issue-1996-03-27•Federal Register proposed rules — 1996-03-27
Federal Register proposed rules — 1996-03-27
issue-1996-03-27Federal Register proposed rules — 1996-03-27Proposed Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 96-7448 Oxidized Pine Lignin, Sodium Salt; Tolerance Exemption
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13476-13478]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7448]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 180
RIN 2070-AB18
[OPP-300418; FRL-5355-6]
Oxidized Pine Lignin, Sodium Salt; Tolerance Exemption
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This document proposes that oxidized pine lignin, sodium salt
(CAS Reg. No. 68201-23-0) be exempted from the requirement of a
tolerance when used as an inert ingredient (surfactant or adjuvant to
surfactant) in pesticide formulations. This proposed regulation was
requested by LignoTech USA, Inc.
DATES: Comments, identified by the docket control number [OPP-300418],
must be received on or before April 26, 1996.
ADDRESSES: By mail, submit written comments to: Public Response and
Program Resources Branch, Field Operations Division (7506C), Office of
Pesticide Programs, Environmental Protection Agency, 401 M St., SW.,
Washington, DC 20460. In person deliver comments to: Rm. 1128, Crystal
Mall, Building #2, 1921 Jefferson Davis Highway, Arlington, VA.
ADDRESSES: The Agency invites any interested person who has concerns
about the implementation of this action to submit written comments in
triplicate to: By mail: Program Resources Section, Public Response and
Program Resources Branch, Field Operations Division (7506C),
Environmental Protection Agency, 401 M St., SW., Washington, DC 20460.
In person, bring comments to: Rm. 1132, Crystal Mall #2, 1921 Jefferson
Davis Highway, Arlington, VA.
Comments and data may also be submitted electronically by sending
electronic mail (e-mail) to: [email protected]. Electronic
comments must be submitted as an ASCII file avoiding the use of special
characters and any form of encryption. Comments and data will also be
accepted on disks in WordPerfect in 5.1 file format or ASCII file
format. All comments and data in electronic form must be identified by
the docket number ``OPP-300418.'' No Confidential Business Information
(CBI) should be submitted through e-mail. Electronic comments on this
document may be filed online at many Federal Depository Libraries.
Additional information on electronic submissions can be found in the
SUPPLEMENTARY unit of this document.
Information submitted as a comment concerning this document may be
claimed confidential by marking any part or all of that information as
CBI. Information so marked will not be disclosed except in accordance
with procedures set forth in 40 CFR part 2. A copy of the comment that
does not contain CBI must be submitted for inclusion in the public
record. Information not marked confidential may be disclosed publicly
by EPA without prior notice. All written comments will be available for
public inspection in Rm. 1132 at the Virginia address given above from
8 a.m. to 4 p.m., Monday through Friday, excluding legal holidays.
For Further Information Contact: By mail: Amelia M. Acierto,
Registration Support Branch, Registration Division (7505W), Office of
Pesticide Programs, Environmental Protection Agency, 401 M St., SW.,
Washington, DC 20460. Office location, telephone number, and e-mail
address: 2800 Crystal Drive North Tower, Arlington, VA, (703) 308-8375,
e-mail [email protected].
SUPPLEMENTARY INFORMATION: LignoTech USA, Inc., 100 Highway 51 South,
Rothschild, WI 54474-1998 submitted pesticide petition (PP) number
5E04471 to EPA requesting that the Administrator, pursuant to section
408(e) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. 346a(e),
propose to amend 40 CFR 180.1001 (c) and (e) by establishing an
exemption from the requirement of a tolerance for oxidized lignin,
sodium salt when used as a surfactant or adjuvant to surfactant in
pesticide formulations applied to growing crops or to raw agricultural
commodities after harvest or to animals. Inert ingredients are all
ingredients that are not active ingredients as defined in 40 CFR
153.125, and include, but are not limited to, the following types of
ingredients (except when they have a
[[Page 13477]]
pesticidal efficacy of their own): solvents such as alcohols and
hydrocarbons; surfactants such as polyoxyethylene polymers and fatty
acids; carriers such as clay and diatomaceous earth; thickeners such as
carrageenan and modified cellulose; wetting, spreading, and dispersing
agents; propellants in aerosol dispensers; microencapsulating agents;
and emulsifiers. The term ``inert'' is not intended to imply
nontoxicity; the ingredient may or may not be chemically active.
The data submitted in the petition and other relevant material have
been evaluated. As part of the EPA policy statement on inert
ingredients published in the Federal Register of April 22, 1987 (52 FR
13305), the Agency set forth a list of studies which would generally be
used to evaluate the risks posed by the presence of an inert ingredient
in a pesticide formulation. However, where it can be determined without
that data that the inert ingredient will present minimal or no risk,
the Agency generally does not require some or all of the listed studies
to rule on the proposed tolerance or exemption from the requirement of
a tolerance for an inert ingredient. The Agency has decided that no
data, in addition to that described below, for oxidized lignin, sodium
salt will need to be submitted. The rationale for this decision is
described below:
1. Similar chemicals such as pine lignin (used as an absorbent) and
sulfonated kraft lignin/lignosulfonates (used as a surfactant or
related adjuvant to surfactant), are exempt from the requirement of a
tolerance when used in pesticide formulations applied to growing crops
or to raw agricultural commodities after harvest or to animals under 40
CFR 180.1001 (c) and (e).
2. Pine lignin, also known as kraft lignin, is a derivative of a
natural plant polymer, lignin, which is the most abundant polymer in
nature. Pine lignin is used as a raw material for oxidized kraft lignin
as well as a starting material for pine-kraft lignin-based
lignosulfonates. It is produced as a coproduct during the manufacture
of paper via the kraft pulping process.
3. The toxicological data show that pine lignin, sulfonated pine
lignin as well as oxidized pine lignin or lignosulfonates are of very
low acute toxicity (LD50 >2 to >5 g/kg in rats and LC50 >1000 to >3000
mg/l in fish).
4. Pine lignin is classified as toxicity category IV in a skin
irritation and eye irritation studies.
Based on the submitted toxicological data, physico-chemical
properties of the sodium salt of oxidized kraft lignin, its structural
similarity to related chemicals such as kraft lignin/lignosulfonates
and pine/kraft lignin that have already been exempted under 40 CFR
180.1001(c) and (e), and the review of its use, the Agency has found
that, when used as a surfactant or adjuvant to surfactant in pesticide
formulations applied preharvest, postharvest or to animals in
accordance with good agricultural practice, this ingredient is useful
and a tolerance is not necessary to protect the public health.
Therefore, EPA proposes that the exemption from the requirement of a
tolerance be established as set forth below.
Any person who has registered or submitted an application for
registration of a pesticide, under the Federal Insecticide, Fungicide,
and Rodenticide Act (FIFRA) as amended, which contains any of the
ingredients listed herein, may request within 30 days after publication
of this document in the Federal Register that this proposal be referred
to an Advisory Committee in accordance with section 408(e) of the
Federal Food, Drug, and Cosmetic Act.
Interested persons are invited to submit written comments on the
proposed regulation. Comments must bear a notation indicating the
document control number [OPP-300418].
A record has been established for this proposal under docket
number ``OPP-300418'' (including comments and data submitted
electronically as described below). A public version of this record,
including printed, paper versions of electronic comments, which does
not include any information claimed as CBI, is available for inspection
from 8 a.m. to 4 p.m., Monday through Friday, excluding legal holidays.
The public record is located in Rm. 1132 of the Public Response and
Program Resources Branch, Field Operations Division (7506C), Office of
Pesticide Programs, Environmental Protection Agency, Crystal Mall #2,
1921 Jefferson Davis Highway, Arlington, VA.
Electronic comments can be sent directly to EPA at:
[email protected]
Electronic comments must be submitted as an ASCII file avoiding the
use of special characters and any form of encryption.
The official record for the proposal as well as the public version,
as described above will be kept in paper form. Accordingly, EPA will
transfer all comments received electronically into printed, paper form
as they are received and will place the paper copies in the official
record which will also include all comments submitted directly in
writing. The official rulemaking record is the paper record maintained
at the address in ``ADDRESSES'' at the beginning of this document.
The Office of Management and Budget has exempted this proposed rule
from the requirements of section 3 of Executive Order 12866.
Pursuant to the requirements of the Regulatory Flexibility Act
(Pub. L. 96-354 Stat. 1164, 5 U.S.C. 601-612), the Administrator has
determined that regulations establishing new tolerances or raising
tolerance levels or establishing exemptions from tolerance requirements
do not have a significant economic impact on a substantial number of
small entities. A certification statement to this effect was published
in the Federal Register of May 4, 1981 (46 FR 24950).
List of Subjects in 40 CFR Part 180
Administrative practice and procedure, Agricultural commodities,
Pesticides and pests, Recording and recordkeeping requirements.
Dated: March 13, 1996.
Stephen L. Johnson,
Director, Registration Division, Office of Pesticide Programs.
Therefore, it is proposed that 40 CFR part 180 be amended as
follows:
PART 180--[AMENDED]
1. The authority citation for part 180 continues to read as
follows:
Authority: 21 U.S.C. 346a and 371.
2. Section 180.1001 is amended by revising the table in paragraphs
(c) and (e) by adding and alphabetically inserting the inert
ingredient, oxidized pine lignin to read as follows:
Sec. 180.1001 Exemptions from the requirement of a tolerance.
* * * * *
(c) * * *
[[Page 13478]]
------------------------------------------------------------------------
Inert ingredients Limits Uses
------------------------------------------------------------------------
* * * * * * *
Oxidized pine lignin, sodium Maximum of 2% of Surfactant or
salt (CAS Reg. No. 68201-23-0) formulation adjuvant to
surfactant
* * * * * * *
------------------------------------------------------------------------
* * * * *
(e) * * *
------------------------------------------------------------------------
Inert ingredients Limits Uses
------------------------------------------------------------------------
* * * * * * *
Oxidized pine lignin, sodium Maximum of 2% of Surfactant or
salt (CAS Reg. No. 68201-23-0) formulation adjuvant to
surfactant
* * * * * * *
------------------------------------------------------------------------
[FR Doc. 96-7448 Filed 3-26-96; 8:45 am]
BILLING CODE 6560-50-F
Complete official Federal Register PDF
FR Doc. 96-7445 Diquat; Pesticide Tolerances
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13474-13476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7445]
=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 180
[PP 4E4365 and 4E4376/P645; FRL-5348-1]
RIN 2070-AB18
Diquat; Pesticide Tolerances
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: This document proposes to establish a tolerance for the plant
growth regulator diquat [6,7-dihydrodipyrido (1,2-a:2',1'-c)
pyrazinediium] derived from application of the dibromide salt and
calculated as the cation in or on the imported raw agricultural
commodities bananas and coffee at 0.05 part per million (ppm). Zeneca,
Inc., petitioned for this proposed regulation to establish a maximum
permissible level for the residues of the plant growth regulator.
DATES: Comments identified by the docket number, (PP 4E4365 and 4E4376/
P645), must be received on or before April 26, 1996.
ADDRESSES: Submit written comments by mail to: Public Response and
Program Resources Branch, Field Operations Division (7506C), Office of
Pesticide Programs, Environmental Protection Agency, 401 M St., SW.,
Washington, DC 20460. In person, bring comments to: Public Docket, Rm.
1132, Crystal Mall #2, 1921 Jefferson Davis Highway, Arlington, VA.
Comments and data may also be submitted electronically by sending
electronic mail (e-mail) to: [email protected]. Electronic
comments must be submitted as an ASCII file avoiding the use of special
characters and any form of encryption. Comments and data will also be
accepted on disks in WordPerfect in 5.1 file format or ASCII file
format. All comments and data in electronic form must be identified by
the docket number (PP 4E4365 and 4E4376/P645). No Confidential Business
Information (CBI) should be submitted through e-mail. Electronic
comments on this proposed rule may be filed online at many Federal
Depository Libraries. Additional information on electronic submissions
can be found below in this document.
Information submitted as a comment concerning this document may be
claimed confidential by marking any part or all of that information as
CBI. Information so marked will not be disclosed except in accordance
with procedures as set forth in 40 CFR part 2. A copy of the comment
that does not contain CBI must be submitted for inclusion in the public
record. Information not marked confidential will be included in the
public docket by EPA without prior notice. The public docket is
available for public inspection in Rm. 1132 at the above address, from
8 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays.
FOR FURTHER INFORMATION CONTACT: By mail: Joanne I. Miller, Product
Manager (PM-23), Registration Division (7505C), Office of Pesticide
Programs, Environmental Protection Agency, 401 M St., SW., Washington,
DC 20460. Office location, telephone number, and e-mail address: Rm.
237, CM #2, 1921 Jefferson Davis Highway, Arlington, VA, (703)-305-
6224; e-mail: [email protected].
SUPPLEMENTARY INFORMATION: Zeneca, Inc., P.O. Box 15458, Wilmington, DE
19850, has submitted pesticide petition (PP 4E4365 and 4E4376) to EPA.
This petition requested that the Administrator, pursuant to the Federal
Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a(e), establish a
tolerance for residues of the plant growth regulator diquat [6,7-
dihydrodipyrido (1,2-a:2',1'-c) pyrazinediium derived from application
of the dibromide salt and calculated as the cation in or on the raw
agricultural commodity bananas at 0.02 ppm and coffee at 0.05 ppm. The
petition for bananas was subsequently amended to raise the tolerance
level to 0.05 ppm.
The data submitted in the petition and other relevant material have
been evaluated. The toxicological data considered in support of the
tolerances include the following:
1. A 2-year chronic toxicity/carcinogenicity study in rats resulted
in a systemic lowest-observed-effect level (LOEL) of 2.91 mg/kg/day in
males and 3.64 mg/kg/day in females (expressed as diquat cation), and a
systemic no-observed effect level (NOEL) of 0.58 mg/
[[Page 13475]]
kg/day in males and 0.72 mg/kg/day in females (expressed as diquat
cation).
2. A 1-year feeding study in dogs resulted in a systemic LOEL of
2.5 mg/kg/day and a systemic NOEL of 0.5 mg/kg/day in both sexes
(expressed as diquat cation).
3. A 2-year feeding study in mice resulted in a systemic LOEL of
11.96 mg/kg/day in males and 16.03 mg/kg/day in females (expressed as
diquat cation), and a systemic NOEL of 3.56 mg/kg/day in males and 4.78
mg/kg/day in females (expressed as diquat cation).
4. A developmental toxicity study in rats resulted in a maternal
toxicity LOEL of 32 to 56 mg/kg/day and a maternal toxicity NOEL of 8
to 14 mg/kg/day (expressed as diquat cation), and a developmental
toxicity LOEL of 32 to 56 mg/kg/day and a developmental toxicity NOEL
of 8 to 14 mg/kg/day (expressed as diquat cation).
5. A developmental toxicity study in rabbits resulted in a maternal
toxicity LOEL of 5.0 mg/kg/day and a maternal toxicity NOEL of 2.5 mg/
kg/day (expressed as diquat cation). The developmental toxicity was not
clearly established.
6. A recently submitted developmental toxicity study in rabbits
resulted in a maternal toxicity LOEL of 3 mg/kg/day and a maternal
toxicity NOEL of 1 mg/kg/day (expressed as diquat cation), and a
developmental toxicity LOEL of 10 mg/kg/day and a developmental
toxicity NOEL of 3 mg/kg/day (expressed as diquat cation).
7. A developmental toxicity study in mice resulted in a maternal
toxicity LOEL of 2 mg/kg/day and a maternal toxicity NOEL of 1 mg/kg/
day (expressed as diquat cation), and a developmental toxicity LOEL of
4 mg/kg/day and a developmental toxicity NOEL of 2 mg/kg/day (expressed
as diquat cation).
8. A two-generation reproduction study on rats resulted in a
systemic toxicity LOEL of 4 mg/kg/day and a systemic toxicity NOEL of
0.8 mg/kg/day (expressed as diquat cation), and a reproductive toxicity
LOEL of 12 to 20 mg/kg/day and a reproductive toxicity NOEL of 4 mg/kg/
day (expressed as diquat cation).
9. Diquat showed nonmutagenicity in one gene mutation test (Ames),
two structural chromosome aberration tests (mouse micronucleus and
dominant lethal in mice), and one test for other genotoxic effects
(unscheduled DNA synthesis in rat hepatocytes in vitro). Positive
results were seen in one gene mutation test (mouse lymphoma cell assay)
and in one chromosome aberration test (human blood lymphocytes,
depending on the concentration of diquat and the presence of the
metabolic activation system).
10. Metabolism studies showed about 90% of the administered dose
being eliminated in feces, indicating that diquat was poorly absorbed
from the gastrointestinal tract. Following a subcutaneous injection to
circumvent the intestine, nearly all of the administered dose was
recovered in the urine within 2 days.
The Office of Pesticide Program's Health Effects Division's
Carcinogenicity Peer Review Committee (CPRC) has classified diquat as a
Group E carcinogen (no evidence of carcinogenicity) under the Agency's
Guidelines for Carcinogen Risk Assessment, published in the Federal
Register of September 24, 1986 (51 FR 33992). In its evaluation, CPRC
gave consideration to body weight changes in a 2-year feeding study in
mice and histopathological changes in the eyes in a 2-year chronic
feeding/carcinogenicity study in rats.
The Reference Dose (RfD) is established at 0.005 mg/kg/day, based
on a NOEL of 0.5 mg/kg/day from the chronic toxicity study in dogs and
an uncertainty factor of 100. The Anticipated Residue Concentration
(ARC) from the current actions is estimated at 0.00074 mg/kg/day of
body weight/day for the general population and utilizes 15% of the RfD
for the U.S. population. The ARC for the most exposed subgroup is
0.0024 mg/kg/day of body weight/day for nonnursing infants (less than
1-year old) and utilizes 48% of the RfD. Therefore, no appreciable risk
is expected from the chronic dietary intake since the RfD is not
exceeded for either the general population or any subgroup.
The nature of the residue is adequately understood for the purposes
of the tolerances. An adequate analytical method, extraction with
sulfuric acid with spectrometric detection, is available for
enforcement purposes. The analytical method for enforcing these
tolerances have been published in the Pesticide Analytical Manual, Vol.
II (PAM II).
The pesticide is considered useful for the purposes for which it is
sought, and the tolerances are capable of achieving the intended
physical or technical effect. There are currently no actions pending
against the registration of this chemical.
Based on the information and data considered, the Agency concludes
that the proposed tolerances will protect the public health. Therefore,
it is proposed that the tolerances be established as set forth below.
Any person who has registered or submitted an application for
registration of a pesticide under the Federal Insecticide, Fungicide,
and Rodenticide Act (FIFRA) as amended, which contains the ingredient
listed herein, may request within 30 days after the publication of this
document in the Federal Register that this proposal be referred to an
Advisory Committee in accordance with section 408(e) of the FFDCA.
Interested persons are invited to submit written comments on the
proposed regulation. Comments must bear a notation indicating the
document control number, [PP 4E4365 and 4E4376/P645). All written
comments filed in response to this petition will be available in the
Public Response and Program Resources Branch at the above address from
8 a.m. to 4:30 p.m., Monday through Friday, except legal holidays.
A record has been established for this proposal under docket number
(PP 4E4365 and 4E4376/P645) (including comments and data submitted
electronically as described below). A public version of this record,
including printed, paper versions of electronic comments, which does
not include any information claimed as CBI, is available for inspection
from 8 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays.
The public record is located in Room 1132 of the Public Response
and Program Resources Branch, Field Operations Division (7506C), Office
of Pesticide Programs, Environmental Protection Agency, Crystal Mall
#2, 1921 Jefferson Davis Highway, Arlington, VA.
Electronic comments can be sent directly to EPA at:
[email protected]
Electronic comments must be submitted as an ASCII file avoiding the
use of special characters and any form of encryption.
