect, Adobe PDF, or Excel files only. DEA will not accept any file format other than those specifically listed here. *Posting of Public Comments:* Please note that all comments received are considered part of the public record and made available for public inspection online at *http://www.regulations.gov* and in the Drug Enforcement Administration's public docket. Such information includes personal identifying information (such as your name, address, etc.) voluntarily submitted by the commenter. If you want to submit personal identifying information (such as your name, address, etc.) as part of your comment, but do not want it to be posted online or made available in the public docket, you must include the phrase “PERSONAL IDENTIFYING INFORMATION” in the first paragraph of your comment. You must also place all the personal identifying information you do not want posted online or made available in the public docket in the first paragraph of your comment and identify what information you want redacted. If you want to submit confidential business information as part of your comment, but do not want it to be posted online or made available in the public docket, you must include the phrase “CONFIDENTIAL BUSINESS INFORMATION” in the first paragraph of your comment. You must also prominently identify confidential business information to be redacted within the comment. If a comment has so much confidential business information that it cannot be effectively redacted, all or part of that comment may not be posted online or made available in the public docket. Personal identifying information and confidential business information identified and located as set forth above will be redacted and the comment, in redacted form, will be posted online and placed in the Drug Enforcement Administration's public docket file. If you wish to inspect the agency's public docket file in person by appointment, please see the FOR FURTHER INFORMATION CONTACT paragraph. FOR FURTHER INFORMATION CONTACT: Mark W. Caverly, Chief, Liaison and Policy Section, Office of Diversion Control, Drug Enforcement Administration, Washington, DC 20537, Telephone

(202)307-7297. SUPPLEMENTARY INFORMATION: Background Legal Authority The Drug Enforcement Administration

(DEA)administers the Controlled Substances Act

(CSA)(21 U.S.C. 801 *et seq.* ) as amended. DEA regulations implementing this statute are published in Title 21 of the Code of Federal Regulations (CFR), Parts 1300 to 1316. These regulations are designed to establish a framework for the legal distribution of controlled substances to ensure that there is a sufficient supply of these drugs for legitimate medical purposes while deterring their diversion to illegal purposes. Controlled substances are those substances listed in the schedules of the CSA and 21 CFR 1308.11-1308.15, and generally include narcotics, stimulants, depressants, hallucinogens, and anabolic steroids that have potential for abuse and physical and psychological dependence. Controlled substances are divided into five schedules. Schedule I substances are drugs which have a high potential for abuse and no currently accepted medical use in treatment in the United States. They may be used only for research, chemical analysis, or manufacture of other drugs. Schedule II substances have legitimate medical uses, but a high potential for abuse and physical and psychological dependence, and are subject to more stringent controls than other legitimate controlled substances. Schedule III through V substances have legitimate medical uses; however, they have a lower potential for abuse and physical and psychological dependence than do schedule II controlled substances. The CSA and DEA regulations require that persons involved in the manufacture, distribution, research, dispensing, import, and export of controlled substances register with DEA, keep track of all stocks of controlled substances, and maintain records to account for all controlled substances received, distributed, or otherwise disposed of. The overall goal of the CSA and its implementing regulations is to provide a closed distribution system so that a controlled substance is at all times under the legal control of a person registered, or specifically exempted from registration, by the Drug Enforcement Administration until it reaches the ultimate user or is destroyed. DEA achieves this goal by registering manufacturers, distributors, reverse distributors, dispensers, researchers, importers and exporters of controlled substances. Thus, any movement of controlled substances between these registered persons is covered by DEA regulations. Order Forms The CSA requires that schedule I and II controlled substances be distributed only pursuant to a written order made by the purchaser on a form issued by the Attorney General, (21 U.S.C. 828). This responsibility has been delegated to the Administrator of DEA (28 CFR 0.100) and redelegated to the Deputy Assistant Administrator of the DEA Office of Diversion Control (28 CFR 0.104; Appendix to Subpart R, § 7). DEA uses these order forms to allow better tracking of all distributions of schedule I and II controlled substances. As stated previously, order forms are required for schedule I and II controlled substances because they have a higher potential for abuse and physical and psychological dependence than schedule III through V controlled substances. The order forms are issued to DEA registrants to allow them to purchase controlled substances. The order forms are designated as DEA Form 222. The law and regulations require that DEA preprint certain information on these order forms including the name, address, and DEA number of the registrant, the authorized activity, and the schedules of the registrant (21 U.S.C. 828, 21 CFR 1305.11). Order forms are triplicate forms, printed on interleaved carbon sheets. Whenever a DEA registrant wishes to acquire a schedule I and/or II controlled substance, that registrant must annotate on the order form the name and address of the supplying DEA registrant, the date requested, the number of packages of controlled substance ordered, the size of the package of the controlled substance ordered, and the name of the controlled substance ordered. The purchaser retains one copy (Copy 3) of the form and sends two copies to the supplier so that the order for a controlled substance can be filled. The supplier annotates the form by entering the actual number of packages of the controlled substance(s) shipped and the actual date shipped. The supplier retains one copy (Copy 1) of the order form sent to him/her by the purchaser, and sends the other copy (Copy 2) of the form to the DEA Special Agent in Charge in the area where the supplier is located. Upon receiving the controlled substances, the purchaser annotates on its copy of the order form the number of packages of the controlled substance(s) ordered which are actually received and the actual date received. Both the purchaser and the supplier are required to preserve their respective copy of the order form for two years and make it available to officials of the DEA for inspection, if requested. Need for New Form The proposed new format for DEA Form 222 will employ a single-sheet form. In executing a transaction of a schedule I and/or II controlled substance, a DEA registrant will process the new single-sheet form in a similar manner to the processing of the current three-part form. The change in processing will be that the single-sheet form will have to be copied rather than having the copies pre-printed. DEA will continue to preprint and issue the original form. The new form is being initiated to improve security and to allow better ease in handling. The new form will have enhanced security features over the current three-part form. DEA will preprint the new form on sturdier paper with a special embedded watermark of the DEA emblem making it more difficult to copy for counterfeit purposes. If photocopied, the photocopy of the new form will display the DEA emblem and the statement “Copy” to hinder counterfeiting. It is anticipated that the new form will be more convenient for DEA registrants to utilize. The old three-part form format was created more than thirty years ago and the processing of a transaction with carbon copies is an outdated concept. Today, new office technology exists such as laser printers and photocopiers which will allow DEA registrants greater ease in utilizing the single-sheet form. The single-sheet form will be beneficial for DEA as well. The equipment used to print the interleaved carbon forms is old, and finding replacement parts and otherwise maintaining the equipment is costly, difficult, and time-consuming. Transition From Old to New Format If this regulation is finalized as proposed, once the new single-sheet form is in use, the current three-part form will be phased out, and eventually will no longer be issued by DEA. DEA registrants will be allowed to exhaust their supply of the old three-part forms as part of the transition. To effect a smooth transition, DEA registrants will be allowed to continue to order the current three-part form for at least one year once the new single-sheet form is introduced. Approximately two years after the establishment of the new single-sheet format, the old three-part form will be totally discontinued. Thus, business firms will have time to shift their processes to accommodate the new form. Revision of DEA Regulations to Accommodate Single Sheet DEA Form 222 DEA proposes to amend its regulations pertaining to orders for schedule I and II controlled substances to allow for the transition from the three-part form to the single-sheet form of DEA Form 222. Initially, the new procedures for the single-sheet format will exist alongside the existing procedures for the three-part form. Eventually, in a later rulemaking, the procedures detailing the use of the three-part form will be deleted from the regulations. DEA is amending its regulations to reflect the fact that only one original DEA Form 222 will be provided to purchasing registrants by DEA. Registrants purchasing schedule I and II controlled substances will now be required to make a copy of the form and send the original to their supplier for filling. It is important to note that the process for handling the DEA Form 222 remains unchanged. The only difference made by these proposed amendments is to require registrants to make photocopies of the form, rather than having DEA provide an original and two carbon copies. Other Minor Regulatory Changes In addition to the changes discussed above, DEA is proposing several minor regulatory changes as part of this rulemaking, as discussed below. Currently, interleaved triplicate order forms are produced in books, with each book containing 7 order forms. The new single-sheet form will not be produced in books, giving DEA and registrants greater flexibility regarding the number of order forms to be requisitioned. Therefore, in § 1305.11, DEA is proposing to modify the language regarding the new single-sheet DEA Form 222 to indicate that a predetermined number of order forms, based on the business activity of the registrant, will be issued, rather than books of 7 order forms. In § 1305.12, DEA is proposing to add to the list of acceptable methods for filling out a DEA Form 222 use of a computer printer, in addition to the existing typewriter, pen, or indelible pencil. Regulatory Certifications Regulatory Flexibility Act The Deputy Assistant Administrator hereby certifies that this rulemaking has been drafted in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), and by approving it certifies that this regulation will not have a significant economic impact upon a substantial number of small entities. This rule proposes that DEA regulations be amended to implement a new format for order forms (DEA Form 222) which are issued by DEA to DEA registrants to allow them to order schedule I and/or II controlled substances. The present format utilizes a three-part, carbon-copy form with Copies 2 and 3 replicating Copy 1. The proposed format will employ a single-sheet form, which will incorporate additional security features and will be easier for DEA registrants to use. Executive Order 12866 The Deputy Assistant Administrator further certifies that this rulemaking has been drafted in accordance with the principles of Executive Order 12866 Section 1(b). It has been determined that this is a significant regulatory action. Therefore, this action has been reviewed by the Office of Management and Budget. Executive Order 12988 The Deputy Assistant Administrator further certifies that this regulation meets the applicable standards set forth in Sections 3(a) and 3(b)(2) of Executive Order 12988. Executive Order 13132 This rulemaking does not preempt or modify any provision of State law; nor does it impose enforcement responsibilities on any State; nor does it diminish the power of any State to enforce its own laws. Accordingly, this rulemaking does not have federalism implications warranting the application of Executive Order 13132. Unfunded Mandates Reform Act of 1995 This rule will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $120,000,000 or more (adjusted for inflation) in any one year, and will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995. Paperwork Reduction Act Although this rule establishes a new DEA Form 222, it does not affect the time necessary to complete the collection of information nor the persons required to use DEA Form 222 in the ordering of schedule I and II controlled substances. Nor does the revision of the design of the form—use of triplicate interleaved sheets versus single sheet—revise the fields contained on the form. The new form does not collect any new information or modify any existing information being collected. Accordingly, revisions to the DEA information collection entitled “U.S. Official Order Forms for Schedule I and II Controlled Substances (Accountable Forms), Order Form Requisition” (OMB approval number 1117-0010) are not necessary. Congressional Review Act This rule is not a major rule as defined by Section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996 (Congressional Review Act). This rule will not result in an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets. List of Subjects in 21 CFR Part 1305 Drug traffic control, Reporting requirements. For the reasons set forth above, 21 CFR part 1305 is proposed to be amended as follows: PART 1305—ORDERS FOR SCHEDULE I AND II CONTROLLED SUBSTANCES [AMENDED] 1. The authority citation for part 1305 continues to read as follows: Authority: 21 U.S.C. 821, 828, and 871, unless otherwise noted. 2. Section 1305.11 is amended by revising paragraphs

