Federal Register Vol. 80, No.141,

The Board's capital planning and stress testing regime is an annual assessment of a banking organization's capital planning and capital adequacy on a post-stress basis and a cornerstone of the Board's supervisory program for bank holding companies with total consolidated assets of $50 billion or more (large bank holding companies).1 The Board's capital planning and stress testing regime consists of two related programs: The Comprehensive Capital Analysis and Review (CCAR), which is conducted pursuant to the Board's capital plan rule (12 CFR 225.8), and Dodd-Frank Act stress testing, which is conducted pursuant to the Board's stress test rules (subparts B, E, and F of Regulation YY). In CCAR, the Board assesses the internal capital planning processes of large bank holding companies and their ability to maintain sufficient capital to continue their operations under expected and stressful conditions. Large bank holding companies must submit annual capital plans to the Board, which the Board may object to on either quantitative or qualitative grounds. If the Board objects to a large bank holding company's capital plan, the large bank holding company may not make any capital distributions unless the Board indicates in writing that it does not object to such distributions.

Dodd-Frank Act stress testing is a forward-looking quantitative evaluation of the impact of stressful economic and financial market conditions on the capital adequacy of banking organizations.2 As part of Dodd-Frank Act stress testing, the Board conducts supervisory stress tests of large bank holding companies, and these bank holding companies also must conduct annual and mid-cycle company-run stress tests. In addition, bank holding companies with total consolidated assets of more than $10 billion but less than $50 billion, savings and loan holding companies with total consolidated assets of more than $10 billion, and state member banks with total consolidated assets of more than $10 billion must conduct annual company-run stress tests.3

This proposal invites comment on targeted adjustments to the Board's capital plan and stress test framework that would apply for the 2016 capital plan and stress test cycles. The Board notes that is considering a broad range of issues relating to the capital plan and stress test rules, including how the rules interact with other elements of the regulatory capital rules and whether any modification may be appropriate. However, the Board does not anticipate proposing another rulemaking that would affect the 2016 capital plan and stress test cycle beyond what is contained in this proposal. The Board would propose any changes resulting from the considerations described above through a separate rulemaking. Any such changes would take effect no earlier than the 2017 capital plan and stress test cycle.

For all banking organizations, the proposal would remove the tier 1 common capital ratio requirement in the capital plan and stress test rules. For large bank holding companies, the proposal would modify the stress test capital action assumptions under the stress test rules. For banking organizations subject to the advanced approaches, the proposal would delay the incorporation of the supplementary leverage ratio for one year and indefinitely defer the use of advanced approaches in the capital plan and stress test rules.4 For the company-run stress test rules, the proposal would eliminate the fixed dividend payment assumptions for bank holding companies with total consolidated assets of more than $10 billion but less than $50 billion and savings and loan holding companies with total consolidated assets of more than $10 billion, and would delay the application of the company-run stress test requirements to these savings and loan holding companies for one stress test cycle. The proposal would also make certain technical amendments to the capital plan and stress test rules to incorporate changes related to other rulemakings.

The proposal would remove the requirement that a banking organization demonstrate its ability to maintain a pro forma tier 1 common capital ratio of five percent of risk-weighted assets under expected and stressed scenarios. When the Board adopted the tier 1 common requirement as part of the capital plan and stress test rules, the Board noted that it expected the tier 1 common ratio to remain in force until the Board adopted a minimum common equity capital requirement. In 2013, the Board revised its regulatory capital rules to strengthen the quantity and quality of regulatory capital held by banking organizations. These revisions included a new minimum common equity tier 1 capital requirement of 4.5 percent of risk-weighted assets, which was fully phased-in on January 1, 2015.5

The 2016 capital plan and stress test cycle is the first cycle in which banking organizations will be subject to the 4.5 percent common equity tier 1 capital ratio for each quarter of the planning horizon. The common equity tier 1 capital ratio generally is expected to be more binding than the tier 1 common ratio under the severely adverse scenario because of the regulatory capital rule's stringent capital deductions, most of which will be fully phased-in by the end of the next planning horizon. Removing the tier 1 common ratio requirement will further reduce the burden of maintaining legacy systems and processes necessary for calculating the tier 1 common ratio.

The proposal would modify capital action assumptions in the stress test rules to allow large banking holding companies to reflect dividends associated with expensed employee compensation and issuances to fund acquisitions. The stress test rules require large bank holding companies to assume that they do not issue capital or redeem capital instruments in the second through ninth quarters of the planning horizon. The October 2014 revisions to the capital plan and stress test rules (October 2014 revisions) provided an exception to this assumption for issuances related to expensed employee compensation.6 The proposal would make a related technical change to require a firm to assume that it pays dividends equal to the quarterly average dollar amount of common stock dividends that the company paid in the previous year on any issuance of stock related to expensed employee compensation.

In addition, the proposal would permit a large bank holding company to assume that it issues capital associated with funding a planned acquisition. This proposed revision would align the capital action assumptions with the assumptions relating to business plan changes, which require a large bank holding company to project the effects of any planned mergers or acquisitions. Under the proposal, to the extent that a large bank holding company is required to include an acquisition in its balance sheet projections, the bank holding company could include any stock issuance associated with funding the acquisition in its stress test.

The supplementary leverage ratio requirement applies only to banking organizations that use the advanced approaches to calculate their minimum regulatory capital requirements. For these banking organizations, the proposal would delay the incorporation of the supplementary leverage ratio in the capital plan and stress test rules for one year. Under the proposal, these banking organizations would not be required to include an estimate of the supplementary leverage ratio for the capital plan and stress test cycles beginning on January 1, 2016. This proposed change is appropriate in light of the October 2014 revisions, which changed the commencement date of the capital plan and stress test cycles. Prior to the timing change in the October 2014 revisions, these banking organizations would have been required to incorporate the supplementary leverage ratio into the stress test cycle beginning on October 1, 2016 (i.e., in the sixth quarter of the 2017 stress testing and capital planning cycle). As a result of the timing change, however, these banking organizations would be required to incorporate the supplementary leverage ratio into the upcoming stress test cycle beginning January 1, 2016 (i.e., in the ninth quarter of the 2016 stress testing and capital planning cycle).

To provide adequate time to develop the required systems necessary to project the supplementary leverage ratio, the proposal would not require these banking organizations to demonstrate compliance with the supplementary leverage ratio for purposes of the 2016 capital plan and stress test cycles.

Under the current capital plan and stress test rules, banking organizations that use the advanced approaches to calculate their minimum regulatory capital requirements must project their risk-weighted assets using both the standardized and the advanced approaches. Several banking organizations have noted that the use of advanced approaches in the capital plan and stress test rules would require significant resources and would introduce complexity and opacity. In light of the concerns raised by these banking organizations, and pending a broader review of how the capital plan and stress test rules interact with the regulatory capital rules as described above, the proposal would delay until further notice the use of the advanced approaches for calculating risk-based capital requirements for purposes of the capital plan and stress test rules.

For bank holding companies with total consolidated assets of more than $10 billion but less than $50 billion and savings and loan holding companies with total consolidated assets of more than $10 billion, the proposal would eliminate the fixed dividend assumptions for company-run stress tests and would delay the application of the company-run stress testing requirements to these savings and loan holding companies for one stress test cycle.

The proposal would eliminate the requirement that bank holding companies with total consolidated assets of more than $10 billion but less than $50 billion and savings and loan holding companies with total consolidated assets of more than $10 billion incorporate fixed assumptions regarding dividends in their stress tests. These bank holding companies and savings and loan holding companies would instead be required to incorporate their own dividend payment assumptions consistent with internal capital needs and projections.

Currently, the stress test rules require these bank holding companies and savings and loan holding companies to make the same capital action assumptions in their stress tests that apply to large bank holding companies. These capital action assumptions require these bank holding companies and savings and loan holding companies to assume they maintain their common stock dividend at a steady rate over the planning horizon, continue payments on other regulatory capital instruments at their stated dividend rate, and assume no repurchases or issuance of shares for each of the second through ninth quarters of the planning horizon. The proposal would maintain the assumptions of no repurchases, redemptions, or issuance of regulatory capital instruments in the stress tests.

This proposed change is responsive to concerns raised by banking organizations that dividends made at the holding company level are often funded directly through a subsidiary bank's distributions to its holding company, but that subsidiary banks may be subject to dividend restrictions that would not permit the bank to upstream capital to its holding company. The proposed change would also better align the stress test rules with the rules applicable to state member banks and the rules of the other banking agencies.

The proposal would delay for one stress test cycle the application of the company-run stress test rules to saving and loan holding companies with total consolidated assets of more than $10 billion, such that these savings and loan holding companies would become subject to the stress test rules for the first time beginning on January 1, 2017.

Savings and loan holding companies with total consolidated assets of more than $10 billion must conduct annual company-run stress tests.7 The original stress test rules provided a two-year transition period for these savings and loan holding companies to comply with the stress test requirements once they became subject to regulatory capital requirements on January 1, 2015. However, the October 2014 revisions to the stress test rules resulted in a shortening of this initial transition period to one year. The proposal would reinstate the previous transition period, such that these savings and loan holding companies would become subject to the company-run stress tests on January 1, 2017. Accordingly, savings and loan holding companies with total consolidated assets of more than $50 billion would report results by April 5, 2017, and those with total consolidated assets of less than $50 billion would report results by July 31, 2017.

The proposal would also make certain technical amendments to the capital plan and stress test rules to incorporate changes related to other rulemakings. On January 1, 2015, the risk-based capital rules under 12 CFR part 217 became effective, and the proposal would remove references to the risk-based capital rules in 12 CFR part 225 that are no longer operative as of that date.

In addition, the Board is proposing to amend the definition of minimum regulatory capital ratio in 12 CFR 225.8(d)(8), and the definition of regulatory capital ratio in 12 CFR 252.12(n), 12 CFR 252.42(m), and 12 CFR 252.52(n) to incorporate the deductions required under 12 CFR 248.12(d) (the Volcker Rule). The Volcker Rule requires a banking organization to deduct from tier 1 capital its aggregate investments in covered funds (as defined in 12 CFR. 248.10(b)). These required deductions are not, however, reflected in the regulatory text of 12 CFR part 217. Accordingly, the proposal would revise the regulatory text of the above-referenced definitions to include the required deductions under the Volcker Rule in the definition of regulatory capital ratio and minimum regulatory capital ratio. The amended language will ensure that the definitions referenced above will incorporate not only the deductions required under 12 CFR part 217 but also the deductions required under the Volcker Rule.

In accordance with the requirements of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521), the Board may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The Board reviewed this proposed rule under the authority delegated to the Board by the OMB and determined that it contains no collections of information. As the Board considers the public comments received and finalizes the rulemaking, the Board will reevaluate this PRA determination.

The Board is providing an initial regulatory flexibility analysis with respect to this proposed rule. The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA), generally requires that an agency prepare and make available an initial regulatory flexibility analysis in connection with a notice of proposed rulemaking.

Under regulations issued by the Small Business Administration (“SBA”), a small entity includes a depository institution, bank holding company, or savings and loan holding company with total assets of $550 million or less (a small banking organization).8 As of March 31, 2015, there were approximately 631 small state member banks. As of December 31, 2014, there were approximately 3,833 small bank holding companies and 271 small savings and loan holding companies. The proposed rule would apply to bank holding companies, savings and loan holding companies, and state member banks with total consolidated asset of $10 billion or more and nonbank financial companies supervised by the Board. Companies that would be subject to the proposed rule therefore substantially exceed the $550 million total asset threshold at which a company is considered a small company under SBA regulations. Therefore, there are no significant alternatives to the proposed rule that would have less economic impact on small banking organizations. As discussed above, the projected reporting, recordkeeping, and other compliance requirements of the rule are expected to be small. The Board does not believe that the rule duplicates, overlaps, or conflicts with any other Federal rules. In light of the foregoing, the Board does not believe that the final rule would have a significant economic impact on a substantial number of small entities.

The Board welcomes comment on all aspects of its analysis. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.

Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 Stat. 1338, 1471, 12 U.S.C. 4809) requires the federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The Board has sought to present the proposed rule in a simple and straightforward manner, and invites comment on the use of plain language.

For example:

• Have we organized the material to suit your needs? If not, how could the rule be more clearly stated?

• Are the requirements in the rule clearly stated? If not, how could the rule be more clearly stated?

• Do the regulations contain technical language or jargon that is not clear? If so, which language requires clarification?

• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes would make the regulation easier to understand?

• Would more, but shorter, sections be better? If so, which sections should be changed?

• What else could we do to make the regulation easier to understand?

For the reasons stated in the Supplementary Information, the Board of Governors of the Federal Reserve System proposes to amend 12 CFR chapter II as follows:

The revisions to read as follows:

The revision to read as follows:

The revision to read as follows:

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2015-2958; Directorate Identifier 2014-NM-248-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

We have received a report indicating that the inner diameters of some batches of landing gear pins were not shot peened and need to be replaced. On high strength steel parts, shot peening increases fatigue life and reduces the likelihood of stress corrosion cracking. Stress corrosion cracking, if not corrected, could result in failure of the landing gear pin, and consequent landing gear collapse and the inability to control the airplane at high speeds on the ground.

We reviewed Boeing Alert Service Bulletin B787-81205-SB320022-00, Issue 001, dated November 14, 2014. The service information describes procedures for the inspection for improperly manufactured landing gear pins (parts that were not shot peened), and replacement if necessary. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of this NPRM.

We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This proposed AD would require accomplishing the actions specified in the service information described previously, except as discussed under “Differences Between this Proposed AD and the Service Information.” Refer to this service information for details on the procedures and compliance times.

Boeing Alert Service Bulletin B787-81205-SB320022-00, Issue 001, dated November 14, 2014, limits the effectivity in Group 2 to airplanes delivered prior to the publication of Boeing Alert Service Bulletin B787-81205-SB320022-00, Issue 001, dated November 14, 2014. However, this NPRM does not propose to include that limitation. The applicability of this proposed AD includes all The Boeing Company Model 787 airplanes. Because the affected landing gear pins are rotable parts, we have determined that these parts could later be installed on production airplanes, thereby subjecting those airplanes to the unsafe condition. This difference has been coordinated with Boeing.

We estimate that this proposed AD affects 13 airplanes of U.S. registry. We estimate the following costs to comply with this proposed AD:

We estimate the following costs to do any necessary replacements that would be required based on the results of the proposed inspection. We have no way of determining the number of aircraft that might need these replacements:

Comments Invited

We invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that might result from adopting the proposals in this document. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit only one time.

We will file in the docket all comments that we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this proposed rulemaking. Before acting on this proposal, we will consider all comments we receive on or before the closing date for comments. We will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. We may change this proposal in light of the comments we receive.

On May 21, 2014, we issued AD 2014-07-52, Amendment 39-17858, 79 FR 33054, June 10, 2014) for Airbus Helicopters Model AS350B, AS350BA, AS350B1, AS350B2, AS350B3, AS350C, AS350D, AS350D1, AS355E, AS355F, AS355F1, AS355F2, AS355N, and AS355NP helicopters with Modification (MOD) 07 3215 installed or with a reinforcement angle, part-number (P/N) 350A08.2493.21 or 350A08.2493.23, installed. AD 2014-07-52 requires, for helicopters with 640 or more hours TIS, within 10 hours TIS and thereafter at intervals not exceeding 10 hours TIS, repetitively inspecting each reinforcement angle for a crack. If there is a crack, AD 2014-07-52 requires, before further flight, repairing the reinforcement angle. As an optional terminating action for the repetitive 10 hour TIS inspections, AD 2014-07-52 allows a repetitive 165 hour TIS inspection of the reinforcement angle under each attaching screw for a crack.

AD 2014-07-52 was prompted by Emergency AD No. 2014-0076-E, dated March 25, 2014, issued by EASA, which is the Technical Agent for the Member States of the European Union, to correct an unsafe condition for Airbus Helicopters Model AS350B, AS350BA, AS350BB, AS350B1, AS350B2, AS350B3, AS350D, AS355E, AS355F, AS355F1, AS355F2, AS355N, and AS355NP helicopters with MOD 07 3215 or with at least one reinforcement angle, P/N 350A08.2493.21 or P/N 350A08.2493.23, installed. EASA advises that during the inspection of several AS355 helicopters, cracks found in the reinforcement angles had initiated on the non-visible surface of the angle, and that this condition, if not corrected, could lead to further crack propagation and subsequent loss of the tailboom, resulting in loss of control of the helicopter. The EASA AD requires repetitive inspections of the reinforcement angles, and states that a terminating action is under investigation.

Since we issued AD 2014-07-52 (79 FR 33054, June 10, 2014), we have determined that the optional terminating action in AD 2014-07-52 should be a required terminating action. This NPRM would retain the actions in AD 2014-07-52 but would require the 165-hour TIS visual inspection as terminating action for the 10-hour TIS inspections. In addition, because MOD 07 3215 installed reinforcement angle P/Ns 350A08.2493.21 and 350A08.2493.23, AD 2014-07-52 was written to apply to helicopters with either the reinforcement angle P/Ns or with MOD 07 3215, so that operators could more easily determine whether AD 2014-07-52 applied to their aircraft. Airbus Helicopters then developed MOD 07 3232, which removes reinforcement angle P/N 350A08.2493.21 and P/N 350A08.2493.23. Because a helicopter with both MOD 07 3215 and MOD 07 3232 in its aircraft records would not have reinforcement angle P/N 350A08.2493.21 or P/N 350A08.2493.23 installed, this NPRM would revise the applicability to no longer include helicopters with MOD 07 3215 and to include a note clarifying that the AD would not apply if MOD 07 3232 is installed.

After AD 2014-07-52 (79 FR 33054, June 10, 2014), was published, we received comments from three commenters.

Two commenters requested that the AD not be applicable to aircraft with MOD 07 3232 installed, as this modification improved the attachment at the junction frame to prevent cracking.

We partially agree. Although AD 2014-07-52 does not apply to helicopters with MOD 07 3232 installed, we have revised the language in the proposed AD so that this exclusion is more clear.

Two commenters requested that we increase the time between inspections or allow the repetitive inspections to end if no cracks are found after a few inspections. The commenters stated that the inspection frequency of the repetitive 165-hour TIS inspection is excessive and that if correctly installed, the doublers do not crack. One commenter stated that in practice the 165-hour inspection is being completed at every 100-hour inspection to avoid repeated grounding of the aircraft. Another commenter stated that frequent removal of the bolts and nuts could affect the airworthiness of the aircraft.

We do not agree. Analysis has demonstrated that cracking has been found in more than one location, which indicates there may be more than one cause of the cracking. The uncertainty regarding the root cause of the cracking supports requiring the 165-hour TIS inspections without any changes.

These helicopters have been approved by the aviation authority of France and are approved for operation in the United States. Pursuant to our bilateral agreement with France, EASA, its technical representative, has notified us of the unsafe condition described in its AD. We are proposing this AD because we evaluated all known relevant information and determined that an unsafe condition is likely to exist or develop on other products of the same type design.

Airbus Helicopters issued Emergency Alert Service Bulletin (EASB) No. 05.00.70 for Model AS350B, BA, BB, Bl, B2, B3, and D helicopters and EASB No. 05.00.62 for Model AS355E, F, F1, F2, N, and NP helicopters, both Revision 0 and dated March 24, 2014. EASB No. 05.00.70 and EASB No. 05.00.62 describe procedures for inspecting the angle reinforcements for a crack. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of this NPRM.

This proposed AD would retain the 10 hour TIS repetitive inspection of the junction frame required by AD 2014-07-52 (79 FR 33054, June 10, 2014), and would also require the repetitive 165 hour TIS inspection of the junction frame bores as a terminating action for the 10 hour TIS inspection. This proposed AD would also revise the applicability paragraph by no longer including helicopters with MOD 07 3215.