The official record for this proposal, as well as the public
version, as described above will be kept in paper form. Accordingly,
EPA will transfer all comments received electronically into printed,
paper form as they are received and will place the paper copies in the
official rulemaking record which will also include all comments
submitted directly in writing. The official rulemaking record is the
paper record maintained at the address in ``ADDRESSES'' at the
beginning of this document.
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether the regulatory
[[Page 13476]]
action is ``significant'' and therefore subject to all the requirements
of the Executive Order (i.e., Regulatory Impact Analysis, review by the
Office of Management and Budget (OMB)). Under section 3(f), the order
defines ``significant'' as those actions likely to lead to a rule: (1)
Having an annual effect on the economy of $100 million or more, or
adversely and materially affecting a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local or tribal governments or communities (also
known as ``economically significant''); (2) creating serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially altering the budgetary impacts of
entitlement, grants, user fees, or loan programs; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in this Executive Order.
Pursuant to the terms of this Executive Order, EPA has determined
that this proposed rule is not ``significant'' and is therefore not
subject to OMB review.
Pursuant to the requirements of the Regulatory Flexibility Act
(Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. 601-612), the Administrator
has determined that regulations establishing new tolerances or raising
tolerance levels or establishing exemptions from tolerance requirements
do not have a significant economic impact on a substantial number of
small entities. A certification statement to this effect was published
in the Federal Register of May 4, 1981 (46 FR 24950).
List of Subjects in 40 CFR Part 180
Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.
Dated: March 20, 1996.
Stephen L. Johnson,
Director, Registration Division, Office of Pesticide Programs.
Therefore, it is proposed that 40 CFR part 180 be amended as
follows:
PART 180--[AMENDED]
1. The authority citation for part 180 continues to read as
follows:
Authority: 21 U.S.C. 346a and 371.
2. In Sec. 180.226, by adding new paragraph (c) to read as follows:
Sec. 180.226 Diquat; tolerances for residues.
* * * * *
(c) Tolerances are established for the plant growth regulator
diquat [6,7-dihydrodipyrido (1,2-a:2',1'-c) pyrazinediium] derived from
application of the dibromide salt and calculated as the cation in or on
the following raw agricultural commodities:
------------------------------------------------------------------------
Commodity Parts per million
------------------------------------------------------------------------
Bananas.............................................. 0.05
Coffee............................................... 0.05
------------------------------------------------------------------------
There are no U.S. registrations as of December 6, 1995.
[FR Doc. 96-7445 Filed 3-26-96; 8:45 am]
BILLING CODE 6560-50-F
Complete official Federal Register PDF
FR Doc. 96-7443 Kiwifruit Grown in California; Continuance Referendum
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Page 13463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7443]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 61, No. 60 / Wednesday, March 27, 1996 /
Proposed Rules
[[Page 13463]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 920
[Docket No. FV96-920-1]
Kiwifruit Grown in California; Continuance Referendum
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Referendum order.
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SUMMARY: This document directs that a referendum be conducted among
eligible growers of California kiwifruit to determine whether they
favor continuance of the marketing order regulating the handling of
kiwifruit grown in the production area.
DATES: The referendum will be conducted from June 3 through June 21,
1996. To vote in this referendum, growers must have been producing
California kiwifruit during the period August 1, 1995, through May 31,
1996.
ADDRESSES: Copies of the text of the aforesaid marketing order may be
obtained from the office of the referendum agent at 2202 Monterey
Street, Suite 102B, Fresno, California 93721, or the Office of the
Docket Clerk, Marketing Order Administration Branch, Fruit and
Vegetable Division, AMS, USDA, P.O. Box 96456, room 2525-S, Washington,
DC 20090-6456.
FOR FURTHER INFORMATION CONTACT: Rose Aguayo, California Marketing
Field Office, Marketing Order Administration Branch, Fruit and
Vegetable Division, Agriculture Marketing Service, USDA, 2202 Monterey
Street, Suite 102B, Fresno, California 93721; telephone (209) 487-5901;
or Charles L. Rush, Marketing Order Administration Branch, Fruit and
Vegetable Division, Agricultural Marketing Service, USDA, room 2536-S,
P.O. Box 96456, Washington, DC 20090-6456; telephone (202) 720-5127.
SUPPLEMENTARY INFORMATION: Pursuant to Marketing Order No. 920 (7 CFR
Part 920), hereinafter referred to as the ``order'' and the applicable
provisions of the Agricultural Marketing Agreement Act of 1937, as
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act,'' it
is hereby directed that a referendum be conducted to ascertain whether
continuance of the order is favored by growers. The referendum shall be
conducted during the period June 3 through June 21, 1996, among
California kiwifruit growers in the production area. Only growers who
were engaged in the production of California kiwifruit during the
period of August 1, 1995, through May 31, 1996, may participate in the
continuance referendum.
The Secretary of Agriculture (Secretary) has determined that
continuance referenda are an effective means for ascertaining whether
growers favor continuation of marketing order programs. The Secretary
would consider termination of the order if less than two-thirds of the
growers voting in the referendum and growers of less than two-thirds of
the volume of California kiwifruit represented in the referendum favor
continuance. In evaluating the merits of continuance versus
termination, the Secretary will not only consider the results of the
continuance referendum. The Secretary will also consider all other
relevant information concerning the operation of the order and the
relative benefits and disadvantages to growers, handlers, and consumers
in order to determine whether continued operation of the order would
tend to effectuate the declared policy of the Act.
In any event, section 8c(16)(B) of the Act requires the Secretary
to terminate an order whenever the Secretary finds that a majority of
all growers affected by the order favor termination, and such majority
produced for market more than 50 percent of the commodity covered under
such order.
In accordance with the Paperwork Reduction Act of 1995 (Pub. L.
104-13), the ballot materials to be used in the referendum herein
ordered have been submitted to and approved by the Office of Management
and Budget (OMB) and have been assigned OMB No. 0581-0149 for
California kiwifruit. It has been estimated that it will take an
average of 20 minutes for each of the approximately 500 growers of
California kiwifruit to cast a ballot. Participation is voluntary.
Ballots postmarked after June 21, 1996 will not be included in the vote
tabulation.
Rose M. Aguayo and Kurt J. Kimmel of the California Marketing Field
Office, Fruit and Vegetable Division, Agricultural Marketing Service,
United States Department of Agriculture (USDA), are hereby designated
as the referendum agents of the Secretary to conduct such referendum.
The procedure applicable to the referendum shall be the ``Procedure for
the Conduct of Referenda in Connection With Marketing Orders for Fruit,
Vegetables, and Nuts Pursuant to the Agricultural Marketing Agreement
Act of 1937, as Amended'' (7 CFR Part 900.400 et seq.).
Ballots will be mailed to all growers of record and may also be
obtained from the referendum agents and from their appointees.
List of Subjects in 7 CFR Part 920
Kiwifruit, Marketing agreements.
Authority: 7 U.S.C. 601-674.
Dated: March 20, 1996.
Michael V. Dunn,
Assistant Secretary, Marketing and Regulatory Programs.
[FR Doc. 96-7443 Filed 3-26-96; 8:45 am]
BILLING CODE 3410-02-P
Complete official Federal Register PDF
FR Doc. 96-7441 Honey Research, Promotion, and Consumer Information Order Amendment of the Rules and Regulations To Add HTS Code for Flavored Honey
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13463-13464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7441]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
7 CFR Part 1240
[AMS-FV-96-701.PR]
Honey Research, Promotion, and Consumer Information Order--
Amendment of the Rules and Regulations To Add HTS Code for Flavored
Honey
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would add a new Harmonized Tariff Schedule
(HTS) code number for imported flavored honey to the rules and
regulations issued under the Honey Research, Promotion, and Consumer
Information Order to provide authority for the U.S. Customs Service to
collect an assessment on all imported, flavored honey.
DATES: Comments must be received by April 26, 1996.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposed rule to: Research and Promotion Branch, Fruit
[[Page 13464]]
and Vegetable Division, Agricultural Marketing Service (AMS), USDA,
P.O. Box 96456, Room 2535-S, Washington, DC 20090-6456; fax (202) 205-
2800. Three copies of all written material should be submitted, and
they will be made available for public inspection at the Research and
Promotion Branch during regular business hours. All comments should
reference the docket number and the date and page number of this issue
of the Federal Register.
FOR FURTHER INFORMATION CONTACT: Sonia N. Jimenez, Research and
Promotion Branch, Fruit and Vegetable Division, AMS, USDA, P.O. Box
96456, Room 2535-So., Washington, D.C. 20090-6456; telephone (202) 720-
9915.
SUPPLEMENTARY INFORMATION: This proposed rule is issued under the Honey
Research, Promotion, and Consumer Information Act, as amended [104
Stat. 3904, 7 U.S.C. 4601 et seq.], hereinafter referred to as the Act.
This proposed rule has been issued in conformance with Executive
Order 12866.
This rule has been reviewed under Executive Order 12778, Civil
Justice Reform. It is not intended to have retroactive effect. This
rule would not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 10 of the Act, a
person subject to an order may file a petition with the Secretary
stating that such order, any provision of such order, or any obligation
imposed in connection with such order is not in accordance with law;
and requesting a modification of the order or an exemption from the
order. Such person is afforded the opportunity for a hearing on the
petition. After the hearing, the Secretary would rule in the petition.
The Act provides that the district court of the United States in any
district in which such person is an inhabitant, or has a principal
place of business, has jurisdiction to review the Secretary's ruling on
the petition, provided that a compliant is filed within 20 days after
the date of entry of the ruling.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Administrator of the Agricultural Marketing Service
(AMS) has considered the economic impact of this action on small
entities.
There are an estimated 145 handlers, 510 producer-packers, 8,300
producers, and 350 importers who are currently subject to the
provisions of the Order. The majority of these persons may be
classified as small agricultural producers and small agricultural
service firms. Small agricultural producers are defined by the Small
Business Administration [13 CFR 121.601] as those having annual
receipts of less than $500,000, and small service firms are defined as
those having annual receipts of less than $5 million.
The Administrator of the AMS has determined that this rule would
not have a significant economic impact on a substantial number of small
entities.
In accordance with the Paperwork Reduction Act [44 U.S.C. Chapter
35], and OMB regulations [5 CFR Part 1320], the information collection
and recordkeeping requirements contained in this action have been
previously approved under OMB control number 0581-0093.
Background
The Honey Research, Promotion, and Consumer Information Order
(Order) provides that each producer and importer shall pay to the Board
a one cent per pound assessment rate on honey and honey products
produced in or imported into the United States. Section 1240.5 of the
Order defines honey products as products wherein honey is a principal
ingredient.
In order for the U.S. Customs Service (Customs) to collect the
assessments on imported honey and honey products, each product needs to
be identified by an HTS Code. Since the Board inception, honey has been
assessed by Customs under HTS code number 0409.00.00. However, there
were no HTS codes for honey products.
The Board has identified flavored honey as a product containing
approximately 99 percent honey. The Board estimates that 500,000 pounds
of flavored honey are imported into the United States annually without
the importer paying the required assessment. Therefore, at the
recommendation of the Board, the Department requested the Committee for
Statistical Annotation of Tariff Schedules (Committee) on the
International Trade Commission to establish an HTS code for flavored
honey. The Committee notified the Department on February 13, 1996, that
a code has been established for flavored honey. The purpose of this
rule is to add the new HTS code for flavored honey to the rules and
regulations under the Order to provide authority for Customs to collect
the assessment on all imported, flavored honey.
This proposed rule would add the new 2106.90.9988 HTS code for
flavored honey to section 1240.115(e) of the rules and regulations
issued under the Order. Flavored honey would be assessed at the one-
cent-per-pound rate. A conversion factor is not necessary because the
amount of honey in flavored honey is estimated at 99 percent of the
total product. Customs will notify importers 60 to 90 days before it
begins collecting the assessment on flavored honey. The notification
will be made only after a final rule, if any, is issued on this action.
A 60-day comment period is provided to allow interested persons to
respond to this proposal. All written comments timely received will be
considered before a final determination is made on this matter.
List of Subjects in 7 CFR Part 1240
Advertising, Agricultural research, Honey, Imports, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, 7 CFR Part 1240 is
proposed to be amended as follows:
PART 1240--HONEY RESEARCH, PROMOTION, AND CONSUMER INFORMATION
ORDER
1. The authority citation for 7 CFR Part 1240 continues to read as
follows:
Authority: 7 U.S.C. 4601-4612
2. In Sec. 1240.115, paragraph (e) is revised to read as follows:
Sec. 1240.115 Levy of assessments.
* * * * *
(e) The U.S. Customs Service (USCS) will collect assessments on all
honey or honey products where honey is the principal ingredient
imported under its tariff schedule (HTS heading numbers 0409.00.00 and
21006.90.9988) at the time of entry or withdrawal for consumption and
forward such assessment as per the agreement between the USCS and USDA.
Any importer or agent who is exempt from payment of assessments
pursuant to Sec. 1240.42 (a) and (b) of the Order may apply to the
Board for reimbursement of such assessment paid.
* * * * *
Dated: March 21, 1996.
Eric M. Forman,
Deputy Director, Fruit and Vegetable Division.
[FR Doc. 96-7441 Filed 3-26-96; 8:45 am]
BILLING CODE 3410-02-P
Complete official Federal Register PDF
FR Doc. 96-7405 Electronic Filing of Reports by Political Committees
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13464-13468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7405]
=======================================================================
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[[Page 13465]]
FEDERAL ELECTION COMMISSION
11 CFR Part 104
[Notice 1996-10]
Electronic Filing of Reports by Political Committees
AGENCY: Federal Election Commission.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Federal Election Commission is seeking comment on proposed
rules to implement an electronic filing system for reports of campaign
finance activity filed with the agency. Although the agency has been
working on the development of an electronic filing sytem for some time,
the proposals in this Notice are also designed to reflect recent
changes in the Federal Election Campaign Act of 1971. The proposed
rules would establish requirements for filing reports electronically,
including specifying the format for data to be submitted by filers,
procedures for submitting amendments to reports, and methods of
satisfying signature requirements under the law.
DATES: Comments must be received on or before May 28, 1996.
ADDRESSES: Comments must be in writing and addressed to: Ms. Susan E.
Propper, Assistant General Counsel, 999 E Street, NW., Washington, DC
20463.
FOR FURTHER INFORMATION CONTACT: Ms. Susan E. Propper, Assistant
General Counsel, 999 E Street, NW., Washington, DC 20463, (202) 219-
3690 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: On December 28, 1995, Public Law 104-79
amended the Federal Election Campaign Act of 1971 to require, inter
alia, that the Commission create a system to ``permit reports required
by this Act to be filed and preserved by means of computer disk or any
other electronic format or method, as determined by the Commission.''
109 Stat. 791(1995), section 1(a). The new law requires this system to
be available for reports covering periods after December 31, 1996. This
means the new system will be in place for the first reports filed in
the 1998 election cycle. The goals of such a system include more
complete on line access to reports on file with the Commission, reduced
paper filing and manual processing, and more efficient and cost-
effective methods of operation for filers and for the Commission. Note
that participation in the electronic filing program by committees and
other persons filing reports will be voluntary.
There are a number of factors that should be considered before any
system can be successfully implemented. The information must be
submitted in a standardized format so that the Commission's computer
system can read the information and locate all the different data
elements that are part of a committee's report. At the outset, the
Commission plans to accept reports filed electronically, store them,
and make them available to the public. The information will then be
processed by the Commission in the same manner as paper reports (i.e.
creating paper copies for review and integration into the disclosure
data base). Ultimately, the electronically filed material will be
directly integrated into the Commission's data bases. While most
electronic filing systems developed at the state and local level have
required submission of paper reports along with electronic media, the
FEC process does not include this requirement. In fact, committees
choosing to file electronically would have to include all information
found in a report in the electronic data submitted. When paper copies
of reports are necessary for processing, the Commission will create
those documents.
(Note: However, that certain forms and schedules have special
requirements that may require submission of a paper copy under
proposed paragraph (f).)
It is also important, however, that the system be designed in a
fashion that allows committees to comply most easily with the Act's
requirements. Thus, the Commission is developing methods for complying
with statutory requirements such as submitting a report signed by the
committee's treasurer, and to accommodate, for example, the need to
file amendments to reports or to explain more fully certain
transactions included on a committee's report. However, certain
schedules and forms require signatures of third parties or submission
of additional materials such as loan agreements. The Commission will
need to design the format structure to include the information provided
on these forms and schedules, but will also need a mechanism to meet
the additional requirements of these documents.
The system being designed by the Commission will be available to
all committees required to file reports with the Commission that wish
to file in an electronic format. Public Law 104-79 changed the place of
filing for committees that formerly filed with the Clerk of the House
of Representatives. These committees, as well as those that have
historically filed with the Commission, will have the opportunity to
file under the new system. Proposed section 104.18 will set forth the
requirements for electronic filing. Please note that committees that
are required to file reports with the Secretary of the Senate will not
be covered by the Commission's new rules.
The Commission welcomes comments from committees that will be
affected by this change. Vendors with knowledge of the software
concerns that might be involved in implementing such a system, and
state and local jurisdictions that have had experience with electronic
filing, are also encouraged to participate. Finally, end-users of
campaign finance information, such as researchers and the media, may
wish to offer their suggestions from a consumer's perspective.
Interested persons should also note that the Commission will be
developing its record format specifications in a separate process at
the same time it is considering these rules. Software vendors and
committees that wish to comment or make suggestions regarding the
format specifications should contact the Data Systems Division to be
included on the list of those consulted.
Standard Format
Several different standardization issues are presented by the
Commission's proposal. A key requirement is that any data submitted
electronically be conveyed in the Commission-approved format. The
agency has dealt with these concerns previously in the context of
publicly financed presidential candidates and convention committees. To
address those situations, the Commission issued its Computerized
Magnetic Media Requirements (CMMR), which established format
specifications for certain computerized data submitted by these
committees. The CMMR specifies the record format for submitting data;
that is, it specifies the ``fields'' (required information) that make
up the records and how much space is allocated for each field of data.
There are separate fields for receipt and disbursement records,
consistent with the Act's reporting provisions.
A similar set of requirements is being developed for electronic
filing of reports. These requirements will be contained in a document
titled ``The Federal Election Commission's Electronic Filing
Specifications Requirements.'' As previously noted, the format
specifications will be made available to interested persons for comment
and suggestions as they are being developed. When completed, this
document will be available from the Commission at no charge.
Another set of issues relates to the steps that will be necessary
to integrate
[[Page 13466]]
the reports filed into the Commission's data base. Currently, the
Commission uses the reports to enter certain selected data into its
computer data base. For the most part, this data is limited to totals
from the committees' summary pages, and information on contributions
and independent expenditures. When the Commission first implements its
electronic filing program in 1997, it expects to continue its cross-
indexing of information from all reports, including those filed
electronically. In addition, the Commission will maintain reports filed
electronically in a separate data base, in order to preserve a record
of what has been filed by each reporting entity. A copy of these
records will be accessible on-line.
In the future, the Commission intends to structure its program so
that the data submitted by reporting entities will be in a form that
can be directly added to the agency's data base. This development may
require the specification of standards for reporting certain categories
of information, in order to maintain the accuracy and integrity of the
Commission's current data base. This will ensure, for example, that all
contributions made by PACs to a particular candidate are reported in
the same way so they can be accurately attributed in the Commission's
data base to that candidate. Currently, the Commission ensures that the
correct recipient is identified in the data base, even though reporting
entities may have described the recipient in slightly different ways.
The Commission may also wish to establish a standard list of purposes
for reported disbursements, which could in turn be based on the expense
classifications used in a chart of accounts. Both of these issues could
be addressed by making updated lists available through the Internet
that could be downloaded by committees. Information from these lists
could then be moved into reports, simplifying the reporting process for
committees.
Acceptance of Reports Filed Electronically
A related issue addressed by the proposed rules concerns the need
to ensure that reports filed electronically can be read by the
Commission's computers. Data submitted in a format that does not meet
the Commission's filing specifications and therefore does not permit
the Commission's computers to read and locate required information will
not be treated as a filed report under proposed paragraph 104.18(c).