(a)and

(b)to read as follows: § 1305.11 Procedure for obtaining DEA Forms 222. (a)(1) Except as provided in paragraph (a)(2) of this section, DEA Forms 222 are issued in mailing envelopes containing seven forms, each form containing an original, duplicate, and triplicate copy (respectively, Copy 1, Copy 2, and Copy 3) (hereafter referred to as the “triplicate” form). A limit, which is based on the business activity of the registrant, will be imposed on the number of DEA Forms 222 which will be furnished on any requisition, unless additional forms are specifically requested and a reasonable need for such additional forms is shown.

(2)DEA Forms 222 are issued in mailing envelopes containing a predetermined number of forms based on the business activity of the registrant, each form consisting of one single-sheet (hereafter referred to as the “single sheet” form). A limit, which is based on the business activity of the registrant, will be imposed on the number of DEA Forms 222 which will be furnished on any requisition unless additional forms are specifically requested and a reasonable need for such additional forms is shown.

(b)Any person applying for a registration that would entitle him or her to obtain a DEA Form 222 may requisition the forms by so indicating on the application or renewal form; a DEA Form 222 will be supplied upon the registration of the applicant. Any person holding a registration entitling him or her to obtain a DEA Form 222 may requisition the forms for the first time by contacting any Division Office or the Registration Section of the Administration. Any person already holding a DEA Form 222 may requisition additional forms by contacting any Division Office or the Registration Section of the Administration. 3. Section 1305.12 is amended by revising paragraph

(a)to read as follows: § 1305.12 Procedure for executing DEA Forms 222. (a)(1) A purchaser must prepare and execute a triplicate DEA Form 222 simultaneously in triplicate by means of interleaved carbon sheets that are part of the DEA Form 222. DEA Form 222 must be prepared by use of a typewriter, computer printer, pen, or indelible pencil.

(2)A purchaser must prepare a single sheet DEA Form 222 by use of a typewriter, computer printer, pen, or indelible pencil. 4. Section 1305.13 is amended by revising paragraphs (a), (b), (d), and

(e)to read as follows: § 1305.13 Procedure for filling DEA Forms 222. (a)(1) A purchaser must submit Copy 1 and Copy 2 of the triplicate DEA Form 222 to the supplier and retain Copy 3 in the purchaser's files.

(2)A purchaser must submit the original of the single sheet DEA Form 222 to the supplier and retain a copy in the purchaser's files. (b)(1) For the triplicate DEA Form 222, a supplier may fill the order, if possible and if the supplier desires to do so, and must record on Copies 1 and 2 the number of commercial or bulk containers furnished on each item and the date on which the containers are shipped to the purchaser. If an order cannot be filled in its entirety, it may be filled in part and the balance supplied by additional shipments within 60 days following the date of the DEA Form 222. No DEA Form 222 is valid more than 60 days after its execution by the purchaser, except as specified in paragraph

(f)of this section.