This proposed AD is not applicable to the AS350BB as that model is not type certificated in the U.S. This proposed AD applies to Airbus Helicopters Model AS350C and AS350D1 helicopters because these helicopters have a similar design. Finally, the EASA AD requires operators to contact Airbus Helicopters if there is a crack, and this proposed AD does not, however it does require repairing the crack before further flight.

We consider this proposed AD to be an interim action. If final action is later identified, we might consider further rulemaking then.

We estimate that this proposed AD would affect 822 helicopters of U.S. Registry. We estimate that operators may incur the following costs in order to comply with this proposed AD. At an average labor rate of $85 per hour, inspecting the reinforcement angles for a crack without removing the screws would require 1.0 work-hour, for a cost per helicopter of $85 and a total cost of $69,870 for the U.S. fleet per inspection cycle. Removing the screws and inspecting the reinforcement angle would require 2 work-hours, for a cost per helicopter of $170 and a total cost of $139,740 for the U.S. fleet, per inspection cycle. If required, repairing a cracked reinforcement angle would require about 10 work-hours, and required parts would cost about $300, for a total cost per helicopter of $1,150.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed, I certify this proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);

3. Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and

4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared an economic evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2015-2464; Directorate Identifier 2014-NM-195-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

Structural fatigue damage is progressive. It begins as minute cracks, and those cracks grow under the action of repeated stresses. This can happen because of normal operational conditions and design attributes, or because of isolated situations or incidents such as material defects, poor fabrication quality, or corrosion pits, dings, or scratches. Fatigue damage can occur locally, in small areas or structural design details, or globally. Global fatigue damage is general degradation of large areas of structure with similar structural details and stress levels. Multiple-site damage is global damage that occurs in a large structural element such as a single rivet line of a lap splice joining two large skin panels. Global damage can also occur in multiple elements such as adjacent frames or stringers. Multiple-site-damage and multiple-element-damage cracks are typically too small initially to be reliably detected with normal inspection methods. Without intervention, these cracks will grow, and eventually compromise the structural integrity of the airplane, in a condition known as widespread fatigue damage (WFD). As an airplane ages, WFD will likely occur, and will certainly occur if the airplane is operated long enough without any intervention.

The FAA's WFD final rule (75 FR 69746, November 15, 2010), became effective on January 14, 2011. The WFD rule requires certain actions to prevent structural failure due to WFD throughout the operational life of certain existing transport category airplanes and all of these airplanes that will be certificated in the future. For existing and future airplanes subject to the WFD rule, the rule requires that design approval holders (DAH) establish a limit of validity (LOV) of the engineering data that support the structural maintenance program. Operators affected by the WFD rule may not fly an airplane beyond its LOV, unless an extended LOV is approved.

The WFD rule (75 FR 69746, November 15, 2010), does not require identifying and developing maintenance actions if the DAHs can show that such actions are not necessary to prevent WFD before the airplane reaches the LOV. Many LOVs, however, do depend on accomplishment of future maintenance actions. As stated in the WFD rule, any maintenance actions necessary to reach the LOV will be mandated by airworthiness directives through separate rulemaking actions.

In the context of WFD, this action is necessary to enable DAHs to propose LOVs that allow operators the longest operational lives for their airplanes, and still ensure that WFD will not occur. This approach allows for an implementation strategy that provides flexibility to DAHs in determining the timing of service information development (with FAA approval), while providing operators with certainty regarding the LOV applicable to their airplanes.

On October 17, 2013, we issued AD 2013-22-11, Amendment 39-17643 (78 FR 66254, November 5, 2013), for certain The Boeing Company Model 747-400 and -400D series airplanes. AD 2013-22-11 requires repetitive inspections to detect cracks in the floor panel attachment fastener holes of the Section 41 upper deck floor beam upper chords, and corrective actions if necessary; repetitive post-repair and post-modification inspections, and corrective actions if necessary; repetitive inspections of Section 44 upper deck floor beam upper chords, and corrective actions if necessary; repetitive post-repair and post-modification inspections, and corrective actions if necessary; and replacement of the upper deck floor beam upper chords. AD 2013-22-11 superseded AD 2009-10-06, Amendment 39-15901 (74 FR 22424, May 13, 2009). AD 2013-22-11 resulted from an evaluation by the design approval holder (DAH) indicating that certain upper chords of the upper deck floor beam are subject to widespread fatigue damage (WFD). We issued AD 2013-22-11 to detect and correct fatigue cracking in certain upper chords of the upper deck floor beam, which could become large and cause the floor beams to become severed and result in rapid decompression or reduced controllability of the airplane.

Since we issued AD 2013-22-11, Amendment 39-17643 (78 FR 66254, November 5, 2013), an evaluation by the DAH indicated that certain fastener holes in the upper deck floor beam upper chords in Section 41, that were plugged or re-used during the conversion to a Boeing Converted Freighter, may not have been inspected in accordance with the requirements of AD 2013-22-11, because the locations may be hidden and not recognized as inspection locations. We have determined that, for certain airplanes, it is necessary to add additional repetitive inspections for cracks in the Section 41 upper deck floor beam upper chords and repair if necessary.

We reviewed Boeing Alert Service Bulletin 747-53A2688, Revision 2, dated August 21, 2014. The service information describes procedures for upper deck floor beam upper chord inspection and repair at floor panel attachment fastener holes in section 41 and section 42. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of this NPRM. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-2464.

We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

Although this proposed AD does not explicitly restate the requirements of AD 2013-22-11, Amendment 39-17643 (78 FR 66254, November 5, 2013), this proposed AD would retain all of the requirements of AD 2013-22-11. Those requirements are referenced in the service information identified previously, which, in turn, is referenced in paragraphs (g) through (k) of this proposed AD. This proposed AD would add new actions. This proposed AD would require accomplishing the actions specified in the service information identified previously, except as discussed under “Differences Between this Proposed AD and the Service Information.” Refer to this service information for information on the procedures and compliance times.

In addition, the phrase “corrective actions” might be used in this proposed AD. “Corrective actions” are actions that correct or address any condition found. Corrective actions in an AD could include, for example, repairs.

Boeing Alert Service Bulletin 747-53A2688, Revision 2, dated August 21, 2014, specifies to contact the manufacturer for instructions on how to repair certain conditions, but this proposed AD would require repairing those conditions in one of the following ways:

• In accordance with a method that we approve; or

• Using data that meet the certification basis of the airplane, and that have been approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) whom we have authorized to make those findings.

We estimate that this proposed AD affects 84 airplanes of U.S. registry. We estimate the following costs to comply with this proposed AD:

We have received no definitive data that would enable us to provide a cost estimate for the repair or modification specified in this proposed AD.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska, and

(4) 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.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Background

Generally, under the statutory framework of Subchapter K of the Code, an allocation or distribution between a partnership and a partner for the provision of services can be treated in one of three ways: (1) A distributive share under section 704(b); (2) a guaranteed payment under section 707(c); or (3) as a transaction in which a partner has rendered services to the partnership in its capacity as other than a partner under section 707(a).

Partnership allocations that are determined with regard to partnership income and that are made to a partner for services rendered by the partner in its capacity as a partner are generally treated as distributive shares of partnership income, taxable under the general rules of sections 702, 703, and 704. In some cases, the right to a distributive share may qualify as a profits interest defined in Rev. Proc. 93-27, 1993-2 C.B. 343. Rev. Proc. 93-27, clarified by Rev. Proc. 2001-43, 2001-2 C.B. 191, provides guidance on the treatment of the receipt of a profits interest for services provided to or for the benefit of the partnership.

In 1954, Congress added section 707 to the Code to clarify transactions between a partner and a partnership. Section 707(a) addresses arrangements in which a partner engages with the partnership other than in its capacity as a partner. The legislative history to section 707(a) provides the general rule that a partner who engages in a transaction with the partnership, other than in its capacity as a partner is treated as though it were not a partner. The provision was intended to apply to the sale of property by the partner to the partnership, the purchase of property by the partner from the partnership, and the rendering of services by the partner to the partnership or by the partnership to the partner. H.R. Rep. No. 1337, 83d Cong., 2d Sess. 227 (1954) (House Report); S. Rep. No. 1622, 83d Cong., 2d Sess. 387 (1954) (Senate Report).

Congress simultaneously added section 707(c) to address payments to partners of the partnership acting in their partner capacity. Section 707(c) provides that to the extent determined without regard to the income of the partnership, payment to a partner for services shall be considered as made to a person who is not a partner, but only for purposes of sections 61(a) and 162(a). The Senate Report and the House Report provide that a fixed salary, payable without regard to partnership income, to a partner who renders services to the partnership is a guaranteed payment. The amount of the payment shall be included in the partner's gross income, and shall not be considered a distributive share of income or gain. A partner who is guaranteed a minimum annual amount for its services shall be treated as receiving a fixed payment in that amount. House Report at 227; Senate Report at 387.

In 1956, the Treasury Department and the IRS issued additional guidance under § 1.707-1 relating to a partner not acting in its capacity as a partner under section 707(a) and to guaranteed payments under section 707(c). See TD 6175. However, it remained unclear when a partner's services to the partnership were rendered in a non-partner capacity under section 707(a) rather than in a partner capacity under section 707(c).

In 1975, the Tax Court distinguished sections 707(a) and 707(c) payments in Pratt v. Commissioner, 64 T.C. 204 (1975), aff'd in part, rev'd in part, 550 F.2d 1023 (5th Cir. 1977). In Pratt, the general partners in two limited partnerships formed to purchase, develop, and operate two shopping centers received a fixed percentage of gross rentals in exchange for the performance of managerial services. The Tax Court held that these payments were not guaranteed payments under section 707(c) because they were computed based on a percentage of gross rental income and therefore were not paid without regard to partnership income. The Tax Court further held that section 707(a) did not apply because the general partners performed managerial duties in their partner capacities in accordance with their basic duties under the partnership agreement. On appeal, the Fifth Circuit affirmed the Tax Court's decision. The Fifth Circuit reasoned that Congress enacted section 707(a) to apply to partners who perform services for the partnership that are outside the scope of the partnership's activities. The Court indicated that if the partner performs services that the partnership itself provides, then the compensation to the service provider is merely a rearrangement among the partners of their distributive shares in the partnership income.

In response to the decision in Pratt, the Treasury Department and the IRS issued Rev. Rul. 81-300, 1981-2 C.B. 143 and Rev. Rul. 81-301, 1981-2 C.B. 144 to clarify the treatment of transactions under sections 707(a) and 707(c). As in the Pratt case, Rev. Rul. 81-300 considers a partnership formed to purchase, develop, and operate a shopping center. The partnership agreement required the general partners to contribute their time, managerial abilities, and best efforts to the partnership. In return for these services, the general partners received a fee equal to five percent of the partnership's gross rental income. The ruling concluded that the taxpayers performed managerial services in their capacities as general partners, and characterized the management fees as guaranteed payments under section 707(c). The ruling provides that, although guaranteed payments under section 707(c) frequently involve a fixed amount, they are not limited to fixed amounts. Thus, the ruling concluded that a payment for services determined by reference to an item of gross income will be a guaranteed payment if, on the basis of all facts and circumstances, the payment is compensation rather than a share of profits.

Rev. Rul. 81-301 describes a limited partnership which has two classes of general partners. The first class of general partner (director general partners) had complete control over the management, conduct, and operation of partnership activities. The second class of general partner (adviser general partner) rendered to the partnership services that were substantially the same as those that the adviser general partner rendered to other persons as an independent contractor. The adviser general partner received 10 percent of daily gross income in exchange for the management services it provided to the partnership. Rev. Rul. 81-301 held that the adviser general partner received its gross income allocation in a nonpartner capacity under section 707(a) because the adviser general partner provided similar services to other parties, was subject to removal by the director general partners, was not personally liable to the other partners for any losses, and its management was supervised by the director general partners.

Congress revisited the scope of section 707(a) in 1984, in part to prevent partners from circumventing the capitalization requirements of sections 263 and 709 by structuring payments for services as allocations of partnership income under section 704. H.R. Rep. No. 432 (Pt. 2), 98th Cong., 2d Sess. 1216-21 (1984) (H.R. Rep.); S. Prt. No. 169 (Vol. 1), 98th Cong., 2d Sess. 223-32 (1984) (S. Prt.). Congress specifically addressed the holdings in Rev. Rul. 81-300 and Rev. Rul. 81-301, affirming Rev. Rul. 81-301 and concluding that the payment in Rev. Rul. 81-300 should be recharacterized as a section 707(a) payment. S. Prt. at 230. Accordingly, the Treasury Department and the IRS are obsoleting Rev. Rul. 81-300 and request comments on whether it should be reissued with modified facts.

Congress also added an anti-abuse rule to section 707(a) relating to payments to partner service providers. Section 707(a)(2)(A) provides that if a partner performs services for a partnership and receives a related direct or indirect allocation and distribution, and the performance of services and allocation and distribution, when viewed together, are properly characterized as a transaction occurring between the partnership and a partner acting other than in its capacity as a partner, the transaction will be treated as occurring between the partnership and one who is not a partner under section 707(a)(1). See section 73 of the Tax Reform Act of 1984 (the 1984 Act). The Treasury Department and the IRS have concluded that section 707(a)(2) applies to arrangements in which distributions to the service provider depend on an allocation of an item of income, and section 707(c) applies to amounts whose payments are unrelated to partnership income.

Section 707(a)(2) grants the Secretary broad regulatory authority to identify transactions involving disguised payments for services under section 707(a)(2)(A). This grant of regulatory authority stems from Congress's concern that partnerships and service providers were inappropriately treating payments as allocations and distributions to a partner even when the service provider acted in a capacity other than as a partner. S. Prt. at 225. Congress determined that allocations and distributions that were, in substance, direct payments for services should be treated as a payment of fees rather than as an arrangement for the allocation and distribution of partnership income. H.R. Rep. at 1218; S. Prt. at 225. Congress differentiated these arrangements from situations in which a partner receives an allocation (or increased allocation) for an extended period to reflect its contribution of property or services to the partnership, such that the partner receives the allocation in its capacity as a partner. In balancing these potentially conflicting concerns, Congress anticipated that the regulations would take five factors into account in determining whether a service provider would receive its putative allocation and distribution in its capacity as a partner. H.R. Rep. at 1219-20; S. Prt. at 227.

Congress identified as its first and most important factor whether the payment is subject to significant entrepreneurial risk as to both the amount and fact of payment. In explaining why entrepreneurial risk is the most important factor, Congress provides that “[p]artners extract the profits of the partnership with reference to the business success of the venture, while third parties generally receive payments which are not subject to this risk.” S. Prt. at 227. An arrangement for an allocation and distribution to a service provider which involves limited risk as to amount and payment is treated as a fee under section 707(a)(2)(A). Congress specified examples of allocations that presumptively limit a partner's risk, including (i) capped allocations of income, (ii) allocations for a fixed number of years under which the income that will go to the partner is reasonably certain, (iii) continuing arrangements in which purported allocations and distributions are fixed in amount or reasonably determinable under all facts and circumstances, and (iv) allocations of gross income items.

An arrangement in which an allocation and distribution to a service provider are subject to significant entrepreneurial risk as to amount will generally be recognized as a distributive share, although other factors are also relevant. The legislative history to section 707(a)(2)(A) includes the following examples of factors that could bear on this determination: (i) Whether the partner status of the recipient is transitory; (ii) whether the allocation and distribution that are made to the partner are close in time to the partner's performance of services; (iii) whether the facts and circumstances indicate that the recipient became a partner primarily to obtain tax benefits for itself or the partnership that would not otherwise have been available; and (iv) whether the value of the recipient's interest in general and in continuing partnership profits is small in relation to the allocation in question.

Section 1.707-1 sets forth general rules on the operation of section 707. Section 1.707-2 is titled “Disguised payments for services” and is currently reserved. Sections 1.707-3 through 1.707-7 provide guidance regarding transactions involving disguised sales under section 707(a)(2)(B). These proposed regulations are issued under § 1.707-2 and provide guidance regarding transactions involving disguised payments for services under section 707(a)(2)(A). The effective date of the proposed regulations is provided under § 1.707-9.

Consistent with the language of section 707(a)(2)(A), § 1.707-2(b) of the proposed regulations provides that an arrangement will be treated as a disguised payment for services if (i) a person (service provider), either in a partner capacity or in anticipation of being a partner, performs services (directly or through its delegate) to or for the benefit of the partnership; (ii) there is a related direct or indirect allocation and distribution to the service provider; and (iii) the performance of the services and the allocation and distribution when viewed together, are properly characterized as a transaction occurring between the partnership and a person acting other than in that person's capacity as a partner.

The proposed regulations provide a mechanism for determining whether or not an arrangement is treated as a disguised payment for services under section 707(a)(2)(A). An arrangement that is treated as a disguised payment for services under these proposed regulations will be treated as a payment for services for all purposes of the Code. Thus, the partnership must treat the payments as payments to a non-partner in determining the remaining partners' shares of taxable income or loss. Where appropriate, the partnership must capitalize the payments or otherwise treat them in a manner consistent with the recharacterization.

The consequence of characterizing an arrangement as a payment for services is otherwise beyond the scope of these regulations. For example, the proposed regulations do not address the timing of inclusion by the service provider or the timing of a deduction by the partnership other than to provide that each is taken into account as provided for under applicable law by applying all relevant sections of the Code and all relevant judicial doctrines. Further, if an arrangement is subject to section 707(a), taxpayers should look to relevant authorities to determine the status of the service provider as an independent contractor or employee. See, generally, Rev. Rul. 69-184, 1969-1 C.B. 256. The Treasury Department and the IRS believe that section 707(a)(2)(A) generally should not apply to arrangements that the partnership has reasonably characterized as a guaranteed payment under section 707(c).

Allocations pursuant to an arrangement between a partnership and a service provider to which sections 707(a) and 707(c) do not apply will be treated as a distributive share under section 704(b). Rev. Proc. 93-27 and Rev. Proc. 2001-43 may apply to such an arrangement if the specific requirements of those Revenue Procedures are also satisfied. The Treasury Department and the IRS intend to modify the exceptions set forth in those revenue procedures to include an additional exception for profits interests issued in conjunction with a partner forgoing payment of a substantially fixed amount. This exception is discussed in part IV of the Explanation of Provisions section of this preamble.

These proposed regulations apply to a service provider who purports to be a partner even if applying the regulations causes the service provider to be treated as a person who is not a partner. S. Prt. at 227. Further, the proposed regulations may apply even if their application results in a determination that no partnership exists. The regulations also apply to a special allocation and distribution received in exchange for services by a service provider who receives other allocations and distributions in a partner capacity under section 704(b).

The proposed regulations characterize the nature of an arrangement at the time at which the parties enter into or modify the arrangement. Although section 707(a)(2)(A)(ii) requires both an allocation and a distribution to the service provider, the Treasury Department and the IRS believe that a premise of section 704(b) is that an income allocation correlates with an increased distribution right, justifying the assumption that an arrangement that provides for an income allocation should be treated as also providing for an associated distribution for purposes of applying section 707(a)(2)(A). The Treasury Department and the IRS considered that some arrangements provide for distributions in a later year, and that those later distributions may be subject to independent risk. However, the Treasury Department and the IRS believe that recharacterizing an arrangement retroactively is administratively difficult. Thus, the proposed regulations characterize the nature of an arrangement when the arrangement is entered into (or modified) regardless of when income is allocated and when money or property is distributed. The proposed regulations apply to both one-time transactions and continuing arrangements. S. Prt. at 226.

