Annual Report of the
Chief Counsel for Advocacy
on Implementation of the
Regulatory Flexibility Act,
Fiscal Year 2001
Office of Advocacy
U.S Small Business Administration
Washington D.C. 20416
February 2002
To the President and Congress of the United States:
The Office of Advocacy has just celebrated a milestone: 25 years since it was empowered by the Congress to be an independent voice for small business. Since the enactment of the Regulatory Flexibility Act (RFA) in 1980, the Office of Advocacy has had an oversight role in implementing the law. The RFA requires federal agencies to determine whether a proposed rule will have a disproportionate effect on small firms and other small entities and, if so, to explore alternative regulatory solutions. As the U.S. Small Business Administration’s Chief Counsel for Advocacy charged with monitoring federal agency compliance with the act, I am pleased to send you this report, which offers a review of RFA achievements and ongoing concerns in fiscal year 2001.
The small business community saved an estimated $4.4 billion in compliance costs as the result of regulatory changes made in fiscal year 2001 in response to recommendations made by the Office of Advocacy and the small business community. Many agencies should be applauded for their willingness to change regulatory proposals after analyzing scientific and economic data about burdensome impacts and finding equally effective alternatives for accomplishing public policy objectives. The RFA was enacted by Congress to accomplish these very outcomes, and it continues to be a strong tool for working within the federal regulatory arena.
The implementation of the act became more effective with the 1996 passage of the Small Business Regulatory Enforcement Fairness Act (SBREFA). Among other things, SBREFA amended the RFA to allow a small business, appealing from an agency final ruling action, to seek judicial review of an agency’s compliance with the RFA. Not surprisingly, this change has been accompanied by increased agency interest in avoiding challenges to their regulations.
One thing has not changed: the need for the Office of Advocacy’s involvement is greater than ever. Small firms continue to rely on an advocate to monitor the obstacles to small business growth that emerge in an ever-changing, regulated, but dynamic marketplace. In one report, of course, there is no way to capture all the daily interactions between Advocacy staff and regulatory officials in other federal agencies. More and more of Advocacy’s involvement occurs during the pre-proposal and regulatory development stages, and while this work is not fully reflected in official comment letters, it is key to RFA enforcement. Certainly, the earlier an agency can take small business concerns into consideration during the regulatory development process, the more effective it can be in fulfilling the law’s intent.
To ensure that the RFA is implemented properly, the Office of Advocacy educates both federal agencies and small entities about the RFA through seminars, briefings, and publications. Information about these, as well as regulatory comments and testimony, appear on Advocacy’s home page at http://www.sba.gov/ADVO. Advocacy’s active outreach, along with other specific procedures in place for examining the effects of rules on small businesses, continues to be a key component in ensuring that the RFA is a tool for responsible government.
Thomas M. Sullivan
Chief Counsel for Advocacy
Overview of the Regulatory Flexibility Act and Federal Agency Compliance
The Role of the Office of Advocacy
Table 1: SBREFA Panels through Fiscal Year 2001
Table 2: Regulatory Comments Filed by the Office of Advocacy, FY2001
Table 3: Regulatory Cost Savings, Fiscal Year 2001
RFA Achievements in Fiscal Year 2001
Agricultural Marketing Service
Food Safety Inspection Service
Forest Service
Department of Health and Human Services
Centers for Medicare and Medicaid Services
Food and Drug Administration
Bureau of Land Management
National Park Service
Occupational Safety and Health Administration
Employee Benefits Working Group
Internal Revenue Service
Environmental Protection Agency
Federal Acquisition Regulation Council
Ongoing RFA Compliance Concerns
Agricultural Marketing Service
Food Safety Inspection Service
Department of Health and Human Services
Food and Drug Administration
Fish and Wildlife Service
Employment Standards Administration
Federal Aviation Administration
Federal Motor Carrier Safety Administration
Research and Special Programs Administration
Internal Revenue Service
Consumer Product Safety Commission
Environmental Protection Agency
Federal Acquisition Regulation Council
Federal Communications Commission
Appendix A: The Regulatory Flexibility Act
Appendix B: Abbreviations
In recent years, the economy has been extremely dynamic, with technology changing industry structure at a very rapid pace and creating new challenges for analyses of regulatory impacts on small business. Small businesses are a major force in this changing economic landscape, contributing major technological innovations that are spurring growth in the economy and creating most of the new jobs. In order to maintain this trend of job development, the continued viability of small businesses must be ensured.In 1980, the U. S. Congress enacted the Regulatory Flexibility Act (RFA) with a mandate to federal regulatory agencies to analyze the impact of their regulations on small entities and to consider alternatives that would be equally effective in achieving public policy goals without unduly burdening small businesses. The Chief Counsel for Advocacy’s annual report to Congress and the President on implementation of the Regulatory Flexibility Act provides insight into whether federal agency regulations were disproportionately burdensome on small businesses and whether they interfered with small business growth and innovation.