(2)For the single sheet DEA Form 222, a supplier may fill the order, if possible and if the supplier desires to do so, and must record on the original and a copy the number of commercial or bulk containers furnished on each item and the date on which the containers are shipped to the purchaser. If an order cannot be filled in its entirety, it may be filled in part and the balance supplied by additional shipments within 60 days following the date of the DEA Form 222. No DEA Form 222 is valid more than 60 days after its execution by the purchaser, except as specified in paragraph

(f)of this section. (d)(1) The supplier must retain Copy 1 of the triplicate DEA Form 222 for his or her files and forward Copy 2 to the Special Agent in Charge of the Drug Enforcement Administration in the area in which the supplier is located. Copy 2 must be forwarded at the close of the month during which the order is filled. If an order is filled by partial shipments, Copy 2 must be forwarded at the close of the month during which the final shipment is made or the 60-day validity period expires.

(2)The supplier must retain the original of the single sheet DEA Form 222 for his or her files and forward a copy to the Special Agent in Charge of the Drug Enforcement Administration in the area in which the supplier is located. The copy must be forwarded at the close of the month during which the order is filled. If an order is filled by partial shipments, the copy must be forwarded at the close of the month during which the final shipment is made or the 60-day validity period expires. (e)(1) The purchaser must record on Copy 3 of the triplicate DEA Form 222 the number of commercial or bulk containers furnished on each item and the dates on which the containers are received by the purchaser.

(2)The purchaser must record on its copy of the single sheet DEA Form 222 the number of commercial or bulk containers furnished on each item and the dates on which the containers are received by the purchaser. 5. Section 1305.14 is amended by revising paragraph

(a)to read as follows: § 1305.14 Procedure for endorsing DEA Forms 222. (a)(1) A triplicate DEA Form 222, made out to any supplier who cannot fill all or a part of the order within the time limitation set forth in § 1305.13, may be endorsed to another supplier for filling. The endorsement must be made only by the supplier to whom the DEA Form 222 was first made, must state (in the spaces provided on the reverse sides of Copies 1 and 2 of the triplicate DEA Form 222) the name and address of the second supplier, and must be signed by a person authorized to obtain and execute DEA Forms 222 on behalf of the first supplier. The first supplier may not fill any part of an order on an endorsed form. The second supplier may fill the order, if possible and if the supplier desires to do so, in accordance with § 1305.13(b), (c), and (d), including shipping all substances directly to the purchaser.

(2)A single-sheet DEA Form 222, made out to any supplier who cannot fill all or a part of the order within the time limitation set forth in § 1305.13, may be endorsed to another supplier for filling. The endorsement must be made only by the supplier to whom the DEA Form 222 was first made, must state (in the spaces provided in Part 2 on the original DEA Form 222 and on the copy to be sent to DEA) the name and address of the second supplier, and must be signed by a person authorized to obtain and execute DEA Forms 222 on behalf of the first supplier. The first supplier may not fill any part of an order on an endorsed form. The second supplier may fill the order, if possible and if the supplier desires to do so, in accordance with § 1305.13(b), (c), (d), including shipping all substances directly to the purchaser. 6. Section 1305.15 is amended by revising paragraphs

(b)and

(d)to read as follows: § 1305.15 Unaccepted and defective DEA Forms 222. (b)(1) If a triplicate DEA Form 222 cannot be filled for any reason under this section, the supplier must return Copies 1 and 2 to the purchaser with a statement as to the reason (e.g. illegible or altered).

(2)If a single-sheet DEA Form 222 cannot be filled for any reason under this section, the supplier must return the original copy to the purchaser with a statement as to the reason (e.g. illegible or altered). (d)(1) When a purchaser receives an unaccepted order, Copies 1 and 2 of the triplicate DEA Form 222 and the statement must be attached to Copy 3 and retained in the files of the purchaser in accordance with § 1305.17. A defective DEA Form 222 may not be corrected; it must be replaced by a new DEA Form 222 for the order to be filled.

(2)When a purchaser receives an unaccepted order, the original of the single-sheet DEA Form 222 and the statement must be retained in the files of the purchaser in accordance with § 1305.17. A defective DEA Form 222 may not be corrected; it must be replaced by a new DEA Form 222 for the order to be filled. 7. Section 1305.16 is amended by revising paragraph

(a)to read as follows: § 1305.16 Lost and stolen DEA Forms 222. (a)(1) If a purchaser ascertains that an unfilled triplicate DEA Form 222 has been lost, he or she must execute another in triplicate and attach a statement containing the serial number and date of the lost form, and stating that the goods covered by the first DEA Form 222 were not received through loss of that DEA Form 222. Copy 3 of the second form and a copy of the statement must be retained with Copy 3 of the DEA Form 222 first executed. A copy of the statement must be attached to Copies 1 and 2 of the second DEA Form 222 sent to the supplier. If the first DEA Form 222 is subsequently received by the supplier to whom it was directed, the supplier must mark upon the face “Not accepted” and return Copies 1 and 2 to the purchaser, who must attach it to Copy 3 and the statement.

(2)If a purchaser ascertains that an unfilled single-sheet DEA Form 222 has been lost, he or she must execute another and attach a statement containing the serial number and date of the lost form, and stating that the goods covered by the first DEA Form 222 were not received through loss of that DEA Form 222. A copy of the second form and a copy of the statement must be retained with a copy of the DEA Form 222 first executed. A copy of the statement must be attached to a copy of the second DEA Form 222 sent to the supplier. If the first DEA Form 222 is subsequently received by the supplier to whom it was directed, the supplier must mark upon the face “Not accepted” and return it (“the original”) to the purchaser, who must attach it to the statement. 8. Section 1305.17 is amended by revising paragraphs (a), (b), and

(c)to read as follows: § 1305.17 Preservation of DEA Forms 222. (a)(1) The purchaser must retain Copy 3 of each executed triplicate DEA Form 222 and all copies of unaccepted or defective forms with each statement attached.

(2)The purchaser must retain a copy of each executed single-sheet DEA Form 222 and all copies of unaccepted or defective forms with each statement attached. (b)(1) The supplier must retain Copy 1 of each triplicate DEA Form 222 that it has filled.

(2)The supplier must retain the original of each single-sheet DEA Form 222 that it has filled. (c)(1) Triplicate DEA Forms 222 must be maintained separately from all other records of the registrant. DEA Forms 222 are required to be kept available for inspection for a period of two years. If a purchaser has several registered locations, the purchaser must retain Copy 3 of the executed triplicate DEA Form 222 and any attached statements or other related documents (not including unexecuted DEA Forms 222, which may be kept elsewhere under § 1305.12 (e)), at the registered location printed on the DEA Form 222.

(2)Single-sheet DEA Forms 222 must be maintained separately from all other records of the registrant. DEA Forms 222 are required to be kept available for inspection for a period of two years. If a purchaser has several registered locations, the purchaser must retain a copy of the executed single-sheet DEA Form 222 and any attached statements or other related documents (not including unexecuted DEA Forms 222, which may be kept elsewhere under § 1305.12 (e)), at the registered location printed on the DEA Form 222. 9. Section 1305.19 is revised to read as follows: § 1305.19 Cancellation and voiding of DEA Forms 222. (a)(1) A purchaser may cancel part or all of an order on a triplicate DEA Form 222 by notifying the supplier in writing of the cancellation. The supplier must indicate the cancellation on Copies 1 and 2 of the triplicate DEA Form 222 by drawing a line through the canceled items and printing “canceled” in the space provided for the number of items shipped.