Whether an arrangement constitutes a payment for services (in whole or in part) depends on all of the facts and circumstances. The proposed regulations include six non-exclusive factors that may indicate that an arrangement constitutes a disguised payment for services. Of these factors, the first five factors generally track the facts and circumstances identified as relevant in the legislative history for purposes of applying section 707(a)(2)(A). The proposed regulations also add a sixth factor not specifically identified by Congress. The first of these six factors, the existence of significant entrepreneurial risk, is accorded more weight than the other factors, and arrangements that lack significant entrepreneurial risk are treated as disguised payments for services. The weight given to each of the other five factors depends on the particular case, and the absence of a particular factor (other than significant entrepreneurial risk) is not necessarily determinative of whether an arrangement is treated as a payment for services.

As described in the Background section of this preamble, Congress indicated that the most important factor in determining whether or not an arrangement constitutes a payment for services is that the allocation and distribution is subject to significant entrepreneurial risk. S. Prt. at 227. Congress noted that partners extract the profits of the partnership based on the business success of the venture, while third parties generally receive payments that are not subject to this risk. Id.

The proposed regulations reflect Congress's view that this factor is most important. Under the proposed regulations, an arrangement that lacks significant entrepreneurial risk constitutes a disguised payment for services. An arrangement in which allocations and distributions to the service provider are subject to significant entrepreneurial risk will generally be recognized as a distributive share but the ultimate determination depends on the totality of the facts and circumstances. The Treasury Department and the IRS request comments on whether allocations to service providers that lack significant entrepreneurial risk could be characterized as distributive shares under section 704(b) in any circumstances.

Whether an arrangement lacks significant entrepreneurial risk is based on the service provider's entrepreneurial risk relative to the overall entrepreneurial risk of the partnership. For example, a service provider who receives a percentage of net profits in each of a partnership that invests in high-quality debt instruments and a partnership that invests in volatile or unproven businesses may have significant entrepreneurial risk with respect to both interests.

Section 1.707-2(c)(1)(i) through (v) of the proposed regulations set forth arrangements that presumptively lack significant entrepreneurial risk. These arrangements are presumed to result in an absence of significant entrepreneurial risk (and therefore, a disguised payment for services) unless other facts and circumstances can establish the presence of significant entrepreneurial risk by clear and convincing evidence. These examples generally describe facts and circumstances in which there is a high likelihood that the service provider will receive an allocation regardless of the overall success of the business operation, including (i) capped allocations of partnership income if the cap would reasonably be expected to apply in most years, (ii) allocations for a fixed number of years under which the service provider's distributive share of income is reasonably certain, (iii) allocations of gross income items, (iv) an allocation (under a formula or otherwise) that is predominantly fixed in amount, is reasonably determinable under all the facts and circumstances, or is designed to assure that sufficient net profits are highly likely to be available to make the allocation to the service provider (for example, if the partnership agreement provides for an allocation of net profits from specific transactions or accounting periods and this allocation does not depend on the overall success of the enterprise), and (v) arrangements in which a service provider either waives its right to receive payment for the future performance of services in a manner that is non-binding or fails to timely notify the partnership and its partners of the waiver and its terms.

With respect to the fourth example, the presence of certain facts, when coupled with a priority allocation to the service provider that is measured over any accounting period of the partnership of 12 months or less, may create opportunities that will lead to a higher likelihood that sufficient net profits will be available to make the allocation. One fact is that the value of partnership assets is not easily ascertainable and the partnership agreement allows the service provider or a related party in connection with a revaluation to control the determination of asset values, including by controlling events that may affect those values (such as timing of announcements that affect the value of the assets). (See Example 3(iv).) Another fact is that the service provider or a related party controls the entities in which the partnership invests, including controlling the timing and amount of distributions by those controlled entities. (These two facts by themselves do not, however, necessarily establish the absence of significant entrepreneurial risk.) By contrast, certain priority allocations that are intended to equalize a service provider's return with priority allocations already allocated to investing partners over the life of the partnership (commonly known as “catch-up allocations”) typically will not fall within the types of allocations covered by the fourth example and will not lack significant entrepreneurial risk, although all of the facts and circumstances are considered in making that determination.

With respect to the fifth example, the Treasury Department and the IRS request suggestions regarding fee waiver requirements that sufficiently bind the waiving service provider and that are administrable by the partnership and its partners.

Congress's emphasis on entrepreneurial risk requires changes to existing regulations under section 707(c). Specifically, Example 2 of § 1.707-1(c) provides that if a partner is entitled to an allocation of the greater of 30 percent of partnership income or a minimum guaranteed amount, and the income allocation exceeds the minimum guaranteed amount, then the entire income allocation is treated as a distributive share under section 704(b). Example 2 also provides that if the income allocation is less than the guaranteed amount, then the partner is treated as receiving a distributive share to the extent of the income allocation and a guaranteed payment to the extent that the minimum guaranteed payment exceeds the income allocation. The treatment of the arrangements in Example 2 is inconsistent with the concept that an allocation must be subject to significant entrepreneurial risk to be treated as a distributive share under section 704(b). Accordingly, the proposed regulations modify Example 2 to provide that the entire minimum amount is treated as a guaranteed payment under section 707(c) regardless of the amount of the income allocation. Rev. Rul. 66-95, 1966-1 C.B. 169, and Rev. Rul. 69-180, 1969-1 C.B. 183, are also inconsistent with these proposed regulations. The Treasury Department and the IRS intend to obsolete Rev. Rul. 66-95 and revise Rev. Rul. 69-180, when these regulations are published in final form.

Section 1.707-2(c)(2) through (6) describes additional factors of secondary importance in determining whether or not an arrangement that gives the appearance of significant entrepreneurial risk constitutes a payment for services. The weight given to each of the other factors depends on the particular case, and the absence of a particular factor is not necessarily determinative of whether an arrangement is treated as a payment for services. Four of these factors, described by Congress in the legislative history to section 707(a)(2)(A), are (i) that the service provider holds, or is expected to hold, a transitory partnership interest or a partnership interest for only a short duration, (ii) that the service provider receives an allocation and distribution in a time frame comparable to the time frame that a non-partner service provider would typically receive payment, (iii) that the service provider became a partner primarily to obtain tax benefits which would not have been available if the services were rendered to the partnership in a third party capacity, and (iv) that the value of the service provider's interest in general and continuing partnership profits is small in relation to the allocation and distribution.

To these four factors, the proposed regulations add a fifth factor. The fifth factor is present if the arrangement provides for different allocations or distributions with respect to different services received, where the services are provided either by a single person or by persons that are related under sections 707(b) or 267(b), and the terms of the differing allocations or distributions are subject to levels of entrepreneurial risk that vary significantly. For example, assume that a partnership receives services from both its general partner and from a management company that is related to the general partner under section 707(b). Both the general partner and the management company receive a share in future partnership net profits in exchange for their services. The general partner is entitled to an allocation of 20 percent of net profits and undertakes an enforceable obligation to repay any amounts distributed pursuant to its interest (reduced by reasonable allowance for tax payments made on the general partner's allocable shares of partnership income and gain) that exceed 20 percent of the overall net amount of partnership profits computed over the partnership's life and it is reasonable to anticipate that the general partner can and will comply fully with this obligation. The proposed regulations refer to this type of obligation and similar obligations, as a “clawback obligation.” In contrast, the management company is entitled to a preferred amount of net income that, once paid, is not subject to a clawback obligation. Because the general partner and the management company are service providers that are related parties under section 707(b), and because the terms of the allocations and distributions to the management company create a significantly lower level of economic risk than the terms for the general partner, the management company's arrangement might properly be treated as a disguised payment for services (depending on all other facts and circumstances, including amount of entrepreneurial risk).

Section 1.707-2(d) of the proposed regulations contains a number of examples illustrating the application of the factors described in § 1.707-2(c). The examples illustrate the application of these regulations to arrangements that contain certain facts and circumstances that the Treasury Department and the IRS believe demonstrate the existence or absence of significant entrepreneurial risk.

Several of the examples consider arrangements in which a partner agrees to forgo fees for services and also receives a share of future partnership income and gains. The examples consider the application of section 707(a)(2)(A) based on the manner in which the service provider (i) forgoes its right to receive fees, and (ii) is entitled to share in future partnership income and gains. In Examples 5 and 6, the service provider forgoes the right to receive fees in a manner that supports the existence of significant entrepreneurial risk by forgoing its right to receive fees before the period begins and by executing a waiver that is binding, irrevocable, and clearly communicated to the other partners. Similarly, the service provider's arrangement in these examples include the following facts and circumstances that taken together support the existence of significant entrepreneurial risk: The allocation to the service provider is determined out of net profits and is neither highly likely to be available nor reasonably determinable based on all facts and circumstances available at the time of the arrangement, and the service provider undertakes a clawback obligation and is reasonably expected to be able to comply with that obligation. The presence of each fact described in these examples is not necessarily required to determine that section 707(a)(2)(A) does not apply to an arrangement. However, the absence of certain facts, such as a failure to measure future profits over at least a 12-month period, may suggest that an arrangement constitutes a fee for services.

The proposed regulations also contain examples that consider arrangements to which section 707(a)(2)(A) applies. Example 1 concludes that an arrangement in which a service provider receives a capped amount of partnership allocations and distributions and the cap is likely to apply provides for a disguised payment for services under section 707(a)(2)(A). In Example 3(iii), a service provider is entitled to a share of future partnership net profits, the partnership can allocate net profits from specific transactions or accounting periods, those allocations do not depend on the long-term future success of the enterprise, and a party that is related to the service provider controls the timing of purchases, sales, and distributions. The example concludes that under these facts, the arrangement lacks significant entrepreneurial risk and provides for a disguised payment for services. Example 4 considers similar facts, but assumes that the partnership's assets are publicly traded and are marked-to-market under section 475(f)(1). Under these facts, the example concludes that the arrangement has significant entrepreneurial risk, and thus that section 707(a)(2)(A) does not apply.

Rev. Proc. 93-27 provides that in certain circumstances if a person receives a profits interest for the provision of services to or for the benefit of a partnership in a partner capacity or in anticipation of becoming a partner, the IRS will not treat the receipt of such interest as a taxable event for the partner or the partnership. The revenue procedure does not apply if (1) the profits interest relates to a substantially certain and predictable stream of income from partnership assets, such as income from high-quality debt securities or a high-quality net lease; (2) within two years of receipt, the partner disposes of the profits interest; or (3) the profits interest is a limited partnership interest in a “publicly traded partnership” within the meaning of section 7704(b).

Rev. Proc. 2001-43 provides that, for purposes of Rev. Proc. 93-27, if a partnership grants a substantially nonvested profits interest in the partnership to a service provider, the service provider will be treated as receiving the interest on the date of its grant, provided that: (i) The partnership and the service provider treat the service provider as the owner of the partnership interest from the date of its grant, and the service provider takes into account the distributive share of partnership income, gain, loss, deduction and credit associated with that interest in computing the service provider's income tax liability for the entire period during which the service provider has the interest; (ii) upon the grant of the interest or at the time that the interest becomes substantially vested, neither the partnership nor any of the partners deducts any amount (as wages, compensation, or otherwise) for the fair market value of the interest; and (iii) all other conditions of Rev. Proc. 93-27 are satisfied.

The Treasury Department and the IRS are aware of transactions in which one party provides services and another party receives a seemingly associated allocation and distribution of partnership income or gain. For example, a management company that provides services to a fund in exchange for a fee may waive that fee, while a party related to the management company receives an interest in future partnership profits the value of which approximates the amount of the waived fee. The Treasury Department and the IRS have determined that Rev. Proc. 93-27 does not apply to such transactions because they would not satisfy the requirement that receipt of an interest in partnership profits be for the provision of services to or for the benefit of the partnership in a partner capacity or in anticipation of being a partner, and because the service provider would effectively have disposed of the partnership interest (through a constructive transfer to the related party) within two years of receipt.

Further, the Treasury Department and the IRS plan to issue a revenue procedure providing an additional exception to the safe harbor in Rev. Proc. 93-27 in conjunction with the publication of these regulations in final form. The additional exception will apply to a profits interest issued in conjunction with a partner forgoing payment of an amount that is substantially fixed (including a substantially fixed amount determined by formula, such as a fee based on a percentage of partner capital commitments) for the performance of services, including a guaranteed payment under section 707(c) or a payment in a non-partner capacity under section 707(a).

In conjunction with the issuance of proposed regulations (REG-105346-03; 70 FR 29675-01; 2005-1 C.B. 1244) relating to the tax treatment of certain transfers of partnership equity in connection with the performance of services, the Treasury Department and the IRS issued Notice 2005-43, 2005-24 I.R.B. 1221. Notice 2005-43 includes a proposed revenue procedure regarding partnership interests transferred in connection with the performance of services. In the event that the proposed revenue procedure provided for in Notice 2005-43 is finalized, it will include the additional exception referenced.

The proposed regulations would be effective on the date the final regulations are published in the Federal Register and would apply to any arrangement entered into or modified on or after the date of publication of the final regulations. In the case of any arrangement entered into or modified before the final regulations are published in the Federal Register, the determination of whether an arrangement is a disguised payment for services under section 707(a)(2)(A) is made on the basis of the statute and the guidance provided regarding that provision in the legislative history of section 707(a)(2)(A). Pending the publication of final regulations, the position of the Treasury Department and the IRS is that the proposed regulations generally reflect Congressional intent as to which arrangements are appropriately treated as disguised payments for services.

The following publication is obsolete as of July 23, 2015:

Rev. Rul. 81-300 (1981-2 C.B. 143).

The following publications will be obsolete as of the date of a Treasury decision adopting these rules as final regulations in the Federal Register:

Rev. Rul. 66-95 (1966-1 C.B. 169); and

Rev. Rul. 69-180 (1969-1 C.B. 183).

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

The Treasury Department and the IRS invite public comment on these proposed regulations. The legislative history supporting section 707(a)(2)(A) indicates that an arrangement that lacks significant entrepreneurial risk is generally treated as a disguised payment for services. The Treasury Department and the IRS have concluded that the presence of significant entrepreneurial risk in an arrangement is necessary for the arrangement to be treated as occurring between a partnership and a partner acting in a partner capacity. Nonetheless, the Treasury Department and the IRS request comments on, and examples of, whether arrangements could exist that should be treated as a distributive share under section 704(b) despite the absence of significant entrepreneurial risk. In addition, the Treasury Department and the IRS request comments on sufficient notification requirements to effectively render a fee waiver binding upon the service provider and the partnership.

The Treasury Department and the IRS have become aware that some partnerships that assert reliance on § 1.704-1(b)(2)(ii)(i) (the economic effect equivalence rule) have expressed uncertainty on the proper treatment of partners who receive an increased right to share in partnership property upon a partnership liquidation without respect to the partnership's net income. These partnerships typically set forth each partner's distribution rights upon a liquidation of the partnership and require the partnership to allocate net income annually in a manner that causes partners' capital accounts to match partnership distribution rights to the extent possible. Such agreements are commonly referred to as “targeted capital account agreements.” Some taxpayers have expressed uncertainty whether a partnership with a targeted capital account agreement must allocate income or a guaranteed payment to a partner who has an increased right to partnership assets determined as if the partnership liquidated at the end of the year even in the event that the partnership recognizes no, or insufficient, net income. The Treasury Department and the IRS generally believe that existing rules under §§ 1.704-1(b)(2)(ii) and 1.707-1(c) address this circumstance by requiring partner capital accounts to reflect the partner's distribution rights as if the partnership liquidated at the end of the taxable year, but request comments on specific issues and examples with respect to which further guidance would be helpful. No inference is intended as to whether and when targeted capital account agreements could satisfy the economic effect equivalence rule.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. All comments will be available for public inspection and copying upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written or electronic comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register.

The principal author of these proposed regulations is Jaclyn M. Goldberg of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). However, other personnel from the Internal Revenue Service and the Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

a. Redesignating paragraph (b) as paragraph (c);

b. Redesignating paragraph (a) as paragraph (b); and

c. Adding new paragraph (a).

The addition reads as follows:

Throughout this document whenever “we,” “us,” or “our” is used, we mean the EPA.

On April 8, 2015, we published in the Federal Register a proposal to establish a FIP for the State of Arkansas addressing regional haze and visibility transport (80 FR 18944). Comments on the proposed rule were required to be received by May 16, 2015. On May 1, 2015 (80 FR 24872), we published in the Federal Register a document that announced the availability in the docket of supplemental modeling performed by us and extended the comment period until July 15, 2015, to allow interested persons additional time to prepare and submit comments.

On July 6, 2015, we received a request from the Domtar Ashdown Mill to extend the comment period for an additional 45 days for the purpose of allowing it to complete modeling work and submit to us information it believes to be essential and related to a significant aspect of the proposed FIP requirements for the Domtar Ashdown Mill. On July 13, 2015, we received a renewed and revised request from the Domtar Ashdown Mill to extend the comment period until August 4, 2015. Given that the comment period closed on July 15, 2015, we are unable to extend the comment period, but will reopen the comment period for 15 days from the date of today's publication. We will also consider any comments submitted to us in the interim period following the close of the public comment period on July 15, 2015, and prior to today's publication. This reopening will allow the Domtar Ashdown Mill and other interested persons additional time to submit comments to us.

In the Rules and Regulations section of this Federal Register, EPA is approving the State's SIP submittal as a direct final rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no adverse comments are received in response to the rule, no further activity is contemplated. If EPA receives adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of the rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment.

For additional information, see the direct final rule which is located in the Rules and Regulations section of this Federal Register.

For further information, please see the information provided in the direct final action, with the same title, that is located in the “Rules and Regulations” section of this Federal Register publication.

Table of Contents I. Introduction II. Overview III. Extending FMVSS No. 224, “Rear Impact Protection,” to SUTs a. 2013 NHTSA/UMTRI Study b. NHTSA's Cost-Benefit Analysis (Overview) IV. Request for Comment on Extension of FMVSS No. 224 V. Amending FMVSS No. 108, “Lamps, Reflective Devices, and Associated Equipment,” To Improve the Conspicuity of SUTs a. 2001 NHTSA Evaluation b. NHTSA's Preliminary Estimate of Cost and Benefits of Requiring Tape on SUTs VI. Request for Comment on Requiring Retroreflective Tape on SUTs VII. Rulemaking Analyses VIII. Submission of Comments

Appendix A to Preamble: Cost-Benefit Evaluation of Requiring Single Unit Trucks (SUTs) To Have CMVSS No. 223 Guards

Appendix B to Preamble: Summary of IIHS's Evaluation of Rear Impact Guards

NHTSA is issuing this ANPRM following a July 10, 2014 grant 1 of a petition for rulemaking from petitioners Ms. Marianne Karth and the Truck Safety Coalition regarding possible amendments to the FMVSSs regulating underride guards. The petitioners request that NHTSA require underride guards on vehicles not currently required by the FMVSSs to have guards, notably, single unit trucks (SUTs),2 and improve the standards' requirements for all guards, including guards now required for heavy trailers and semitrailers.

The July 10, 2014 grant document announced that NHTSA would be pursuing possible rulemaking through two separate actions. The first action would be an ANPRM pertaining to rear impact guards for SUTs and other safety strategies not currently required for those vehicles. Today's ANPRM completes that step, requesting comment on NHTSA's estimated cost and benefits of requiring underride guards and estimated cost and benefits of requiring retroreflective material on the rear and sides of the vehicles to improve the conspicuity of the vehicles to other motorists. In the near future, NHTSA will be issuing the second action, a notice of proposed rulemaking (NPRM) to upgrade the FMVSSs for underride guards for vehicles subject to the current standards.3

NHTSA is undertaking rulemaking to upgrade FMVSS No. 223, “Rear impact guards,” and FMVSS No. 224, “Rear impact protection,” which together establish rear underride protection for vehicles subject to the standards. This ANPRM comprises the first step of a larger agency initiative to upgrade the standards.