The annual report on regulatory flexibility compliance provides Congress and the President an opportunity to review the effects agency actions may have on small entities and to determine whether the agencies are meeting both the intent and the letter of the law. This report is divided into several parts. The first provides an overview of the RFA, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA): its purpose, how it is to be implemented by agencies, and why it is important to the small business community. The second part describes the role of the Office of Advocacy in rulemaking and lists FY 2001 achievements, comment letters, and SBREFA panels. The third highlights agency achievements and how more than $4.4 billion in compliance cost savings were achieved in fiscal year 2001. The fourth looks at ongoing concerns with respect to agency RFA compliance.
For many years the view of the Office of Advocacy and many small business advocates was that the RFA needed more teeth to accomplish compliance and that noncompliance was caused, in large part, by the lack of enforcement provisions in the law. With the passage of SBREFA, a small entity adversely affected or aggrieved by a final rule may, on appeal from the rule, seek judicial review of an agency’s failure to comply with the RFA. This revision in the law continues to have a beneficial effect on the regulatory process. To avoid judicial review, some agencies are more inclined to do the kind of analysis required by the RFA and select the regulatory options that will achieve the regulatory objectives without imposing an unduly heavy burden on small entities.
The law is working, but the need for continued attention to the effects of regulation on the regulated population is greater than ever.
Overview of the Regulatory Flexibility Act and Federal Agency Compliance with the LawThe Regulatory Flexibility Act(1) is an important statute that, at long last, largely because of the 1996 SBREFA amendments, is having an impact on the way the government views the role of small businesses in the economy. The RFA mandates an analytical process that agencies must follow in order to level the regulatory playing field for small businesses and to preserve competition in the marketplace without compromising public policy objectives. Agencies must undertake a thorough analysis of the economic impact of their proposed regulations and consider alternatives that will achieve the same public policy goals, but with more equitable impact on small entities.
History of the RFABefore the RFA was enacted in 1980, federal agencies did not evaluate, nor did they see the need to evaluate the impact their rules would have on small businesses. More often than not, agencies failed to recognize or understand the dynamic role small businesses play and how important they are to the nation’s economic growth.
It was not readily understood that small businesses would suffer disproportionately—compared with large businesses—from "one-size-fits-all" regulations and that this could harm competition. Direct costs involved in complying with a regulation are often approximately the same for a large company as for a small company. But because a large company is able to spread the compliance costs over larger output, it can maintain a competitive advantage over a small company subject to the same regulation. Because large businesses can afford to hire more people to monitor proposed agency regulations and have easier and more direct input into the regulatory process, small businesses are inherently at a disadvantage in influencing final decisions on regulations.
In 1980, at the first White House Conference on Small Business, the message the delegates sent to the President and the Congress was loud and clear: they wanted relief from the heavy burdens placed on them by federal government regulations. Small businesses argued that when a federal agency issued a regulation, the burden of the law often fell hardest on them, not through any intentional desire by the agency to harm them, but because "one-size-fits-all" regulations were easier to design and enforce. No thought was given to any disproportionate impact, nor to the possibility that alternatives might be equally effective in achieving public policy objectives. Recognizing both the different impacts of regulations on firms of different sizes and the disparity between large and small firms in the level of input in the regulatory process, the Congress enacted the RFA in 1980 to alter how agencies craft regulatory solutions to societal problems and to change the one-size-fits-all regulatory mindset.(2)
The Analysis Required by the RFAThe RFA requires a federal agency to review its regulatory proposals and determine if any new rule is likely to have a "significant economic impact on a substantial number of small entities." If such impact is likely to occur, the agency must prepare and make available for public comment an "initial regulatory flexibility analysis," describing in detail the potential economic impact of the proposed rule on small entities.