(2)A purchaser may cancel part or all of an order on a single-sheet DEA Form 222 by notifying the supplier in writing of the cancellation. The supplier must indicate the cancellation on the original copy of the DEA Form 222 sent by the purchaser to the supplier by drawing a line through the canceled items and printing “canceled” in the space provided for the number of items shipped. (b)(1) A supplier may void part or all of an order on a triplicate DEA Form 222 by notifying the purchaser in writing of the voiding. The supplier must indicate the voiding in the manner prescribed for cancellation in paragraph (a)(1) of this section.

(2)A supplier may void part or all of an order on a single-sheet DEA Form 222 by notifying the purchaser in writing of the voiding. The supplier must indicate the voiding in the manner prescribed for cancellation in paragraph (a)(2) of this section. Dated: November 17, 2007. Joseph T. Rannazzisi, Deputy Assistant Administrator, Office of Diversion Control. [FR Doc. E7-22984 Filed 11-26-07; 8:45 am] BILLING CODE 4410-09-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 167 [USCG-2007-0057] Port Access Route Study of Potential Vessel Routing Measures To Reduce Vessel Strikes of North Atlantic Right Whales; Correction AGENCY: Coast Guard, DHS. ACTION: Notice of study; request for comments; correction. SUMMARY: The Coast Guard is correcting a notice of study and request for comments that appeared in the **Federal Register** on November 19, 2007 (72 FR 64968). That notice informed the public the Coast Guard is conducting a Port Access Route Study

(PARS)on the area east and south of Cape Cod, Massachusetts, to include the northern right whale critical habitat, mandatory ship reporting system area, and the Great South Channel including Georges Bank out to the exclusive economic zone

(EEZ)boundary. The purpose of the PARS is to analyze potential vessel routing measures that might help reduce ship strikes with the highly endangered North Atlantic right whale while minimizing any adverse effects on vessel operations. The recommendations of the study will inform the Coast Guard and may lead to appropriate international actions. DATES: Comments and related material must reach the Docket Management Facility on or before January 18, 2008. FOR FURTHER INFORMATION CONTACT: If you have questions on the notice of study, call Mr. George Detweiler, Coast Guard Division of Navigation Systems, 202-372-1566, or send e-mail to *George.H.Detweiler@uscg.mil.* If you have questions on viewing or submitting material to the docket, call Ms. Renee K. Wright, Program Manager, Docket Operations, telephone 202-366-9826. SUPPLEMENTARY INFORMATION: In **Federal Register** Volume 72, Number 222, appearing on page 64969 on Monday, November 19, 2007, the following correction is made: 1. On page 64969, in the third column, under *“What are the timeline, study area, and processes of this PARS?”,* remove the words “and must be completed by December 2007.” Dated: November 20, 2007. Stefan G. Venckus, Chief, Office of Regulations and Administrative Law, United States Coast Guard. [FR Doc. E7-23050 Filed 11-26-07; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF THE INTERIOR Fish and Wildlife Service 50 CFR Part 17 RIN 1018-AU86 Endangered and Threatened Wildlife and Plants; Designation of Critical Habitat for Acanthomintha ilicifolia (San Diego Thornmint) AGENCY: Fish and Wildlife Service, Interior. ACTION: Proposed rule; reopening of comment period, corrections to proposed critical habitat, notice of availability of draft economic analysis, and amended Required Determinations. SUMMARY: We, the U.S. Fish and Wildlife Service (Service), announce the reopening of the comment period on the proposed designation of critical habitat for *Acanthomintha ilicifolia* (San Diego thornmint) under the Endangered Species Act of 1973, as amended (Act). We also announce corrections to proposed critical habitat subunits 3C, 3D, 3F, 4A, 4B, and 4C as described in the preamble to the proposed rule published in the **Federal Register** on March 14, 2007 (72 FR 11946); announce the availability of the draft economic analysis for the proposed critical habitat designation; and announce amended Required Determinations for the proposal. The draft economic analysis provides information about the pre-designation costs and forecasts post-designation costs associated with conservation efforts for *Acanthomintha ilicifolia.* The draft economic analysis estimates potential future costs to be approximately $0.6 to $2.8 million in undiscounted dollars over a 20-year period in areas proposed as final critical habitat and approximately $1.6 to $5.1 million in undiscounted dollars over a 20-year period in areas proposed for exclusion from critical habitat under section 4(b)(2) of the Act. The amended Required Determinations section provides our determination concerning compliance with applicable statutes and Executive orders that we have deferred until the information from the draft economic analysis of the proposal was available. We are reopening the comment period to allow all interested parties an opportunity to comment simultaneously on the proposed rule, corrections to the preamble of the proposed rule, the associated draft economic analysis, and the amended Required Determinations section. Comments previously submitted need not be resubmitted as they will be incorporated into the public record as part of this comment period and will be fully considered in preparation of the final rule. DATES: We will accept public comments until December 27, 2007. ADDRESSES: If you wish to comment, you may submit your comments and materials by any one of several methods:

(1)*By mail or hand-delivery to:* Jim Bartel, Field Supervisor, U.S. Fish and Wildlife Service, Carlsbad Fish and Wildlife Office, 6010 Hidden Valley Road, Carlsbad, CA 92011.

(2)*By electronic mail (e-mail) to:* *fw8cfwocomments@fws.gov.* Please see the Public Comments Solicited section below for other information about electronic filing.

(3)*By fax to:* the attention of Jim Bartel at 760-431-5901.

(4)*Via the Federal eRulemaking Portal:* at *http://www.regulations.gov.* Follow the instructions for submitting comments. FOR FURTHER INFORMATION CONTACT: Jim Bartel, Field Supervisor, Carlsbad Fish and Wildlife Office, at the address listed in the ADDRESSES section (telephone 760-431-9440; facsimile 760-431-5901). If you use a telecommunications device for the deaf (TDD), call the Federal Information Relay Service

(FIRS)at 800-877-8339. SUPPLEMENTARY INFORMATION: Public Comments Solicited We will accept written comments and information during this reopened comment period on the proposed critical habitat designation for *Acanthomintha ilicifolia* published in the **Federal Register** on March 14, 2007 (72 FR 11946), the corrections to the proposed critical habitat described herein (see Corrections to Proposed Critical Habitat section), and our draft economic analysis of the proposed designation. We will consider information and recommendations from all interested parties. We are particularly interested in comments concerning:

(1)The reasons why we should or should not designate habitat as “critical habitat” under section 4 of the Act (16 U.S.C. 1531 *et seq.* ), including whether the benefit of designation would outweigh threats to the species caused by the designation, such that the designation of critical habitat is prudent.

(2)Specific information on: • The amount and distribution of *Acanthomintha ilicifolia* habitat, • What areas occupied at the time of listing and that contain features essential to the conservation of the species we should include in the designation and why, and • What areas not occupied at the time of listing are essential to the conservation of the species and why.

(3)Land use designations and current or planned activities in the subject areas and their possible impacts on proposed critical habitat.