Similarly, a damaged disk that cannot be read by the computer system
will not be accepted. In addition, filings that do not contain valid
identifying information for the committee and the report being
submitted, or that are not signed using one of the signature mechanisms
provided by the rules, will not be considered filed. The Commission
proposes to notify committees whose reports are not accepted.
To determine that a report submitted in an electronic format meets
these requirements, the Commission is developing validation software
that will check the submitted record structures to be sure they meet
the requirements of the format specifications. This software will be
available to committees at no charge, to enable them to run their
reports against this program and ensure that their submission will not
be rejected.
Another issue involves the method of submitting electronic reports.
When the program first goes into effect in 1997, the Commission
proposes to accept reports only on floppy disk. This approach will help
ease the transition to accepting reports in this new format, since it
is comparable to the Commission's past practice of accepting
computerized media from Presidential campaigns. As soon as practicable,
however, the Commission expects to initiate acceptance of reports
through telecommunications. Among other things, since the law provides
that reports are due on specified dates, this option would require the
arrangement of a mechanism for handling a large influx of data during a
compressed time period with intervening periods of no activity. As a
guide to assessing the potential load factor involved in accepting
reports via modem, the Commission encourages committees to comment on
whether they are currently capable of submitting an electronic report
via telecommunications and whether they perceive any problems with a
system that allows reports to be filed in this manner.
Amended Reports
Proposed paragraph (d) would require that amendments to reports be
filed in an electronic format if the original report was filed
electronically, and that the amendment consist of a complete version of
the report as amended, not just those portions of the earlier
submission that are being changed. The Commission welcomes comments on
how to address amendments, particularly with regard to whether the
amendment should be a complete version of the report. This approach has
the advantage of placing a complete revised copy of the report on the
public file, and therefore would not require those reviewing a
committee's records to piece later amendments of reports together with
earlier submissions. However, filing a complete revised version would
not immediately indicate what aspects of the earlier report had
changed. Larger reports could pose a particular problem in this regard.
In addition, the Commission encourages comments on whether one approach
would be easier for committees to comply with than the other.
Signature Requirements
The Act requires that reports and statements shall be signed by the
person responsible for filing them. See, 2 U.S.C. 434(a)(1) and (c).
Public Law 104-79 directs the Commission to develop one or more methods
for verifying reports filed electronically and states that such a
verification will be treated the same as a signature for all purposes.
In the initial phase of the new system, paragraph (e) of the proposed
rule would require that filers utilize one of two methods for verifying
their reports. Either a signed certification page would be submitted
with the disk containing the electronic report, or the disk would
contain a digitized version of the signed certification. When the
Commission begins to accept reports filed by telecommunications, it
plans to provide other methods for verification, such as providing an
encryption key to the treasurer or allowing simultaneous mailing of a
signature page, similar to the system being used by the Internal
Revenue Service in its electronic filing program. Suggestions for other
methods are welcome.
Certain schedules and forms must be filed with signatures from
third parties, however. For example, the Act requires that Schedule E
and Form 5, which are used to report independent expenditures, be
notarized. Schedule C-1 (Loans and Lines of Credit from Lending
Institutions) and Form 8 (Debt Settlement Plans) must be filed with
signatures from lenders and creditors, respectively. In addition,
Schedule C-1 must be accompanied by a copy of the relevant loan
agreement. The electronic record format will be designed to include the
data provided on these forms and schedules. However, to satisfy these
additional requirements, proposed paragraph (f) would also require that
either a signed version of these schedules and forms (and any
accompanying materials) be digitized and submitted as a separate file
in the electronic submission, or that a signed paper original of these
schedules and forms (and accompanying materials) be submitted with the
electronic media.
[[Page 13467]]
Additional Issues
For those commenters who are reporting entities, some additional
information about the committee would be helpful to the Commission's
inquiry. In particular, the Commission would be interested in whether
the committee uses a computer to maintain its records and prepare its
reports. If so, what data is maintained on the computer? For example,
does the data include information regarding contributors, contributions
to candidates, other receipts and disbursements? If the committee uses
a software package to maintain this data and/or to prepare its reports,
what package(s) does it use? Does this software incorporate all the
information the committee needs to file its reports or is it necessary
to bring in information from other sources?
In addition, the Commission would welcome comments indicating
whether reporting committees plan to take advantage of this option. The
Commission recognizes that, to be successful, any electronic filing
program must accommodate to the extent possible the needs and
capabilities of the filing community. A major factor to be considered
in this regard is the high level of turnover among filers. A
significant portion of the filing population is only involved in
campaign finance disclosure for a relatively short period. This
includes unsuccessful candidates as well as political committees that
go out of existence after a few months or a year. Many committees,
including those that have a more stable existence (such as party
committees), operate largely with volunteers or experience frequent
staff changes. Consequently, there also may be little staff continuity
in some ongoing committees. Moreover, those that depend on volunteers
may be disadvantaged by the limited time those individuals can devote
to committee responsibilities.
However, other committees have a more permanent staff and are
sophisticated in their use of computers and their knowledge of the law.
These committees might have an easier time converting to an electronic
filing format.
Therefore, a fundamental question on which the Commission welcomes
comment concerns the potential benefits of an electronic filing system
to filers and others. How can electronic filing make disclosure easier?
Conversely, are there any perceived problems with the Commission's
approach to electronic filing, whether from a procedural or technical
perspective, and how can these problems be averted?
A related point concerns committees that begin filing
electronically but for some reason are later unable to do so. Proposed
paragraph (a) would require that committees continue to submit reports
in an electronic format for the remainder of the calendar year in which
they elect to begin filing electronically. This provision has been
added for several reasons, including enabling the agency to efficiently
administer the disclosure program and to ensure continuity in the means
by which a committee's reports are placed on the public record. While
these are important considerations for the Commission's administration
of the Act, should the Commission attempt to distinguish committees
with a genuine problem from those who simply decide to discontinue
submitting electronic reports? If so, how could this be accomplished?
Information on the electronic capability of current filers would be
helpful in assessing the community's readiness to move to this
reporting format. Any other information the committee feels would be
helpful to the Commission in its efforts to assess the ability of the
regulated community to move to an electronic filing format would be
appreciated.
Finally, the Commission is interested in the experience of other
jurisdictions that have implemented an electronic filing program. What
have these jurisdictions found to be the most effective means of
introducing filers to the new system, without jeopardizing the
integrity of their ongoing program? Since the Commission will not have
a test period for filing reports electronically before it begins
accepting these reports solely in electronic format, are there any
concerns of committees that should be addressed?
List of Subjects in 11 CFR Part 104
Campaign funds, Political candidates, Political committees and
parties, Reporting requirements.
Certification of No Effect Pursuant to 5 U.S.C. 605(B) (Regulatory
Flexibility Act)
These proposed rules will not, if promulgated, have a significant
economic impact on a substantial number of small entities. The basis
for this certification is that no small entity is required to submit
reports electronically under these proposed rules.
For the reasons set out in the preamble, it is proposed to amend
subchapter A, Chapter I of title 11 of the Code of Federal Regulations
as follows:
PART 104--REPORTS BY POLITICAL COMMITTEES
1. The authority citation for Part 104 would be amended as follows:
Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432(d), 432(i), 434,
438(a)(8), 438(b).
Sec. 104.17 [Reserved]
2. Section 104.17 is reserved.
3. Section 104.18 would be added to read as follows:
Sec. 104.18 Electronic filing of reports (2 U.S.C. 432(d) and
434(a)(11)).
(a) General. A political committee that files reports with the
Commission, as provided in 11 CFR Part 105, may choose to file its
reports in an electronic format that meets the requirements of this
section. If a committee chooses to file its reports electronically, and
its first electronic report passes the Commission's validation program
in accordance with paragraph (c) of this section, it must continue to
file in an electronic format all reports covering financial activity
for that calendar year.
(b) Format specifications. Reports filed electronically shall
conform to the technical specifications, including file requirements,
described in the Federal Election Commission's Electronic Filing
Specifications Requirements. The data contained in the computerized
magnetic media provided to the Commission shall be organized in the
order specified by the Electronic Filing Specifications Requirements.
(c) Acceptance of reports filed in electronic format.
(1) Each committee that submits an electronic report shall check
the report against the Commission's validation program before it is
submitted, to ensure that the files submitted meet the Commission's
format specifications and can be read by the Commission's computer
system. Each report submitted in an electronic format under this
section shall also be checked upon receipt against the Commission's
validation program. The Commission's validation program is available on
request and at no charge.
(2) A report that does not pass the validation program will not be
accepted by the Commission and will not be considered filed. If a
committee submits a report that does not pass the validation program,
the Commission will notify the committee that the report has not been
accepted.
(d) Amended reports. If a committee files an amendment to a report
that was filed electronically, it shall also submit the amendment in an
electronic format. The committee shall submit a complete version of the
report as amended, and
[[Page 13468]]
not just the portions of the earlier report that are being amended.
(e) Signature requirements. The committee's treasurer, or any other
person having the responsibility to file a designation, report or
statement under this subchapter, shall verify the report in one of the
following ways: by submitting a signed certification on paper that is
submitted with the computerized media; or by submitting a digitized
copy of the signed certification as a separate file in the electronic
submission. Each verification submitted under this section shall
certify that the person has examined the report or statement and, to
the best of the signatory's knowledge and belief, it is true, correct
and complete. Any verification under this section shall be treated for
all purposes (including penalties for perjury) in the same manner as a
verification by signature on a report submitted in a paper format.
(f) Schedules and forms with special requirements. The following
list of schedules, materials, and forms have special signature and
other requirements and reports containing these documents shall
include, in addition to providing the required data within the
electronic report, either a paper copy submitted with the committee's
electronic report or a digitized version submitted as a separate file
in the electronic submission: Schedule C-1 (Loans and Lines of Credit
From Lending Institutions), including copies of loan agreements
required to be filed with that Schedule, Schedule E (Itemized
Independent Expenditures), Form 5 (Report of Independent Exepnditures
Made and Contributions Received), and Form 8 (Debt Settlement Plan).
The committee shall submit any paper materials together with the
electronic media containing the committee's report.
(g) Preservation of reports. For any report filed in electronic
format under this section, the treasurer shall retain a machine-
readable copy of the report as the copy preserved under 11 CFR
104.14(b)(2). In addition, the treasurer shall retain the original
signed version of any documents submitted in a digitized format under
paragraphs (e) and (f) of this section.
Dated: March 22, 1996.
Lee Ann Elliott,
Chairman, Federal Election Commission.
[FR Doc. 96-7405 Filed 3-26-96; 8:45 am]
BILLING CODE 6715-01-P
Complete official Federal Register PDF
FR Doc. 96-7335 Exemption for the Acquisition of Securities During the Existence of an Underwriting Syndicate
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13630-13639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7335]
[[Page 13629]]
_______________________________________________________________________
Part VI
Securities and Exchange Commission
_______________________________________________________________________
17 CFR Part 270
Exemption for the Acquisition of Securities During the Existence of an
Underwriting Syndicate; Proposed Rule
Federal Register / Vol. 61, No. 60 / Wednesday, March 27, 1996 /
Proposed Rules
[[Page 13630]]
SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 270
[Release No. IC-21838, File No. S7-7-96]
RIN 3235-AG61
Exemption for the Acquisition of Securities During the Existence
of an Underwriting Syndicate
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: The Commission is proposing amendments to the rule under the
Investment Company Act of 1940 that permits investment companies that
are affiliated with members of underwriting syndicates to purchase
securities underwritten by these syndicates if certain conditions are
met. The proposed amendments are designed to make the rule more
flexible by, among other things, increasing the percentage of an
underwriting that an investment company may purchase in reliance on the
rule and expanding the scope of the rule to include foreign securities.
The proposed amendments, and a proposed new companion rule, also would
permit investment companies to acquire municipal securities from
underwriting syndicates in ``group sales.'' The proposed amendments
respond to changes in the investment company and underwriting
industries that have occurred since the rule last was substantively
amended in 1979.
DATES: Comments must be received on or before June 3, 1996.
ADDRESSES: Comments should be submitted in triplicate to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW., Stop 6-9, Washington, DC 20549. Comments also may be submitted
electronically at the following E-mail address: [email protected].
All comment letters should refer to File No. S7-7-96; this file number
should be included on the subject line if E-mail is used. Comment
letters will be available for public inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street, NW., Washington,
DC 20549. Electronically submitted comment letters will be posted on
the Commission's Internet web site (http://www.sec.gov).
FOR FURTHER INFORMATION CONTACT: David M. Goldenberg, Senior Counsel,
or Kenneth J. Berman, Assistant Director, at (202) 942-0690, Office of
Regulatory Policy, Division of Investment Management, Stop 10-6, 450
Fifth Street, NW., Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The Commission today is requesting public
comment on proposed amendments to rule 10f-3 (17 CFR 270.10f-3) and a
proposed new rule, rule 17a-10 (17 CFR 270.17a-10), under the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (the
``Investment Company Act'').
Table of Contents
Executive Summary
I. Background
A. Introduction
B. Rule 10f-3
C. Need for Amendments
II. Discussion
A. Quantity Limitations
1. Amount Purchased
2. Percentage of Fund Assets
3. Request for Comment on Quantity Limitations
B. Purchases of Foreign Securities
1. Eligible Foreign Offering
a. General
b. Disclosure
c. Offering Price
2. Foreign Issuer Rule 144A Offerings
3. General Request for Comment
C. Group Sales
D. Reporting and Recordkeeping
III. General Request for Comments
IV. Cost/Benefit Analysis
V. Paperwork Reduction Act
VI. Summary of Regulatory Flexibility Analysis
VII. Statutory Authority
Text of Proposed Rule and Form Amendments
Executive Summary
Section 10(f) of the Investment Company Act was designed to address
the practice prior to 1940 by some securities underwriters
(``underwriters'') of ``dumping'' unmarketable securities on their
affiliated investment companies (``funds''). The section prohibits a
fund from purchasing securities for which an underwriter having certain
relationships with the fund (``affiliated underwriter'') is acting as a
principal underwriter during the existence of an underwriting or
selling syndicate. Rule 10f-3 under the Investment Company Act permits
funds to purchase securities during the existence of an underwriting
syndicate under specified conditions designed to assure that the
purchase is consistent with the protection of fund investors. These
conditions include requirements that (i) the purchased securities be
either registered under the Securities Act of 1933 (``Securities Act'')
or municipal securities, (ii) the fund (along with other funds advised
by the same investment adviser) purchase no more than the greater of
four percent of the underwritten securities, or $500,000, but in no
case more than 10% of the offering (the ``percentage limit''), (iii)
the fund use no more than three percent of its assets to purchase
securities in a transaction subject to the rule, and (iv) the fund not
purchase the securities from the affiliated underwriter. The last
condition also prohibits a fund from purchasing municipal securities in
a ``group sale,'' which is a sale for which all members of a syndicate
receive credit in proportion to their respective underwriting
commitments.
The Commission believes that the conditions of rule 10f-3 should be
reevaluated in light of changes in the fund and financial services
industries since the principal provisions of rule 10f-3 were last
amended in 1979 and is proposing amendments to the rule that reflect
these changes. The proposed amendments are intended to provide funds
with additional flexibility, consistent with the policies underlying
section 10(f), to make investments that may be in the best interests of
investors.
The proposed amendments would raise the percentage limit to the
greater of 10% of an offering or $1,000,000 (but not to exceed 15% of
the offering). The proposed amendments also would eliminate the current
limit on the amount of a fund's assets that may be used to make
purchases pursuant to the rule and the current requirement that funds
report rule 10f-3 transactions in their semi-annual reports filed with
the Commission on Form N-SAR.
In recognition of the increase in the extent to which funds invest
in foreign securities, the proposed amendments would expand rule 10f-3
to permit funds to purchase securities of foreign issuers (``foreign
securities'') that are not registered under the Securities Act, subject
to certain conditions. These conditions are designed to permit funds to
purchase foreign securities in transactions having certain
characteristics similar to public offerings in the United States, such
as disclosure of specified information and a single public offering
price.
The proposed amendments would permit funds to purchase municipal
securities in group sales, subject to certain conditions designed to
protect against overreaching by fund affiliates. Purchases of
securities in group sales would be permitted, for example, only when
the underwriting syndicate has established that group sales would have
priority over other types of sales.
I. Background
A. Introduction
A central theme underlying the regulation of investment companies
is the concern that fund affiliates could
[[Page 13631]]
use fund assets for their own purposes, to the detriment of fund
shareholders. One of the major abuses noted in the period preceding the
Investment Company Act was the use of funds by underwriters that
controlled these funds as a ``dumping ground'' for unmarketable
securities.1 An underwriter could, for example, ``dump''
unmarketable securities on its controlled fund, either by causing the
fund to purchase the securities from the underwriter itself, or by
encouraging the fund to purchase securities from another member of the
underwriting syndicate. Fund assets also could be used to absorb the
risks of an underwriting in more subtle ways, such as to facilitate
price stabilization in connection with an underwriting.2
\1\ See Investment Trusts and Investment Companies: Hearings on
S. 3580 Before a Subcomm. of the Senate Comm. on Banking and
Currency, 76th Cong., 3d Sess. 35 (1940) (statement of Commissioner
Healy).
\2\ In its study of the fund industry prior to 1940, the
Commission gave specific examples of cases in which underwriters had
used the assets of their affiliated funds to benefit the
underwriters or to save them from insolvency. See generally SEC,
Investment Trusts and Investment Companies, H.R. Doc. No. 279, 76th
Cong., 1st Sess., pt. 3, at 2519-2624 (1939). The Commission
explained:
The control of an investment company by an investment banker
naturally impresses the client, who desires to be financed, with the
resources that the investment banker may call upon to make the
financing operation successful, such as, selling some of the
securities to the investment company, securing the company's
participation in the underwriting commitment, including the company
in trading accounts or using the company's funds in stabilizing the
market.
Id. at 2535-36.
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Section 10(f) of the Investment Company Act was designed to address
these concerns.3 The section prohibits a fund from purchasing
securities for which an affiliated underwriter is acting as a principal
underwriter during the existence of an underwriting or selling
syndicate.4 Recognizing that section 10(f), by prohibiting all
purchases by funds affiliated with members of an underwriting syndicate
during the existence of the syndicate, could be overly broad, Congress
gave the Commission specific authority to exempt persons from that
section by order or rule when the exemption is consistent with the
protection of investors.5
\3\ See 2 T. Frankel, The Regulation of Money Managers 555
(1978) (``The purpose of [section 10(f)] is to protect investment
companies from purchasing securities to advance the interests of
their affiliates rather than their own.''). Even in the absence of
section 10(f), a fund effectively would be prohibited by section
17(a) of the Investment Company Act from purchasing securities
directly from its affiliated underwriter or from an affiliate of its
affiliate. See 15 U.S.C. 80a-17(a). That section 10(f) prevents a
fund from acquiring securities from an unaffiliated member of the
underwriting syndicate would seem to reflect the view that the
affiliated underwriter has the potential to pressure the fund into
acquiring the securities through another underwriter in order to
facilitate the underwriting. If each member of a syndicate has
proportionate liability for securities remaining unsold, as is
frequently the case in many municipal securities syndicates, for
example, the successful sale of all of the securities, regardless of
from which member of the syndicate the securities are purchased,
benefits all members of the syndicate, including the affiliated
underwriter.
\4\ ``Principal Underwriter'' is defined in section 2(a)(29) of
the Investment Company Act, 15 U.S.C. 80a-2(a)(29), to mean (in
relevant part) an underwriter who, in connection with a primary
distribution of securities, (A) is in privity of contract with the
issuer or an affiliated person of the issuer, (B) acting alone or in
concert with one or more other persons, initiates or directs the
formation of an underwriting syndicate, or (C) is allowed a rate of
gross commission, spread, or other profit greater than the rate
allowed another underwriter participating in the distribution.