Rear underride crashes are those in which the front end of a vehicle impacts the rear of a generally larger vehicle, and slides under the chassis of the rear-impacted vehicle. Underride may occur to some extent in collisions in which a small passenger vehicle crashes into the rear end of a large SUT or trailer because the SUT or trailer bed is higher than the hood of the passenger vehicle. In passenger compartment intrusion (PCI) crashes, the passenger vehicle underrides so far that the rear end of the struck vehicle strikes and enters the passenger compartment. PCI crashes can result in passenger vehicle occupant injuries and fatalities caused by occupant contact with the rear end of the struck vehicle.

FMVSS Nos. 223 and 224 were issued in 1996 to prevent PCI by upgrading then-existing underride guards to make them stronger but energy-absorbing as well. The agency was concerned that overly rigid guards may prevent PCI but could stop the passenger vehicle too suddenly, resulting in excessive occupant compartment deceleration forces which could harm passenger vehicle occupants.

NHTSA established the two-standard approach to underride protection to reduce test burdens on small trailer manufacturers. FMVSS No. 223, an “equipment standard,” specifies performance requirements that rear impact guards must meet to be sold for installation on new trailers and semitrailers. The guard may be tested for compliance while mounted to a test fixture or to a complete trailer. FMVSS No. 224, a “vehicle standard,” requires most new trailers and semitrailers with a gross vehicle weight rating of 4,536 kilograms (kg) (10,000 pounds (lb)) or more to be equipped with a rear impact guard meeting FMVSS No. 223. The vehicle standard requires that the guard be mounted on the trailer or semitrailer in accordance with the instructions provided with the guard by the guard manufacturer. Under this approach, a small manufacturer that produces relatively few trailers can certify its trailers to FMVSS No. 224 without feeling compelled to undertake destructive testing of what could be a substantial portion of its production. The two-standard approach provides a practicable and reasonable means of meeting the safety need served by an underride guard requirement.

FMVSS No. 224 only applies to trailers and semitrailers with GVWR greater than 4,536 kg (10,000 lb).4 The agency excluded SUTs from FMVSS No. 224 requirements because it was concerned that the variety, complexity, and relatively lower weight and chassis strength of many SUTs would require guards that are substantially more costly than the guards for trailers. Additionally, field data indicated that the rear end fatality problem was more prominent in trailers than in SUTs. While SUTs represented 72 percent of the registered heavy vehicle fleet, they only represented 27 percent of the rear end fatalities.

However, there are Federal requirements now in place ensuring that SUTs provide some degree of rear impact protection. Federal Motor Carrier Safety Regulation (FMCSR) No. 393.86(b), “Rear impact guards and rear end protection,” (49 CFR 393.86(b), “FMCSR 393.86(b)”) has rear impact protection requirements for certain SUTs utilized in interstate commerce.5 The regulation requires that the horizontal member of the rear impact guard be located such that its bottom surface is not more than 760 millimeters (mm) (30 inches) vertically above ground level (ground clearance), its rear surface is not more than 610 mm (24 inches) forward of the rear extremity of the vehicle, and that it laterally extends to within 460 mm (18 inches) of each side of the vehicle. The regulation requires the guard to be “substantially constructed and attached by means of bolts, welding, or other comparable means.” FMCSA's regulation also ensures that carriers maintain the mandated device throughout the life of the vehicle.

NHTSA's interest in this rulemaking originated from the findings of a 2009 NHTSA study 6 to evaluate why fatalities were still occurring in frontal crashes despite high rates of seat belt use and the presence of air bags and other advanced safety features. NHTSA reviewed all cases of frontal crash fatalities to belted drivers or right-front passengers in model year (MY) 2000 or newer vehicles in the Crashworthiness Data System of the National Automotive Sampling System (NASS-CDS) through calendar year 2007. Among the 122 fatalities examined in this review, 49 (40 percent) were in exceedingly severe crashes that were not survivable, 29 (24 percent) were in oblique or corner impact crashes where there was low engagement of the striking vehicle's structural members (a factor which would have resulted in the striking vehicle absorbing more of the crash energy), and 17 (14 percent) were underrides into SUTs and trailers (14 were rear underride and 3 were side underride).7 In survivable frontal crashes of newer vehicle models resulting in fatalities to belted vehicle occupants, rear underrides into large SUTs and trailers were the second highest cause of fatality.

In 2010, NHTSA analyzed several data sources to determine the effectiveness of trailer rear impact guards compliant with FMVSS Nos. 223 and 224 in preventing fatalities and serious injuries.8 While the agency's analysis of the Fatality Analysis Reporting System (FARS) could not establish a nationwide downward trend in fatalities to passenger vehicle occupants in impacts with the rear of trailers subsequent to the implementation of FMVSS Nos. 223 and 224, supplemental data collected in Florida and North Carolina showed decreases in fatalities and serious injuries. However, the observed decrease in fatalities in these two States was not statistically significant, possibly due to small sample sizes of the data.

Following these studies, NHTSA undertook research to examine the agency's underride protection requirements, highlighting this program as a significant one in the “NHTSA Vehicle Safety and Fuel Economy Rulemaking and Research Priority Plan 2011-2013 (March 2011).”

One of the resulting research projects began in 2009, as NHTSA initiated research with the University of Michigan Transportation Research Institute (UMTRI) to gather data on the rear geometry of SUTs and trailers, the configuration of rear impact guards on SUTs and trailers, and the incidence and extent of underride and fatalities in rear impacts with SUTs and trailers. UMTRI collected the supplemental information as part of its Trucks Involved in Fatal Accidents (TIFA) survey for the years 2008 and 2009.9 10 These data enabled NHTSA to obtain national estimates of rear impact crashes into heavy vehicles that resulted in PCI. Details of the UMTRI study, completed in 2013, are discussed in detail below in the next section of this preamble. The findings with regard to SUTs particularly pertain to this ANPRM.

More data were obtained in 2011 from the Insurance Institute for Highway Safety (IIHS), which had petitioned NHTSA to upgrade FMVSS No. 223 and FMVSS No. 224 to improve the strength and energy-absorbing capabilities of rear impact guards. IIHS provided analyses of data from DOT's Large Truck Crash Causation Study (LTCCS) and from a series of 56 kilometers per hour (km/h) (35 miles per hour (mph)) impact speed passenger car-to-trailer rear impact crash tests IIHS conducted. (We provide a discussion of the IIHS tests in Appendix B to this preamble.) 11 IIHS believes that trailers with rear impact guards compliant with the Canada Motor Vehicle Safety Standard (CMVSS) for underride guards (CMVSS No. 223) were significantly superior to FMVSS No. 224 in mitigating PCI of the striking passenger car. The information submitted by IIHS is particularly pertinent to the upcoming NPRM which will propose upgrades to FMVSS No. 223 and 224.

In this ANPRM, the agency requests comments that would help NHTSA assess and make judgments on the benefits, costs and other impacts of strategies that increase the crash protection to occupants of vehicles crashing into the rear of SUTs and/or that increase the likelihood of avoiding a crash into SUTs. Strategies discussed in this ANPRM are possible amendments to the FMVSSs to: (a) Expand FMVSS Nos. 223 and 224, to require upgraded guards on SUTs; and (b) amend FMVSS No. 108, “Lamps, reflective devices, and associated equipment,” to require the type of retroreflective material on the rear and sides of SUTs that is now required to be placed on the rear and sides of trailers to improve the conspicuity of the vehicles to other motorists.

In 2009, the agency initiated an in-depth field analysis to obtain a greater understanding of the characteristics of underride events and factors contributing to such crashes. NHTSA sought this information to assess the need for and impacts of possible amendments to the FMVSSs to reduce severe passenger vehicle underride in truck/trailer rear end impacts.

NHTSA published the first phase of the field analysis in 2012,12 and published the final report in March 2013. The reports analyze 2008-2009 data collected as a supplement to UMTRI's TIFA survey.13 The TIFA survey contains data for all the trucks with a GVWR greater than 4,536 kg (10,000 lb) (“medium and heavy trucks”) that were involved in fatal traffic crashes in the 50 U.S. States and the District of Columbia. TIFA data contains additional detail beyond the information contained in NHTSA's Fatality Analysis Reporting System (FARS).

NHTSA contracted UMTRI to collect supplemental data for 2008 and 2009 as part of the TIFA survey. The supplemental data included the rear geometry of the SUTs and trailers; type of equipment at the rear of the trailer, if any; whether a rear impact guard was present; the type of rear impact guard; and, the standards the guard was manufactured to meet. For SUTs and trailers involved in fatal rear impact crashes, additional information was collected on: the extent of underride; damage to the rear impact guard; estimated impact speeds; and whether the collision was offset or had fully engaged the guard.

NHTSA derived average annual estimates from the 2008 and 2009 TIFA data files and the supplemental information collected in the 2013 UMTRI study. The agency's review of these files found that there are 3,762 SUTs and trailers involved in fatal accidents annually, among which trailers accounted for 2521 (67 percent), SUTs for 1080 (29 percent), tractor alone for 66 (1.5 percent), and unknown for the remaining 95 (2.5 percent).14 About 489 SUTs and trailers are struck in the rear in fatal crashes annually, constituting about 13 percent of all SUTs and trailers in fatal crashes. Among rear impacted SUTs and trailers in fatal crashes, 331 (68 percent) are trailers, 151 (31 percent) are SUTs, and 7 (1 percent) are tractors alone.

UMTRI evaluated 2008 and 2009 TIFA data regarding the rear geometry of the trailers and SUTs involved in all fatal crashes (not just those rear-impacted) to assess whether the vehicle had to have a guard under FMVSS No. 224 (regarding trailers) or the Federal Motor Carrier Safety Administration's (FMCSA's) Federal Motor Carrier Safety Regulation (FMCSR) No. 393.86(b) (49 CFR 393.86(b), “FMCSR 393.86(b)”) (regarding SUTs).15 Based on this evaluation, UMTRI estimated that 38 percent of the SUTs involved in fatal crashes were required to have rear impact guards (based on the truck rear geometry according to FMCSR 393.86(b)) (Table 1). However, only 18 percent of SUTs were equipped with rear impact guards (Table 1). It is likely that the remaining 20 percent of the SUTs that were configured such that they would be subject to FMCSR 393.86(b) based on vehicle design, but that did not have a guard, were not used in interstate commerce. Among the 62 percent of SUTs that were excluded from installing rear impact guards by the FMCSR, 27 percent were wheels back SUTs,16 9 percent were low chassis SUTs,17 2 percent were wheels back and low chassis SUTs, and 16 percent had equipment in the rear that interfered with rear impact guard installation (see Table 1). UMTRI also estimated that 65 percent of trailers had to have a rear impact guard per FMVSS No. 224 and the remaining were excluded because of their rear geometry, equipment in the rear, or type of cargo or operation.

Since the data presented in Table 1 takes into consideration all SUTs involved in all types of fatal crashes in 2008 and 2009 (total of 2,159 SUTs), we assume that the percentage of SUTs with and without rear impact guards in Table 1 is representative of that in the SUT fleet.

Among the types of vehicles that impacted the rear of trailers and SUTs, 73 percent were light vehicles,18 18 percent were large trucks, 7.4 percent were motorcycles, and 1.7 percent were other/unknown vehicle types. Since we do not expect trucks and buses to underride other trucks in rear impacts, the data presented henceforth only apply to light vehicles impacting the rear of trailers and SUTs.

In the UMTRI study of 2008 and 2009 TIFA data, survey respondents estimated the amount of underride in terms of the amount of the striking vehicle that went under the rear of the struck vehicle and/or the extent of deformation or intrusion of the vehicle. The categories were “no underride,” “less than halfway up the hood,” “more than halfway but short of the base of the windshield,” and “at or beyond the base of the windshield.” When the extent of underride is “at or beyond the base of the windshield,” there is PCI that could result in serious injury to occupants in the vehicle. Rear impacts into heavy vehicles could result in some level of underride without PCI when the rear impact guard prevents the impacting vehicle from traveling too far under the heavy vehicle during impact. Such impacts into the rear of heavy vehicles without PCI may not pose additional crash risk to light vehicle occupants than that in crashes with another light vehicle at similar crash speeds.

The data show that about 319 light vehicle fatal crashes into the rear of trailers and trucks occur annually. UMTRI determined that about 36 percent (121) of light vehicle impacts into the rear of trailers and trucks resulted in PCI. Among fatal light vehicle impacts, the frequency of PCI was greatest for passenger cars and sport utility vehicles (SUVs) (40 and 41.5 percent, respectively) and lowest for large vans and large pickups (25 and 26 percent respectively), as shown in Figure 1 below. Since the extent of underride was also determined by the extent of deformation and intrusion of the vehicle, it was observed in a number of TIFA cases that large vans and large pickups did not actually underride the truck or trailer but sustained PCI because of the high speed of the crash and/or because of the very short front end of the vehicle.

Fatal light vehicle crashes into the rear of trucks and trailers were further examined by the type of truck and trailer struck and whether a guard was required (according to FMCSR 393.86(b) for SUTs and FMVSS No. 224 for trailers) (Figure 2 and Figure 3).

Among the 319 fatal light vehicle crashes into the rear of SUTs and trailers, 79 (25 percent) are into SUTs without any guards, 23 (7 percent) are into SUTs with guards, 115 (36 percent) are into trailers with guards, and 102 (32 percent) are into excluded trailers without guards and other truck/trailer type. (Figure 2).

Among these annual light vehicle fatal crashes, 121 result in PCI, among which 23 (19 percent) occur in impacts with SUTs without guards, 8 (7 percent) in impacts with SUTs with guards, 62 (51 percent) in impacts with trailers with guards, and 28 (23 percent) with excluded trailers and other truck/trailer type (Figure 3).20

It is noteworthy that trailers with guards represent 36 percent of annual light vehicle fatal rear impacts but represent 51 percent of annual light vehicle fatal rear impacts with PCI. On the other hand, SUTs (with and without guards) represent 32 percent of annual light vehicle fatal rear impacts but represent 26 percent of annual light vehicle fatal rear impacts with PCI. The field data suggest that there are more light vehicle fatal impacts into the rear of trailers than SUTs and a higher percentage of fatal light vehicle impacts into the rear of trailers involve PCI than those into the rear of SUTs.

Using information derived by reviewing police crash reports,21 UMTRI estimated the relative velocity of fatal light vehicle crashes into the rear of SUTs and trailers. Relative velocity was computed as the resultant of the difference in the truck velocity and the striking vehicle velocity and could only be estimated for about 30 percent of light vehicle fatal crashes into the rear of trailers and SUTs. Most of the crashes (with known relative velocity) were at a very high relative velocity and many were not survivable. The mean relative velocity at impact into the rear of trailers and SUTs was estimated at 44 mph. Among fatal light vehicle impacts into the rear of SUTs that resulted in PCI, 70 percent were with relative velocity greater than 56 km/h (35 mph). Among the remaining 30 percent fatal light vehicle impacts into the rear of SUTs, 3 percent of the SUTs had rear impact guards, 10 percent of the SUTs could be required to have a guard based on rear geometry but did not have a guard, 3 percent were excluded from requiring a guard (wheels back, low chassis vehicles), and 14 percent had equipment in the rear precluding rear impact guards.

There are about 362 light vehicle occupant fatalities annually due to impacts into the rear of SUTs and trailers.22 Of these fatalities, 104 (29 percent) are in impacts with SUTs, 125 (35 percent) are in impacts with trailers with guards, and 133 (37 percent) are in impacts with excluded trailers and other truck/trailer type (Figure 5).

Among the 104 light vehicle occupant fatalities resulting from impacts with the rear of SUTs, 80 occurred in impacts with SUTs without rear impact guards while the remaining 24 were in impacts to SUTs with guards. PCI was associated with 33 annual light vehicle occupant fatalities resulting from impacts into the rear of SUTs; 25 of these fatalities were in impacts with SUTs without rear impact guards and 8 with SUTs with guards (see Figure 5).

Among light vehicle occupant fatalities in impacts into the rear of SUTs, approximately 70 percent were in vehicles with no underride, underride less than halfway or underride up to the hood without PCI. The agency found that in a number of TIFA cases reviewed, fatalities occurred due to occupants being unrestrained, other occupant characteristics (e.g. age), and other crash circumstances. Additionally, as shown in Figure 4, only 30 percent of light vehicle impacts with PCI into the rear of SUTs had a relative velocity less than or equal to 56 km/h (35 mph). Since currently manufactured light vehicles are subject to FMVSS No. 208 requirements that ensure adequate occupant crash protection to restrained occupants in a 56 km/h (35 mph) rigid barrier frontal crash test, some light vehicle occupant fatalities in impacts into the rear of SUTs and trailers at speeds less than or equal to 56 km/h (35 mph) that resulted in PCI may be preventable if intrusion into the passenger compartment were mitigated.24

As part of its evaluation of whether an underride guard requirement should apply to SUTs, NHTSA conducted a cost-benefit analysis of equipping SUTs with rear impacts guards. The analysis is set forth in Appendix A of this preamble, and an overview is provided below. We are requesting comments on the analysis.

FMVSS Nos. 223 and 224 requirements were developed to prevent PCI in 48 km/h (30 mph) impacts of compact and subcompact passenger cars into the rear of trailers. CMVSS No. 223 performance requirements were developed to prevent PCI in 56 km/h (35 mph) impacts. The crash tests conducted by IIHS (see Appendix B) indicated the improved performance of rear impact guards designed to CMVSS No. 223 compared to guards designed to FMVSS No. 223. The rear impact guard geometric specifications in CMVSS No. 223 cover a larger portion of the truck rear extremity than those specified in FMCSR 393.86(b). Additionally, there are no strength specifications for rear impact guards in FMCSR 393.86(b). Since a high percentage of crashes into the rear of SUTs are at high speeds, it is unlikely that equipping all SUTs with FMCSR 393.86(b) would sufficiently mitigate light vehicle occupant fatalities in PCI crashes into the rear of SUTs. For these reasons, NHTSA estimated the cost and benefits of requiring SUTs to comply with the requirements of CMVSS No. 223.

We estimate 25 that currently 18 percent of SUTs in the fleet are equipped with rear impact guards meeting the FMCSR regulation, 49 CFR 393.86(b). A requirement for SUTs to comply with CMVSS No. 223, though, would require 59 percent of newly manufactured SUTs to be equipped with CMVSS No. 223 rear impact guards due to that regulation's greater coverage.26 The estimated incremental minimum to average cost of equipping new covered SUTs with CMVSS No. 223 guards ranges from $307 to $453 per vehicle (See Table A-7 in Appendix A for details). The total annual fleet cost of equipping new SUTs with CMVSS No. 223 guards ranges from $105 million to $155 million. The estimate of minimum to average additional weight of equipping SUTs with CMVSS No. 223 guards is 76.8 kg (169 lb) to 95.5 kg (210 lb) per vehicle. The estimate of minimum to average additional fuel cost during the lifetime of the vehicle due to the additional weight of the guard ranges from $924.7 to $1,505.3. Therefore, the total minimum to average annual cost (including fuel costs) of requiring SUTs to have CMVSS No. 223 rear impact guards is estimated to be $421 million to $669 million.