(4)Our proposed exclusion of 1,134 acres

(ac)(459 hectares (ha)) of lands already conserved or targeted for conservation within subarea plans under the San Diego Multiple Species Conservation Program

(MSCP)and the San Diego Multiple Habitat Conservation Program

(MHCP)from the final designation of critical habitat for *Acanthomintha ilicifolia* under section 4(b)(2) of the Act (see Exclusions Under Section 4(b)(2) of the Act in the proposed critical habitat rule for details of these habitat conservation plans (HCPs)). Please note that in the March 14, 2007, proposed rule (72 FR 11946), we sought comments on our proposed exclusion of 1,302 ac (527 ha) of non-Federal lands from the final designation. In this notice, we have made several corrections that have resulted in reductions in the areas being proposed as critical habitat and the area being proposed for exclusion (see Corrections to the Proposed Rule below for a detailed discussion of these corrections). We are specifically seeking public comment on our proposed exclusion of lands covered under the City of Encinitas subarea plan of the MHCP (see Exclusions Under Section 4(b)(2) of the Act in the proposed critical habitat rule for details of this HCP). It is our understanding that little progress has been made by the City of Encinitas to finalize their subarea plan since the 2001 release of the draft plan. Based on information received during the public comment period, the Secretary may determine that sufficient progress has not been made and that lands within the City of Encinitas' subarea plan should not be excluded from the final designation. Specifically, useful information would include: whether essential lands within Encinitas are being managed, or are reasonably assured of being managed, to conserve *Acanthomintha ilicifolia,* and the outlook for completion of the draft subarea plan. Please provide information concerning whether the benefit of excluding any of these specific areas from the critical habitat designation outweighs the benefit of including these areas in the designation under section 4(b)(2). If the Secretary determines that the benefits of including these lands outweigh the benefits of excluding them, they will not be excluded from final critical habitat.

(5)Our corrections to proposed critical habitat subunits 3C, 3D, 3F, 4A, 4B, and 4C as described in this notice (see Corrections to Proposed Critical Habitat section below).

(6)Information on whether, and, if so, the extent to which any State and local environmental protection measures referenced in the draft economic analysis were adopted largely as a result of the listing of *Acanthomintha ilicifolia,* and which were either already in place at the time of listing or enacted for other reasons.

(7)Information on whether the draft economic analysis identifies all State and local costs and benefits attributable to the proposed critical habitat designation, and information on any costs or benefits that have been inadvertently overlooked.

(8)Information on whether the draft economic analysis makes appropriate assumptions regarding current practices and likely regulatory changes imposed as a result of the designation of critical habitat.

(9)Information on whether the draft economic analysis correctly assesses the effect on regional costs associated with any land use controls that may derive from the designation of critical habitat.

(10)Information on areas that could potentially be disproportionately impacted by designation of critical habitat for *Acanthomintha ilicifolia* .

(11)Any foreseeable economic, national security, or other potential impacts resulting from the proposed designation, and in particular, any impacts on small entities, and the benefits of including or excluding areas that exhibit these impacts; the reasons why our conclusion that the proposed designation of critical habitat will not result in a disproportionate impact on small businesses should or should not warrant further consideration; and other information that would indicate that the designation of critical habitat would or would not have any impacts on small entities.

(12)Information on whether the draft economic analysis appropriately identifies all costs that could result from the designation.

(13)Information on whether there are any quantifiable economic benefits that could result from the designation of critical habitat.

(14)Whether the benefit of excluding any particular area from the critical habitat designation under section 4(b)(2) of the Act outweighs the benefit of including the area in the designation.

(15)Economic data on the incremental impacts that would result from designating any particular area as critical habitat, since it is our intent to include the incremental costs attributed to the critical habitat designation in the final economic analysis.