\5\ Section 10(f) prohibits a fund from purchasing a security
during the existence of an underwriting or selling syndicate if a
principal underwriter of the security is an officer, director,
member of an advisory board, investment adviser, or employee of the
fund, or is a person of which any such officer, director, member of
an advisory board, investment adviser, or employee is an affiliated
person. For purposes of this release, a person that falls within one
of these categories is referred to as an ``affiliated underwriter,''
and the syndicate of which such person is a member is referred to as
an ``affiliated underwriting syndicate.'' Funds that are subject to
section 10(f) because an affiliated underwriter is a member of a
syndicate are referred to as ``affiliated funds.''
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B. Rule 10f-3
In 1958, the Commission used its exemptive authority under section
10(f) to adopt rule 10f-3.6 The rule permits a fund to purchase
securities in a transaction that otherwise would violate section 10(f)
if, among other things (i) the securities are either registered under
the Securities Act or municipal securities, (ii) the offering involves
a ``firm commitment'' underwriting,7 (iii) the fund and all other
funds advised by the same investment adviser do not in the aggregate
purchase more than the greater of 4% of the principal amount of the
securities being offered or $500,000 (but in no event greater than 10%
of the offering), (iv) the fund does not use more than 3% of its assets
to purchase the securities, (v) the fund purchases the securities from
a member of the syndicate other than the affiliated underwriter, (vi)
the fund purchases the securities at a price not more than the public
offering price prior to the end of the first full business day after
the first date on which the securities are offered, and (vii) the
fund's directors have adopted procedures for purchases made in reliance
on the rule and regularly review fund purchases to determine whether
they comply with these procedures.8 The conditions of rule 10f-3
are designed to ensure that a purchase by a fund from a syndicate in
which an affiliated underwriter is participating is consistent with the
protection of fund investors.
\6\ See Adoption of Rule N-10F-3 Permitting Acquisition of
Securities of Underwriting Syndicate Pursuant to Section 10(f) of
the Investment Company Act of 1940, Investment Company Act Release
No. 2797 (Dec. 2, 1958), 23 FR 9548 (hereinafter ``1958 Adopting
Release''). The rule codified the conditions of orders that the
Commission had granted prior to 1958 exempting certain funds from
section 10(f) to permit them to purchase specific securities. See,
e.g., The Chicago Corporation, Release No. 40-107 (Apr. 8, 1941);
The Pennroad Corporation, Investment Company Act Release No. 1636
(Aug. 10, 1951).
The Commission amended rule 10f-3 in 1979 to permit its use for
the purchase of municipal securities, in 1985 to reflect changes in
the periodic reporting requirements for all funds, and again in 1993
to remove a requirement that fund boards annually review procedures
adopted pursuant to the rule. See Exemption of Acquisition of
Securities During the Existence of Underwriting Syndicate,
Investment Company Act Release No. 10736 (June 14, 1979), 44 FR
36152 (hereinafter ``1979 Adopting Release''); Withdrawal of
Quarterly Reporting Forms and Filing Obligation of Certain
Registered Investment Companies, Securities Act Release No. 6591
(July 1, 1985), 50 FR 29368; Revision of Certain Annual Review
Requirements of Investment Company Boards of Directors, Securities
Act Release No. 7013 (Sept. 17, 1993), 58 FR 49919.
\7\ A ``firm commitment'' underwriting, for purposes of rule
10f-3, is one in which the underwriters are committed to purchase
all of the securities being offered, if the underwriters purchase
any of the securities being offered. See rule 10f-3(a)(3).
\8\ The provisions of rule 10f-3 are similar to provisions
permitting limited affiliated transactions by persons subject to
section 406 of the Employee Retirement Income Security Act of 1974
(``ERISA''), 29 U.S.C. 1106, and by banks subject to section 23B of
the Federal Reserve Act, 12 U.S.C. 371c-1. Section 406 of ERISA, as
interpreted by the Department of Labor, prohibits a plan fiduciary
from purchasing a security for the plan from a syndicate in which an
affiliate of the fiduciary is an underwriter. See Prohibited
Transaction Class Exemption 75-1 (Oct. 24, 1975) (``PTCE 75-1'').
The Department of Labor has issued a class exemption permitting
purchases in limited circumstances, subject to conditions similar to
rule 10f-3. Id.
Section 23B of the Federal Reserve Act, 12 U.S.C. 371c-1(b),
like section 10(f) of the Investment Company Act, prohibits a bank
or its subsidiary from purchasing, as principal or fiduciary,
securities from underwriting syndicates in which an affiliate of the
bank participates. Section 23B, however, permits acquisitions of
these securities if a majority of the bank's independent directors
have approved the acquisition in advance. 12 U.S.C. 371c-1(b)(2).
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C. Need for Amendments
The Commission believes that the conditions of rule 10f-3 should be
reevaluated in light of changes in the financial markets, particularly
in the fund and financial services industries.9
[[Page 13632]]
The number of funds and the amount of assets invested in funds has
grown exponentially since 1980.10 The increase in the number and
size of funds has resulted in funds becoming major sources of capital
and significant purchasers in syndicated offerings.11 This growth,
however, has had an effect on the ability of funds to use rule 10f-3.
The provisions in the rule limiting the amount of an offering that a
fund may purchase may, in effect, be more restrictive today than they
were when the Commission last substantively amended the rule in
1979.12
\9\ The Commission first recognized a need to reevaluate rule
10f-3 when it issued a release in 1986 requesting comment on whether
the Commission should amend the rule, and requesting suggestions on
possible amendments. See Advance Notice and Request for Comment on
Whether the Commission Should Amend an Existing Rule that Permits an
Investment Company to Acquire Securities Underwritten by an
Affiliate of that Company, Investment Company Act Release No. 14924
(Jan. 29, 1986), 51 FR 4386 (``1986 Concept Release''). In response,
the Commission received 11 letters commenting on nearly every aspect
of the rule. The Commission's Division of Investment Management
(``Division'') further evaluated the rule in connection with its
1992 study of the Investment Company Act. The Division recommended
at that time that the Commission amend rule 10f-3 to permit the
purchase of foreign securities. See Division of Investment
Management, U.S. Securities and Exchange Commission, Protecting
Investors: A Half Century of Investment Company Regulation 499-500
(1992).
\10\ In 1980, there were 564 funds with total assets of $134.8
billion. By December 1995, there were 5,789 funds with total assets
of over $2.8 trillion. Investment Company Institute, Press Release
(Jan. 25, 1996).
\11\ See, e.g., The Boom in IPOs, Bus. Wk., Dec. 18, 1995, at
64, 68 (stating that ``mutual funds are major buyers of new equity
issues'').
\12\ The average size of a municipal bond fund, for example, has
increased at a much greater rate than the average size of a
municipal bond offering. In 1980, the average municipal bond fund
had $69.5 million in assets and the average municipal bond offering
was $8.5 million. Investment Company Institute, 1982 Mutual Fund
Fact Book 27; Investment Company Institute, 1986 Mutual Fund Fact
Book 19; Bond Buyer, 1990 Yearbook 38. In 1995, the average
municipal bond fund had more than tripled in size, with $249.6
million in assets, while the average municipal bond offering, $15.2
million, had not even doubled in size. See Investment Company
Institute, Press Release (Jan. 25, 1996); 1995 Year-End Statistics
Supplement, Bond Buyer, Jan. 26, 1996, at 13A. See also infra note
and accompanying text.
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The growth of the fund industry has been accompanied by changes in
the financial services industry that have limited the usefulness of
rule 10f-3. Over the recent past, the financial services industry has
become more concentrated as large financial conglomerates have replaced
smaller, independent underwriting firms.13 Increasing
concentration in the underwriting industry has made it more likely that
an affiliated underwriter will participate in an underwriting
syndicate. In addition, more underwriters have either developed or
otherwise become affiliated with fund complexes, and the sponsors of
some fund complexes have established broker-dealer affiliates.14
As a result of the increasing affiliations among funds and
underwriters, more funds have become, and more are likely in the future
to become, subject to section 10(f).
\13\ See, e.g., Shawn Tully, Can Lehman Survive?, Fortune, Dec.
11, 1995, at 154; see also Helene Duffy, Few to Get Fewer in
Investment Banking, Bank Mgmt., Mar. 1991, at 8; From the Many,
Perhaps Just a Few, Bus. Month, Feb. 1988, at 69. Some commentators
have suggested that there has been an increased concentration in the
municipal securities industry as firms have departed from that
business. See, e.g., Michael Stanton, Chemical Securities to Close
Muni Division; 50 Jobs Lost, Bond Buyer, Jan. 17, 1996, at 1; Muni
Market Liquidity Not Seen Growing Significantly, Sec. Industry
Daily, Sept. 29, 1995, at 15.
\14\ See, e.g., Mercedes M. Cardona, Wall St. Managers Pay Off,
Pensions & Investments, Sept. 5, 1994, at 3 (``money managers owned
by big Wall Street brokerage and investment banking firms
increasingly are contributing to their parents' bottom lines, while
underwriting and brokerage activities slow down''); Geoffrey Smith,
This Little Broker Went to Market--And Got Big, Bus. Wk., Jan. 27,
1992, at 76 (describing the development and increasing growth of a
broker-dealer affiliate of the nation's largest fund complex).
According to statistics compiled by the Division, in 1970 only 8 of
the top 25 underwriters (ranked by percentage of amount of
securities underwritten, giving full credit to the lead underwriter)
were affiliated with funds. By 1980, that number had risen to 13. By
1995, 23 of the top 25 underwriters were affiliated with fund
groups.
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Another significant change in the fund industry since 1980 has been
the dramatic increase in the number of funds that invest in foreign
securities.15 This trend may be the result of a combination of
several factors, including the internationalization of the securities
markets and increased investor interest in overseas investment
opportunities.16 The increase in demand for foreign securities by
U.S. funds has been accompanied by an increase in the participation of
U.S. underwriters in the global offerings of these securities.17
Additionally, funds that invest only in securities of issuers located
in particular countries often employ investment advisers located in
those countries, many of which advisers are affiliated with major
underwriters in those countries.18 As a result of these
developments, funds that invest in foreign securities increasingly are
subject to the prohibitions of section 10(f), but often cannot rely
upon rule 10f-3 for purchases of these securities because the
securities frequently are not registered under the Securities
Act.19
\15\ According to statistics compiled by the Division, 21 funds,
with aggregate assets of $2.2 billion, invested primarily in foreign
securities as of December 1980. By December 1995, 682 funds, with
aggregate assets of $230.3 billion, invested primarily in foreign
securities. See Investment Company Institute, Press Release (Jan.
25, 1996).
\16\ See, e.g., Michael Hurley, Comments: International Debt and
Equity Markets: U.S. Participation in the Globalization Trend, 8
Emory Int'l L. Rev. 701 (1994) (describing the internationalization
of the securities markets); William Glasgall, Who's Afraid of the
Global Markets? Not U.S. Investors, Bus. Wk., Sept. 18, 1995, at 70
(describing how U.S. investors ``continue to roam the world in
search of portfolio diversification and growth'').
\17\ See, e.g., Michael R. Sesit, Top Dogs: U.S. Financial Firms
Seize Dominant Role In the World Markets, Wall St. J., Jan. 5, 1996,
at A1; see also Michael Carroll, As the Cycle Turns, Inst. Inv.,
Sept. 1994, at 138-39 (describing how U.S. firms are in a
``preeminent worldwide position in underwriting'').
\18\ See, e.g., Irish Investment Fund, Investment Company Act
Release Nos. 20220 (Apr. 14, 1994), 59 FR 19035 (Notice of
Application) and 20286 (May 10, 1994), 56 SEC Docket 1843 (Order);
Brazilian Equity Fund, Investment Company Act Release Nos. 19601
(July 28, 1993), 58 FR 41533 (Notice of Application) and 19650 (Aug.
24, 1993), 54 SEC Docket 1840 (Order); First Philippine Fund,
Investment Company Act Release Nos. 19034 (Oct. 16, 1992), 57 FR
48534 (Notice of Application) and 19096 (Nov. 12, 1992), 52 SEC
Docket 2436 (Order).
\19\ If a fund is prohibited by section 10(f) from purchasing a
security during the existence of an underwriting syndicate, the fund
theoretically can wait until the syndicate is completed and purchase
the security in the market. This option has disadvantages, however.
See infra note and accompanying text.
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The Commission believes that amendments to rule 10f-3 may be
desirable in light of these changes. Because the incentives that could
lead fund affiliates to seek to use fund assets to facilitate
underwritings are substantially the same today as they were in 1940,
however, the concerns underlying section 10(f) remain important.20
The proposed amendments are designed to balance these concerns with the
need for funds to have more flexibility to purchase securities when
their affiliated underwriters are members of syndicates.
\20\ See I Louis Loss & Joel Seligman, Securities Regulation 378
(1989) (``The high turnover of underwriting capital in this country
means that investment bankers for the most part cannot retain the
securities they underwrite for any length of time even if they
should want to.''); id. at 379-80 (``It is a simple fact * * * that
diminution of risk and its by-product, speed, are the keynotes in
distribution.''). Members of the fund industry, on the other hand,
have observed that the increased contributions of funds to the
revenues of major financial conglomerates, and the increased
scrutiny given funds by the financial press, have reduced the
likelihood that funds would be used to facilitate underwritings to
the disadvantage of fund shareholders. See, e.g., Letter from IDS
Financial Services, Inc. to John P. Wheeler, III, Secretary, SEC,
Apr. 4, 1986 (commenting on 1986 Concept Release, File No. S7-3-86).
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II. Discussion
A. Quantity Limitations
1. Amount Purchased
Rule 10f-3 currently prohibits funds advised by the same investment
adviser from purchasing, in the aggregate, more than 4% of the
principal amount of the offering, or $500,000, whichever is greater,
but in no event greater than 10% of the offering.21 The Commission
is proposing to amend the percentage
[[Page 13633]]
limit to permit funds relying on the rule to purchase up to the greater
of 10% of the principal amount of an offering, or $1,000,000 (but not
more than 15% of the offering).22 This proposed change is designed
to respond to the increasing size of funds and the increasing
concentration in the underwriting industry in general.
\21\ Rule 10f-3(d).
\22\ Proposed rule 10f-3(f).
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When originally adopted in 1958, rule 10f-3 limited funds to
purchasing 3% of the amount offered by the syndicate in which the
affiliated underwriter participated. The exemptions from section 10(f)
obtained by funds prior to 1958 generally had involved purchases that
would not exceed this amount.23 In 1979, the Commission increased
the percentage limit to its current level.24
\23\ See 1958 Adopting Release, supra note 6.
\24\ See 1979 Adopting Release, supra note 6.
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The current percentage limit, in some instances, may be more
restrictive than is necessary for the protection of fund investors. A
fund that is limited to purchasing 4% of an offering must, if it wishes
to purchase more than that amount, wait until the syndicate has closed
and purchase the securities in the secondary market. This delay may
result in a fund paying a significantly higher price for the securities
and incurring significant additional transaction costs.25 Thus, a
fund that is restricted by the percentage limit in rule 10f-3 may not
be able to purchase desirable securities at prices that would benefit
its portfolio. Large funds or funds in a large fund complex also may
find it inefficient to purchase only 4% of an offering, particularly if
the total offering amount is small. For these funds, 4% of an offering
may be too small an amount to have any effect on the fund's
portfolio.26 The portfolio manager of such a fund may then decide
not to purchase the security at all.
\25\ In many instances, particularly in the equity market, the
price of a security increases, sometimes dramatically, after an
initial public offering. See, e.g., I Louis Loss & Joel Seligman,
supra note 20, at 333 n.28; Jonathan A. Shayne & Larry D.
Soderquist, Inefficiency in the Market for Initial Public Offerings,
48 Vand. L. Rev. 965 (1995). There are additional potential costs to
purchasing securities in the secondary market. In secondary market
purchases, funds would be required to pay brokerage commissions that
they usually would not pay when purchasing directly in an
underwritten offering. A fund that must wait until the dissolution
of the underwriting syndicate to purchase more than 4% of an
offering also may not have the opportunity to purchase the amount of
the security that is desirable for its portfolio because of limited
supply. This particularly would be the case for popular securities
that are in high demand.
\26\ See, e.g., Letter from Alliance Capital Management Corp. to
John P. Wheeler, III, Secretary, SEC, Apr. 14, 1986 (commenting on
1986 Concept Release, File No. S7-3-86); Application of First Funds,
File No. 812-9248; see also supra note 12 and accompanying text. In
the case of municipal securities, smaller blocks of securities often
are more difficult to sell than larger blocks. If a fund manager is
able to purchase only a small block of municipal securities because
of the percentage limit in rule 10f-3, the liquidity of the fund's
portfolio may be adversely affected.
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Notwithstanding these potential disadvantages, the percentage limit
would appear to limit the possibility that securities will be
``dumped'' on an affiliated fund. The percentage limit provides an
indication that a significant portion of the offering is being
purchased by persons other than the affiliated fund. In view of its
administrative experience with rule 10f-3, however, the Commission
believes that the percentage limit can be raised to afford funds
additional flexibility. The proposed 10% purchase limit would continue
to provide assurance that a significant portion of the offering is
being distributed to persons not affiliated with the fund.
2. Percentage of Fund Assets
Rule 10f-3 currently prohibits a fund from using more than 3% of
its assets to acquire securities in a transaction subject to the rule
(the ``3% limit'').27 The Commission is proposing to eliminate
this condition. The Commission believes that the other provisions of
rule 10f-3 provide sufficient protection against dumping. In addition,
the diversification provisions of the Investment Company Act provide
shareholders of most funds with similar protections.28
\27\ Rule 10f-3(e).
\28\ Section 5(b)(1), 15 U.S.C. 80a-5(b)(1), of the Investment
Company Act, for example, generally limits a diversified fund to
investing, with respect to 75% of its assets, no more than 5% of its
assets in the securities of a single issuer.
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3. Request for Comment on Quantity Limitations
The Commission requests comment on the percentage limit and the 3%
limit generally. Does the percentage limit continue to serve a useful
regulatory purpose? Should the percentage limit be retained at all?
Would increasing the percentage limit to 10% provide sufficient
flexibility to funds while addressing the concerns underlying section
10(f)? 29 Would a higher limit (such as 15% or 20%) be
appropriate? Does the 3% limit serve a useful purpose, and if so,
should the limit be retained or raised?
\29\ The Commission notes that a factor in determining the
percentage limit is the possibility that several underwriters would
together agree to underwrite an offering and sell the entire
offering to their affiliated funds. The higher the percentage limit,
the fewer the number of underwriters necessary to make such an
agreement.
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The Commission also requests comment whether other types of
quantity limits, in addition or as an alternative to the current and
proposed limits, are appropriate or necessary to reduce the risk that
an underwriter will seek to cause an affiliated fund to purchase
unmarketable securities. One industry commenter, for example, has
suggested raising the percentage limit dramatically while limiting the
percentage of a fund's assets that may consist of securities acquired
in rule 10f-3 transactions.30 Another possible approach would be
to limit the amount of an offering all funds affiliated with members of
the underwriting syndicate may purchase. Commenters are requested to
provide specific suggestions for these types of provisions and indicate
whether they would supplement or replace existing quantity limitations
in the rule.
\30\ Letter from Smith Barney Inc. to Kenneth J. Berman,
Assistant Director, Office of Regulatory Policy, Division of
Investment Management, SEC, Feb. 28, 1996 (available in public file
S7-7-96).
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B. Purchases of Foreign Securities
Funds cannot rely on rule 10f-3 to purchase foreign securities from
syndicates in which their affiliated underwriters participate when
those offerings are not registered under the Securities Act. As a
result, several funds have, over time, applied for orders from the
Commission that would exempt them from section 10(f) and allow them to
make these purchases.31 The proposed amendments would permit funds
to rely on rule 10f-3 to purchase foreign securities in circumstances
similar to those described in prior Commission orders.