For estimating the benefits of requiring SUTs to have CMVSS No. 223 guards, NHTSA estimated the annual number of fatalities and injuries in light vehicle rear impact crashes with PCI into the rear of SUTs. Non-PCI crashes were not considered as part of the target population for estimating benefits. This is because the IIHS test data (see Appendix B to this preamble) show that when PCI was prevented, the dummy injury measures were significantly below the injury assessment reference values specified in FMVSS No. 208. In non-PCI crashes into the rear of SUTs and trailers, the IIHS test data indicated that the passenger vehicle's restraint system would mitigate injury.

Although CMVSS No. 223's requirements are intended to mitigate PCI in light vehicle rear impacts at speeds less than or equal to 56 km/h (35 mph),27 we note that CMVSS No. 223 guards may not be able to mitigate all fatalities in such crashes because some of the crashes may be low overlap (30 percent or less),28 and because some fatalities are not as a result of PCI but are due to other circumstances (e.g. unrestrained status of occupants, elderly and other vulnerable occupants). In those circumstances, we believe that a rear impact guard would not prevent the fatality.29

For the purpose of this analysis, NHTSA assumed that CMVSS No. 223 compliant guards on SUTs would be able to prevent about 85 percent of light vehicle occupant fatalities with PCI in impacts into the rear of SUTs with crash speeds less or equal to 56 km/h.30 However, since only 30 percent of the target population of light vehicle crashes with PCI into the rear of SUTs are at speeds less than or equal to 56 km/h, CMVSS No. 223 compliant guards would only be effective for a portion of the target population. Therefore, NHTSA estimated an overall effectiveness of 25 percent (approximately 30% x 85%) for CMVSS No. 223 rear impact guards in preventing fatalities in light vehicle crashes into the rear of SUTs with PCI.31 We believe this is an upper estimate of CMVSS No. 223 guard effectiveness in preventing fatalities, because (1) there will be real-world crashes of light passenger vehicles into the rear of SUTs at low overlap (30 percent or less) for which IIHS test data indicates that the CMVSS No. 223 compliant guards would not be able to prevent PCI, (2) some restrained occupants of light passenger vehicles would be killed even if PCI were prevented due to other circumstances (e.g. elderly and other vulnerable occupants), and (3) our review of 2009 TIFA data files of light vehicle impacts with PCI into the rear of SUTs indicated that only 55 percent of the fatally injured occupants were restrained.32

The real world data indicated that there are annually 31 light vehicle crashes with PCI into the rear of SUTs resulting in 33 light vehicle occupant fatalities. Since only 59 percent of SUTs would require rear impact guards, the target population is reduced to approximately 20 (=33 x 59%). Applying 25 percent effectiveness of CMVSS compliant guards, the upper bound on lives saved by CMVSS No. 223 compliant rear impact guards on SUTs is about 5.

In our current analysis, we also assumed 20 percent effectiveness of CMVSS No. 223 compliant guards in preventing nonfatal injuries in light vehicle crashes with PCI into the rear of SUTs. CMVSS No. 223 guards are effective in mitigating PCI in light vehicle impacts into the rear of SUTs at speeds less or equal to 56 km/h (35 mph), which is about 30 percent of all such impacts with PCI.33 Additionally, we expect the effectiveness of rear impact guards for preventing injuries to be lower than that for fatalities since occupant injuries could occur from interior vehicle contacts even if PCI were prevented. The 20 percent effectiveness estimate takes into consideration that some injuries are due to factors such as the unrestrained status of the occupants. An improved rear impact guard would not prevent such injuries.

The agency analyzed the National Accident Sampling System—Crashworthiness Data System (NASS-CDS) data files for the year 1999-2012 and estimated a total of 151—291 MAIS 34 1 to 5 severity nonfatal injuries to light vehicle occupants in PCI crashes into the rear of SUTs. Applying a 20 percent effectiveness of rear impact guards in preventing nonfatal injuries, we estimate that 30—58 nonfatal injuries would be prevented annually.

The benefits analysis in Appendix A estimates the equivalent lives saved (ELS) from a requirement for SUTs to have CMVSS No. 223 guards. The ELS are approximately 5.7 to 6.3 lives. The cost per ELS (3 and 7 percent discounted) is $106.7 million to $164.7 million, for each equivalent life saved. A summary of the analysis estimating incremental costs using low and average estimates, benefits using average and high estimates, and cost per equivalent lives saved is shown below in Table 2.

Guidance from the U.S. Department of Transportation 35 identifies $9.1 million as the value of a statistical life (VSL) to be used for Department of Transportation analyses assessing the benefits of preventing fatalities for the base year of 2012. Per this guidance, VSL in 2014 is $9.2 million. While not directly comparable, the preliminary estimates for rear impact guards on SUTs (minimum of $106.7 million per equivalent lives saved) is a strong indicator that these systems will not be cost effective (current VSL $9.2 million).

NHTSA further considered whether excluding Class 3 SUTs (GVWR 10,000 lb to 14,000 lb) from a requirement to have CMVSS No. 223 guards would make the requirement more cost effective (see Table 3, below). (An exclusion of Class 3 SUTs may also be based on a practical matter, as the vehicles may be too small to withstand the loads imparted from impacts to CMVSS No. 223 guards.) NHTSA analyzed the cost and benefits of a requirement that would require only Class 4-8 SUTs to have CMVSS No. 223 guards. Class 4-8 SUTs comprise approximately 60 percent of annual sales of SUTs. The total annual cost of CMVSS No. 223 compliant rear impact guards on Class 4 -8 SUTs is estimated to be $218 million to $348.5 million. The analysis was conducted with a conservative assumption of no reduction in benefits by not requiring Class 3 SUTs to have the rear impact guards. Even with such a conservative assumption, the cost per ELS (3 and 7 percent discounted) was $55.2 million to $85.9 million, respectively.

As in the analysis for Class 3-8 SUTs shown in Table 2, the preliminary estimates for rear impact guards on Class 4-8 SUTs (minimum of $55.2 million per equivalent lives saved) is a strong indicator that these systems will not be cost effective (current VSL $9.2 million).

NHTSA requests comments that would help the agency assess and make judgments on the benefits, costs and other impacts of requiring SUTs to have underride guards. In providing a comment on a particular matter or in responding to a particular question, interested persons are asked to provide any relevant factual information to support their opinions, including, but not limited to, statistical and cost data and the source of such information. For easy reference, the questions below are numbered consecutively.

1. The injury target population was obtained from weighted NASS-CDS data files (1999-2012). Analysis was conducted with not only the weighted average estimates but also with the upper bound of the injury estimates. We seek comment on the estimated injury target population resulting from underride crashes with PCI into the rear of SUTs.

2. The agency assumed 25 percent effectiveness of CMVSS No. 223 rear impact guards in preventing fatalities in light vehicle crash with PCI into the rear of SUTs. We seek comment on this effectiveness estimate.

3. The agency assumed 20 percent effectiveness of CMVSS No. 223 guards in preventing injuries in light vehicle crashes with PCI into the rear of SUTs. We seek comment on this effectiveness estimate.

4. In estimating benefits, the agency assumed that rear impact guards would mitigate fatalities and injuries in light vehicle impacts with PCI into the rear of SUTs at impact speeds up to 56 km/h (35 mph), since the requirements of CMVSS No. 223 are intended to prevent PCI in impacts with speeds up to 56 km/h (35 mph). We recognize, however, that benefits may accrue from underride crashes at speeds higher than 56 km/h (35 mph), if, e.g., a vehicle's guard exceeded the minimum performance requirements of the FMVSS. NHTSA requests information that would assist the agency in quantifying the possible benefits of CMVSS No. 223 rear impact guards in crashes with speeds higher than 56 km/h (35 mph).

5. The percentage of SUTs requiring rear impact guards was determined by obtaining details of the rear extremity of SUTs involved in fatal crashes in the 2008-2009 TIFA data files. We seek any other information to corroborate these estimates.

6. The cost-benefit analysis showed that requiring CMVSS No. 223 guards on SUTs would cost more than $100 million per equivalent life saved. The following information was not included in the analysis. NHTSA seeks the information so that the analysis is more complete.

a. The additional cost to install CMVSS No. 223 compliant rear impact guards did not include the cost of strengthening the rear beams, frame rails, and floor of the vehicle. We seek information on the changes to SUTs to accommodate the CMVSS No. 223 rear impact guard and the additional costs resulting from these changes.

b. The additional weight to install CMVSS No. 223 compliant rear impact guards did not include the weight of additional material needed to strengthen the rear beams, frame rails, and floor of the vehicle. We seek information on the changes to SUTs to accommodate the CMVSS No. 223 rear impact guard and the additional weight resulting from these changes.

c. The cost-benefit analysis did not take into consideration the reduction in payload resulting from increased weight of the SUT due to installation of a CMVSS No. 223 guard. We seek comment on what type of SUT operations are affected by the increased weight and the associated cost impacts.

d. The cost-benefit analysis did not take into consideration the aerodynamic effects of rear impact guards on fuel consumption due to paucity of information on this matter. We seek comment on whether aerodynamic effects due to the presence of a rear impact guard would increase or decrease fuel consumption and by how much.

7. The fuel economy for SUTs was obtained from a 2012 market report by Oakridge National Laboratories. However, this report did not distinguish the miles per gallon for different classes of SUTs. We seek more refined information on the fuel economy for different class SUTs so as to refine the cost-benefit analysis.

8. SUTs with equipment in the rear (in the zone where the guard would be located) were excluded from the cost-benefit analysis of a requirement for the guard. We seek comment on whether rear impact guards can be accommodated in such SUTs.

9. We seek information that would help us determine the feasibility, benefits, and costs associated with improving the performance of CMVSS No. 223 guards in low overlap crashes. “Overlap” refers to the portion of the striking passenger vehicle's width overlapping the underride guard.

NHTSA seeks to improve safety not just when there is a crash but by reducing the likelihood of a crash occurring in the first place. This is especially important in preventing the types of fatal crashes that NHTSA is addressing in this ANPRM, where most of the fatalities occur in crashes that are either at high speeds that render the crash unsurvivable, or, conversely, involve comparatively minor to no underride but are nevertheless fatal because of other factors, most prominently the presence of unbelted occupants. One strategy relevant to the crashes addressed in today's ANPRM, NHTSA has for years mandated that heavy trailers and truck tractors be equipped with red-and-white tape (“retroreflective tape,” “conspicuity tape,” or “tape”) under FMVSS No. 108. In this ANPRM, the agency requests comments that would help NHTSA assess and make judgments on the benefits, costs and other impacts of amending FMVSS No. 108 to require retroreflective material on the rear and sides of SUTs to improve the conspicuity of the vehicles to other motorists. The retroreflective material would be the same as tape now placed on the rear and sides of heavy trailers 36 and the rear of truck tractors pursuant to FMVSS No. 108 (S8.2.3). This ANPRM is consistent with the National Transportation Safety Board recommendation (H-13-017) 37 that the agency amend FMVSS No. 108 to include a conspicuity tape requirement for SUTs with a GVWR greater than 10,000 lb.

The purpose of retroreflective tape is to increase the visibility of heavy trailers and truck tractors to other motorists, especially in the dark. At those times, the tape brightly reflects other motorists' headlights and warns them that they are closing on a large vehicle. In the dark, without the tape, many trailers and truck tractors do not become visible to other road users until motorists are dangerously close. The alternating red-and-white pattern identifies the vehicle as a large vehicle and at the same time helps other road users gauge their distance and rate of approach.

FMVSS No. 108's conspicuity requirement for heavy trailers applies to vehicles manufactured on or after December 1, 1993. Two types of material are permitted by the standard: (a) retroreflective sheeting, or tape; and (b) reflex reflectors. A combination of the two types is also permissible. Retroreflective tape has been used almost exclusively for meeting the standard.38 Essentially, the retroreflective tape must outline the bottom of the sides of the trailers and the top corners, bottom and underride guard of the rear of the trailers. When the agency issued the final rule adopting the requirement, NHTSA estimated the requirement would be 15 percent effective in preventing nighttime fatalities and injuries resulting from crashes to the sides and rear of trailers.

In 1996, NHTSA amended FMVSS No. 108 to extend the conspicuity requirements to truck tractors manufactured on or after July 1, 1997.39 Because truck tractors riding bobtail (without pulling a trailer) have poorer rear-end conspicuity compared to trailers, NHTSA used a 15 to 25 percent range to estimate fatality and injury-prevention effectiveness for truck tractors to reflect a potentially greater effectiveness of a conspicuity countermeasure on the vehicles compared to trailers.

In the first part of this section, the agency discusses a 2001 NHTSA evaluation that found conspicuity tape to be “quite effective” in reducing side and rear impacts by other vehicles into heavy trailers in dark conditions. In the second part, based on the findings of effectiveness of the 2001 evaluation and certain assumptions, NHTSA provides preliminary estimates of the cost and benefits of requiring new SUTs to have conspicuity tape. In the third part, the agency requests comments on the data collection techniques used in the 2001 evaluation, NHTSA's assumptions in applying the findings of that evaluation to SUTs, and other issues.

In 2001, NHTSA issued an evaluation of the effectiveness of retroreflective tape in reducing side and rear impacts by other vehicles into heavy trailers during dark conditions. (“The Effectiveness of Retroreflective Tape on Heavy Trailers,” March 2001, NHTSA Technical Report, DOT HS 809 222.40 ) Because the crash data at the time (FARS, NASS, or State files) did not identify whether crash-involved heavy trailers had retroreflective tape, NHTSA entered into arrangements with the Florida Highway Patrol and the Pennsylvania State Police to collect data for an analysis. For a two-year period, each time these State agencies investigated a crash involving a tractor-trailer combination 41 and filed a crash report, they also filled out an “Investigator's Supplementary Truck-Tractor Trailer Accident Report” on every trailer in the crash.

The Florida Highway Patrol collected 6,095 crash cases from June 1, 1997, through May 31, 1999. The Pennsylvania State Police collected 4,864 crash cases from December 1, 1997, through November 30, 1999. NHTSA's analysis estimated the reduction of side and rear impacts by other vehicles into conspicuity tape-equipped trailers in dark conditions, relative to the number that would have been expected if the trailers had not been equipped. The analysis tabulated and statistically analyzed crash involvements of tractor-trailers by three critical parameters: (1) whether the trailer was tape-equipped; (2) the light condition, i.e., dark (comprising “dark-not-lighted,” “dark-lighted,” “dawn” and “dusk”) versus daylight; and (3) relevant versus control-group crash involvements.

Given that the tape can help the other driver see and possibly avoid hitting the trailer, NHTSA determined that relevant crash involvements were those in which another vehicle crashed into the side or rear of a tractor-trailer combination. The control group consisted of single-vehicle crashes of tractor-trailers (where visibility of the tractor-trailer to other road users is not an issue at all) and impacts of the front of the tractor into other vehicles (where conspicuity of the side and rear of the trailer is also not an issue).

The principal conclusion of the study was that retroreflective tape is quite effective, and that it significantly reduces side and rear impacts into heavy trailers in the dark.

Other findings and conclusions are as follows:

• Annual benefits: When all heavy trailers have conspicuity tape, the tape will be saving an estimated 191 to 350 lives per year, preventing approximately 3,100 to 5,000 injuries per year, and preventing approximately 7,800 crashes per year, relative to a hypothetical fleet in which none of the trailers have the tape.

• Crash reductions by lighting conditions: In dark conditions (combining the subsets of “dark-not-lighted,” “dark-lighted,” “dawn,” and “dusk”), the tape reduces side and rear impacts into heavy trailers by 29 percent. The reduction is statistically significant (confidence bounds: 19 to 39 percent).

• The tape is by far the most effective in dark-not-lighted conditions. The tape reduces side and rear impacts into heavy trailers by 41 percent. The reduction is statistically significant (confidence bounds: 31 to 51 percent).

• In dark-lighted, dawn, and dusk conditions, the tape did not significantly reduce crashes. The tape also did not significantly reduce crashes during daylight.

The following effectiveness estimates are the percentage reductions of various subgroups of the side and rear impacts into heavy trailers in dark conditions. As stated above, tape reduces these crash involvements by 29 percent, overall.

• Conspicuity tape is especially effective in preventing the more severe crashes, specifically, injury crashes. Impacts resulting in fatal or nonfatal injuries to at least one driver are reduced by 44 percent.

• The tape is more effective when the driver of the impacting vehicle is under 50. The crash reduction is 44 percent when the driver of the impacting vehicle is 15 to 50 years old, but only 20 percent when that driver is more than 50 years old. A possible explanation of this difference is that older drivers are less able to see, recognize and/or react to the tape in time to avoid hitting the trailer.

• The tape may be somewhat more effective in preventing rear impacts (43 percent) than side impacts (17 percent) into trailers; however, this difference is not consistent in the two States.

• The tape is effective in both clear (28 percent) and rainy/foggy weather conditions (31percent).

• The tape is especially effective on flatbed trailers (55 percent). It could be that these low-profile vehicles were especially difficult to see in the dark before they were treated with tape.

• Dirt on the tape significantly diminished tape effectiveness in rear impacts. Clean tapereduces rear impacts by 53 percent but dirty tape by only 27 percent.

These findings are evidence that large trailers are difficult to see in dark not lighted conditions and that conspicuity tape improves their visibility and reduces crashes in a dramatic way. Large trailers and large SUTs share a common general appearance and standard lighting requirements (with the exception of tape, which is required on large trailers, but is optional on SUTs). As such, the agency believes that the dramatic increase in safety that has been observed in trailers because of conspicuity tape may also be realized for SUTs. However, while the general appearance and standard lighting equipment is similar for large trailers and large SUTs, the agency recognizes that differences in visibility may exist between the two vehicle types that could result in a different effectiveness for tape applied to SUTs than has been observed thus far in large trailers. The agency seeks comment on such potential differences and the best way to accurately estimate the effectiveness that tape can be expected to have on SUT crash risk.

NHTSA has preliminarily examined the cost and benefits of requiring new SUTs (SUTs with a GVWR greater than 4,536 kg (10,000 lb)) to have and maintain retroreflective tape on the sides, rear, and upper corners of the vehicles, based on the findings of the agency's 2001 evaluation 42 of the effectiveness of retroreflective tape on heavy trailers. In our analysis, we only considered vehicle crashes into the rear and side of SUTs in dark-not-lighted conditions and used the same effectiveness (41 percent) of retroreflective tape in dark-not-lighted conditions for heavy trailers. Our analysis is discussed in this section.

To obtain a preliminary look at the potential value of conspicuity tape on SUTs, the agency examined fatal crashes involving SUTs over a four-year period (2010 through 2013). We estimate that there was an average of 34 fatalities annually in crashes into SUTs for which conspicuity tape could be an effective countermeasure in terms of assisting to avoid or mitigate these crashes. The 34 fatalities occurred in vehicle crashes in dark not lighted conditions into the rear and sides 43 of SUTs. These are the conditions for which conspicuity tape was shown to be 41 percent effective in mitigating crashes into trailers. Among these 34 fatalities, 21 occurred in crashes where the front end of a vehicle impacted the rear end of an SUT.

As described above, conspicuity systems on trailers were most effective in dark-not-lighted condition for side and rear impacts. The target population for the conspicuity systems can be established considering dark-not-lighted crashes for which the SUT is struck in the sides or rear. If we assume an effectiveness of 41 percent (based on the observed effectiveness of these systems on heavy trailers) to these fatalities, we can establish a rough estimate of 14 fatalities annually could be prevented by the application of conspicuity systems to SUTs.

NHTSA made a preliminary estimate of the cost of requiring new SUTs to have conspicuity tape. The cost of installing the tape was calculated based on the cost of the material itself and the cost to install the tape.