(16)Whether we could improve or modify our approach to designating critical habitat in any way to provide for greater public participation and understanding, or to better accommodate public concerns and comments. The Secretary shall designate critical habitat on the basis of the best scientific data available and after taking into consideration the economic impact, the impact on national security, and any other relevant impact of specifying any particular area as critical habitat. Pursuant to section 4(b)(2) of the Act, an area may be excluded from critical habitat if it is determined that the benefits of such exclusion outweigh the benefits of including the area as critical habitat, unless the failure to designate such area as critical habitat will result in the extinction of the species. We may exclude an area from designated critical habitat based on economic impacts, national security, or any other relevant impact. Comments and information submitted during the initial comment period from March 14, 2007, to May 14, 2007, on the proposed rule (72 FR 11946) need not be resubmitted as they will be incorporated into the public record as part of this comment period and will be fully considered in preparation of the final rule. If you wish to comment, you may submit your comments and materials concerning the draft economic analysis and the proposed rule by any one of several methods (see ADDRESSES ). Our final designation of critical habitat will take into consideration all comments and any additional information we have received during both comment periods. On the basis of public comment on the draft economic analysis, the critical habitat proposal, and the final economic analysis, we may, during the development of our final determination, find that areas proposed are not essential, are appropriate for exclusion under section 4(b)(2) of the Act, or are not appropriate for exclusion. If you use e-mail to submit your comments, please include “ *Attn:* San Diego thornmint” in your e-mail subject header, preferably with your name and return address in the body of your message. If you do not receive a confirmation from the system that we have received your e-mail, please contact the person listed under FOR FURTHER INFORMATION CONTACT . Before including your address, phone number, e-mail address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so. Comments and materials received, as well as supporting documentation used in preparation of the proposal to designate critical habitat, will be available for public inspection, by appointment during normal business hours, at the Carlsbad Fish and Wildlife Office (see ADDRESSES ). You may obtain copies of the proposed critical habitat rule and the draft economic analysis by mail from the Carlsbad Fish and Wildlife Office (see ADDRESSES ) or by visiting our Web site at *http://www.fws.gov/carlsbad* . Background On August 10, 2004, the Center for Biological Diversity and California Native Plant Society challenged our failure to designate critical habitat for this species as well as four other plant species ( *Center for Biological Diversity, et al.* v. *Norton* , C-04-3240 JL (N. D. Cal.)). In settlement of the lawsuit, the Service agreed to submit to the **Federal Register** a proposed rule to designate critical habitat, if prudent, on or before February 28, 2007, and a final designation by February 28, 2008. On March 14, 2007, we published a proposed rule to designate critical habitat for *Acanthomintha ilicifolia* (72 FR 11946), identifying a total of approximately 1,936 ac (783 ha) of land in San Diego County, California. Of the total area proposed, we proposed to exclude from the final critical habitat designation 1,302 ac (527 ha) of land under section 4(b)(2) of the Act. Critical habitat is defined in section 3 of the Act as the specific areas within the geographical area occupied by a species, at the time it is listed in accordance with the Act, on which are found those physical or biological features essential to the conservation of the species and that may require special management considerations or protection, and specific areas outside the geographical area occupied by a species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. If the proposed rule is made final, section 7 of the Act will prohibit destruction or adverse modification of critical habitat by any activity funded, authorized, or carried out by any Federal agency. Federal agencies proposing actions affecting areas designated as critical habitat must consult with us on the effects of their proposed actions, in accordance with section 7(a)(2) of the Act. Corrections to Proposed Critical Habitat By this notice, we are advising the public of corrections in area, land ownership, and San Diego MSCP boundary associations within six of the subunits described in the March 14, 2007, proposed rule (72 FR 11946): Subunit 3C (Viejas Mountain), Subunit 3D (Viejas Mountain), Subunit 3F (Poser Mountain), Subunit 4A (McGinty Mountain), Subunit 4B (McGinty Mountain), and Subunit 4C (McGinty Mountain). In our March 14, 2007, proposed rule (72 FR 11946) we proposed to exclude a total of 95 ac (38 ha) of private lands in subunits 3C, 3D, and 3F from the final critical habitat designation under section 4(b)(2) of the Act. We believed that these lands were within the planning boundary for the San Diego MSCP (see “Relationship of Critical Habitat to Habitat Conservation Plan Lands—Exclusions Under Section 4(b)(2) of the Act” section of the proposed rule (72 FR 11946, March 14, 2007) for a detailed discussion of this proposed exclusion). However, the private lands in subunits 3C, 3D, and 3F are not within the planning boundary for the San Diego MSCP, and we are no longer proposing to exclude these lands from the final designation under section 4(b)(2) of the Act. The draft economic analysis reflects that we are no longer proposing to exclude these 95 ac (38 ha) of lands. In this notice, we are also correcting errors within subunits 4A and 4B. The maps and boundary descriptions of subunits 4A and 4B were delineated correctly in the March 14, 2007, proposed rule (72 FR 11946); however, the area estimates in the preamble were incorrect. The correct area for subunit 4A is 20 ac (8 ha) rather than 18 ac (7 ha), and the correct area for subunit 4B is 148 ac (60 ha) rather than 220 ac (89 ha). The draft economic analysis reflects these corrections to area estimates. Furthermore, the March 14, 2007, proposed rule (72 FR 11946), did not identify that subunit 4A contains 2 ac (1 ha) of federally owned land and subunit 4C contains 1 ac (less then 1/2 ha) of federally owned land. Both of these subunits overlap slightly with the Service's San Diego National Wildlife Refuge. We proposed to exclude all private and State/local lands in subunits 4A and 4C from the final designation based on the benefits provided to *Acanthomintha ilicifolia* by the MSCP (see “Relationship of Critical Habitat to Habitat Conservation Plan Lands—Exclusions Under Section 4(b)(2) of the Act” section of the proposed rule (72 FR 11946, March 14, 2007) for a detailed discussion of this proposed exclusion). While we are continuing to propose to exclude all private and State/local lands covered by the MSCP, we are clarifying that this proposed exclusion does not include Federal lands, and, therefore, we overestimated the proposed exclusion by 3 acres (1 ha). The draft economic analysis does not reflect this change; however, the final economic analysis will be revised to address the incorporation of 3 ac (1 ha) of the San Diego National Wildlife Refuge into the proposed designation. As a result of these corrections, the total identified critical habitat area has been reduced from 1,936 ac (783 ha) to 1,867 ac (756 ha). The total area being proposed for exclusion from the final designation has been reduced from 1,302 ac (527 ha) to 1,134 ac (459 ha). The draft economic analysis states that we are proposing to exclude 1,137 ac (460 ha) of critical habitat; however, that figure erroneously includes 3 ac (1 ha) of federally owned lands in subunits 4A and 4C. Other than these corrections, the proposed rule of March 14, 2007, remains intact. Draft Economic Analysis Section 4(b)(2) of the Act requires that we designate or revise critical habitat based upon the best scientific and commercial data available, after taking into consideration the economic impact, impact on national security, or any other relevant impact of specifying any particular area as critical habitat. Based on the March 14, 2007, proposed rule to designate critical habitat for *Acanthomintha ilicifolia* , (72 FR 11946), we have prepared a draft economic analysis of the proposed critical habitat designation. The draft economic analysis is intended to quantify the economic impacts of all potential conservation efforts for *Acanthomintha ilicifolia* ; some of these costs will likely be incurred regardless of whether critical habitat is designated. The draft economic analysis provides estimated costs of the foreseeable potential economic impacts of the proposed critical habitat designation and other conservation-related actions for this species over the next 20 years. It also considers past costs associated with conservation of the species from the time it was listed (63 FR 54938, October 13, 1998), until the year the proposed critical habitat rule was published (72 FR 11946, March 14, 2007). Activities associated with the conservation of *Acanthomintha ilicifolia* are likely to primarily impact future land development, recreation management, and exotic plant species management. Pre-designation (1998-2007) impacts associated with species conservation activities in areas proposed for final designation are estimated at $53,000 in 2007 dollars. The draft economic analysis forecasts post-designation impacts in the areas proposed for final designation at $0.6 to $2.8 million (undiscounted dollars) over the next 20 years. The present value of these impacts, applying a 3 percent discount rate, is $0.4 to $2.1 million ($25,000 to $137,000 annualized); or $0.3 to $1.5 million ($25,000 to $136,000 annualized) using a 7 percent discount rate. Total undiscounted future impacts in areas proposed for exclusion according to section 4(b)(2) of the Act are forecast at approximately $1.6 to $5.1 million over the next 20 years. The present value of these impacts applying a 3 percent discount rate is approximately $1.2 to $3.7 million or approximately $0.8 to $2.6 million applying a 7 percent discount rate. In annualized terms, potential impacts are expected to range from $77,000 to $253,000 (annualized at 3 percent) and $72,000 to $248,000 (annualized at 7 percent) in areas proposed for exclusion. The cost estimates are based on the proposed designation of critical habitat published in the **Federal Register** on March 14, 2007 (72 FR 11946) as well as the corrections we have identified above in subunits 3C, 3D, 3F, 4A, and 4B. The cost estimates assume that we are proposing to exclude 3 ac (1 ha) of federally owned lands in subunits 4A and 4C; we are not proposing to exclude any federally owned lands from this designation. We will address the costs associated with this last correction in more detail in the final economic analysis. The draft economic analysis considers the potential economic effects of actions relating to the conservation of *Acanthomintha ilicifolia* , including costs associated with sections 4, 7, and 10 of the Act, and including those attributable to the designation of critical habitat. It further considers the economic effects of protective measures taken as a result of other Federal, State, and local laws that aid habitat conservation for *Acanthomintha ilicifolia* in areas containing features essential to the conservation of the species. The draft economic analysis considers both economic efficiency and distributional effects. In the case of habitat conservation, efficiency effects generally reflect the “opportunity costs” associated with the commitment of resources to comply with habitat protection measures (such as lost economic opportunities associated with restrictions on land use). This analysis also addresses how potential economic impacts are likely to be distributed, including an assessment of any local or regional impacts of habitat conservation and the potential effects of conservation activities on small entities and the energy industry. This information can be used by decision-makers to assess whether the effects of the designation might unduly burden a particular group or economic sector. Finally, the draft analysis looks retrospectively at costs that have been incurred since the date * Acanthomintha ilicifolia * was listed as threatened (63 FR 54938; October 13, 1998) and considers those costs that may occur in the 20 years following the designation of critical habitat. Forecasts of economic conditions and other factors beyond this point would be speculative. As stated earlier, we solicit data and comments from the public on the draft economic analysis, as well as on all aspects of the proposal. We may revise the proposal or its supporting documents to incorporate or address new information received during the comment period. In particular, we may exclude an area from critical habitat if we determine that the benefits of excluding the area outweigh the benefits of including the area as critical habitat, provided such exclusion will not result in the extinction of the species. Required Determinations—Amended In our March 14, 2007 proposed rule (72 FR 11946), we indicated that we would be deferring our determination of compliance with several statutes and Executive Orders until the information concerning potential economic impacts of the designation and potential effects on landowners and stakeholders was available in the draft economic analysis. Those data are now available for our use in making these determinations. In this notice we are affirming the information contained in the proposed rule concerning Executive Order (E.O.) 13132; E.O. 12988; the Paperwork Reduction Act; and the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments'' (59 FR 22951). Based on the information made available to us in the draft economic analysis, we are amending our Required Determinations, as provided below, concerning E.O. 12866 and the Regulatory Flexibility Act, E.O. 13211, E.O. 12630, and the Unfunded Mandates Reform Act. Regulatory Planning and Review In accordance with E.O. 12866, this document is a significant rule because it may raise novel legal and policy issues. Based on our draft economic analysis of the proposed designation of critical habitat for *Acanthomintha ilicifolia* , post-designation impacts are estimated to be approximately $0.6 to $2.8 million (undiscounted dollars) over the next 20 years in the areas proposed as final critical habitat and approximately $1.6 to $5.1 million (undiscounted dollars) over the next 20 years in areas proposed for exclusion from the final critical habitat designation. These impacts would occur only if the area proposed for exclusion is instead designated as critical habitat. The cost estimates are based on the proposed designation of critical habitat published in the **Federal Register** on March 14, 2007 (72 FR 11946), as well as the corrections we have identified above in subunits 3C, 3D, 3F, 4A, and 4B. The cost estimates assume that we are proposing to exclude 3 ac (1 ha) of federally owned lands in subunits 4A and 4C; we are not proposing to exclude any federally owned lands from this designation. We will address the costs associated with this last correction in more detail in the final economic analysis. Discounted future costs in areas proposed as final critical habitat are estimated to be approximately $0.4 to $2.1 million ($25,000 to $137,000 annualized) at a 3 percent discount rate or approximately $0.3 to $1.5 million ($25,000 to $136,000 annualized) at a 7 percent discount rate. In areas proposed for exclusion from the final critical habitat designation, the discounted future costs are estimated to be approximately $1.2 to $3.7 million ($77,000 to $253,000 annualized) at a 3 percent discount rate or approximately $0.8 to $2.6 million ($72,000 to $248,000 annualized) over the next 20 years. Therefore, based on our draft economic analysis, we have determined that the proposed designation of critical habitat for *Acanthomintha ilicifolia* would not result in an annual effect on the economy of $100 million or more or affect the economy in a material way. Due to the timeline for publication in the **Federal Register** , the Office of Management and Budget