\31\ See, e.g., Brazilian Investment Fund, Investment Company
Act Release Nos. 19301 (Mar. 1, 1993), 58 FR 12613 (Notice of
Application) and 19366 (Mar. 30, 1993), 53 SEC Docket 2139 (Order);
France Growth Fund, Investment Company Act Release Nos. 19097 (Nov.
13, 1992), 57 FR 54627 (Notice of Application) and 19151 (Dec. 9,
1992), 52 SEC Docket 3001 (Order). The orders granted by the
Commission generally have required the applicants to comply with all
of the provisions of rule 10f-3 except for the Securities Act
registration requirement.
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The Commission has granted orders permitting funds to purchase
foreign securities in accordance with rule 10f-3 when the securities
have been offered in foreign public offerings that have characteristics
similar to those present in offerings registered under the Securities
Act.32 One important factor present in all of the orders, for
example,
[[Page 13634]]
has been that the securities were publicly offered and distributed at a
uniform public offering price.33 Another important factor has been
that the applicable laws or regulations of the country in which the
public offering was taking place required information about the issuer
to be made available to the public. These and other factors outlined in
the orders suggested that the securities would be widely distributed,
that a wide range of market participants would agree that the offering
price of the securities was fair, and that a secondary market for the
securities would likely develop.
\32\ See, e.g., The Mexico Fund, Investment Company Act Release
Nos. 20156 (Mar. 23, 1994), 59 FR 14946 (Notice of Application) and
20225 (Apr. 19, 1994), 56 SEC Docket 1455 (Order); The New Germany
Fund, Investment Company Act Release Nos. 19353 (Mar. 24, 1993), 58
FR 16723 (Notice of Application) and 19421 (Apr. 20, 1993), 53 SEC
Docket 2481 (Order); The First Philippine Fund, supra note 18.
\33\ At least one applicant that received a Commission order
invested in securities in a country where existing shareholders
could be offered securities on terms different than those offered to
other potential purchasers. See The New Germany Fund, supra note 32.
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The Commission proposes to amend rule 10f-3 to permit purchases of
foreign securities in circumstances in which the offerings have
characteristics similar to those described above. The proposed
amendments would permit a fund to purchase, through an affiliated
underwriting syndicate, securities issued by a foreign issuer and not
registered under the Securities Act if they are issued in either an
``Eligible Foreign Offering'' or a ``Foreign Issuer Rule 144A
Offering,'' described below.34 The fund also would be required to
comply with all other provisions of rule 10f-3.
\34\ A ``foreign issuer'' would be defined in the same manner as
it is in rule 405 under the Securities Act, 17 CFR 230.405, to mean
any issuer which is a foreign government, a national of any foreign
country or a corporation or other organization incorporated or
organized under the laws of any foreign country.
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1. Eligible Foreign Offering
a. General. The proposed amendments would define an Eligible
Foreign Offering as a public offering, conducted under the laws of a
country other than the United States, of the securities of a foreign
issuer.35 The offering would be required to be subject to
regulation by a Foreign Financial Regulatory Authority (``FFRA''), as
defined in the Investment Company Act, in the country in which the
public offering occurs.36 Thus, an offering would meet the terms
of the proposed definition if it is conducted in a country that has
laws, rules or regulations regarding public offerings. An offering also
would fall within the definition if an organization such as a stock
exchange in that country has rules that regulate the offering of the
securities. The Commission requests comment whether the proposed
requirement for regulation by a FFRA appropriately recognizes that
securities regulatory schemes differ among countries. Comment is
requested whether a narrower definition of regulatory scheme would be
appropriate for the protection of investors. Are additional or
alternative provisions, such as a requirement that the country have
laws imposing liability for misleading disclosure, or a requirement
that the country have a system for the registration of securities,
appropriate or necessary for the protection of investors?
\35\ The proposed amendments do not affect the obligation of any
issuer, whether domestic or foreign, to comply with U.S. securities
laws. The proposed definition of Eligible Foreign Offering, for
example, would not affect an issuer's obligation to determine
whether the offering is conducted in such a manner as to bring it
within the reach of the registration requirements of section 5 of
the Securities Act.
\36\ Proposed rule 10f-3(k)(1)(i). ``Foreign Financial
Regulatory Authority'' is defined in section 2(a)(50) of the
Investment Company Act, 15 U.S.C. 80a-2(a)(50), generally as any (A)
Foreign securities authority, (B) other governmental body or foreign
equivalent of a self-regulatory organization empowered by a foreign
government to administer or enforce its laws relating to certain
financial activities, or (C) membership organization a function of
which is to regulate the participation of its members in such
financial activities.
A ``foreign securities authority'' is defined in section
2(a)(49) of the Investment Company Act, 15 U.S.C. 80a-2(a)(49), as
any foreign government or any governmental body or regulatory
organization empowered by a foreign government to administer or
enforce its laws as they relate to securities matters.
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The public offering requirement may provide some assurance that a
market for the securities will develop. The Commission requests comment
whether additional conditions, such as a minimum market float or a
requirement that there be no legal restrictions on transferability, are
necessary to provide adequate assurance that a market for the
securities will exist after the offering is complete. The Commission
also requests comment whether the proposal should require all foreign
securities purchased pursuant to the rule to be listed on a securities
exchange, either as an alternative or an addition to the proposed
provisions. Would a listing requirement provide greater assurance that
the securities are widely distributed?
b. Disclosure. An offering subject to regulation by a FFRA would
meet the terms of the definition of Eligible Foreign Offering only if,
under applicable law or the rules of the applicable FFRA, the issuer of
the securities is required to disclose information about the issuer and
the offering to prospective purchasers.37 The proposed amendments
also would require that financial statements, audited in accordance
with the accounting standards of the appropriate country, for the two
years prior to the offering, be made available to the public and
prospective purchasers in connection with the offering.38
\37\ This condition would not require that the issuer become
subject to an ongoing disclosure regime. The condition would be
satisfied if information about the issuer and the offering were
required to be disclosed to prospective purchasers in connection
with the sale of the securities.
\38\ Proposed rule 10f-3(k)(1)(iv). The proposed amendments
would not specify the format of the financial statements that must
be provided in recognition that financial reporting standards differ
from country to country.
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The proposed rule would not set objective disclosure standards,
other than the financial statement requirement, that must be met in
order to comply with the rule. The Commission requests comment whether
the rule should be amended to provide specific standards of disclosure
that would be applicable to purchases of foreign securities made
pursuant to the rule.
c. Offering Price. Under the proposed definition of Eligible
Foreign Offering, the foreign securities would have to be offered at a
fixed price to all purchasers in the offering. The single public
offering price requirement is designed to enable a fund to comply with
the provision of rule 10f-3 that requires the fund to purchase the
securities at not more than the public offering price prior to the end
of the first business day after the first date on which the securities
are offered to the public.39 The Commission believes the proposed
single price offering requirement is consistent with the purposes of
section 10(f) because it would preclude an underwriter from obtaining
an advantage for the syndicate by causing an affiliated fund to
purchase securities from the syndicate at a price that is higher than
the price offered to unaffiliated purchasers.
\39\ See rule 10f-3 (a)(2) (paragraph (b) of rule 10f-3 as
proposed to be amended).
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An exception from the single offering price requirement would be
available if applicable law requires an issuer to offer the securities
at a lower price to existing securities holders.40 The Commission
requests comment whether there are other discrete classes of persons to
whom discounts are offered, other than persons who may control a
company through ownership or influence over the company's operations,
that should be included in this exception. In privatization
transactions, for example, citizens of the country that formerly owned
the enterprise often are offered the securities at a discount.
\40\ See supra note 33.
[[Page 13635]]
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2. Foreign Issuer Rule 144A Offerings
Many fund purchases of foreign securities are made in transactions
(``rule 144A placements'') that are exempt from the registration
provisions of the Securities Act and that qualify the purchased
securities as eligible to be resold pursuant to rule 144A under the
Securities Act (``rule 144A-eligible securities'').41 Rule 144A is
a non-exclusive safe harbor that exempts from the registration
provisions of the Securities Act resales of securities to certain large
institutions, known as Qualified Institutional Buyers
(``QIBs'').42 Typically, a rule 144A placement involving a foreign
issuer's securities is part of a larger global offering of those
securities.43 Frequently, a global offering is divided into
several tranches--one for the issuer's home country, one for the United
States, and one or more for other countries. The securities in the U.S.
tranche are sold in either a registered public offering or an offering
that is exempt from registration under the Securities Act. Often, the
U.S. tranche is sold only to institutions that qualify as QIBs.
Usually, the price for the securities is uniform across all the
tranches and the issuer prepares an offering document that provides
detailed information about the issuer and the offered
securities.44 Securities purchased by a fund in a rule 144A
placement are transferable to another QIB in the United States, and may
be sold freely in a foreign market (assuming foreign law permits such
sale).45
\41\ 17 CFR 230.144A. In 1993, funds purchased more foreign
equity securities in rule 144A placements than did any other type of
purchaser. See SEC, Staff Report on Rule 144A 15 (1994) (hereinafter
Staff Report). The Commission has received applications from several
funds requesting exemptive relief from section 10(f) for purchases
of foreign securities in transactions that would produce rule 144A-
eligible securities. See, e.g., Application of the Brazilian
Investment Fund, Inc. et al., File No. 812-9676; Application of
Merrill Lynch Balanced Fund For Investment and Retirement et al.,
File No. 812-8346.
\42\ Under rule 144A, the seller must reasonably believe that
the purchaser is a QIB. A QIB is an institution of a type listed in
rule 144A and owning or investing on a discretionary basis at least
$100 million of securities. See 17 CFR 230.144A(a)(1). Many funds
qualify as QIBs in their own right, and others qualify because they
are part of a ``family'' of funds that own, in the aggregate, at
least $100 million in securities. 17 CFR 230.144A(a)(1)(iv).
\43\ One of the purposes of rule 144A was to encourage foreign
issuers to access the U.S. capital markets. See Securities Act
Release No. 6862 (April 30, 1990), 55 FR 17933. According to
statistics compiled by the Commission's Division of Corporation
Finance, from the adoption of rule 144A through December 31, 1994,
approximately $39 billion of equity and debt securities relating to
more than 480 foreign issuers were sold in rule 144A placements.
\44\ Although most foreign rule 144A placements appear to be
priced the same as concurrent foreign offerings, there is no
regulatory requirement that the securities be priced in this manner.
See Staff Report, supra note 41, at 26. It has been suggested,
however, that most rule 144A transactions are sold in underwriting
arrangements with terms and conditions substantially similar to
those applicable to registered public offerings. 1 E. Greene et al.,
U.S. Regulation of the International Securities Markets: A Guide for
Domestic and Foreign Issuers and Intermediaries 141 (1993). Rule
144A requires an issuer to provide certain information about the
issuer that the purchaser of the securities may request, including
financial information for its two most recent fiscal years of
operation. See 17 CFR 230.144A(d)(4). The rule exempts from this
information requirement foreign governments and foreign private
issuers that furnish information to the Commission pursuant to rule
12g3-2(b), 17 CFR 240.12g3-2(b), under the Securities Exchange Act
of 1934, 15 U.S.C. 78a et seq. (``Exchange Act''). See 17 CFR
230.144A(d)(4)(i).
\45\ Regulation S under the Securities Act generally permits the
sale of securities owned by a U.S. person into a foreign market if
certain conditions are met. See 17 CFR 230.901 et seq.
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In order to increase the flexibility of affiliated funds to
purchase securities in these types of transnational offerings, the
proposed amendments would permit a fund to purchase securities in a
Foreign Issuer Rule 144A Offering, subject to the other conditions of
rule 10f-3 (other than the Securities Act registration
requirement).46 A Foreign Issuer Rule 144A Offering generally
would be a distribution of securities of a foreign issuer, made
exclusively to QIBs, if the securities would be eligible to be resold
pursuant to rule 144A.47 In addition, the proposed amendments
would require that securities of the same class be offered in a
concurrent Eligible Foreign Offering.48 This condition is designed
to provide some assurance that there is a widespread distribution of
securities that are fungible with the rule 144A securities purchased by
the fund.
\46\ The proposed amendments would in no way affect the
determination that must be made by fund boards of directors whether
a security purchased by the fund in a rule 144A placement is deemed
a liquid security for purposes of the fund's liquidity policies. See
Resale of Restricted Securities, Securities Act Release No. 6862
(Apr. 23, 1990), 55 FR 17933.
\47\ Rule 144A provides that a person who offers or sells
securities in compliance with rule 144A is not deemed to be an
underwriter of such securities for purposes of section 2(11) of the
Securities Act. 17 CFR 230.144A(c). Rule 144A, however, does not
limit the scope of section 10(f).
\48\ Proposed rule 10f-3(k)(4). The definition of ``foreign
issuer'' for purposes of rule 10f-3 would not be limited to
``foreign private issuers,'' as defined in rule 405, 17 CFR 230.405,
under the Securities Act. A foreign issuer that is not a foreign
private issuer may have a substantial presence in the United States
(either through securities ownership or operation of business, or
both). Under the amended rule, for a fund to purchase securities of
that issuer in a rule 144A placement, the issuer would be required
to have a concurrent Eligible Foreign Offering of securities of the
same class in a foreign country.
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Consistent with the purpose of section 10(f), the proposed
amendments would require a fund purchasing securities in a Foreign
Issuer Rule 144A Offering to pay no more than the public offering price
in the concurrent Eligible Foreign Offering or the price paid by each
other QIB, whichever is lower.49 This provision is designed to
provide assurance that a fund does not pay more for the securities than
it would if it could engage in arm's length negotiations as to the
price of the securities.
\49\ Proposed rule 10f-3(b)(2). The proposed amendments would
provide that a fund will be deemed to have satisfied this condition
if it reasonably relies on written statements of the seller.
Proposed rule 10f-3(h).
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The proposed amendments would permit funds to purchase securities
in rule 144A placements of foreign issuers. The Commission recognizes
that rule 144A placements also often are used by U.S. issuers, and
requests comment whether rule 10f-3 should permit purchases of rule
144A-eligible securities of domestic issuers, subject to conditions
that protect investors by reducing the likelihood that dumping of
unmarketable securities will occur.50 The conditions applicable to
Foreign Issuer Rule 144A Offerings and Eligible Foreign Offerings,
however, generally could not be made applicable to domestic rule 144A
placements.51 Commentators in favor of expanding the rule to
permit the purchase of securities of domestic issuers in rule 144A
placements should suggest alternative conditions.
\50\ See Staff Report, supra note , at 3-4.
\51\ The requirement that there be a concurrent public offering
of securities of the same class, for example, could not be met
because rule 144A is not available for transactions in securities
if, at issuance, securities of the same class were listed on a
national securities exchange.
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3. General Request for Comment
The Commission believes that the proposed conditions for purchases
of foreign securities should provide assurance that the purposes
underlying rule 10f-3 will be met in foreign offerings. Nonetheless,
the Commission requests comment on its overall approach to permitting
purchases of foreign securities under rule 10f-3. Commenters are
encouraged to suggest specific alternatives that would provide
flexibility without diminishing investor protection. The Commission
also requests comment whether the proposed standards for an Eligible
Foreign Offering and a Foreign Issuer Rule 144A Offering are
sufficiently clear. The Commission considered alternatives to the
proposed approach, such as specifically identifying countries in which
purchases may be made, but believes that its proposed approach
[[Page 13636]]
would protect investors while also affording greater flexibility to
funds.
The proposed amendments would not differentiate between securities
issued by foreign companies and those issued by foreign governments.
The definition of Eligible Foreign Offering, therefore, would permit an
affiliated fund to purchase foreign government securities if the
offering of those securities otherwise meets the conditions of the
definition. Comment is requested, however, whether these conditions are
appropriate for purchases of foreign government securities that could
be subject to section 10(f).
Rule 10f-3 currently requires fund directors to adopt procedures
pursuant to which a fund may purchase securities in reliance on the
rule.52 The Commission requests comment on the role of fund
directors in determining compliance with the proposed foreign
securities provisions. In particular, the Commission asks commenters to
consider whether the existing requirements for the establishment and
review of procedures are sufficient to cover the new proposals.
\52\ Rule 10f-3(h). The Commission proposes to amend this
requirement to clarify that the board of directors must approve,
rather than adopt, procedures for the purchase of securities of rule
10f-3. Proposed rule 10f-3(i)(1). The Commission believes that this
change would more accurately reflect the role of the board of
directors of approving policies and procedures developed by fund
management.
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C. Group Sales
A ``group sale'' is a sale of municipal securities resulting from a
``group order,'' which is an order for securities for the account of
all members of a syndicate in proportion to their respective
participations in the syndicate.53 Rule 10f-3 prohibits a fund
from purchasing a security, directly or indirectly, from its affiliated
underwriter, and, in effect, provides that a purchase from a syndicate
manager that is designated as a group sale is deemed a purchase from
the affiliated underwriter.54 These provisions are designed to
ensure that a purchase permitted by rule 10f-3 does not violate section
17(a) of the Investment Company Act, which prohibits a fund from
purchasing securities from an affiliate or an affiliate of an
affiliate.55
\53\ See Municipal Securities Rulemaking Board (``MSRB'') Rule
G-11(a)(iii), MSRB Manual (CCH) para.3551; see also The Galaxy Fund
et al., Investment Company Act Release No. 20660 (Oct. 26, 1994)
(Notice of Application).
\54\ Rule 10f-3(f) provides that a purchase from a syndicate may
not be made from, or directly or indirectly benefit, an affiliated
underwriter. The rule implicitly permits certain purchases of
municipal securities to indirectly benefit an affiliated
underwriter, however, so long as such purchases are not designated
as group sales or otherwise allocated to the account of the
affiliated underwriter. See Exemption of Acquisition of Securities
During the Existence of Underwriting Syndicate, Investment Company
Act Release No. 10592 (Feb. 13, 1979) (proposing amendments to rule
10f-3).
\55\ Rule 10f-3 currently defines ``municipal securities'' by
reference to section 3(a)(29) of the Exchange Act. See rule 10f-
3(a)(1)(ii). The proposed rule would continue to refer to the
definition under the Exchange Act. See proposed rule 10f-3(k)(7).
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The prohibition in rule 10f-3 on group sales may act to the
detriment of funds that invest in municipal bonds. The rules of the
Municipal Securities Rulemaking Board (``MSRB''), which govern the sale
of municipal securities, require a syndicate that is offering municipal
securities to establish a priority by which orders for the securities
will be filled.56 Frequently, group orders are designated to
receive first priority.57 Thus, if a municipal securities offering
were oversubscribed, it is possible that only prospective purchasers
who placed group orders would be able to purchase the securities being
offered. A fund that is prohibited by rule 10f-3 from placing group
orders would be precluded from purchasing any securities in that
offering. Because of the potential cost of this prohibition to
municipal bond funds and their shareholders, particularly during times
in which demand for municipal securities is increasing and supply of
these securities is decreasing, the Commission believes that funds
subject to rule 10f-3 should be given more flexibility to place group
orders for municipal securities.58
\56\ MSRB Rule G-11(e), MSRB Manual (CCH) para.3551.
\57\ See, e.g., Public Securities Association, Fundamentals of
Municipal Bonds 80 (1990). After group orders, ``designated orders''
generally are next in priority to be filled. A designated order is
an order submitted by a member of the syndicate on behalf of a buyer
on which all or a portion of the sale is to be credited to certain
members of the syndicate. MSRB, Glossary of Municipal Securities
Terms 34 (1985). Because rule 10f-3 prohibits funds that are
purchasing municipal securities from placing group orders, these
funds generally must place designated orders, designating
underwriters other than affiliated underwriters to be credited with
the sale.