The cost of the material depends on the length of tape needed for SUTs, which depends on the vehicles' size. NHTSA evaluated data from a U.S. Department of Commerce “Vehicle Inventory and Use Survey” (VIUS),44 which is a random sample survey of physical and operational characteristics of private and commercial trucks and truck-tractors registered or licensed in the 50 States and the District of Columbia.

The 1997 VIUS survey data, which is the most recent data available, indicates that the weighted average length of SUTs from the front bumper to the rear of the vehicle is 1029 cm (33 feet (ft), 9 inches (in)). A survey of SUTs by NHTSA indicates that the average length from the front bumper to the end of the cab is 229 cm (7 ft, 6 in). Assuming a requirement would not apply conspicuity tape to the front cab length of SUTs, the average length that would be covered by conspicuity tape is 800 cm (26 ft, 3 in). In addition, 244 cm (8 ft) of tape would be applied along the width of the SUT at the rear of the vehicle, and two pairs of 30 cm (1 ft) strips would be applied to outline the upper rear of the SUT. The total length of tape applied to an average SUT is estimated to be 1164 cm (38 ft, 2 in).

We estimate that the 2-inch wide conspicuity tape can be purchased by SUT single-stage manufacturers for about $0.53 per linear foot. The distributors that sell the tape to smaller fleets mark up the cost of the tape from about 15 percent to 30 percent, which amounts to $0.61 to $0.69 per linear foot. NHTSA used $0.61 per linear foot for the cost (the average of $0.53 and $0.69) of the conspicuity tape.

As for the cost to apply the tape, NHTSA estimated in the final regulatory evaluation for the FMVSS No. 108 conspicuity rulemaking that 30 minutes is needed to apply conspicuity tape on all categories of trailers. NHTSA has also assumed that it would take 30 minutes to apply the tape to SUTs at an hourly rate of $22.20 per hour.

This yields labor costs of $11.10 (for 30 minutes labor) to apply tape to 50 percent of the length of the sides and the entire rear width and upper rear corners of an average SUT (a total of 1164 cm (38 ft, 2 in) of tape. Tape cost is estimated at $0.61 per linear foot (or per 30.48 cm), resulting in an estimated cost of tape at $23.28 per SUT. The total cost for labor and materials is estimated at ($23.28 + $11.10) x 1.51 consumer markup = $51.91 per SUT. (1.51 is the standard markup NHTSA uses to go from variable costs (labor and material) to consumer costs. The 1.51 markup includes fixed costs, manufacturer profit and dealer markups.)

NHTSA estimates that 578,631 new Class 3-8 trucks (GVWR greater than 4,536 kg (10,000 lb) are sold annually. Thus, the total consumer costs required for applying conspicuity tape to new SUTS is estimated to be approximately $30.0 million annually ($51.91 x 578,631 = $30,036,735).

NHTSA made a preliminary estimate of the benefits of requiring new SUTs to have conspicuity tape. The benefit of the tape is a reduction in the number of crashes and severity of injuries, although in this preliminary analysis we examined fatal crashes only. While any future analysis by the agency would include injuries and property damage, our preliminary evaluation demonstrates the potential for conspicuity tape to be a cost effective solution in preventing and/or mitigating crashes involving SUTs.

NHTSA analyzed the Fatality Analysis Reporting System (FARS) data files for the years 2010 through 2013. The analysis determined that on average 34 lives per year are lost annually in vehicles striking the sides or rear of SUTs in dark-not-lighted conditions (see Table 5). If conspicuity systems are as effective in these crashes as they have been on heavy trailer crashes, there is a potential to prevent 14 fatalities a year.

The estimated costs per fatality prevented for a retroreflective tape requirement for SUTs are shown in Table 6.

Guidance from the U.S. Department of Transportation 45 identifies $9.1 million as the value of a statistical life (VSL) to be used for Department of Transportation analyses assessing the benefits of preventing fatalities for the base year of 2012. Per this guidance, VSL in 2014 is $9.2 million. While not directly comparable, the preliminary estimates for conspicuity systems on SUTs ($2.1 million per fatality prevented) is a strong indicator that these systems will be cost effective (current VSL $9.2 million).

NHTSA requests comments that would help the agency assess and make judgments on the benefits, costs and other impacts of requiring SUTs to have retroreflective tape. In providing a comment on a particular matter or in responding to a particular question, interested persons are asked to provide any relevant factual information to support their opinions, including, but not limited to, statistical and cost data and the source of such information. For easy reference, the questions below are numbered consecutively.

1. The agency assumed retroreflective tape would be 41 percent effective in preventing side and rear crashes into SUTs in dark-not-lighted conditions, based on the effectiveness NHTSA found for the tape in reducing side and rear impacts into heavy trailers. We seek comment on this effectiveness estimate. How effective are conspicuity systems at reducing crashes when applied to SUTs? Are there effectiveness studies specific to SUTs or statistical methods that could provide evidence that the effectiveness will be similar to that observed on heavy trailers?

2. While some fleet operations may be voluntarily applying conspicuity tape to their SUTs, our current crash databases do not include information on whether an SUT involved in a crash has conspicuity tape. The agency seeks input on ways that our analysis can better account for the voluntary installation of tape on SUTs.

3. Should all types of SUTs (box trucks, tow trucks, dual-wheeled pickups, etc.) be required to have conspicuity tape or only particular types of SUTs? What are the distinguishing characteristics of an SUT that make conspicuity tape needed?

4. What would be the cost of applying conspicuity tape on SUTs, including installation and materials?

5. Does conspicuity tape need to be replaced during the lifetime of the vehicle? How often and what sections of the vehicle need reapplication of conspicuity tape?

6. Are there any reasons that the agency should consider different patterns of application for SUTs as compared to trailers (different colors or locations)?

7. Should conspicuity tape be required on both the sides and the rear of the applicable SUTs, or should the agency consider application of the tape on the rear only?

8. Should NHTSA consider requiring current vehicles to be retrofitted with conspicuity tape? In March 1999, the Federal Highway Administration (FHWA) directed motor carriers engaged in interstate commerce to retrofit heavy trailers manufactured before December 1993 with some form of conspicuity treatment by June 1, 2001. In 2000, the Federal Motor Carrier Safety Administration (FMCSA) was established to perform motor carrier safety functions and operations, and authority for issuing and enforcing Federal Motor Carrier Safety Regulations was transferred to FMCSA. In 2000, NHTSA was delegated authority to promulgate safety standards for commercial motor vehicles and equipment already in use when the standards are based upon and similar to an FMVSS. See 49 CFR 1.95.46

The agency has considered the impact of this ANPRM under Executive Orders (E.O.) 12866 and 13563 and the Department of Transportation's regulatory policies and procedures.

In this ANPRM, the agency requests comments that would help NHTSA assess and make judgments on the benefits, costs and other impacts, of strategies that increase the crash protection to occupants of vehicles crashing into the rear of SUTs and/or that increase the likelihood of avoiding a crash into SUTs. Strategies discussed in this ANPRM are possible amendments to the FMVSSs to: (a) expand FMVSS Nos. 223 and 224, to require upgraded guards on SUTs; and (b) amend FMVSS No. 108, to require the type of retroreflective material on the rear and sides of SUTs that is now required to be placed on the rear and sides of heavy trailers to improve the conspicuity of the vehicles to other motorists.

The agency has made preliminary estimates of the costs and benefits of the two above strategies. NHTSA requests comments on these estimates. Information from the commenters will help the agency further evaluate the course of action NHTSA should pursue in this rulemaking on SUTs.

A requirement for SUTs to comply with CMVSS No. 223 would require 59 percent of newly manufactured SUTs to be equipped with CMVSS No. 223 rear impact guards.47 The estimated incremental minimum to average cost of equipping newly covered SUTs with CMVSS No. 223 guards ranges from $307 to $453 per vehicle. The total annual fleet cost of equipping new SUTs with CMVSS No. 223 guards ranges from $105 million to $155 million. The estimate of minimum to average additional weight of equipping SUTs with CMVSS No. 223 guards is 76.8 kg (169 lb) to 95.5 kg (210 lb) per vehicle. The estimate of minimum additional fuel cost during the lifetime of the vehicle due to the additional weight of the guard ranges from $316 million to $514 million. Therefore, the total minimum to average annual cost (including fuel costs) of requiring SUTs to have CMVSS No. 223 rear impact guards is estimated to be $421 million to $669 million.

For estimating the benefits of requiring SUTs to have CMVSS No. 223 guards, NHTSA estimated the annual number of fatalities in light vehicle rear impact crashes with PCI into the rear of SUTs. The real world data indicated that there are annually 33 light vehicle occupant fatalities in impacts into the rear of SUTs that resulted in PCI. Only 30 percent of these impacts are at closing speeds less than or equal to 56 km/h (35 mph) for which CMVSS No. 223 compliant rear impact guards could prevent PCI.

The benefits analysis also included an estimate of the annual number of injuries in light vehicle crashes with PCI into the rear of SUTs. Non-PCI crashes were not considered as part of the target population for estimating benefits. This is because the IIHS test data (see Appendix B to this preamble) show that when PCI was prevented, the dummy injury measures were significantly below the injury assessment reference values specified in FMVSS No. 208. In non-PCI crashes into the rear of SUTs and trailers, the IIHS test data indicated that the passenger vehicle's restraint system would mitigate injury.

The benefits analysis in Appendix A estimates the equivalent lives saved (ELS) from a requirement for SUTs to have CMVSS No. 223 guards. The ELS are approximately 5.7 to 6.3 lives. The cost per ELS (3 and 7 percent discounted) is $106.7 million to $164.7 million, for each equivalent life saved. A summary of the analysis estimating incremental costs, benefits, and cost per equivalent lives saved is shown below in Table 7.

NHTSA made a preliminary estimate of the cost of requiring new SUTs to have conspicuity tape. The cost of installing the tape was calculated based on the cost of the material itself and the cost to install the tape. The total cost for labor and materials is estimated at $23.28 + $11.10 x 1.51 consumer markup = $51.91 per SUT. NHTSA estimates that 578,631 new Class 3-8 trucks (GVWR > 10,000 lb) are sold annually. Thus, the total consumer costs required for applying conspicuity tape to new SUTs is estimated to be approximately $30.0 million annually ($51.91 x 578,631 = $30,036,735).

NHTSA made a preliminary estimate of the benefits of requiring new SUTs to have conspicuity tape. The agency estimates that a requirement would prevent 14 fatalities. The estimated costs per fatality prevented for a retroreflective tape requirement for SUTs are shown in Table 8.

The Department of Transportation assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda.

Executive Order 12866 requires each agency to write all rules in plain language. Application of the principles of plain language includes consideration of the following questions:

• Have we organized the material to suit the public's needs?

• Are the requirements in the rule clearly stated?

• Does the rule contain technical language or jargon that isn't clear?

• Would a different format (grouping and order of sections, use of headings, paragraphing) make the rule easier to understand?

• Would more (but shorter) sections be better?

• Could we improve clarity by adding tables, lists, or diagrams?

• What else could we do to make the rule easier to understand?

If you have any responses to these questions, please write to us with your views.

In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, including any personal information the commenter provides, to www.regulations.gov, as described in the system of records notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy.

In developing this ANPRM, we tried to address the concerns of all our stakeholders. Your comments will help us improve this rulemaking. We invite you to provide different views on options we discuss, new approaches we have not considered, new data, descriptions of how this ANPRM may affect you, or other relevant information. We welcome your views on all aspects of this ANPRM, but request comments on specific issues throughout this document. Your comments will be most effective if you follow the suggestions below:

—Explain your views and reasoning as clearly as possible.

—Provide solid technical and cost data to support your views.

—If you estimate potential costs, explain how you arrived at the estimate.

—Tell us which parts of the ANPRM you support, as well as those with which you disagree.

—Provide specific examples to illustrate your concerns.

—Offer specific alternatives.

—Refer your comments to specific sections of the ANPRM, such as the units or page numbers of the preamble.

Your comments must be written and in English. To ensure that your comments are correctly filed in the docket, please include the docket number of this document in your comments.

Your comments must not be more than 15 pages long (49 CFR 553.21). We established this limit to encourage you to write your primary comments in a concise fashion. However, you may attach necessary additional documents to your comments. There is no limit on the length of the attachments.

Please submit your comments to the docket electronically by logging onto http://www.regulations.gov or by the means given in the ADDRESSES section at the beginning of this document.

Please note that pursuant to the Data Quality Act, in order for substantive data to be relied upon and used by the agency, it must meet the information quality standards set forth in the OMB and DOT Data Quality Act guidelines. Accordingly, we encourage you to consult the guidelines in preparing your comments. OMB's guidelines may be accessed at http://www.whitehouse.gov/omb/fedreg/reproducible.html.

If you wish to submit any information under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Chief Counsel, NHTSA, at the address given in the FOR FURTHER INFORMATION CONTACT section. In addition, you should submit a copy from which you have deleted the claimed confidential business information to the docket. When you send a comment containing information claimed to be confidential business information, you should include a cover letter setting forth the information specified in our confidential business information regulation. (49 CFR part 512.)

We will consider all comments that the docket receives before the close of business on the comment closing date indicated in the DATES section. To the extent possible, we will also consider comments that the docket receives after that date. If the docket receives a comment too late for us to consider it in developing the next step in this rulemaking, we will consider that comment as an informal suggestion for future rulemaking action.

You may read the comments received by the docket at the address given in the ADDRESSES section. You may also see the comments on the Internet (http://regulations.gov).

Please note that even after the comment closing date, we will continue to file relevant information in the docket as it becomes available. Further, some people may submit late comments. Accordingly, we recommend that you periodically check the docket for new material.

Anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19476 at 19477-78).

This appendix provides NHTSA's analysis of the cost and benefits of requiring new SUTs to have CMVSS No. 223 rear impact guards. The analysis's findings, which are discussed in detail in this appendix, are summarized in the following Table A-1.48

Currently, rear impact protection for SUTs is regulated by FMCSR regulation 49 CFR 393.86(b), which requires that certain SUTs used in interstate commerce have a guard if there is no vehicle parts or equipment within the area where the rear impact guard location is prescribed. (The bottom plane of the area is not more than 762 mm (30 inches) above the ground, the forward-most plane of the area is not more than 610 mm (24 inches) forward of the rear extremity, and the lateral planes of the area are not more than 457 mm (18 inches) from the side extremity of the SUT.)

CMVSS No. 223 requires rear impact guards on trailers 49 that do not have equipment or vehicle parts within the area where the rear impact guard is prescribed to be located. (The bottom plane of the area is not more than 560 mm (22 inches) above the ground, the forward-most plane of the area is not more than 305 mm (12 inches) forward of the rear extremity, and the lateral planes of the area are not more than 100 mm (4 inches) from the side extremity of the trailer.)

The geometric requirements for the guards in CMVSS No. 223 are similar to that in FMVSS No. 224. The contrast between the geometric requirements of the guards in FMCSR 393.86(b) and CMVSS No. 223 is shown in Figure A-1.

The various underride guard standards exclude certain vehicles from their requirements due to reasons such as impediments to equipping a guard in a specified area or because the design of the vehicle renders a guard unnecessary to prevent underride. FMVSS No. 224 and CMVSS No. 223 have similar exclusions of vehicles, in contrast to FMCSA 393.86(b). For example, in FMCSR 393.86(b), a “wheels back vehicle” is one where the vehicle's rearmost axle is not more than 610 mm forward of the rear extremity of the vehicle, while in FMVSS No. 224 and CMVSS No. 223, a “wheels back” trailer is one where the rearmost axle is not more than 305 mm forward of the rear extremity of the vehicle. Another example is definitions of a “low chassis” vehicle. In FMCSR 393.86(b), a “low chassis vehicle” is one where the ground clearance of the bottom edge of the chassis which extends to the rearmost part of the vehicle is less than or equal to 762 mm, while in FMVSS No. 224 and CMVSS No. 223, a low chassis trailer is one where the ground clearance of the bottom edge of the chassis which extends to the rearmost part of the vehicle is less than or equal to 560 mm. If NHTSA were to require SUTs to comply with CMVSS No. 223, then some SUTs that were previously excluded by the FMCSR from having guards because they were considered wheels back or low chassis vehicles under FMCSR 393.86(b) would no longer qualify as wheels back or low chassis vehicles under CMVSS No. 223. These vehicles therefore would have to be equipped with rear impact guards in accordance with CMVSS No. 223.

UMTRI 50 evaluated the rear geometry of SUTs involved in fatal crashes in the 2008 and 2009 TIFA data files and estimated that 38 percent of SUTs were configured so as to be included under FMCSA 393.86(b) based on vehicle design, as shown below in Table A-2. However, UMTRI estimated that only 18 percent of SUTs were equipped with rear impact guards. The remaining 20 percent of the SUTs that appeared, based on vehicle design, to be included in the requirement to have a guard but did not have one, likely were not used in interstate commerce and so not covered by FMCSR 393.86(b).

NHTSA examined the rear geometry of SUTs in the 2008 and 2009 TIFA data files from the 2013 UMTRI study to determine the vehicles that would need to have rear impact guards in accordance with CMVSS No. 223 and the vehicles that would be excluded (as within an excluded type of vehicle, i.e., wheels back, low chassis, rear equipment, special vehicles). The examination (Table A-3) shows that 59 percent of SUTs would need rear impact guards according to CMVSS No. 223.

Since UMTRI's evaluation (Table A-2) indicates that only 18 percent of SUTs that had a rear geometry that did not outwardly qualify as an excluded vehicle under FMCSR 393.86(b) had guards,51 18 percent of SUTs (those now with guards meeting FMCSR 393.86(b)) would need upgraded CMVSS No. 223 guards, and 41 percent (= 59 -18) of SUTs now without rear impact guards would need CMVSS No. 223 guards.

The agency evaluated SUTs of Classes 3 to 8 (SUTs with a GVWR greater than 10,000 lb) as shown in Table A-4 for upgrading to CMVSS No. 223 requirements. The annual truck sales for 2012 were obtained from the Ward's Automotive Yearbook 2013 by the Ward's Automotive Group 52 and are presented in Table A-5.

The total sales volume of SUTs of Class 3-8 in 2012 was 578,631. Assuming that the classification of SUTs in the 2008-2009 TIFA data files as shown in Table A-3 is representative of the SUT fleet, then 59 percent of the SUTs sold annually would require CMVSS No. 223 guards. Therefore, applying CMVSS No. 223 to SUTs would affect approximately 341,692 (= 0.59 × 578,631) SUTs sold annually.54

In 2013, NHTSA conducted a study to develop cost and weight estimates for rear impact guards on heavy trailers.55 Using the cost estimates for rear impact guards obtained from this study, in this section we estimate the cost of equipping SUTs with the guards.

In the 2013 study, the researchers estimated the cost and weight of FMCSR 393.86(b) rear impact guards, FMVSS No. 223 rear impact guards, and CMVSS No. 223 rear impact guards (Table A-6). All costs are presented in 2012 dollars. In estimating the cost and weight of guards, an engineering analysis of the guard system for each trailer was conducted, including material composition, manufacturing and construction methods and processes, component size, and attachment methods. We note, however, that the authors did not take into account the construction, costs, and weight changes in the trailer structure that would be needed to withstand loads from the stronger guards. Thus, a limitation of this analysis is the fact that the authors did not evaluate the changes in design of the rear beam, frame rails, and floor of the trailer when replacing a rear impact guard compliant with FMCSR 393.86(b) with an FMVSS No. 224 compliant guard and then to a CMVSS No. 223 compliant guard.