(OMB)has not formally reviewed the proposed rule or accompanying draft economic analysis. Further, E.O. 12866 directs Federal agencies promulgating regulations to evaluate regulatory alternatives (Office of Management and Budget, Circular A-4, September 17, 2003). Pursuant to Circular A-4, once it has determined that the Federal regulatory action is appropriate, the agency will then need to consider alternative regulatory approaches. Since the designation of critical habitat is a statutory requirement pursuant to the Act, we must then evaluate alternative regulatory approaches, where feasible, when promulgating a designation of critical habitat. In developing our designations of critical habitat, we consider economic impacts, impacts to national security, and other relevant impacts pursuant to section 4(b)(2) of the Act. Based on the discretion allowable under this provision, we may exclude any particular area from the designation of critical habitat providing that the benefits of such exclusion outweigh the benefits of specifying the area as critical habitat and that such exclusion would not result in the extinction of the species. As such, we believe that the evaluation of the inclusion or exclusion of particular areas, or combination thereof, in a designation constitutes our regulatory alternative analysis. Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) Under the Regulatory Flexibility Act

(RFA)(5 U.S.C. 601 *et seq.* ), as amended by the Small Business Regulatory Enforcement Fairness Act (5 U.S.C. 802(2)) (SBREFA), whenever an agency is required to publish a notice of rulemaking for any proposed or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effect of the rule on small entities (i.e., small businesses, small organizations, and small government jurisdictions). However, no regulatory flexibility analysis is required if the head of an agency certifies the rule will not have a significant economic impact on a substantial number of small entities. Based upon our draft economic analysis of the proposed designation, we provide our analysis for determining whether the proposed rule would result in a significant economic impact on a substantial number of small entities. Based on comments received, this determination is subject to revision as part of the final rulemaking. According to the Small Business Administration (SBA), small entities include small organizations, such as independent nonprofit organizations; small governmental jurisdictions, including school boards and city and town governments that serve fewer than 50,000 residents; and small businesses (13 CFR 121.201). Small businesses include manufacturing and mining concerns with fewer than 500 employees, wholesale trade entities with fewer than 100 employees, retail and service businesses with less than $5 million in annual sales, general and heavy construction businesses with less than $27.5 million in annual business, special trade contractors doing less than $11.5 million in annual business, and agricultural businesses with annual sales less than $750,000. To determine if potential economic impacts to these small entities are significant, we considered the types of activities that might trigger regulatory impacts under this designation as well as types of project modifications that may result. In general, the term “significant economic impact” is meant to apply to a typical small business firm's business operations. To determine if the proposed designation of critical habitat for *Acanthomintha ilicifolia* would affect a substantial number of small entities, we considered the number of small entities affected within particular types of economic activities (such as residential development and dispersed recreational activities). We considered each industry or category individually to determine if certification is appropriate. In estimating the numbers of small entities potentially affected, we also considered whether their activities have any Federal involvement; some kinds of activities are unlikely to have any Federal involvement and thus will not be affected by the designation of critical habitat. Designation of critical habitat affects only activities conducted, funded, permitted, or authorized by Federal agencies; non-Federal activities are not affected by the designation. If this proposed critical habitat designation is made final, Federal agencies must consult with us under section 7 of the Act if their activities may affect designated critical habitat. Consultations to avoid the destruction or adverse modification of critical habitat would be incorporated into the existing consultation process. In our draft economic analysis of the proposed critical habitat designation (including those areas proposed for exclusion), we evaluated the potential economic effects on small business entities resulting from conservation actions related to the listing of *Acanthomintha ilicifolia* and the proposed designation of critical habitat. The analysis is based on the estimated impacts associated with the proposed rulemaking as described in Chapters 2 through 4 and Appendices A, B, C, and F of the analysis and evaluates the potential for economic impacts related to three categories: development and HCP implementation; recreation management; and invasive, nonnative plant management. The U.S. Forest Service (USFS), the California Department of Fish and Game (CDFG), and the U.S. Fish and Wildlife Service are not considered small entities by the Small Business Administration. Two nonprofit organizations, The Nature Conservancy