\58\ The increase in the number of municipal bond funds over the
past 15 years has contributed to an increase in demand for municipal
securities. See, e.g., Investment Company Institute, Trends in
Mutual Fund Activity, (Sept. 1995); Investment Company Institute,
1986 Mutual Fund Fact Book; Investment Company Institute, 1982
Mutual Fund Fact Book. The supply of newly issued municipal
securities varies from year to year, depending upon a number of
factors, including interest rates, tax considerations and political
factors. Between 1986 and 1995, for example, the annual amount of
issuances of new-money municipal securities ranged from a low of
approximately $59.4 billion in 1987 to a high of $119.3 billion in
1993. See 1995 Year-End Statistics Supplement, Bond Buy., Jan. 26,
1996, at 16A.
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The proposed provision that would permit group sales contains two
conditions designed to limit the likelihood that a group sale would be
motivated primarily by an affiliated underwriter's intention to be the
primary beneficiary of the group sale. First, a purchase designated as
a group sale could be made only if the syndicate has established that
orders designated as group orders have first priority, or that only
group orders will be filled.59 Second, a purchase designated as a
group sale would be permitted only if, at the time of the sale, the
affiliated underwriter is not committed to underwriting more than 50%
of the principal amount of the offered securities.60 In
determining whether the conditions have been satisfied, the proposed
amendments would permit a fund reasonably to rely upon the written
statements of a member of the syndicate.61
\59\ Proposed rule 10f-3(g)(2)(i).
\60\ Proposed rule 10f-3(g)(2)(ii).
\61\ Proposed rule 10f-3(h). MSRB rule G-11(f) requires a member
of a municipal securities syndicate, upon request, to promptly
furnish in writing information about the syndicate's priority
provisions. A fund attempting to comply with rule 10f-3 could
therefore easily obtain the required information.
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Absent an exemption by order or rule, section 17(a) of the
Investment Company Act could prohibit a fund from purchasing securities
in a group sale. To clarify that a purchase of municipal securities in
a group sale permitted by rule 10f-3 also is exempt from section 17(a),
the Commission is proposing new rule 17a-10. The new rule would exempt
any purchase of municipal securities in a group sale that complies with
rule 10f-3 from section 17(a)(1).
The Commission requests comment whether permitting funds to
purchase through group sales would give needed flexibility to funds. To
further reduce the likelihood that the syndicate is giving group sales
first priority to benefit the affiliated underwriter, should the
proposed amendments require there to be at least a certain number of
syndicate members for a fund to take advantage of the provision
permitting group sales? Comment also is requested whether there are
other arrangements similar to group sales with respect to securities
other than municipal securities and whether rule 10f-3 should be
amended to permit these types of arrangements.
D. Reporting and Recordkeeping
The Commission proposes eliminating the current requirement that
funds report all rule 10f-3 transactions to the Commission in their
semi-annual reports on Form N-SAR by filing an
[[Page 13637]]
exhibit setting forth certain details about each transaction.62
Information about transactions that rely on rule 10f-3 currently are
required to be kept with other records pursuant to rule 10f-3 and is
available to Commission staff during periodic on-site examinations of
funds and investment advisers.63 The Commission thus believes that
it is unnecessary for funds to continue to file these reports. The
Commission requests comment whether any changes to the reporting and
recordkeeping requirements of rule 10f-3, other than the elimination of
the requirement to report on Form N-SAR, are necessary.
\62\ See rule 10f-3(g).
\63\ See rule 10f-3(i).
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III. General Request for Comments
Any interested persons wishing to submit written comments on the
rule changes that are the subject of this Release, to suggest
additional changes, or to submit comments on other matters that might
have an effect on the proposals contained in this Release, are
requested to do so. Comment is specifically requested whether the
Commission should amend or eliminate conditions in rule 10f-3 other
than those addressed in this Release. Does the requirement that the
issuer have three years of operations and, in the case of municipal
securities, have at least an investment grade rating, for example,
continue to serve the purposes of rule 10f-3? Suggestions for such
amendments should explain how they are consistent with the protection
of investors and the purposes of section 10(f). The Commission also
requests comments whether rule 10f-3 should be amended to permit the
purchase of other classes of securities, such as U.S. government
securities, that currently are not addressed by the rule, and the
extent to which the conditions of the rule should apply to such
purchases.64
\64\ The Commission notes that it may not be necessary for rule
10f-3 to permit the purchase of U.S. government securities because
the arrangements among distributors of these securities may not
always constitute underwriting or selling syndicates for purposes of
section 10(f). See Institutional Liquid Assets (pub. avail. Dec. 16,
1981).
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IV. Cost/Benefit Analysis
The proposed amendments to rule 10f-3 would increase the
flexibility for funds to purchase securities during the existence of a
syndicate in which an affiliated underwriter participates. These
amendments would benefit funds, which would be able to (i) purchase
foreign securities in reliance upon rule 10f-3, without having to seek
an exemptive order from the Commission, (ii) in many cases, purchase
more desirable quantities of securities at advantageous prices, and
(iii) purchase municipal securities that are in high demand. Funds also
would no longer be required to file information about rule 10f-3
transactions on Form N-SAR. The potential benefits to fund investors of
the proposed amendments are better investment performance, lower fund
expenses, and less paperwork burden.
The costs to funds and investors of the proposed amendments are
minimal. Fund advisers and boards of directors would be required to
determine whether purchases of foreign securities and municipal
securities in group sales comply with the proposed standards. Rule 10f-
3, however, currently has standards that must be met for purchases
permitted under the rule. Thus, the additional cost of determining
compliance with the standards related to foreign securities and
municipal securities in group sales should be minimal. These costs
likely would be outweighed by the potential benefits to funds and
investors described above.
V. Paperwork Reduction Act
Certain provisions of the proposed amendments to rule 10f-3 contain
``collection of information'' requirements within the meaning of the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), and the
Commission has submitted the proposed amendments to the Office of
Management and Budget for review in accordance with 44 U.S.C. 3507(d).
The title for the collection of information is ``Exemption for the
Acquisition of Securities During the Existence of an Underwriting
Syndicate.'' The Supporting Statement to the Paperwork Reduction Act
submission notes that the proposed amendments to rule 10f-3 would
permit funds to purchase foreign securities and to purchase municipal
securities in group sales, if certain conditions are met. The proposed
amendments also would permit funds to purchase up to the greater of 10%
of the offering amount or $1,000,000 (but not greater than 15% of the
offering amount).
The submission further notes that the amendments would require
funds that wish to rely upon the proposed new provisions to amend the
procedures that are required by the rule to account for purchases of
foreign securities and municipal securities in group sales. Adoption,
and occasional revision, of procedures is important to ensure continual
board oversight of transactions relying upon rule 10f-3. The Division
of Investment Management estimates that 600 funds rely upon rule 10f-3
each year, and that 140 of those funds purchase municipal and/or
foreign securities (although not all such funds rely upon rule 10f-3 to
purchase such securities). It is estimated that the proposed amendments
would increase the recordkeeping burden of funds that invest in foreign
and/or municipal securities by an estimated 0.50 hours per fund per
year. Thus, the total additional burden of the proposed amendments is
estimated to be 70 hours.
Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits
comments concerning: whether the proposed collection of information is
necessary for the proper performance of the function of the Commission,
including whether the information shall have practical utility; on the
accuracy of the Commission's estimate of the burden of the proposed
collection of information; on the quality, utility, and clarity of the
information to be collected; and whether the burden of collection of
information on those who are to respond, including through the use of
automated collection techniques or other forms of information
technology, may be minimized.
Persons desiring to submit comments on the collection of
information requirements should direct them to the Office of Management
and Budget, Attention: Desk Officer for the Securities and Exchange
Commission, Office of Information and Regulatory Affairs, Washington
D.C. 20503, and should also send a copy of their comments to Jonathan
G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth St.,
N.W., Washington, D.C. 20549 with reference to File No. S7-7-96. The
Office of Management and Budget is required to make a decision
concerning the collection of information between 30 and 60 days after
publication, so a comment to the Office of Management and Budget is
best assured of having its full effect if the Office of Management and
Budget receives it within 30 days of publication.
VI. Summary of Regulatory Flexibility Analysis
The Commission has prepared an Initial Regulatory Flexibility
Analysis in accordance with 5 U.S.C. 603 regarding amendments to rule
10f-3 under the Investment Company Act. The analysis indicates that the
proposed amendments would affect small entities in the same manner as
other entities subject to section 10(f), but that the proposed
amendments increase flexibility for all funds. Cost-benefit information
reflected in the ``Cost/Benefit Analysis'' section
[[Page 13638]]
of this Release also is reflected in the analysis. A copy of the
Initial Regulatory Flexibility Analysis may be obtained by contacting
David M. Goldenberg, Securities and Exchange Commission, 450 Fifth
Street, N.W., Mail Stop 10-6, Washington, D.C. 20549.
VII. Statutory Authority
The Commission is proposing to amend rule 10f-3 pursuant to the
authority set forth in sections 10(f), 31(a) and 38(a) of the
Investment Company Act [15 U.S.C. 80a-10(f), 80a-30(a), 80a-37(a)]. New
rule 17a-10 is proposed pursuant to the authority set forth in sections
6(c) and 38(a) of the Investment Company Act [15 U.S.C. 80a-6(c), 80a-
37(a)].
Text of Proposed Rule and Form Amendments
List of Subjects in 17 CFR Part 270
Investment companies, Reporting and recordkeeping requirements,
Securities.
For the reasons set out in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is proposed to be amended as follows:
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
The authority citation for Part 270 continues to read, in part, as
follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-37, 80a-39 unless
otherwise noted;
* * * * *
Section 270.10f-3 is revised to read as follows:
Sec. 270.10f-3. Exemption of acquisition of securities during the
existence of underwriting syndicate.
Any purchase of securities by a registered investment company
prohibited by section 10(f) of the Act shall be exempt from the
provisions of such section if the following conditions are met:
(a) The securities to be purchased are:
(1) Part of an issue registered under the Securities Act of 1933
(15 U.S.C. 77a et seq.) which is being offered to the public;
(2) Municipal Securities; or
(3) Securities of a Foreign Issuer sold in either an Eligible
Foreign Offering or a Foreign Issuer Rule 144A Offering.
(b) The securities are purchased at not more than the public
offering price prior to the end of the first full business day after
the first date on which the issue is offered to the public; provided,
however, that:
(1) If the securities are offered for subscription upon exercise of
rights, the securities shall be purchased on or before the fourth day
preceding the day on which the rights offering terminates; and
(2) If the securities are part of a Foreign Issuer Rule 144A
Offering, the securities shall be purchased at not more than the lesser
of the public offering price in the concurrent Eligible Foreign
Offering or the price paid by each other purchaser of securities in the
Foreign Issuer Rule 144A Offering, in each case prior to the end of the
first full business day after the first date on which the issue is
offered.
(c)(1) If the securities to be purchased are not Municipal
Securities, the issuer of such securities shall have been in continuous
operation for not less than three years, including the operations of
any predecessors; or
(2) If the securities to be purchased are Municipal Securities, the
securities shall have received an investment grade rating from at least
one NRSRO; provided, that if the issuer of the Municipal Securities, or
the entity supplying the revenues or other payments from which the
issue is to be paid, shall have been in continuous operation for less
than three years, including the operation of any predecessors, the
securities shall have received one of the three highest ratings from an
NRSRO.
(d) The securities are offered pursuant to an underwriting or
similar agreement under which the underwriters are committed to
purchase all of the securities being offered, except those purchased by
others pursuant to a rights offering, if the underwriters purchase any
thereof.
(e) The commission, spread or profit received or to be received by
the principal underwriters is reasonable and fair compared to the
commission, spread or profit received by other such persons in
connection with the underwriting of similar securities being sold
during a comparable period of time.
(f) The amount of securities of any class of such issue to be
purchased by the investment company, or by two or more investment
companies having the same investment adviser, shall not exceed 10
percent of the principal amount of the offering of such class, or
$1,000,000 in principal amount, whichever is greater, but in no event
greater than 15 percent of the principal amount of the offering of such
class.
(g) Such investment company does not purchase the securities being
offered directly or indirectly from an officer, director, member of an
advisory board, investment adviser or employee of such investment
company or from a person of which any such officer, director, member of
an advisory board, investment adviser or employee is an affiliated
person; provided, that a purchase from a syndicate manager shall not be
deemed to be a purchase from a specific underwriter if:
(1) Such underwriter does not benefit directly or indirectly from
the transaction; or
(2) In the case of a purchase of Municipal Securities that is
designated as a group sale:
(i) The syndicate manager has determined that group orders for the
securities will be given first priority or that only group orders for
the securities will be accepted; and
(ii) At the time of the purchase by the investment company, a
person referred to in the introductory sentence of paragraph (g) of
this section is not obligated to underwrite more than 50 percent of the
securities being offered.
(h) For purposes of determining compliance with paragraphs (b)(2)
and (g)(2) of this section, an investment company may reasonably rely
upon written statements made by a seller of the securities or a member
of the underwriting syndicate through which the securities are
purchased.
(i) The board of directors, including a majority of the directors
of the investment company who are not interested persons with respect
thereto:
(1) Has approved procedures, pursuant to which such purchases may
be effected for the company, that are reasonably designed to provide
that the purchases comply with all the conditions of this section;
(2) Makes and approves such changes as the board deems necessary;
and
(3) Determines no less frequently than quarterly that all purchases
made during the preceding quarter were effected in compliance with such
procedures.
(j) The investment company:
(1) Shall maintain and preserve permanently in an easily accessible
place a written copy of the procedures (and any modification thereto)
described in paragraph (i)(1) of this section; and
(2) Shall maintain and preserve for a period not less than six
years from the end of the fiscal year in which any transactions
occurred, the first two years in an easily accessible place, a written
record of each such transaction, setting forth from whom the securities
were acquired, the identity of the underwriting syndicate's members,
the terms of the transaction, and the information or materials upon
which the determination described in paragraph (i)(3) of this section
was made.
[[Page 13639]]
(k) For purposes of this section:
(1) Eligible Foreign Offering means a public offering, conducted
under the laws of a country other than the United States, of securities
issued by a Foreign Issuer, meeting the following conditions:
(i) The offering is subject to regulation by a Foreign Financial
Regulatory Authority in such country;
(ii) The laws of such country, or the rules and regulations of such
Foreign Financial Regulatory Authority, require the issuer, in
connection with the offering, to make information about the issuer and
the offering available to the public;
(iii) The securities are offered at a fixed price to all purchasers
in the offering (except for any rights to purchase that are required by
law to be granted to existing security holders of the issuer); and
(iv) Financial statements, audited in accordance with the
accounting standards of such country, for the two years prior to the
offering, are made available to the public and prospective purchasers
in connection with the offering.
(2) Foreign Financial Regulatory Authority has the same meaning as
that set forth in section 2(a)(50) of the Act (15 U.S.C. 80a-2(a)(50)).
(3) Foreign Issuer means any issuer which is a foreign government,
a national of any foreign country, or a corporation or other
organization incorporated or organized under the laws of any foreign
country.
(4) Foreign Issuer Rule 144A Offering means a distribution of
securities of a foreign issuer if such securities are offered or sold
in the United States solely to persons that the seller and any person
acting on behalf of the seller reasonably believe to be qualified
institutional buyers, as defined in Sec. 230.144A(a)(1) of this
chapter, which securities (``offered securities'') would be eligible
for resale to other qualified institutional buyers pursuant to
Sec. 230.144A of this chapter, provided, that securities of the same
class as the offered securities are offered in a concurrent Eligible
Foreign Offering.
(5) Group Order means an order for securities for the account of
all members of a syndicate on a pro rata basis in proportion to their
respective participations in the syndicate.
(6) Group Sale means a sale resulting from a group order.
(7) Municipal Securities has the same meaning as that set forth in
section 3(a)(29) of the Securities Exchange Act of 1934 [15 U.S.C.
78c(a)(29)].
(8) NRSRO has the same meaning as that set forth in Sec. 270.2a-
7(a)(10).
3. By adding Sec. 270.17a-10 to read as follows:
Sec. 270.17a-10. Exemption of certain group sales.
Any group sale of municipal securities exempted pursuant to
Sec. 270.10f-3 shall be exempt from the provisions of section 17(a)(1)
of the Act [15 U.S.C. 80a-17(a)(1)].
Dated: March 21, 1996.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-7335 Filed 3-26-96; 8:45 am]
BILLING CODE 8010-01-P
Complete official Federal Register PDF
FR Doc. 96-7333 Conformance of the Uniform State Waterways Marking System and the Western Rivers Marking System With the United States Aids to Navigation System
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13470-13472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7333]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Parts 62 and 66
[CGD 94-091]
RIN 2115-AF14
Conformance of the Uniform State Waterways Marking System and the
Western Rivers Marking System With the United States Aids to Navigation
System
AGENCY: Coast Guard, DOT.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: As part of the President's Regulatory Reinvention Initiative,
the Coast Guard proposes to eliminate the Uniform State Waterway
Marking System (USWMS), which is not widely used and may be confusing
to the mariner. The Coast Guard also proposes to replace the solid-
color crossing dayboards in the Western Rivers Marking System (WRMS)
with the checkered non-lateral dayboards used in the United States Aids
to Navigation System (USATONS); the latter dayboards would have the
same meaning and be the same size and shape as the former, but would be
easier to see. These changes would help mariners avoid misinterpreting
navigational markers they might see when transiting different bodies of
water now subject to different marking systems.
DATES: Comments are requested by April 26, 1996.
ADDRESSES: Comments may be mailed to the Executive Secretary, Marine
Safety Council (G-LRA/3406) (CGD 94-091), U.S. Coast Guard
Headquarters, 2100 Second Street SW., Washington, DC 20593-0001, or may
be delivered to room 3406 at the same address between 8 a.m. and 3
p.m., Monday through Friday, except Federal holidays. The telephone
number is (202) 267-1477.
The Executive Secretary maintains the public docket for this
request for comments. Comments will become part of this docket and will
be available for inspection or copying at room 3406, U.S. Coast Guard
Headquarters, between 8 a.m. and 3 p.m., Monday through Friday, except
Federal holidays.
FOR FURTHER INFORMATION CONTACT:
LTJG Chad Asplund, Short Range Aids to Navigation Division, Telephone:
(202) 267-1386.
SUPPLEMENTARY INFORMATION:
Request for Comments
The Coast Guard encourages interested persons to participate in
this request for comments by submitting written data, views, or
arguments. Persons submitting comments should include their names and
addresses, identify this notice (CGD 94-091) and the specific section
of this notice to which each comment applies, and give the reason for
each comment. Please submit two copies of all comments and attachments
in an unbound format, no larger than 8\1/2\ by 11 inches, suitable for
copying and electronic filing. Persons wanting acknowledgment of
receipt of comments should enclose stamped, self-addressed postcards or
envelopes.
The Coast Guard will consider all comments received during the
comment period. It may change this proposal in view of the comments.
The brevity of the comment period owes to three facts. First, an
advanced notice of proposed rulemaking (ANPRM) has already sounded
public opinion. Second, that opinion holds the two changes proposed
here to be minor and non-controversial. Third, this rulemaking
constitutes part of the President's Regulatory Reinvention Initiative.
[[Page 13471]]
The Coast Guard plans no public hearing. Persons may request a
public hearing by writing to the Marine Safety Council at the address
under ADDRESSES. The request should include the reason why a hearing
would be beneficial. If it determines that the opportunity for oral
presentations will aid this rulemaking, the Coast Guard will hold a
public hearing at a time and place announced by later notice in the
Federal Register.
Regulatory History
On December 29, 1995, the Coast Guard published an ANPRM in the
Federal Register (60 FR 67345). It gave interested persons until
February 9, 1996, to submit comments. The Coast Guard received two
comments on that notice. One came from a trade association and the
other from an independent consultant.