The average cost of a CMVSS rear impact guard is $485, which is $226 more than an FMVSS No. 224 guard and $379 more than an FMCSR 393.86(b) guard. In comparing the Great Dane rear impact guards, the 2012 Great Dane guard (the least expensive CMVSS No. 223 guard studied) is $234 more expensive than the 1993 guard (FMCSR 393.86(b) guard).

NHTSA used the incremental cost of $234 to $379 56 (from Table A-6) to estimate costs of upgrading SUTs presently with FMCSR 393.86(b) guards to CMVSS No. 223 guards. The agency used the incremental cost of $339 to $485 57 (from Table A-6) to estimate costs of equipping SUTs presently without guards with CMVSS No. 223 guards. These incremental costs do not take into account additional construction, costs, and weight changes needed in the SUT structure to withstand loads from the upgraded guards. Thus, the agency believes that the lower cost estimates may not represent the true incremental cost of equipping SUTs with rear impact guards. An analysis was therefore also conducted using the average incremental costs.

In the new SUT fleet, 18 percent of the fleet now equipped with FMCSR guards would be upgraded to CMVSS guards, and 41 percent of the fleet now without guards would need CMVSS guards. Therefore, the weighted incremental cost of CMVSS guards for applicable SUTs is $307 to $453, as shown in Table A-7.

Based on these data, the agency estimated the total annual incremental material and installation cost of requiring new applicable SUTs to be equipped with CMVSS No. 223 rear impact guards (shown in Table A-8).

Using the data in Table A-6, the average weight of a CMVSS No. 223 compliant guard is 234 lb, which is 156 lb greater than an FMCSR 393.86(b) guard. In comparing the Great Dane rear impact guards, the 2012 Great Dane guard is 115 lb heavier than the 1993 Great Dane guard.

In the new SUT fleet, 18 percent equipped with FMCSR guards would be upgraded to CMVSS guards and 41 percent without any guards would need CMVSS guards. The weighted incremental increase in the weight of SUTs was obtained in a similar manner as the weight incremental cost shown in Table A-9.

Therefore, the minimum to average increased weight of equipping CMVSS guards for applicable SUTs is 169 lb to 210 lb. The added weight would increase the fuel consumption costs during the lifetime of the vehicle, costs that have to be discounted to present rate to determine the total present value annual cost of equipping SUTs with CMVSS No. 223 rear impact guards.

The vehicle miles of travel and the fuel economy for heavy vehicles is shown in Table A-10.

Using the base fuel economy of 7.3 miles per gallon (mpg) shown in Table A-10 for the year 2011, the reduced new fuel economy for Class 3-8 SUTs due to the minimum to average added weight of 169 lb-210 lb (for CMVSS No. 223 guards) was computed (as shown in Table A-11) using the standard formula: 59

The average weight of Class 3, Class 4-6, Class 7, and Class 8 SUTs (shown in Table A-11) was estimated from Table A-4. The average weight of Class 4-6 SUTs was weighted by their respective sales volume shown in Table A-5. The average weight of Class 8 (weight range 33,001 and over) trucks was assumed to be 40,000 lb.

The method of deriving discount rates is presented in Table A-12 for Class 3 SUTs as an example. The 3 percent and 7 percent discount rates for Class 3, Class 4-6, Class 7, and Class 8 SUTs are summarized in Table A-13.

The Convention on the Conservation and Management of Highly Migratory Fish Stocks in the Western and Central Pacific Ocean (Convention) focuses on the conservation and management of highly migratory species (HMS) and the management of fisheries for HMS. The objective of the Convention is to ensure, through effective management, the long-term conservation and sustainable use of HMS in the WCPO. To accomplish this objective, the Convention established the Commission, which includes Members, Cooperating Non-members, and Participating Territories. The United States of America is a Member. American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands are Participating Territories.

As a Contracting Party to the Convention and a Member of the Commission, the United States is obligated to implement conservation and management measures adopted by the Commission and other decisions of the Commission. The WCPFC Implementation Act (16 U.S.C. 6901 et seq.), authorizes the Secretary of Commerce, in consultation with the Secretary of State and the Secretary of the Department in which the United States Coast Guard is operating (currently the Department of Homeland Security), to promulgate such regulations as may be necessary to carry out the obligations of the United States under the Convention, including the decisions of the Commission. The WCPFC Implementation Act further provides that the Secretary of Commerce shall ensure consistency, to the extent practicable, of fishery management programs administered under the WCPFC Implementation Act and the Magnuson-Stevens Fishery Conservation and Management Act (MSA; 16 U.S.C. 1801 et seq.), as well as other specific laws (see 16 U.S.C. 6905(b)). The Secretary of Commerce has delegated the authority to promulgate regulations under the WCPFC Implementation Act to NMFS. A map showing the boundaries of the area of application of the Convention (Convention Area), which comprises the majority of the WCPO, can be found on the WCPFC Web site at: www.wcpfc.int/doc/convention-area-map.

To date NMFS has implemented the Commission's decisions through regulations establishing specific requirements, restrictions, and prohibitions. This proposed rule includes several such specific regulations, and it also includes more general regulations that would establish a framework within which NMFS could establish specific requirements and restrictions. Under the framework, NMFS would issue and seek public comment on proposed specifications through announcements in the Federal Register, and subsequently issue final specifications through announcements in the Federal Register. The specifications would be designed to satisfy the obligations of the United States with respect to particular provisions of conservation and management measures adopted by the Commission. The specifications could include fishing effort limits, catch limits, and other restrictions on particular fishing activities during specific periods and/or in specific areas.

This proposed action is described in the following sections under four categories. The first three categories are regulatory changes, and include: (1) Framework to implement Commission decisions; (2) requirement to obtain IMO number; and (3) other regulatory changes. The last category proposes specifications for the purse seine fishery for 2015; specifically: (4) purse seine fish aggregation device (FAD) restrictions.

This proposed rule includes several elements, described in detail below, that would be included in the regulations at 50 CFR part 300 Subpart O under three categories. The first would establish a framework to implement Commission decisions, the second would require that certain fishing vessels be issued IMO numbers, and the third would make changes to several existing regulations to implement Commission decisions, some of which are administrative in nature.

The proposed rule would establish a framework under which NMFS would specify fishing effort limits, catch limits, and other restrictions and requirements in U.S. fisheries for HMS in the Convention Area to implement particular decisions of the Commission. The framework would not be used to implement all Commission decisions, but rather those that are amenable to the framework process, such as quantitative fishing effort limits and catch limits, and spatial and/or temporal restrictions on specific fishing activities. For the purpose of describing the proposed framework, all such restrictions and requirements are called “limits.”

Purpose of framework: The purpose of a framework is to make it possible to manage fisheries more responsively under conditions requiring “real time” management. Such conditions exist in the context of the Convention because the Commission makes decisions that must be implemented by its members quickly—often within 60 days of the decision. The framework proposed here would allow NMFS to implement Commission decisions more rapidly than it would be able to without such a framework. The proposed framework, which would be codified at 50 CFR part 300, subpart O, contains the parameters within which NMFS could take specific actions, including the types of actions it could take, as well as the procedures for doing so. Limits implemented by NMFS under the proposed framework, called “specifications,” would be announced in the Federal Register. Except when warranted and allowed by law, specifications would be subject to prior public notice and comment. The limits specified under the framework would likely, but not always, be time-limited.

Types and details of limits: The types of limits that would be specified under the framework include quantitative limits on the weight or number of fish that may be caught, retained, transshipped, landed, and/or sold; quantitative limits on the amount of fishing effort that may be expended, such as in terms of amounts of time vessels spend at sea or engaged in fishing or engaged in particular fishing activities or other measures of fishing effort, such as the number of gear sets or deployments of gear; and restrictions or prohibitions on particular fishing activities in certain areas and/or periods.

Most recent Commission decisions do not apply in territorial seas or archipelagic waters. Accordingly, the framework regulations would state that any specified limit would not—unless otherwise indicated in the specification—apply in the territorial seas or archipelagic waters of the United States or any other nation, as defined by the domestic laws and regulations of that nation and recognized by the United States. If a Commission decision does apply in territorial seas and/or archipelagic waters, the specification issued by NMFS to implement that decision would specify that it does apply in those areas.

For each limit specified under the framework, NMFS would identify the area and period in which it applies, and as appropriate, the vessel types, gear types, species, fish sizes, and any other relevant attributes to which it applies. For spatial or temporal limits, NMFS would also specify the specific activities that would be restricted in the area or period, and for quantitative limits, NMFS would specify the restrictions and requirements that would go into effect after the limit is reached and the applicable dates of those restrictions and requirements. These restrictions and requirements could include a prohibition on the catch, retention, transshipment and/or landing of specific species or specific sizes of specific species, a prohibition on the use of specific fishing gears or methods, restrictions on specific fishing activities, and reporting or other requirements.

Fisheries affected: In the decisions of the Commission, the three Participating Territories of the United States—American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam—often are treated separately from the United States. For example, the fisheries of the territories often are subject to different controls and limits than are the fisheries of the United States. Therefore, to implement the Commission decisions, it is necessary to distinguish the fisheries from each other because fishing vessels from the Participating Territories are flagged vessels of the United States. The proposed regulatory framework would include criteria to distinguish the fisheries from each other, for the purpose of attributing fishing effort and catch among the fisheries, and determining to which vessels a given restriction applies. The proposed criteria mirror those used in previous regulations issued under the WCPFC Implementation Act. Under the proposed criteria, all fishing activities by U.S. fishing vessels would be considered to be part of a fishery of the United States except as follows:

1. Except as provided under paragraphs 2 and 3 below, if catch is landed in American Samoa, Guam, or the Commonwealth of the Northern Mariana Islands, the catch and associated fishing effort are considered part of a fishery of the territory in which it is landed, provided that: (a) It was not caught using purse seine gear; (b) it was not caught in any portion of the U.S. exclusive economic zone (EEZ) other than the portion of the U.S. EEZ surrounding the territory in which it was landed; and (c) it was landed by a fishing vessel operated in compliance with a valid permit issued under 50 CFR 660.707 or 665.801.

2. Except as provided under paragraph 3 below, if catch is made by longline gear by a vessel registered for use under a valid American Samoa Longline Limited Access Permit issued under 50 CFR 665.801(c), the catch and associated fishing effort are considered part of a fishery of American Samoa, provided that: (a) It was not caught in any portion of the U.S. EEZ other than the portion of the U.S. EEZ surrounding American Samoa; and (b) it was landed by a fishing vessel operated in compliance with a valid permit issued under 50 CFR 660.707 or 665.801.

3. If catch or fishing effort is made by a vessel that is included in a specified fishing agreement under 50 CFR 665.819(c), the catch and associated fishing effort are considered part of a fishery of American Samoa, Guam, or the Commonwealth of the Northern Mariana Islands, according to the terms of the agreement to the extent the agreement is consistent with 50 CFR 665.819(c) and other applicable laws, provided that: (a) The start date specified in 50 CFR 665.819(c)(9)(i) has occurred or passed; and (b) NMFS has not made a determination under 50 CFR 665.819(c)(9)(iii) that the catch or fishing effort exceeds any limit allocated to the territory that is a party to the agreement.

Allocation of limits: Under the proposed framework, NMFS could allocate a Commission-mandated limit among different fisheries sectors, such as among groups of fishing vessels that use different types of fishing gear. For example, given a Commission decision to limit catches of a particular species irrespective of the type of fishing gear used to catch it, NMFS could decide to allocate the limit between the longline and the purse seine fisheries, using the proposed framework to establish specific limits for each of the two fisheries. NMFS could also use the framework to specify limits for particular fisheries even when the Commission-mandated limit is not specific to particular fisheries.

The proposed framework would not be used to allocate Commission-mandated limits among individual fishing vessels (except in the case where a single fishing vessel comprises an entire sector or fishery). This would not preclude NMFS from allocating Commission-mandated limits among individual fishing vessels through separate regulations.

Framework procedures: The framework's procedures for specifying limits would be as follows: NMFS would publish in the Federal Register a notice of the proposed specification and a request for public comment on the proposed specification. The proposed specification would include all the relevant characteristics of the limit. After consideration of public comment received on the proposed specification, NMFS would publish in the Federal Register a notice of the final specification.

Consequences of limits being reached: For quantitative limits, NMFS would monitor catch or fishing effort with respect to the specified limit using data submitted in vessel logbooks and other available information. When NMFS estimates or projects that the specified limit has been or will be reached, NMFS would publish a notification to that effect in the Federal Register. For quantitative limits, this notification would include an advisement that specific activities will be restricted, and/or that certain requirements will be in place, during a specific period. The notification would specify the restrictions and requirements and the specific activities to which they apply and the start and end dates and times of those restrictions. The start date of the restrictions and requirements would not be earlier than 7 days after the date of filing the closure notice for public inspection at the Office of the Federal Register.

This element of the proposed rule would apply to all U.S. fishing vessels (including those participating in the fisheries of the U.S. Participating Territories) that are used for commercial fishing for highly migratory fish stocks in the Convention Area either on the high seas or in waters under the jurisdiction of a foreign nation, and the gross tonnage of which is at least 100 GRT (gross register tons) or 100 GT (gross tons) ITC. This requirement would implement a decision of the Commission made in 2013 as part of CMM 2013-10, “WCPFC Record of Fishing Vessels and Authorization to Fish.” CMM 2013-10 requires each member of the Commission, including the United States, to maintain a record of its fishing vessels that are authorized to fish in the Convention Area beyond its area of national jurisdiction, and to periodically share the information in its record with the Commission. As reflected in CMM 2013-10, in 2013 the Commission decided to require that an additional piece of information be included in members' records for fishing vessels whose gross tonnage is at least 100 GRT or 100 GT: The International Maritime Organization (IMO) number or Lloyd's Register number. An IMO number, also known as an IMO ship identification number, is the number issued for a ship or vessel under the ship identification number scheme established by the International Maritime Organization. An IMO number is unique and stays with the vessel for its life, regardless of changes in the vessel's flag, name, ownership, or other attributes. As used in CMM 2013-10, “Lloyd's Register number,” or “LR number,” has the same meaning as IMO number except that the former refers to the number issued for a vessel that is not required—under IMO agreements—to be issued an IMO number. The administrator of the IMO ship identification number scheme issues both types of numbers using the same numbering scheme. Hereafter in this proposed rule, “IMO number” is used to refer to both IMO numbers and Lloyd's Register numbers. Currently, IMO numbers are issued on behalf of the IMO by IHS Maritime, the current administrator of the IMO ship identification number scheme.

For each of the subject fishing vessels described above, this proposed rule would require that the owner of the fishing vessel ensure that an IMO number has been issued for the vessel. Furthermore, satisfying this requirement, if applicable, would be made a prerequisite for eligibility to receive a WCPFC Area Endorsement. The WCPFC Area Endorsement is the endorsement required—along with a high seas fishing permit—for a U.S. fishing vessel to be used for commercial fishing for HMS on the high seas in the Convention Area (see 50 CFR 300.212).

If not already issued, the vessel owner may request that an IMO number be issued by following the instructions given by IHS Maritime, available at: www.imonumbers.lrfairplay.com/default.aspx. There is no fee for making such a request or having an IMO number issued, but specific information about the fishing vessel and its ownership and management must be provided to the administrator of the scheme.

Because IHS Maritime is not affiliated with the U.S. government and its actions are outside the control of NMFS and the U.S. government, the proposed rule includes a process for fishing vessel owners to claim to NMFS that they are unable—through no fault of their own—to obtain IMO numbers. NMFS would review the claim, assist the fishing vessel owner as appropriate, and if it determines that it is infeasible or impractical for the fishing vessel owner to comply with the requirement, NMFS would issue an exemption from the requirement for a specific or indefinite amount of time. The exemption would become void if ownership of the fishing vessel changes.

The proposed rule includes several other changes to the existing regulations to enhance clarity and promote efficiency, some of which are administrative in nature.

First, this rule proposes to remove the regulations requiring that U.S. purse seine vessels carry WCPFC observers on fishing trips in the Convention Area (50 CFR 300.223(e)) because the applicable dates of the requirements, which extended through December 31, 2014, have passed. NMFS emphasizes that U.S. purse seine vessels operating in the Convention Area are, and will likely continue to be, subject to requirements to carry WCPFC observers under the current regulations at 50 CFR 300.215. Under this section, U.S. fishing vessels operating in the Convention Area must carry a WCPFC observer when directed to do so by NMFS. NMFS has issued such directions to purse seine vessel owners for 2015, and anticipates doing so in subsequent years.

Second, this rule proposes to revise the definition of “fishing day” to remove the reference to 50 CFR 300.223. As currently defined at 50 CFR 300.211, the term applies only to the regulations at 50 CFR 300.223, “Purse seine fishing restrictions,” which establish limits on purse seine fishing effort, restrictions on the use of FADs, and other restrictions that apply to purse seine fishing. Because under this proposed rule some restrictions of those types would be established under a new regulatory section devoted to the framework, NMFS proposes to revise the term “fishing day” to apply more broadly to all the regulations in 50 CFR part 300 subpart O, but it would continue to be limited to the activities of purse seine fishing vessels. Under this proposed rule, “fishing day” would mean, for fishing vessels equipped with purse seine gear, any day in which a fishing vessel searches for fish, deploys a FAD, services a FAD, or sets a purse seine, with the exception of setting a purse seine solely for the purpose of testing or cleaning the gear and resulting in no catch.

Third, this rule proposes to remove certain elements of the existing regulations that require purse seine vessels in the Convention Area to retain on board all the catch of three species of tuna (bigeye tuna, yellowfin tuna, and skipjack tuna), with certain exceptions (50 CFR 300.223(d)), because they are obsolete. When the first version of these regulations was established in 2009 (final rule published August 4, 2009; 74 FR 38544), the catch retention requirements were made contingent on a continuing determination by NMFS that there are an adequate number of WCPFC observers available for the purse seine vessels of all members of the Commission as necessary to ensure compliance by such vessels with the catch retention requirements. This contingency was based on the provisions of the Commission decision being implemented at the time, CMM 2008-01, which included a qualifier that the catch retention requirements were subject to implementation by Commission members of 100 percent observer coverage for purse seine vessels. However, CMM 2014-01, a successor to CMM 2008-01, which is currently in effect, does not include any such qualifier for the catch retention requirements. Thus, this proposed rule would remove paragraphs (1) and (2) of 50 CFR 300.223(d), which contain the contingencies.

Fourth, this rule proposes to make changes to the requirements related to the installation and operation of vessel monitoring system (VMS) units on fishing vessels that are used to fish commercially for HMS on the high seas in the Convention Area. The current regulations at 50 CFR 300.219 require the owner and the operator (i.e., the master or other individual aboard and in charge of the vessel) of any such vessel to expressly authorize NMFS and the Commission to receive and relay transmissions from the VMS unit. NMFS proposes to revise those regulations to provide NMFS and the Commission with an implicit authorization to receive and relay transmissions from the unit. In other words, under the proposed change, an explicit written authorization from the vessel owner and operator would not be needed for NMFS and the Commission to receive and relay transmissions from the VMS unit. NMFS recognizes this requirement is an unnecessary step and therefore is proposing to remove this requirement.