(TNC)and the Center for Natural Lands Management (CNLM), are involved with conservation activities for *Acanthomintha ilicifolia* ; however, the primary mission of both of these organizations is to preserve, restore, and protect natural resources. Therefore, impacts from species conservation on these organizations is not considered in the small business impacts analysis. Additionally, the boundaries of four city governments encompass portions of the proposed critical habitat—Carlsbad, Encinitas, San Diego, and Poway—with the remainder of the proposed critical habitat located within unincorporated San Diego County. All four cities and the County exceed the criteria to be considered a “small entity” under the RFA. The draft analysis identified 18 privately owned, undeveloped parcels within areas proposed as critical habitat. The 18 parcels are owned by 9 individual landowners. For the nine individual landowners that may be affected by the proposed designation of critical habitat, the DEA could not determine if any of these landowners qualify as small businesses. However, for the purposes of estimating potential costs associated with the proposed designation of critical habitat, the DEA determine that two landowners own four parcels that are in proposed subunits 3D, 3E, and 3F, and the remaining seven landowners own parcels in subunits we are proposing to exclude from the final designation. For the two landowners of proposed subunits 3D, 3E, and 3F, the DEA estimates annualized impacts associated with conservation activities for *Acanthomintha ilicifolia* could range from a low of $700 to $35,700, with an average range of annualized impact of $5,300 to $42,300 per landowner over the next 20 years. The remaining seven landowners of the 14 parcels in subunits we are proposing to exclude from the final designation, annualized impacts are estimated to range from a low of $300 in subunit 4D up to $18,700 in subunit 2C, with an average annualized impact ranging from $17,000 to $84,000. With only nine private landowners, it is not considered a substantial number. However, even if the landowners were to represent small development businesses, any developer directly impacted by the proposed designation of critical habitat would not be expected to bear the additional cost of conservation measures for *Acanthomintha ilicifolia.* We anticipate that additional costs that could arise from the designation would be passed on to individual homebuyers if the parcels were to be developed. Please refer to our DEA of the proposed critical habitat designation for a more detailed discussion of potential economic impacts. In summary, we have considered whether this proposed designation of critical habitat would result in a significant economic impact on a substantial number of small entities. We have determined, and therefore, certify that, for the above reasons and based on currently available information, the proposed designation will not have a significant economic impact on a substantial number of small business entities. Executive Order 13211—Energy Supply, Distribution, and Use On May 18, 2001, the President issued E.O. 13211 on regulations that significantly affect energy supply, distribution, and use. E.O. 13211 requires agencies to prepare Statements of Energy Effects when undertaking certain actions. This proposed designation of critical habitat for *Acanthomintha ilicifolia* is considered a significant regulatory action under E.O. 12866 due to its potentially raising novel legal and policy issues. OMB has provided guidance for implementing E.O. 13211 that outlines nine outcomes that may constitute “a significant adverse effect” when compared without the regulatory action under consideration. The draft economic analysis finds that none of these criteria are relevant to this analysis. Thus, based on the information in the draft economic analysis, energy-related impacts associated with *Acanthomintha ilicifolia* conservation activities within proposed critical habitat are not expected. As such, the proposed designation of critical habitat is not expected to significantly affect energy supplies, distribution, or use and a Statement of Energy Effects is not required. Unfunded Mandates Reform Act (2 U.S.C. 1501 *et seq.* ) In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501), the Service makes the following findings:

(a)This rule will not produce a Federal mandate. In general, a Federal mandate is a provision in legislation, statute, or regulation that would impose an enforceable duty upon State, local, or Tribal governments, or the private sector, and includes both “Federal intergovernmental mandates” and “Federal private sector mandates.” These terms are defined in 2 U.S.C. 658(5)-(7). “Federal intergovernmental mandate” includes a regulation that “would impose an enforceable duty upon State, local, or tribal governments,” with two exceptions. It excludes “a condition of federal assistance.” It also excludes “a duty arising from participation in a voluntary Federal program,” unless the regulation “relates to a then-existing Federal program under which $500,000,000 or more is provided annually to State, local, and Tribal governments under entitlement authority,” if the provision would “increase the stringency of conditions of assistance” or “place caps upon, or otherwise decrease, the Federal Government's responsibility to provide funding” and the State, local, or tribal governments “lack authority” to adjust accordingly. (At the time of enactment, these entitlement programs were: Medicaid; Aid to Families with Dependent Children work programs; Child Nutrition; Food Stamps; Social Services Block Grants; Vocational Rehabilitation State Grants; Foster Care, Adoption Assistance, and Independent Living; Family Support Welfare Services; and Child Support Enforcement.) “Federal private sector mandate” includes a regulation that “would impose an enforceable duty upon the private sector, except

(i)a condition of Federal assistance; or

(ii)a duty arising from participation in a voluntary Federal program.” The designation of critical habitat does not impose a legally binding duty on non-Federal government entities or private parties. Under the Act, the only regulatory effect is that Federal agencies must ensure that their actions do not destroy or adversely modify critical habitat under section 7. Non-Federal entities that receive Federal funding, assistance, permits, or otherwise require approval or authorization from a Federal agency for an action may be indirectly impacted by the designation of critical habitat. However, the legally binding duty to avoid destruction or adverse modification of critical habitat rests squarely on the Federal agency. Furthermore, to the extent that non-Federal entities are indirectly impacted because they receive Federal assistance or participate in a voluntary Federal aid program, the Unfunded Mandates Reform Act would not apply, nor would critical habitat shift the costs of the large entitlement programs listed above on to State governments.

(b)We do not believe that this rule will significantly or uniquely affect small governments. As discussed in the DEA, approximately 59 percent of the lands proposed as critical habitat are owned or managed by Federal, State, or local governments, none of which qualify as a small government. Consequently, we do not believe that critical habitat designation would significantly or uniquely affect small government entities. As such, a Small Government Agency Plan is not required. Executive Order 12630—Takings In accordance with E.O. 12630 (“Government Actions and Interference with Constitutionally Protected Private Property Rights”), we have analyzed the potential takings implications of proposing critical habitat for *Acanthomintha ilicifolia* in a takings implications assessment. The takings implications assessment concludes that this proposed designation of critical habitat for *Acanthomintha ilicifolia* does not pose significant takings implications. Author The primary author of this notice is staff of the Carlsbad Fish and Wildlife Office. Authority The authority for this action is the Endangered Species Act of 1973 (16 U.S.C. 1531 *et seq.* ). Dated: November 15, 2007. Todd Willens, Acting Assistant Secretary for Fish and Wildlife and Parks. [FR Doc. E7-22971 Filed 11-26-07; 8:45 am] BILLING CODE 4310-55-P 72 227 Tuesday, November 27, 2007 Notices AGENCY FOR INTERNATIONAL DEVELOPMENT Notice of Public Information Collections Being Reviewed by the U.S. Agency for International Development: Comments Requested SUMMARY: U.S. Agency for International Development (USAID) is making efforts to reduce the paperwork burden. USAID invites the general public and other Federal agencies to take this opportunity to comment on the following proposed and/or continuing information collections, as required by the Paperwork Reduction Act for 1995. Comments are requested concerning:

(a)Whether the proposed or continuing collections of information are necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility:

(b)the accuracy of the burden estimates:

(c)ways to enhance the quality, utility, an clarity of the information collected: and

(d)ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. DATES: Submit comments on or before January 28, 2008. FOR FURTHER INFORMATION CONTACT: Beverly Johnson, Bureau for Management, Office of Administrative Services, Information and Records Division, U.S. Agency for International Development, Room 2.07-106, RRB, Washington, DC, 20523,

(202)712-1365 or via e-mail *bjohnson@usaid.gov.* SUPPLEMENTARY INFORMATION: *OMB No:* OMB 0412-0035. *Form No.:* AID 1550-2. *Title:* PVO Initial and Annual Registration Form. *Type of Review:* Renewal of Information Collection. *Purpose:* USAID is required to collect information regarding the financial support of private and voluntary organizations registered with the Agency. The information is used to determine the eligibility of PVOs to receive USAID funding. *Annual Reporting Burden:* *Respondents:* 533. *Total annual responses:* 533. *Total annual hours requested:* 1,599 hours. Dated: November 19, 2007. Joanne Paskar, Chief, Information and Records Division, Office of Administrative Services, Bureau for Management. [FR Doc. 07-5840 Filed 11-26-07; 8:45 am]

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