The ANPRM intended to gauge public opinion towards eliminating the
USWMS, replacing the crossing dayboards in the WRMS, and allowing the
aids to navigation in the WRMS a larger selection of flash
characteristics from which to chose. The first two items were non-
controversial; therefore, the Coast Guard here proposes eliminating the
USWMS and replacing the crossing dayboards in the WRMS.
The issue of flash characteristics may be more important that the
Coast Guard thought it would be. The Coast Guard has determined that
more time is necessary to study this issue and may address it in a
future rulemaking.
Background and Purpose
The USWMS was created in 1966 to adequately mark State waters. It
offers two types of aids to navigation, a system of regulatory markers
as well as a system to supplement the USATONS. It features red and
black buoys to mark lateral hazards. But 33 CFR 66.10-1(b) already
allows the USATONS on all waterways in the United States. Many states
already use the USATONS instead of the USWMS. The Coast Guard proposes
eliminating the USWMS to move towards a unitary lateral aids to
navigation system. This change would make the waterways less confusing
for the mariner.
The WRMS was created to adequately mark the dynamic waterways of
the Mississippi River and its Western counterparts. Some deviations
from the USATONS were necessary for this. One of these is the use of
crossing dayboards. These dayboards indicate where the river channel
(``sailing line'') crosses from one bank to the other. The dayboards
currently used in the WRMS are either solid green or solid red. They
are important aids, but can be difficult to see, especially the green
dayboards against the overgrowth of trees that line the Western Rivers.
The Coast Guard proposes replacing the (red or green) solid-color
crossing dayboards used in the WRMS with the checkered (green-and-white
or red-and-white) non-lateral dayboards used in the USATONS. The
checkered non-lateral dayboards would retain the same meaning as the
sold-color crossing dayboards, yet would be easier to see.
The purpose of these two proposed changes is to adequately mark the
Uniform State Waterways and Western Rivers and reduce the number of
systems of aids to navigation.
Consultation With Advisory Committee
The Coast Guard has consulted with the National Association of
State Boating-Law Administrators (NASBLA) concerning elimination of the
USWMS. NASBLA indicates this would be a minor, non-controversial
change.
Discussion of Comments
1. Should crossing dayboards used in the WRMS be replaced by the non-
lateral dayboards used in the USATONS?
The comments generally indicated that this change would entail a
massive reeducation. The Coast Guard believes, with an adequate phase-
in period and increased boaters' awareness, this change would not be
problematic. The benefits gained from the increased visibility would
far outweigh the possible confusion.
2. What is the best way to mark obstructions in the USWMS? Should the
meaning of the red-and-white striped buoys in the USWMS be changed so
such buoys mark safe water as in the USATONS?
The comments generally supported this change. They did express some
concern towards boaters' reeducation. The Coast Guard has consulted
with NASBLA, which believes this would be a minor, insignificant
change. Very few states, if any, use the USWMS.
Discussion of Proposed Rule
The Coast Guard has weighed the needs of the mariner against the
conflicts cited in the comments and has decided to propose eliminating
the USWMS and replacing the solid-color crossing dayboards used in the
WRMS with the checkered non-lateral dayboards used in the USATONS.
Therefore, the Coast Guard is proposing the following changes to 33 CFR
Parts 62 and 66:
Revise Sec. 62.45(d)(6) to include mooring buoys and their light
characteristics. The elimination of the USWMS, Sec. 66.10, also removes
the reference to the lighting characteristics on mooring buoys.
Sec. 62.45(d)(6) will be revised to place the requirements for lighting
characteristics on mooring buoys in the regulatory text for the
USATONS.
Revise Sec. 62.51(b)(3) to replace diamond-shaped crossing
dayboards, solid red or solid green as appropriate, with diamond-shaped
crossing dayboards, checkered red-and-white or green-and-white, non-
lateral dayboards similar to those used in the USATONS as appropriate.
Revise Part 66 to eliminate the USWMS by deleting Subpart 66.10.
The USWMS is not used and is obsolete.
Regulatory Evaluation
This proposal is not a significant regulatory action under section
3(f) of Executive Order 12866 and does not require an assessment of
potential costs and benefits under section 6(a)(3) of that Order. It
has not been reviewed by the Office of Management and Budget under that
Order. It is not significant under regulatory policies and procedures
of the Department of Transportation (DOT) (44 FR 11010; February 26,
1979).
The Coast Guard expects the economic impact of this proposal to be
minimal enough that a full Regulatory Evaluation under paragraph 10e of
the regulatory policies and procedures of DOT is unnecessary.
Eliminating the USWMS would ultimately save money for states still
using this system. States could purchase the aids to navigation used in
the USATONS, which are manufactured in bulk and should cost less than
the aids peculiar to the USWMS. Replacing the solid-color crossing
dayboards of the WRMS would cost the Federal government little
additional money, since new ones would cost essentially the same as the
current ones. The Coast Guard proposes to replace the current ones with
the new ones when it would otherwise replace them in kind, so the cost
will be similar to that of regular maintenance.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the
Cost Guard must consider whether this proposal, if adopted, would have
a significant impact on a substantial number of small entities. ``Small
entities'' may include (1) small businesses and not-for-profit
organizations that are independently owned and operated and are not
dominant in their fields and (2)
[[Page 13472]]
government jurisdictions with populations less than 50,000.
This proposal would have minimal impact on small entities.
Eliminating the USWMS would not affect small entities; the USWMS is a
system run by the State governments. Replacing the crossing dayboards
on the WRMS would only affect the Federal government. Because it
expects the impact of this proposal to be minimal, the Coast Guard
certifies under 5 U.S.C. 605(b) that this proposal, if adopted, would
not have a significant economic impact on a substantial number of small
entities. If, however, you think that your business or organization
qualifies as a small entity and that this proposal would have a
significant economic impact on your business or organization, please
submit a comment (see ADDRESSES) explaining why you think it qualifies
and in what way and to what degree this proposal would economically
affect it.
Collection of Information
This proposal contains no increase in collection-of-information
requirements under the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.).
Federalism
The Coast Guard has analyzed this proposal under the principles and
criteria contained in Executive Order 12612 and has determined that
this proposal does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
Environment
The Coast Guard considered the environmental impact of this
proposal and concluded that, under paragraph 2.B.2.e(34)(a) of
Commandant Instruction M164475.1B, this proposal is categorically
excluded from further environmental documentation. Eliminating the
USWMS and replacing the solid-color crossing dayboards in the WRMS
would have no environmental implications. A Categorical Exclusion
Determination is available in the rulemaking docket for inspection or
copying where indicated under ADDRESSES.
List of Subjects
33 CFR Part 62
Navigation (water)
33 CFR Part 66
Intergovernmental relations, Navigation (water), Reporting and
recordkeeping requirements.
For the reasons set out in the preamble, the Coast Guard proposes
to amend 33 CFR Parts 62 and 66 as follows:
PART 62--UNITED STATES AIDS TO NAVIGATION SYSTEM
1. The authority citation for part 62 continues to read as follows:
Authority: 14 U.S.C. 85; 33 U.S.C. 1233; 43 U.S.C. 1333; 49 CFR
1.46.
Sec. 62.45 [Amended]
2. In Sec. 62.45, paragraph (d)(6) is revised to read as follows:
* * * * *
(d) * * *
(6) Information and Regulatory Marks, and mooring buoys, display
white lights of various rhythms.
* * * * *
Sec. 62.51 [Amended]
3. In Sec. 62.51, paragraph (b)(3) is revised to read as follows:
* * * * *
(b) * * *
(3) Diamond-shaped non-lateral dayboards, checkered red-and-white
or green-and-white, similar to those used in the USATONS, as
appropriate, are used as crossing dayboards where the river channel
crosses from one bank to the other.
* * * * *
PART 66--PRIVATE AIDS TO NAVIGATION
4. The authority citation for part 66 continues to read as follows:
Authority: 14 U.S.C. 83, 85; 43 U.S.C. 1333; 49 CFR 1.46.
Subpart 66.10--[Removed]
5. Subpart 66.10 is removed.
Dated: March 21, 1996.
Rudy K. Peschel,
Rear Admiral, U.S. Coast Guard, Chief, Office of Navigation Safety and
Waterway Services.
[FR Doc. 96-7333 Filed 3-26-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-7332 Testing of Obstruction Lights and Fog Signals on Offshore Facilities.
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13472-13474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7332]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
33 CFR Part 67
[CGD 95-052]
RIN 2115-AF15
Testing of Obstruction Lights and Fog Signals on Offshore
Facilities.
AGENCY: Coast Guard, DOT.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: In keeping with the National Performance Review, the Coast
Guard proposes to amend its testing procedures for obstruction lights
and fog signals on Outer Continental Shelf facilities. Presently,
manufacturers of lighting equipment must forward an application to each
of the ten Coast Guard districts for approval. Fog signal equipment
manufacturers must schedule and pay for Coast Guard representatives to
observe their tests. This proposal would allow independent laboratories
to conduct the tests using Coast Guard approved procedures. This would
improve the quality control of the tests, reduce the administrative
burden on the pubic, and minimize the cost to the Coast Guard.
DATES: Comments are requested by April 26, 1996.
ADDRESSES: Comments may be mailed to the Executive Secretary, Marine
Safety Council (G-LRA/3406) (CGD 95-052), U.S. Coast Guard
Headquarters, 2100 Second Street SW., Washington, DC 20593-0001, or may
be delivered to room 3406 at the same address between 8 a.m. and 3
p.m., Monday through Friday, except Federal holidays. The telephone
number is (202) 267-1477.
The Executive Secretary maintains the public docket for this
rulemaking. Comments will become part of this docket and will be
available for inspection or copying at room 3406, U.S. Coast Guard
Headquarters, between 8 a.m. and 3 p.m., Monday through Friday, except
Federal holidays.
FOR FURTHER INFORMATION CONTACT:
LTJG Chad Asplund, Short Range Aids to Navigation Division, (202) 267-
1386.
SUPPLEMENTARY INFORMATION:
Requests for Comments
The Coast Guard encourages interested persons to participate in
this rulemaking by submitting written data, views, or arguments.
Persons submitting comments should include their names and addresses,
identify this rulemaking (CGD 95-052) and the specific section of this
proposal to which each comment applies, and give the reason for each
comment. Please submit two copies of all comments and attachments in an
unbound format, no larger than 8\1/2\ by 11 inches, suitable for
copying and electronic filing. Persons wanting acknowledgment of
receipt of comments should enclose stamped, self-addressed postcards or
envelopes.
The Coast Guard will consider all comments received during the
comments period. It may change this proposal in view of the comments.
The Coast Guard plans no public hearing. Persons may request a
public hearing by writing to the Marine Safety Council at the address
under ADDRESSES. The request should include the reasons why a hearing
would be beneficial. If it determines that the opportunity for oral
presentations will aid this rulemaking, the Coast Guard will hold a
public hearing at a time and
[[Page 13473]]
place announced by a later notice in the Federal Register.
Regulatory History
On January 10, 1996, the Coast Guard published a notice requesting
comments in the Federal Register (61 FR 708). Interested persons were
given until February 12, 1996, to submit comments. The Coast Guard
received six letters commenting on the questions raised in the notice.
Five of the letters came from owners of offshore structures and one
letter came from an independent laboratory.
The January 10, 1996, notice asked questions about whether (1) the
flash characteristics of obstruction lights should be changed from a
quick-flashing rhythm to a Morse ``U'', (2) the candlepower
requirements on obstruction lighting should be adapted to the new
transmissivity tables developed by the Coast Guard, and (3) lights and
fog signals should be tested by independent laboratories rather than by
the Coast Guard. The Coast Guard has determined that more time is
needed to study issues (1) and (2) and may address them in a future
rulemaking project. This rulemaking is limited to issue (3).
Background and Purpose
The existing 33 CFR 67.05-10 states that manufacturers of lights
must have their equipment approved by the District Commander and a
permit must be issued before the equipment can be distributed.
Currently the manufacturer must apply to each Coast Guard district in
which the lights are to be operated. This proposal would amend this
provision to require that the tests be conducted by an independent
laboratory in accordance with Coast Guard procedures. The manufacturer
would then forward one application and the test results of the
independent laboratory to Commandant (G-NSR), U.S. Coast Guard, 2100
2nd Street SW., Washington, DC, 20593, for review.
Under 33 CFR 67.10-20, manufacturers of fog signals must apply to
the Coast Guard and schedule to have a Coast Guard representative
observe the test procedure. The test must be completed using equipment
supplied and calibrated by the Coast Guard. The manufacturer must also
bear the cost of Coast Guard personnel and test equipment. This
requirement would be changed to require independent laboratories to
conduct fog signal tests in accordance with existing Coast Guard
procedures.
The amendments would relieve the financial and administrative
burden from both the public and the government.
Discussion of Comments on Testing by Independent Laboratories
The comments were generally favorable towards this change. The
consensus was that independent laboratory testing would improve quality
and reduce the costs and administrative burden associated with
inspection. However, one company commented that the existing procedures
are adequate. In light of the favorable response to the testing issue,
the Coast Guard is pursuing this change in this rulemaking project.
Discussion of Proposed Rules
(1) Proposed Sec. 67.05-30 would be added to require testing of
lights by independent laboratories. One sample of each product model
would be tested. Once approved, the manufacturer and model numbers
would be placed on a Coast Guard approved list which would be made
available to the public. Information regarding testing procedures may
be obtained from Commandant (G-NSR), U.S. Coast Guard, 2100 Second
Street SW., Washington, DC 20593-0001.
(2) Existing Sec. 67.10 would be amended to require testing of fog
signals by independent laboratories. This procedure would be similar to
that used for lights. One sample of each product model would be tested.
Once approved, the manufacturer and model numbers would be placed on a
Coast Guard approved list which would be made available to the public.
Information regarding testing procedures may be obtained from
Commandant (G-NSR), U.S. Coast Guard, 2100 Second Street SW.,
Washington, DC 20593-0001.
(3) Section 67.10-25, Application for tests, would be removed
because of the proposed changes to Sec. 67.10-20.
Regulatory Evaluation
This proposal is not a significant regulatory action under section
3(f) of Executive Order 12866 and does not require an assessment of
potential costs and benefits under section 6(a)(3) of that order. It
has not been reviewed by the Office of Management and Budget under that
order. It is not significant under regulatory policies and procedures
of the Department of Transportation (DOT) (44 FR 11010; February 26,
1979).
The Coast Guard expects the economic impact of this proposal to be
minimal enough that a full Regulatory Evaluation under paragraph 10e of
the regulatory policies and procedures of DOT is unnecessary. The cost
of testing each model of light by an independent laboratory is
approximately $500.00 per test. This is an initial cost to the
manufacturer and will only apply to the production sample tested. Once
the sample passes the tests, its manufacturer and model numbers are
placed on the approved list. Many manufacturers of lighting equipment
are already using independent laboratories to conduct tests, and,
therefore, would not incur additional costs.
The cost for testing fog signal equipment will be greatly reduced.
Presently, the manufacturer has to bear all expenses of conducting the
test including all expenses of the U.S. Government in sending a Coast
Guard representative to the test. The expense to the manufacturer for
Coast Guard personnel to observe a test is approximately $2,000.00. By
having an independent laboratory conduct the test without Coast Guard
representatives, manufacturers would save a minimum of $2,000.00.
Manufacturers would submit one production sample to an independent
laboratory for testing. Once the sample passes the tests, its
manufacturer and model numbers are placed on an approved list.
Manufacturers will see a significant savings by having independent
laboratories conduct tests.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the
Coast Guard must consider whether this proposal, if adopted, will have
a significant impact on a substantial number of small entities. ``Small
entities'' may include (1) small businesses and not-for-profit
organizations that are independently owned and operated and are not
dominant in their fields and (2) governmental jurisdictions with
populations less than 50,000.
Small entities would not be affected by this proposal. The
manufacturers of lighting and fog signal equipment are large
corporations. If anything, small entities would benefit from this
proposal by creating jobs for small independent laboratories. Because
it expects the impact of this proposal to be minimal, the Coast Guard
certifies under 5 U.S.C. 605(b) that this proposal, if adopted, will
not have a significant economic impact on a substantial number of small
entities. If, however, you think that your business or organization
qualifies as a small entity and that this proposal will have a
significant economic impact on your business or organization, please
submit a comment (see ADDRESSES) explaining why you think it qualifies
and in what way and to what degree this proposal will economically
effect it.
[[Page 13474]]
Collection of Information
This proposal contains no collection-of-information requirements
under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Federalism
The Coast Guard has analyzed this proposal under the principles and
criteria contained in Executive Order 12612 and has determined that
this proposal does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
Environment
The Coast Guard considered the environmental impact of this
proposal and concluded that, under paragraph 2.B.2.e(34)(a) of
Commandant Instruction M16475.1B, this proposal is categorically
excluded from further environmental documentation. Revision of the
testing procedures for lighting and fog signal equipment will have no
effect on the environment. A ``Categorical Exclusion Determination'' is
available in the docket for inspection or copying where indicated under
ADDRESSES.
List of Subjects in 33 CFR Part 67
Continental shelf, Navigation (water), Reporting and recording
requirements.
For the reasons set out in the preamble, the Coast Guard proposes
to amend 33 CFR part 67 as follows:
PART 67--AIDS TO NAVIGATION ON ARTIFICIAL ISLANDS AND FIXED
STRUCTURES
1. The authority citation for part 67 continues to read as follows:
Authority: 14 U.S.C. 85, 633; 43 U.S.C. 1333; 49 CFR 1.46.
2. In subpart 67.05, Sec. 67.05-30 is added to read as follows:
Sec. 67.05-30 Testing of obstruction lights.
Each obstruction light must be tested by an independent laboratory
to ensure that it meets or exceeds the requirements in subparts 67.20,
67.25, and 67.30 of this part for the class of structure on which it is
to be used. Information on the test procedure may be obtained from
Commandant (G-NSR), U.S. Coast Guard, 2100 Second Street SW.,
Washington, DC 20593-0001.
3. Section 67.10-30 is revised to read as follows:
Sec. 67.10-20 Fog signal tests.
Each fog signal must be tested by an independent laboratory to
ensure that it meets the required sound pressure levels in table A of
this section. Information on the test procedure may be obtained from
Commandant (G-NSR), U.S. Coast Guard, 2100 Second Street SW.,
Washington, DC 20593-0001.
Sec. 67.10-25 [Removed]
4. Section 67.10.25 is removed.
Dated: March 15, 1996.
Rudy K. Peschel,
Rear Admiral, U.S. Coast Guard, and Waterway Services.
[FR Doc. 96-7332 Filed 3-26-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-7329 Airworthiness Directives; The New Piper Aircraft, Inc. (Formerly Piper Aircraft Corporation) PA31, PA31P, PA31T, and PA42 Series Airplanes
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13468-13470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7329]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. 95-CE-84-AD]
Airworthiness Directives; The New Piper Aircraft, Inc. (Formerly
Piper Aircraft Corporation) PA31, PA31P, PA31T, and PA42 Series
Airplanes
AGENCY: Federal Aviation Administration, DOT.
ACTION: Notice of proposed rulemaking (NPRM).
-----------------------------------------------------------------------
SUMMARY: This document proposes to adopt a new airworthiness directive
(AD) that would apply to certain The New Piper Aircraft, Inc. (Piper)
PA31, PA31P, PA31T, and PA42 series airplanes. The proposed action
would require inspecting for cracks beneath and in the area of the
inboard aileron hinge bracket on the aileron spar and rib using dye
penetrant methods, replacing any cracked aileron spar or rib, and
replacing the inboard aileron hinge bracket with a hinge bracket of
improved design. Several reports of cracks in the vicinity of the
inboard aileron hinge bracket, aileron spar, and aileron rib prompted
this proposed action. The actions specified by the proposed AD are
intended to prevent structural failure of the aileron caused by cracks
in the area of the inboard aileron hinge bracket, which, if not
detected and corrected, could result in loss of control of the
airplane.