Finally, this rule proposes changes to the requirement for the owners or operators of U.S. purse seine vessels to submit to NMFS daily reports on how many sets were made on FADs. These reports enable NMFS to monitor the number of purse seine sets on FADs (“FAD sets”) to determine if they are within the established limits. The existing requirement, at 50 CFR 300.218(g), only goes into effect when NMFS publishes a notice in the Federal Register announcing that it is in effect. NMFS has never issued such a notice because there is currently no limit on the number of FAD sets. NMFS expects that the proposed framework to implement Commission decisions, as described earlier in the preamble, could be used to establish limits on FAD sets in the future. NMFS proposes to revise the daily FAD reporting requirement to make the daily report process more efficient, if FAD limits are put in place. Under the proposed revisions, NMFS would remove the requirement for the publication of a Federal Register notice, and instead allow NMFS to contact vessel owners or operators directly with instructions on the timing and submission of the reports. This would give NMFS more flexibility in specifying when the reports are required. NMFS anticipates directing vessel owners or operators to submit the reports only in periods during which limits on FAD sets are in place. Under the proposed revised reporting requirement, if directed by NMFS, the owner or operator of any fishing vessel of the United States equipped with purse seine gear must report to NMFS, within 24 hours of the end of each day that the vessel is at sea in the Convention Area the number of purse seine sets that were made on FADs during the period and in the format and manner directed by the NMFS Pacific Islands Regional Administrator.

Using the framework proposed to be established at 50 CFR 300.227, as described above, NMFS proposes specifications to implement particular provisions of CMM 2014-01, “Conservation and Management Measure for Bigeye, Yellowfin and Skipjack Tuna in the Western and Central Pacific Ocean,” adopted at the Commission's Eleventh Regular Session, in December 2014. CMM 2014-01 is a successor to, and is only slightly modified from, CMM 2013-01. These and other WCPFC conservation and management measures are available at: www.wcpfc.int/conservation-and-management-measures.

The stated general objective of CMM 2014-01, and several of its predecessor CMMs, is to ensure that the stocks of bigeye tuna, yellowfin tuna, and skipjack tuna in the WCPO are, at a minimum, maintained at levels capable of producing their maximum sustainable yield as qualified by relevant environmental and economic factors. CMM 2014-01 includes specific objectives for each of the three stocks; the common objective is that the fishing mortality rate is to be reduced to or maintained at levels no greater than the fishing mortality rate associated with maximum sustainable yield.

The provisions of CMM 2014-01 apply on the high seas and in EEZs in the Convention Area; that is, they do not apply in territorial seas or archipelagic waters.

CMM 2014-01 went into effect February 3, 2015, and is generally applicable for the 2015-2017 period. The CMM includes provisions for purse seine vessels, longline vessels, and other types of vessels that fish for HMS.

The specifications proposed here are for 2015 only. NMFS anticipates proposing specifications for subsequent years separately, and generally on a year-by-year basis.

The only provisions of the CMM that would be implemented in the specifications proposed here are those related to restrictions on the use of FADs in purse seine fisheries. For reasons of timing, NMFS intends to implement the CMM's provisions for longline fisheries, specifically, the provisions requiring that longline catches of bigeye tuna in the Convention Area in 2015 be limited to specified levels, through a separate rulemaking that would not make use of the framework proposed in this document (the catch limit for 2015 would be established in regulations at 50 CFR 300.224, as done in previous years). However, for years subsequent to 2015, NMFS anticipates using the proposed framework to establish longline bigeye tuna catch limits, as well as to implement other Commission decisions.

Below, the proposed specification related to purse seine FAD restrictions is introduced by describing the relevant provisions of CMM 2014-01, or the “Commission decision.” That description is followed by a description of the basis for NMFS' proposed specification, and the proposed specification itself.

Commission decision: Paragraphs 14-19 of CMM 2014-01 require WCPFC members to implement certain restrictions on the use of FADs by purse seine fishing vessels. All the restrictions are to be applied in the Convention Area between the latitudes of 20° N. and 20° S.

Paragraph 14 requires that WCPFC members prohibit specific activities related to FADs by their purse seine vessels during July through September (called a “FAD prohibition period” here) in each of 2015, 2016, and 2017. Paragraphs 15-18 require that WCPFC members impose additional restrictions on the use of FADs in 2015, 2016, and 2017, some of which are contingent on further Commission decision-making. Until those decisions are taken, paragraphs 15-18, read in combination, mean that the United States must either add a fourth month, October, to the July-September FAD prohibition period in each of 2015, 2016, 2017, or limit the number of FAD sets in each of those three years to 2,522. Finally, paragraph 18 also requires WCPFC members to prohibit setting on FADs on the high seas in the Convention Area in 2017.

Basis for proposed specification: To implement paragraphs 14-19 of CMM 2014-01 for 2015, NMFS proposes restrictions on the use of FADs by U.S. purse seine vessels as follows.

In accordance with paragraph 14 of the CMM, in 2015 there would be a FAD prohibition period from July through September. NMFS has already established this three-month FAD prohibition period in regulations at 50 CFR 300.223(b) (see final rule published December 2, 2014; 79 FR 71327). It would be reiterated in the specification proposed here. In addition, NMFS proposes to implement the first of the two FAD-related options in paragraphs 15-18; that is, adding October to the FAD prohibition period, because NMFS believes it is the more cost-effective of the two options, taking into account the objectives of the CMM, the expected economic impacts on U.S. fishing operations and the nation as a whole, and expected environmental and other effects. The expected environmental and economic effects of both options are described in the PEA, RIR, and IRFA prepared for this proposed specification.

The specific activities that would be prohibited during the FAD prohibition period in 2015 are the same as those during FAD prohibition periods established by NMFS since 2009 (see proposed specifications below).

NMFS does not propose changes to the definition of a FAD, and it would remain as currently defined at 50 CFR 300.211. Although the definition of a FAD does not include a vessel, the restrictions during the FAD prohibition periods would include certain activities related to fish that have aggregated in association with a vessel, or drawn by a vessel, as described below.

Proposed specification for 2015: From July 1 through October 31, 2015, owners, operators, and crew of fishing vessels of the United States shall not do any of the following activities in the Convention Area in the area between 20° N. latitude and 20° S. latitude:

(1) Set a purse seine around a FAD or within one nautical mile of a FAD.

(2) Set a purse seine in a manner intended to capture fish that have aggregated in association with a FAD or a vessel, such as by setting the purse seine in an area from which a FAD or a vessel has been moved or removed within the previous eight hours, or setting the purse seine in an area in which a FAD has been inspected or handled within the previous eight hours, or setting the purse seine in an area into which fish were drawn by a vessel from the vicinity of a FAD or a vessel.

(3) Deploy a FAD into the water.

(4) Repair, clean, maintain, or otherwise service a FAD, including any electronic equipment used in association with a FAD, in the water or on a vessel while at sea, except that: (a) A FAD may be inspected and handled as needed to identify the FAD, identify and release incidentally captured animals, un-foul fishing gear, or prevent damage to property or risk to human safety; and (b) A FAD may be removed from the water and if removed may be cleaned, provided that it is not returned to the water.

(5) From a purse seine vessel or any associated skiffs, other watercraft or equipment, do any of the following, except in emergencies as needed to prevent human injury or the loss of human life, the loss of the purse seine vessel, skiffs, watercraft or aircraft, or environmental damage: (a) Submerge lights under water; (b) suspend or hang lights over the side of the purse seine vessel, skiff, watercraft or equipment, or; (c) direct or use lights in a manner other than as needed to illuminate the deck of the purse seine vessel or associated skiffs, watercraft or equipment, to comply with navigational requirements, and to ensure the health and safety of the crew.

The Administrator, Pacific Islands Region, NMFS, has determined that this proposed rule and these proposed specifications are consistent with the WCPFC Implementation Act and other applicable laws, subject to further consideration after public comment.

This proposed rule has been determined to be not significant for purposes of Executive Order 12866.

An initial regulatory flexibility analysis (IRFA) was prepared, as required by section 603 of the RFA. The IRFA describes the economic impact this proposed rule and specifications, if adopted, would have on small entities. A description of the action, why it is being considered, and the legal basis for this action are contained in the SUMMARY section of the preamble and in other sections of this SUPPLEMENTARY INFORMATION section of the preamble. The analysis follows:

Small entities include “small businesses,” “small organizations,” and “small governmental jurisdictions.” The Small Business Administration (SBA) has established size standards for all major industry sectors in the United States, including commercial finfish harvesters (NAICS code 114111). A business primarily involved in finfish harvesting is classified as a small business if it is independently owned and operated, is not dominant in its field of operation (including its affiliates), and has combined annual receipts not in excess of $20.5 million for all its affiliated operations worldwide.

The proposed rule and specifications would apply to owners and operators of U.S. fishing vessels used for commercial fishing for HMS in the Convention Area. With the exception of the requirement to obtain an IMO number, the substantive elements of the rule and specifications (i.e., those elements that could bring economic impacts to affected entities) would apply only to purse seine vessels. NMFS estimates that of all the U.S. fishing vessels to which the IMO number requirement would apply, only 7 do not already have an IMO number. Of the 7, 1 is a purse seine vessel, 4 are longline vessels, and 2 are troll vessels.

The number of purse seine vessels that would be affected by the purse seine specifications is the number of vessels licensed under the Treaty on Fisheries between the Governments of Certain Pacific Island States and the Government of the United States of America (South Pacific Tuna Treaty, or SPTT). The current number of licensed vessels is 37. The maximum number allowed under the SPTT, apart from joint venture licenses, none of which have ever been issued, is 40.

Thus, the fish harvesting entities that would be affected by the proposed rule and specifications include about 37 purse seine vessels, 4 longline vessels, and 2 troll vessels.

Based on (limited) available financial information about the affected fishing vessels and the SBA's small entity size standards for commercial finfish harvesters, and using individual vessels as proxies for individual businesses, NMFS believes that all the affected fish harvesting businesses are small entities. NMFS used average per-vessel returns over recent years to estimate annual revenue because gross receipts and ex-vessel price information specific to the affected vessels are not available to NMFS. For the purse seine fishery, NMFS estimates that the average annual receipts over 2010-2012 for each purse seine vessel were less than the $20.5 million threshold for finfish harvesting businesses (the greatest was about $19 million) based on the catches of each vessel in the purse seine fleet during that period, and indicative regional cannery prices developed by the Pacific Islands Forum Fisheries Agency (available at https://www.ffa.int/node/425#attachments). Since 2012, cannery prices have declined dramatically, so the vessels' revenues in 2013 and 2014 have very likely declined as well. For the longline fishery, the ex-vessel value of catches by the Hawaii longline fleet in 2012 was about $87 million. With 129 active vessels in that year, per-vessel average revenues were about $0.7 million, well below the $20.5 million threshold for finfish harvesting businesses.

The recordkeeping, reporting, and other compliance requirements are discussed below for each of the main elements of the proposed rule and proposed specifications, as described earlier in the SUPPLEMENTARY INFORMATION section of the preamble. Fulfillment of these requirements is not expected to require any professional skills that the affected vessel owners and operators do not already possess. The costs of complying with the proposed requirements are described below to the extent possible:

The proposed framework would establish administrative procedures for implementing Commission decisions. It would not in itself establish any requirements for owners or operators of fishing vessels or other entities, so it is not discussed further in this IRFA.

The requirement to obtain an IMO number would be a one-time requirement; once a number has been issued for a vessel, the vessel would be in compliance for the remainder of its life, regardless of changes in ownership. Most entities that would be required to obtain an IMO number already have them. NMFS estimates that 7 fishing vessels (that are currently in the fishery) would initially be subject to the requirement, and projects that as fishing vessels enter the fishery in the future, roughly two per year would be required to obtain IMO numbers. Completing and submitting the application form (which can be done online and requires no fees) would take about 30 minutes per applicant, on average. Assuming a value of labor of approximately $26 per hour and communication costs of about $1 per application, the (one-time) cost to each entity would be about $14.

Among the proposed rule's other regulatory changes, only the change to the daily FAD reporting requirements has the potential to bring economic impacts to affected entities. Under the existing regulations, when NMFS triggers the daily FAD reporting requirement through an announcement in the Federal Register, the vessel owner or operator has to complete and submit the reports each day while the fishing vessel is at sea in the Convention Area. NMFS currently estimates this cost to be about $1,360 per vessel per year. Under the proposed change, the vessel owner or operator would have to complete and submit the reports only if and when directed by NMFS. Because the proposed purse seine FAD restrictions for 2015 do not include any FAD set limits, it is unlikely that NMFS would direct vessel operators to submit reports for 2015. Thus, the change would potentially reduce the reporting costs to affected purse seine entities during this period.

The proposed FAD prohibition period in July-October in 2015 would substantially constrain the manner in which purse seine fishing could be conducted in that period in the Convention Area; vessels would be able to set only on free, or “unassociated,” schools.

The costs associated with the FAD restrictions cannot be quantitatively estimated, but the fleet's historical use of FADs can give a qualitative estimate of the costs. In the years 1997-2013, the proportion of sets made on FADs in the U.S. purse seine fishery ranged from less than 30 percent in some years to more than 90 percent in others. Thus, the importance of FAD sets in terms of profits appears to be quite variable over time, and is probably a function of many factors, including fuel prices (unassociated sets involve more searching time and thus tend to bring higher fuel costs than FAD sets) and market conditions (e.g., FAD fishing, which tends to result in greater catches of lower-value skipjack tuna and smaller yellowfin tuna and bigeye tuna than unassociated sets, might be more attractive and profitable when canneries are not rejecting small fish). Thus, the costs of complying with the FAD restrictions would depend on a variety of factors.

In 2010-2013, the last 4 years for which complete data are available and for which there was 100 percent observer coverage, the U.S. WCPO purse seine fleet made about 39 percent of its sets on FADs. During the months when setting on FADs was allowed, the percentage was about 58 percent. The fact that the fleet has made such a substantial portion of its sets on FADs indicates that prohibiting the use of FADs for four months each year could bring substantial costs and/or revenue losses.

To mitigate these impacts, vessel operators might choose to schedule their routine vessel and equipment maintenance during the FAD prohibition periods. However, the limited number of vessel maintenance facilities in the region might constrain vessel operators' ability to do this. It also is conceivable that some vessels might choose not to fish at all during the FAD prohibition periods rather than fish without the use of FADs. Observations of the fleet's behavior in 2009-2013, when FAD prohibition periods were in effect, do not suggest that either of these responses occurred to an appreciable degree. The proportion of the fleet that fished during the two- and three-month FAD prohibition periods of 2009-2013 did not appreciably differ from the proportion that fished during the same months in the years 1997-2008, when no FAD prohibition periods were in place.

In summary, the economic impacts of the FAD prohibition period in 2015 cannot be quantified, but they could be substantial. Their magnitude would depend in part on market conditions, ocean conditions and the magnitude of any limits on allowable levels of fishing effort in foreign EEZs and on the high seas in the Convention Area.

As indicated above, all affected entities are believed to be small entities, thus small entities would not be disproportionately affected relative to large entities. Nor would there be disproportionate economic impacts based on home port.

As indicted above, there could be disproportionate impacts according to vessel type and size and the types of fishing permits held.

NMFS has not identified any Federal regulations that duplicate, overlap with, or conflict with the proposed regulations, with the exception of a Federal regulation that duplicates to some extent the daily FAD reporting requirement that would be revised under the proposed rule. Existing regulations at 50 CFR 300.34 require that a record of catch, effort and other information must be maintained on board vessels licensed under the South Pacific Tuna Act, on catch report forms known as Regional Purse Seine Logsheets, or RPLs. The RPLs must be submitted to NMFS within two days of a vessel reaching port. The RPLs include the information that would be required to be reported under this proposed rule, such as, how many FAD sets were made on a given day. However, the timing of the RPL requirement is such that it would not provide NMFS with the information it needs to estimate and project FAD sets with respect to the proposed limit in a timely and reliable manner. For that reason, NMFS established the daily FAD reporting requirement that is duplicative in terms of the substance—but not the timing—of one element of the existing RPL reporting requirement. Under the revision proposed in this rule, that duplication would remain.

NMFS has sought to identify alternatives that would minimize the proposed provisions' economic impact on small entities (“significant alternatives”). Taking no action could result in lesser adverse economic impacts than the proposed action for many affected entities (but as described above, for some affected entities, the proposed provisions could be more economically beneficial than no-action), but NMFS has determined that the no-action alternative would fail to accomplish the objectives of the WCPFC Implementation Act, including satisfying the international obligations of the United States as a Contracting Party to the Convention, and NMFS does not prefer it for that reason. Alternatives identified for each of the main elements of the proposed rule and proposed specifications are discussed below:

The proposed framework would not in itself establish any requirements for owners or operators of fishing vessels or other entities, so would not bring economic impacts. Thus, NMFS has not identified any significant alternatives.

NMFS has not identified any significant alternatives to the IMO number requirement that would comport with U.S. obligations to implement the Commission decision regarding IMO numbers.

None of the other proposed regulatory changes are expected to bring adverse economic impacts to affected entities, so NMFS has not identified any significant alternatives.

NMFS considered in detail one alternative to the proposed restrictions on the use of FADs. Under the alternative, purse seine vessels would be subject to a three-month (July-September) FAD prohibition period in 2015, and a limit of 2,522 FAD sets for the year. This alternative would be consistent with the options available to the United States under CMM 2014-01. The impacts of this alternative relative to those of the proposed action would depend on the total amount of fishing effort available to the U.S. purse seine fleet in the Convention Area in 2015. If total available fishing effort is relatively high, the proposed action would likely allow for more FAD sets than would this alternative, and thus likely cause lesser adverse impacts. The reverse would be the case for relatively low levels of total available fishing effort. For example, given the fleet's historical average FAD set ratio of 58 percent, and assuming an even distribution of sets throughout the year, the estimated “breakeven” point between the two alternatives would be 6,502 total available sets for the year. Although the amount of fishing effort that will be available to the fleet in the future, particularly under the SPTT, cannot be predicted with any certainty, 6,502 sets is substantially less than the amounts of fishing effort that have been available to the fleet since it has been operating under the SPTT. For that reason, NMFS expects that the proposed action likely would cause less severe economic impacts on the purse seine fleet and its participants than would this alternative, and NMFS prefers the proposed action for that reason.

This proposed rule contains three collection-of-information requirements that are subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA).

The first collection has been submitted to OMB for review and approval under control number 0648-0595, “Western and Central Pacific Fisheries Convention Vessel Information Family of Forms.” This collection-of-information would be revised to include the requirement for the owners of certain fishing vessels to ensure that IMO numbers are issued for the vessels. This would be a one-time requirement; no renewals or updates would be required during the life of a vessel. A fishing vessel owner would request the issuance of an IMO number by submitting specific information about the vessel and its ownership and management to IHS Maritime, which issues IMO numbers on behalf of the International Maritime Organization. If a fishing vessel requires an exemption, the owner must provide the required information to NMFS. Providing the required information would bring a reporting burden of approximately 30 minutes per response.

The second collection, requirements related to installing and operating vessel monitoring system units, has been approved by OMB under control number 0648-0596, “Vessel Monitoring System Requirements under the Western and Central Pacific Fisheries Convention.” Public reporting burden for the VMS requirements is estimated to average 5 minutes per response for the activation reports and on/off reports, 4 hours per response for VMS unit purchase and installation, and 1 hour per response for VMS unit maintenance.

The third collection, the daily FAD reporting requirement, has been approved by OMB under control number 0648-0649, “Transshipment Requirements under the WCPFC.” Public reporting burden for the daily FAD report is estimated to average 10 minutes per response.

These estimated response times include time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.

Send comments regarding these burden estimates, or any other aspect of the data collections, including whether the current and/or proposed collections are necessary for the performance of the functions of the agency, the accuracy of the agency's estimates of burden, ways to enhance the utility and clarity of information, and suggestions for reducing the burden, to Michael D. Tosatto, Regional Administrator, NMFS PIRO (see ADDRESSES) and by email to [email protected] or fax to 202-395-7285.

Notwithstanding any other provision of the law, no person is required to respond to, and no person shall be subject to penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB control number.

For the reasons set out in the preamble, 50 CFR part 300 is proposed to be amended as follows: