Ms. Faye Robinson
Program Manager
Statutory Import Programs Staff
Room 4211
U.S. Department of Commerce
Washington, DC 20230
Dear Ms. Robinson:
By way of introduction, the Office of Advocacy of the U.S. Small Business Administration (SBA) was established by Congress under Pub. L. No. 94-305 to represent the interests small business before federal agencies and Congress. Advocacy is also required by §612 of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612) to monitor agency compliance with the RFA. On March 28, 1996, President Clinton signed the Small Business Regulatory Enforcement Fairness Act (SBRFA) which made a number of significant changes to the Regulatory Flexibility Act, the most significant being provisions to allow judicial review of agencies' compliance with the RFA.
On November 5, 1997, the Department of Commerce's International Trade Administration (ITA) and the Department of Interior's Office of Insular Affairs (OIA) published a joint proposed rulemaking entitled Proposed Limit on Duty-Free Insular Watches in Calendar Year 1998, 62 Federal Register 59820. The proposal establishes the total quantity and respective territorial shares of insular watches and watch movements which will be allowed to enter the United States free of duty in the calendar year 1998 pursuant to 15 CFR §303.3 and 15 CFR §303.4. In accordance with the proposal, the quota for imports from the U.S. Virgin Islands will be reduced by 500,000 units. The quotas for Guam, American Samoa, and the North Mariana Islands will remain the same. The agencies certified that the proposal would not have a significant economic impact on a substantial number of small entities because the rulemaking primarily makes technical changes. The Office of Advocacy asserts that the certification is inadequate for RFA purposes.
Requirements for an Adequate Certification Under the RFA
If a proposed rule is not expected to have a significant economic impact on a substantial number of small entities, the agency head may certify the rulemaking. The certification must be accompanied by the factual basis for the certification. 5 U.S.C. §605 (b) A mere statement without a factual basis does not satisfy the law.
The purported certification published by the ITA and OIA is devoid of any type of support or explanation. There is no explanation of the nature of the industry, the number of small entities involved in the industry, the number of small entities that will be affected by the proposal, the types of small entities affected by the proposal, the projected cost on the small entities, or any other data to provide a basis for the conclusion of no significant economic effects on small entities. Merely stating that the proposal only makes technical changes, without a factual analysis, misrepresents the substance of the rule and disregards the law. Lowering a quota by 500,000 or 16% is not a technical change. Technical changes usually refer to changes to a regulation that are not substantive. Lowering a quota is a substantive change which could possibly affect a number of small entities, especially since the quota reduction exceeds the 10% reduction limit that is imposed by 15 CFR §303.3 (b)(2). Without some substantiation, the public cannot evaluate the merits of the agencies' certification.
In the recent case of North Carolina Fisheries Association v. Daley, Civil Action No. 2:92cv339, the United States Court of Appeals for the Eastern District of Virginia remanded a rulemaking to the Department of Commerce for non-compliance with the RFA. The basis of the decision was that the Department failed to provide a proper factual statement to support its certification that maintaining the quota in the flounder fishery would not have a significant economic effect on a substantial number of small entities. To address the Department's noncompliance, the Court ordered the Department of Commerce to "undertake enough analysis to determine whether the quota had a significant economic impact on the North Carolina Fishery." (1)The Court further ordered the Department of Commerce to "include in … [the] analysis whether the adjusted quota will have a significant economic impact on a small entities in North Carolina."(2) Given the findings in North Carolina Fishery v. Daley , the Office of Advocacy submits that it is reasonable to assume that a court would find similar inadequacies in this proposal.
In promulgating the RFA, Congress intended to create an analytical process through which agencies would consider the impact of their actions on small entities and assure that small entities were not being subjected to unduly burdensome regulations. Requiring agencies to substantiate their certifications in the public record is intended to provide the public with sufficient information on an agency's analysis to elicit informed public comment of an agency's findings. Public comments on an agency's analysis helps the agency achieve rational rulemaking.
If you would like to discuss this matter or if this office can be of any further assistance, please contact, Jennifer A. Smith. She may be reached either by mail at the above address or by telephone at (202) 205-6943.
Thank you for your attention to this matter.
Sincerely,
Jere W. Glover
Chief Counsel
Office of Advocacy
Jennifer A. Smith
Assistant Chief Counsel for
Economic Regulation
cc: Sally Katzen
ENDNOTES
1. North Carolina Fisheries Association v. Daley, No. 2:97cv339, slip op. at 13 ( E.D. VA Oct. 10, 1997)
2. Id.
* Last Modified: 6/14/01