DATES: Comments must be received on or before June 7, 1996.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), Central Region, Office of the Assistant Chief
Counsel, Attention: Rules Docket No. 95-CE-84-AD, Room 1558, 601 E.
12th Street, Kansas City, Missouri 64106. Comments may be inspected at
this location between 8 a.m. and 4 p.m., Monday through Friday,
holidays excepted.
Piper Service Bulletin (SB) No. 967, dated January 24, 1994, and
Piper SB No. 974, dated October 19, 1994, may be obtained from The New
Piper Aircraft, Inc., Attn: Customer Service, 2926 Piper Dr., Vero
Beach, Florida, 32960. This information also may be examined at the
Rules Docket at the address above.
FOR FURTHER INFORMATION CONTACT: Christina Marsh, Aerospace Engineer,
FAA, Atlanta Aircraft Certification Office, Campus Building, 1701
Columbia Avenue, suite 2-160, College Park, Georgia 30337-2748;
telephone (404) 305-7362; facsimile (404) 305-7348.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested persons are invited to participate in the making of the
proposed rule by submitting such written data, views, or arguments as
they may desire. Communications should identify the Rules Docket number
and be submitted in triplicate to the address specified above. All
communications received on or before the closing date for comments,
specified above, will be considered before taking action on the
proposed rule. The proposals contained in this notice may be changed in
light of the comments received.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the proposed rule. All
comments submitted will be available, both before and after the closing
date for comments, in the Rules Docket for examination by interested
persons. A report that summarizes each FAA-public contact concerned
with the substance of this proposal will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this notice must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to Docket No. 95-CE-84-AD.'' The postcard will be date stamped and
returned to the commenter.
Availability of NPRMs
Any person may obtain a copy of this NPRM by submitting a request
to the FAA, Central Region, Office of the Assistant Chief Counsel,
Attention: Rules Docket No. 95-CE-84-AD, Room 1558, 601 E. 12th Street,
Kansas City, Missouri 64106.
Discussion
The FAA has received several service difficulty reports (SDRs) on
certain Piper PA31, PA31P, PA31T, and PA42 series airplanes reflecting
a problem with cracks in the aileron spar in the area of the inboard
aileron hinge brackets. The cracks are appearing in certain Piper
airplanes having between 3,000 hours time-in- service (TIS) and 12,000
hours TIS. The cause of this condition is believed to be the location
of the inboard aileron hinge bracket in relation to the aileron
pushrod. The inboard aileron hinge bracket is located 2.06 inches from
the center line of the pushrod whereas the outboard aileron hinge
bracket is located 45.17 inches from the center line of the pushrod,
with both brackets being identical in
[[Page 13469]]
design. This arrangement causes the majority of the load to be
transferred to the inboard hinge bracket, which in time could cause
cracks to develop in the aileron spar or in the corresponding aileron
rib in the area of the inboard aileron hinge bracket. As a result of
the reported cracking, Piper has redesigned the inboard aileron hinge
bracket to better distribute the load into the aileron spar web. A
crack in the aileron spar or in the vicinity of inboard aileron hinge
bracket, if left uncorrected, could possibly compromise the structural
integrity of the aileron.
Piper has issued two service bulletins (SB), No. 967, dated January
24, 1994, and Piper SB No. 974, dated October 19, 1994, which specify
procedures for inspecting the designated areas for cracks and replacing
the aileron inboard hinge brackets with a part of improved design as a
terminating action.
After examining the circumstances and reviewing all available
information related to the incidents described above, the FAA has
determined that AD action should be taken to prevent structural failure
of the aileron caused by cracks in the area of the inboard aileron
hinge bracket, which, if not detected and corrected, could result in
loss of control of the airplane.
Since an unsafe condition has been identified that is likely to
exist or develop in other Piper PA31, PA31P, PA31T, PA42 series
airplanes of the same type design, the proposed AD would require:
Inspecting the aileron spar beneath and in the area of the
inboard aileron hinge bracket for cracks;
If cracks are found in the area of the aileron spar,
inspecting the aileron rib for cracks, and replacing the cracked spar
assembly and any cracked rib;
Replacing the inboard aileron hinge brackets with part
number (P/N) 74461-02 (left) and P/N 74461-03 (right).
The FAA estimates that 2,501 airplanes in the U.S. registry would
be affected by the proposed AD, that it would take approximately 2
workhours per airplane for the inspection and 5 workhours per airplane
for the modification, with a total of 7 workhours to accomplish the
proposed action, and that the average labor rate is approximately $60
an hour. Parts cost approximately $300 per airplane. Based on these
figures, the total cost impact for the initial inspection and the
modification of the proposed AD on U.S. operators is estimated to be
$1,800,720 or $720 per airplane. This figure does not include the
amount for repetitive inspections and is based on the assumption that
all of the owners/operators of the affected airplanes have not
inspected for cracks, repaired cracks, or incorporated the modification
of this proposed AD. The FAA has no way of determining the number of
repetitive inspections each owner/operator will incur before the
proposed modification is accomplished.
Piper has informed the FAA that parts have been distributed to
equip approximately 1,250 airplanes. Assuming that these distributed
parts are incorporated on the affected airplanes, the cost of the
proposed AD would be reduced by $900,000 from $1,800,720 to $900,720.
The regulations proposed herein would not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this
proposal would not have sufficient federalism implications to warrant
the preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated,
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. A copy of the draft regulatory evaluation
prepared for this action has been placed in the Rules Docket. A copy of
it may be obtained by contacting the Rules Docket at the location
provided under the caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
The Proposed Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration proposes to amend
part 39 of the Federal Aviation Regulations (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.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding a new AD to read as follows:
The New Piper Aircraft, Inc. (formerly Piper Aircraft Corporation):
Docket No. 95-CE-84-AD.
Applicability: The following airplane models and serial numbers,
certificated in any category:
------------------------------------------------------------------------
Models Serial Nos.
------------------------------------------------------------------------
(The following aircraft should reference Piper Service Bulletin No. 974,
dated October 19, 1994)
------------------------------------------------------------------------
PA31, PA31-300, and PA31-325.............. 31-2 through 31-8312019.
PA31-350.................................. 31-5001 through 31-8553002.
PA31P-350................................. 31P-8414001 through 31P-
8414050.
PA31T3.................................... 31T-8275001 through 31T-
8475001, and 31T-5575001.
------------------------------------------------------------------------
(The following aircraft should reference Piper Service Bulletin No. 967,
dated January 24, 1994)
------------------------------------------------------------------------
PA31P..................................... 31P-1 through 31P-7730012,
and 31P-03.
PA31T..................................... 31T-7400002 through 31T-
7400009, and 31T-7520001
through 31T-8120104.
PA31T1.................................... 31T-7804001 through 31T-
8304003, and 31T-1104004
through 31T-1104017.
PA31T2.................................... 31T-8166001 through 31T-
8166076, and 31T-1166001
through 31T-1166008.
PA42...................................... 42-7800001 through 42-
7800004, and 42-8001001
through 42-8001106.
PA42-720.................................. 42-8301001, 42-8301002, 42-
5501003 through 42-5501023,
42-5501025 through 42-
5501027, 42-5501129 through
42-5501031, 42-5501033, and
42-5501039 through 42-
5501059.
PA42-720R................................. 42-5501024, 42-5501028, 42-
5501032, and 42-5501034
through 42-5501038.
PA42-1000................................. 42-5527002 through 42-
5527044.
------------------------------------------------------------------------
Note 1: This AD applies to each airplane identified in the
preceding applicability revision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must request approval for an
alternative method of compliance in accordance with paragraph (e) of
this AD. The request should include an assessment of
[[Page 13470]]
the effect of the modification, alteration, or repair on the unsafe
condition addressed by this AD; and, if the unsafe condition has not
been eliminated, the request should include specific proposed
actions to address it.
Compliance: Upon the accumulation of 3,000 hours time-in-service
(TIS), or within the next 100 hours TIS after the effective date of
this AD, whichever occurs later, unless already accomplished.
Note 2: The paragraph structure of this AD is as follows:
Level 1: (a), (b), (c), etc.
Level 2: (1), (2), (3), etc.
Level 3: (i), (ii), (iii), etc.
Level 2 and Level 3 structures are designations of the Level 1
paragraph they immediately follow.
To prevent structural failure of the aileron caused by cracks in
the area of the inboard aileron hinge bracket, which, if not
detected and corrected, could result in loss of control of the
airplane, accomplish the following:
(a) Inspect (using dye penetrant methods) the area beneath and
in the area of the inboard aileron hinge bracket on the aileron spar
for cracks in accordance with the INSTRUCTIONS section of Piper
Service Bulletin (SB) No. 967, dated January 24, 1994, or Piper SB
No. 974, dated October 19, 1994, whichever service bulletin applies
to the particular model and serial number.
(1) If cracks are found on the aileron spar:
(i) Prior to further flight, inspect the corresponding aileron
rib at the inboard aileron hinge bracket location;
(ii) Prior to further flight, replace any cracked spar assembly
and any cracked aileron rib in accordance with the applicable
Maintenance Manual;
(iii) Prior to further flight, replace the inboard aileron hinge
brackets with an inboard aileron hinge bracket of improved design,
part number (P/N) 74461-02 (left) and P/N 74461-03 (right), in
accordance with the INSTRUCTIONS section of Piper SB No. 967, dated
January 24, 1994, or Piper SB No. 974, dated October 19, 1994, as
applicable.
(2) If no cracks are found, prior to further flight, replace the
inboard aileron hinge brackets with a part of improved design P/N
74461-02 (left) and P/N 74461-03 (right), in accordance with the
INSTRUCTIONS section of Piper SB No. 967, dated January 24, 1994, or
Piper SB No. 974, dated October 19, 1994, as applicable.
(b) If the inboard aileron hinge brackets, P/N 74461-02 (left)
or P/N 74461-03 (right) have been ordered from the manufacturer but
are not available, prior to further flight, and thereafter at
intervals not to exceed 100 hours TIS, dye penetrant inspect beneath
and in the vicinity of the inboard aileron hinge bracket for cracks
in accordance with the INSTRUCTIONS section of Piper SB No. 967,
dated January 24, 1994, or Piper SB No. 974, dated October 19, 1994,
as applicable.
(c) If any one of the following occurs, prior to further flight,
terminate the above repetitive inspections, replace any cracked
aileron rib and any cracked spar assembly (if applicable), and
replace the inboard aileron hinge bracket as specified in paragraph
(a)(1)(iii) of this AD:
(1) Parts become available;
(2) An inboard aileron bracket hinge, aileron spar or aileron
rib is found cracked; or
(3) 1,000 hours TIS are accumulated after the initial inspection
required by this AD.
(d) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the airplane to a location where
the requirements of this AD can be accomplished.
(e) An alternative method of compliance or adjustment of the
compliance times that provides an equivalent level of safety may be
approved by the Manager, FAA, Atlanta Aircraft Certification Office,
Campus Building, 1701 Columbia Avenue, suite 2-160, College Park,
Georgia 30337-2748. The request shall be forwarded through an
appropriate FAA Maintenance Inspector, who may add comments and then
send it to the Manager, Atlanta Aircraft Certification Office.
Note 3: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Atlanta Aircraft Certification Office.
(f) All persons affected by this directive may obtain copies of
the document referred to herein upon request to The New Piper
Aircraft, Inc., Attn: Customer Service, 2926 Piper Dr., Vero Beach,
Florida, 32960; or may examine this document at the FAA, Central
Region, Office of the Assistant Chief Counsel, Room 1558, 601 E.
12th Street, Kansas City, Missouri 64106.
Issued in Kansas City, Missouri, on March 20, 1996.
James E. Jackson,
Acting Manager, Small Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 96-7329 Filed 3-26-96; 8:45 am]
BILLING CODE 4910-13-P
Complete official Federal Register PDF
FR Doc. 96-7319 American Lobster Fishery; Removal of Regulations
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13478-13479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7319]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 649
[Docket No. 960315082-6082-01; I.D. 031296C]
RIN 0648-XX55
American Lobster Fishery; Removal of Regulations
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Proposed rule; request for comments.
-----------------------------------------------------------------------
SUMMARY: NMFS announces its initial determination to withdraw approval
of the Fishery Management Plan for the American Lobster Fishery (FMP),
and proposes to remove the regulations implementing the FMP. Withdrawal
of FMP approval appears necessary, because changed circumstances have
called into question whether this FMP is consistent with the national
standards of the Magnuson Fishery Conservation and Management Act
(Magnuson Act). The intended effect of this action is to ensure that
Federal management of the American lobster fishery more closely
complies with state-administered programs.
DATES: Comments on the proposed rule must be received on or before May
13, 1996.
ADDRESSES: Comments on the proposed rule should be sent to Dr. Andrew
A. Rosenberg, Regional Director, Northeast Region, NMFS, One Blackburn
Drive, Gloucester, MA 01930-3799.
Copies of the Environmental Assessment (EA) supporting this action
and the regulatory impact review (RIR) are available from the same
address.
FOR FURTHER INFORMATION CONTACT: Paul H. Jones, Fishery Policy Analyst,
508-281-9273.
SUPPLEMENTARY INFORMATION:
The subject FMP, prepared by the New England Fishery Management
Council (Council), was approved and implemented in 1983. Implementing
regulations are found at 50 CFR part 649. The FMP has been amended
several times since implementation, most recently by Amendment 5. The
purpose of Amendment 5 is to prevent overfishing through adoption of a
stock rebuilding program in the exclusive economic zone (EEZ) to be
developed by effort management teams (EMTs) to enhance the existing
regulations, including those implemented by the individual coastal
states and the Atlantic States Marine Fisheries Commission (ASMFC).
Amendment 5 has not yet achieved this objective and on September 18,
1995 (60 FR 48086), NMFS published an advance notice of proposed
rulemaking (ANPR) that requested comments from the public on options
for lobster management. This proposed rule discusses the comments
received as a result of the ANPR and the other circumstances that give
rise to this proposed action to withdraw the FMP.
These options were discussed in the ANPR: Whether to withdraw the
FMP and develop regulations under the Atlantic Coastal Fisheries
Cooperative Management Act (ACFCMA), or proceed with development of a
Secretarial fishery management plan, or some other option. NMFS stated
that it wished to retain as many current measures as possible under the
law, and especially desired to consider those measures proposed by the
group of industry, government, and other non-government participants
who constituted the EMTs. Written responses were received on the ANPR
from the Council, the ASMFC, two state fishery agencies, three fishing
associations, and one individual. Two comments favored withdrawal of
the FMP and the development of regulations under the ACFCMA. Five
comments requested that NMFS keep the current FMP in place while the
ASMFC develops an amendment to its lobster coastal management plan
(CMP). The one remaining comment was in favor of Secretarial action for
the offshore lobster fishery.
There are several reasons to withdraw this FMP. In accordance with
the goals of the initiative to reform the Federal regulatory system
announced by the President on February 21, 1995, the lobster FMP can be
eliminated without compromising resource management and conservation
objectives. The American lobster fishery is prosecuted primarily in
state waters from Maine to Virginia and these states have implemented
protective measures under state law in addition to the ASMFC CMP. Final
withdrawal of the FMP and its implementing regulations would only occur
upon completion of an effective state management program, most likely
developed by the ASMFC. The primary objective of the FMP has been to
serve as a vehicle for coordinated management of the American lobster
fishery throughout its range. The FMP was prepared to support the
management efforts of the states. However, the need for a Magnuson Act
fishery management plan for lobster is now in question, given the
[[Page 13479]]
compliance authority included in the ACFCMA.
In addition, NMFS can no longer ensure that the FMP is, or can be
amended to be, consistent with National Standard 1, which requires
implementation of conservation and management measures to prevent
overfishing. Fishing mortality for American lobster is occurring at a
rate in excess of that in the overfishing definition, and Amendment 5
has not fostered the necessary cooperation between the Atlantic coastal
states, the Council, and the ASMFC to address the problem. Withdrawal
would allow the ASMFC to address the overfished condition of the stocks
unhindered by the Council process.
Withdrawal would also ensure consistency with National Standard 7,
which requires that conservation and management measures shall, where
practicable, minimize costs and avoid unnecessary duplication. Prior to
the implementation of the ACFCMA, interstate plans lacked effective
compliance authority and states relied upon Federal regulations under
the Magnuson Act to provide cohesiveness and compliance. This is no
longer a problem, because the ACFCMA, as recently amended, now provides
a mechanism for state compliance to coastal management plans
implemented by the ASMFC and, therefore, is a more appropriate vehicle
to support the effective implementation of these plans. As a result, in
some instances where a coastal plan exists or is proposed, the Magnuson
Act may be an unnecessary duplication.
Withdrawal of the FMP, provided that complementary Federal
regulations are issued by NMFS under the ACFCMA, is consistent with the
formal comments submitted by the ASMFC during the comment period on the
ANPR. During the comment period, the ASMFC requested a status quo
approach until the states, through ASMFC, determine where lobster
management should go from here by amending its CMP for American
lobster. The Maine Department of Marine Resources commented that
management of lobster should transfer from the Council to the ASMFC
immediately. The Connecticut Department of Environmental Protection
requested that the FMP remain in place to allow the ASMFC time to
develop its CMP. Timely withdrawal of this FMP and replacement by a
state-administered CMP is consistent with the requests of these
agencies.
Therefore, NMFS is publishing this proposed rule stating its intent
to withdraw the FMP and remove its implementing regulations. Final
action would be contingent upon appropriate action by the ASMFC that
would allow NMFS to issue effective Federal regulations under the
ACFCMA, as necessary.
Timing the withdrawal to coincide with implementation of an ASMFC
CMP is necessary, because a lapse in the Federal regulations would
suspend conservation measures in the EEZ. For instance, the Federal
minimum size limit, the protective measures for egg-bearing lobsters,
and the limited access permit program would lapse, jeopardizing
conservation and canceling roughly 3,000 Federal limited access
moratorium permits. The administrative and resource costs that would
result from a lapse in the regulations would exceed the benefits of
this action.
Amendment 5 to the FMP was approved on the basis that it
established a participative process to reduce effort and prevent
overfishing. As stated in the ANPR, NMFS supports the EMT concept and
the prevention of overfishing objective of Amendment 5 and expects that
the state management plan initiative will be guided by the national
standards and guidelines to ensure effective conservation and
management of the American lobster resource.
Classification
This proposed rule has been determined to be not significant for
purposes of E.O. 12866.
At this time, the Assistant Administrator for Fisheries (AA) has
not determined that the action this rule would implement is consistent
with the national standards, other provisions of the Magnuson Act, and
other applicable law. The AA, in making that determination, will take
into account the data, views, and comments received during the comment
period.
NMFS prepared a draft EA for this amendment that discusses the
impact on the environment as a result of this rule. A copy of the draft
EA may be obtained from NMFS (see ADDRESSES).
The Assistant General Counsel for Legislation and Regulation of the
Department of Commerce has certified to the Chief Counsel for Advocacy
of the Small Business Administration that this proposed rule, if
adopted, would not have a significant economic impact on a substantial
number of small entities. As a result, a regulatory flexibility
analysis was not prepared. This rule has no direct effect on the stock
of lobster or the lobster fishery, since the management measures that
would be removed via this action are expected to be implemented under
the ACFCMA before withdrawal is complete. If NMFS intends to alter,
add, or eliminate any regulations implemented under the FMP under the
authority of the ACFCMA, an initial regulatory flexibility analysis
will be done for those specific regulations at that time.
This rule does not contain a collection-of-information requirement
for the purposes of the Paperwork Reduction Act.
This proposed rule does not contain policies with federalism
implications sufficient to warrant preparation of a federalism
assessment under E.O. 12612.
List of Subjects in 50 CFR Part 649
Fisheries.
Dated: March 20, 1996.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
For the reasons set out in the preamble, under the authority of 16
U.S.C. 1801 et seq., part 649 is proposed to be removed.
[FR Doc. 96-7319 Filed 3-26-96; 8:45 am]
BILLING CODE 3510-22-F
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