An essential part of this analysis is identifying alternatives to the proposed rule that can accomplish the same regulatory objectives but with reduced economic impact on small entities. By mandating this analytical process, the RFA seeks to ensure that agencies understand not only the industries they are regulating, but also the potential effect of their regulations on small entities before it is too late to pursue alternative measures. To reach this level of understanding, it is crucial for the agencies to solicit meaningful input from the small business community as early as possible.
The RFA is built on the premise that when an agency undertakes a careful analysis of its proposed regulations—with sufficient small business input—the agency can and will identify any disproportionate economic impact on small businesses. Once an agency identifies the impact a rule will have on small businesses, it is expected to seek alternative measures to reduce or eliminate the disproportionate small business burden without compromising public policy objectives. The RFA does not require special treatment or regulatory exceptions for small business, but mandates an analytical process for determining how best to achieve public policy objectives without unduly burdening small businesses.
Federal Agencies’ Response to the RFAThe general purpose of the RFA is clear. However, in monitoring agency compliance, the Office of Advocacy has found over the years, and has reported to the President and the Congress, that federal agencies often failed to conduct the proper analyses as required by the law. Some agencies ignored the RFA altogether, while others asserted that the RFA did not apply to them. Other agencies recognized the RFA’s applicability to their regulations, yet failed to comply with its requirements.
Agencies often did not understand or accept the possibility that less burdensome regulatory alternatives might be equally effective in achieving the agency’s public policy objectives. Thus, many agencies failed—or even refused—to consider valid alternatives to their proposals, even when such options were brought to their attention by small businesses during the rulemaking process.
An agency’s failure to weigh alternatives properly not only defeats the core purpose of the RFA; it effectively excludes small businesses from meaningful opportunity to influence the regulatory development process as Congress intended. Until 1996, there was no way to force agencies to comply, nor did the small business community have a remedy to seek redress. And although the RFA authorized the Chief Counsel for Advocacy of the U.S. Small Business Administration (SBA) to file amicus curiae briefs in court cases involving agency regulation, prior to SBREFA, Advocacy could not successfully raise the issue of agency noncompliance because the courts did not have jurisdiction over the question.
The 1996 SBREFA Amendments to the RFAThe 1995 White House Conference on Small Business provided small business owners another opportunity to seek an amendment to the RFA authorizing judicial review of agency compliance with the RFA. They urged Congress to pass amendments that would add "teeth" to the law.
In 1996, the Congress enacted the Small Business Regulatory Enforcement Fairness Act, which amended the RFA in several critical respects. The SBREFA amendments to the RFA were specifically designed to ensure meaningful small business input during the earliest stages of the regulatory development process.
Most significantly, SBREFA authorized judicial review of agency compliance with the RFA, and reaffirmed the authority of the Chief Counsel for Advocacy to file amicus curiae briefs in regulatory appeals brought by small entities.
The SBREFA amendments also added a new provision to the RFA, namely, a requirement that small business advocacy review panels be convened to review Environmental Protection Agency (EPA) and Occupational Safety and Health Administration (OSHA) rules that might affect small entities. The purpose of the panels is to elicit comments from small entities on a rule’s impact and alternatives that should be considered, and to develop a report on the panel’s findings for the head of the agency within 60 days.
The Role of the Office of AdvocacyThe statutory responsibilities of the Office of Advocacy include representing the interests of small business before policymaking bodies within the federal government, conducting research on small businesses’ contribution to the economy, and monitoring federal agency compliance with the Regulatory Flexibility Act.
The Office of Advocacy works with small businesses, federal agencies, trade associations, and the Congress to promote compliance with the RFA through several avenues. In FY 2001, the office responded to congressional inquiries on issues such as procurement reform, universal telephone service, bonding for mine operations, and recordkeeping for occupational injury and illnesses.
Advocacy staff members review thousands of pages of proposed regulations and work closely with small business owners and regulatory contacts within the federal agencies to focus agency attention on RFA requirements. In FY 2001, there was a noticeable increase in the number of agency inquiries requesting information on how to comply with the RFA and how to address RFA issues in the context of specific rules. These inquiries provided unique opportunities for one-on-one guidance, as well as opportunities to address the concerns of small entities before a rule was proposed. The Office of Advocacy attributes this increase in pre-proposal consultation in part to the SBREFA amendments.
Early intervention by the Office of Advocacy has helped federal agencies develop a greater appreciation of the role small businesses play in the economy and the rationale for ensuring that regulations do not erect barriers to competition. In particular, the Office of Advocacy has provided economic statistics on which industries or industrial sectors are dominated by small firms. These data show regulators why rules should be written to fit the economics of small businesses if public policy objectives will not otherwise be compromised. The Office of Advocacy gives federal agencies ready access to the statistics for use in the federal rulemaking process by making them available on its Internet home page. Advocacy also maintains a database of information on trade associations that can be helpful to federal agencies seeking input from small businesses.
Another avenue used by the Office of Advocacy to promote agency compliance is the network of small business representatives who can inform their members about changes in the law and how small businesses can more effectively participate in the rulemaking process. The Office of Advocacy conducts workshops for small business representatives on federal regulatory agency responsibilities under the law, factors to be addressed in economic analyses performed by agencies as they assess the impact of regulatory proposals, and the new judicial review provision enacted in the SBREFA amendments. Roundtable meetings are routinely held with small businesses and trade associations on specific issues such as procurement reform, environmental regulations, and industrial safety. Advocacy also plays a key role as a participant in the small business advocacy review panels convened to review Environmental Protection Agency and Occupational Safety and Health Administration rules (Table 1).
As regulatory proposals are developed, the Office of Advocacy may become involved through formal comment letters to the agency, congressional testimony if requested, or, where warranted, "friend of the court" briefs. In FY 2001, the Office of Advocacy submitted several dozen formal comment letters on proposed rules, critiquing agency noncompliance with the RFA and suggesting regulatory alternatives for consideration by the agency (Table 2).
One measure of the RFA’s effectiveness is an estimate of the compliance costs that small firms will not have to incur as the result of regulatory changes made in response to Advocacy’s recommendations and those of the small business community. These cost savings as a result of FY 2001 actions amounted to approximately $4.4 billion (Table 3). The savings are the direct result of agencies’ analyses of economic and scientific data urged by Advocacy and the small business community.
Despite Advocacy’s efforts, many agencies still fail to comply with the RFA. Some still use "boilerplate" language to certify that rules will not have a significant impact on a substantial number of small businesses without providing the factual justification required by the RFA. Many agencies continue to define "small business" and "small entity" incorrectly. Others fail to provide meaningful evaluations of regulatory alternatives or to perform adequate economic impact analyses. The culture change that finds some agencies welcoming the participation of small businesses and the Office of Advocacy in regulatory development is sometimes the result of litigation brought by small businesses against federal agencies.
The Office of Advocacy continues to work through the RFA and SBREFA processes to bring about better rulemaking at federal agencies up front. The changing culture at the Internal Revenue Service (IRS), whose rules affect every small business, is one example. The IRS once escaped the requirements of the RFA because it categorized most of its rules as "interpretive," meaning the rules simply carried out the intent of Congress and did not impose any additional requirements within the agency’s discretion. Since the passage of SBREFA and the addition of some interpretive rules to the scope of the RFA, the IRS has been working with the Office of Advocacy to learn more about RFA compliance. In 2001, the IRS was more likely to request suggestions from small businesses about the most troublesome regulatory requirements and the best approach to solving such problems before the rules were published. That is exactly how the RFA intends the regulatory process to work.
Table 1: SBREFA Panels Through Fiscal Year 2001| Rule Subject | Date Convened |
Report Completed |
NPRM1 | Final Rule Published |
|
| Environmental Protection Agency | |||||
| Non-Road Diesel Engines | 03/25/97 | 05/23/97 | 09/24/97 | 10/23/98 | |
| Industrial Laundries Effluent Guideline | 06/06/97 | 08/08/97 | 12/12/97 | Withdrawn | |
| Stormwater Phase 2 | 06/19/97 | 08/07/97 | 01/09/98 | 12/08/99 | |
| Transport Equipment Cleaning Effluent Guideline | 07/16/97 | 09/23/97 | 06/25/98 | 08/14/00 | |
| Centralized Waste Treatment Effluent Guideline | 11/06/97 | 01/23/98 | 01/13/99 | 12/22/00 | |
| Underground Injection Control Class V Wells | 02/17/98 | 04/17/98 | 07/29/98 | 12/07/99 | |
| Ground Water | 04/10/98 | 06/09/98 | 05/10/00 | ||
| Federal Implementation Plan for Regional
Nitrogen Oxides Reductions |
06/23/98 | 08/21/98 | 09/30/98 | ||
| Section 126 Petitions | 06/23/98 | 08/21/98 | 09/30/98 | 05/25/99 | |
| Radon in Drinking Water | 07/09/98 | 09/18/98 | 11/02/99 | ||
| Long Term 1 Enhanced Surface Water Treatment | 08/21/98 | 10/19/98 | 04/10/00 | ||
| Filter Backwash Recycling | 08/21/98 | 10/19/98 | 04/10/00 | ||
| Light Duty Vehicles/Light Duty Trucks
Emissions and Sulfur in Gasoline |
08/27/98 | 10/26/98 | 05/13/99 | 02/10/00 | |
| Arsenic in Drinking Water | 03/30/99 | 06/04/99 | 06/22/00 | 01/22/01 | |
| Recreational Marine Engines | 06/07/99 | 08/25/99 | In process | ||
| Diesel Fuel Sulfur Control Requirements | 11/12/99 | 03/24/00 | 06/02/00 | 01/18/01 | |
| Lead Renovation and Remodeling Rule | 11/23/99 | 03/03/00 | In process | ||
| Metals Products and Machinery | 12/09/99 | 03/03/00 | 01/03/01 | ||
| Concentrated Animal Feedlots | 12/16/99 | 04/07/00 | 01/12/01 | ||
| Reinforced Plastics Composites | 04/06/00 | 06/02/00 | In process | ||
| Stage 2 Disinfection Byproducts | 04/25/00 | 06/23/00 | In process | ||
| Recreational Rule – Air Pollution | 05/03/01 | 07/17/01 | In process | ||
| Construction and Development Effluent Guideline |
07/16/01 | 10/12/01 | In process | ||
| Occupational Safety and Health Administration | |||||
| Tuberculosis | 09/10/96 | 11/12/96 | 10/17/97 | ||
| Safety and Health Program Rule | 10/20/98 | 12/19/98 | In process | ||
| Ergonomics Program Standard | 03/02/99 | 04/30/99 | 11/23/99 | 11/14/002 | |
1
NPRM= Notice of proposed rulemaking.| Date | Agency | Comment Subject |
| 10/05/00 | FCC | Eligibility Requirements for the Personal Communications Services (PCS) Frequency Blocks C and F Auction |
| 10/12/00 | DOT | Regarding H.R. 5164, the Transportation Recall Enhancement, Accountability, and Documentation Act |
| 10/13/00 | DOI | Final Regulatory Flexibility Analysis for the Department of the Interior’s Rulemaking on Subpart 3809 Surface Management |
| 11/09/00 | EPA | Notice of Proposed Rulemaking, Cooling Water Intake Structures for New Facilities Pursuant to 316(b) of the Clean Water Act (65 Fed. Reg. 49,060 Aug 10, 2000) |
| 11/20/00 | DOJ | Regulation Concerning Commercial Mail Receiving Agencies. |
| 12/12/00 | FCC | Regarding Amendment of the Commission’s Rules with regard to the 3650-3700 MHz Government Transfer Band (ET Dkt. No 98-237) |
| 12/14/00 | FCC | Amendment of the Rules with Regard to the 3650-3700 MHz and 4.9 GHz Band Transfer from the Federal Government. |
| 12/15/00 | DOT | Hours of Service
of Drivers; Rest and Sleep for Safe Operation (65 Fed. Reg. 25540) |
| 01/05/01 | FCC | Automatic and Manual Roaming Obligations pertaining to Commercial Mobile Radio Services (WT Dkt. No. 00-193) |
| 01/09/01 | FCC | Regarding
Children’s Television; Obligation of Digital Television Broadcasters; (MM Dkt. No. 00-167) |
| 01/16/01 | FCC | In the Matter of Amendment of the Commission’s Rules for Community Wireless Telecommunication Networks RM-10024 |
| 01/31/01 | HHS | Interim Final Rule on the Use of Restraint and Seclulsion in Psychiatric Residential Treatment Facilities Providing Psychiatric Services to Individuals under 21 Years of Age. |
| 02/08/01 | FCC | Promoting Efficient Use of Spectrum through Elimination of Barriers to the Development of Secondary Markets (WT Dkt. No. 00-230) |
| 03/17/01 | FDA | Ruling that will have a Direct Impact on Ongoing FDA Rulemakings that could be Detrimental to Small Business Interests |
| 03/22/01 | DOL | Employment Standards Administration Application of the Fair Labor Standards Act to Domestic Service (66 Fed. Reg. 5481 Jan 19, 2001) |
| 03/27/01 | EPA | Review of Arsenic Safe Drinking Water Standard. |
| 03/30/01 | HHS | Final Rule on Standards for Privacy of Individually Indentifiable Health Information |
| 03/30/01 | FCC | Final Regulatory Flexibility Analysis and Initial Regulatory Flexibility Analysis for Numbering Resources Optimization |
| 04/09/01 | EPA | Control of Emissions from Nonroad Large Spark Ignition Engines, Recreational Engines (Marine and Land-based), and Highway Motorcycles; SBREFA Small Business Advocacy Panel |
| 04/09/01 | EPA | Review of Lead Toxic Release Inventory Reporting Rule. |
| 04/13/01 | FCC | Regulatory Review Spectrum Aggregation Limits for Commercial mobile Radio Services. |
| 04/16/01 | DOI | The National Park Service’s Final Rule Phasing Out Snowmobiles in Yellowstone National Park, on the John D. Rockefeller Jr.Parkway; and with Some Exceptions in Grand Teton National Park (66 Fed. Reg. 7259) |
| 04/19/01 | FCC | Final Regulatory Flexibility Analysis for Revision of the Commission’s Rules to Ensure Compatibility with Enhanced 911 Emergency Calling Systems |
| 05/03/01 | FCC | Final Regulatory Flexibility Analysis for Implementation of the Subscriber Carrier Selection Change Provisions of the Telecommunications Act of 1996 and Policies and Rules Concerning Unauthorized Changes of Consumers’ Long Distance Carriers |
| 05/04/01 | DOE | Energy Efficiency Standards for Air Conditioners and Heat Pumps |
| 05/07/01 | BLM | Proposed Suspension of the Mining Claims Under the General Mining Laws Rule |
| 05/09/01 | USDA | Department Side Management and Renewable Energy Systems |
| 05/14/01 | FWS | Notice of Availabiltiy of Interim Strategy on Section 7 Consultations Under the Endangered Species Act for Watercraft Access Projects in Florida that may Indirectly Affect the West Indian Manatee. |
| 05/16/01 | NAS | Comment on the Provisional Appointments to the NAS Subcommittee to Update the 1999 Arsenic in Drinking Water Report Tasked by the EPA to Review the Standard, Project No. BEST-01-01-A |
| 05/21/01 | NAS | Testimony before the National Research Council’s Subcommittee to Update the 1999 Arsenic Drinking Water Report |
| 05/21/01 | DOT | Pipeline Safety: Hazardous Liquid Pipeline Accident Reporting Revisions |
| 05/25/01 | DOT | Pipeline Integrity Management In Height Consequence Areas (Hazardous Liquid Operators with Less Than 500 Miles of Pipeline) |
| 05/31/01 | EPA | Effluent Elimination Guidelines and Standards for the Construction and Development Category; Small Entity Representative Recommendations |
| 06/07/01 | DOT | Participation by Disadvantaged Business Enterprises (DBEs) in Department of Transportation Financial Assistance Programs (66 Fed. Reg. 23208 May 8, 2001) |
| 06/19/01 | NAS | National Research Council Conflict of Interest/Bias Disclosure Regarding Arsenic Update Subcommittee. |
| 06/25/01 | EPA | Notice of Data Availability for the Proposal to Regulate Cooling Water Intake Structures for New Facilities (66 Fed. Reg. 28853 May 25, 2001) |
| 07/06/01 | GSA | Support for Revoking the Proposed Rule, Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings (66 Fed. Reg. 17758 April 3, 2001) |
| 07/09/01 | FCC | Regarding Streamlining Contributions to the Universal Service Fund (CC Dkt. No. 96-45, et al.) |
| 07/09/01 | FCC | Federal-State Joint Board Universal Service. Streamlined Contributor Reporting Requirements Associated with Administration of Telecommunications Relay Service. Telecommunications Services for Individuals with Hearing and Speech Disabilities, and the Americans with Disabilities Act. Administration of the North American Numbering Plan. Number Resource Optimization. Telephone Number Portability |
| 07/12/01 | NAS | National Research Council Scientific Integrity Procedures and the Arsenic Update Subcommittee |
| 07/16/01 | GSA | Electronic Commerce in Federal Procurement (66 Fed. Reg. 27407 May 16, 2001 |
| 07/20/01 | DOL | Employment Standards Administration; Supplemental Comments Regarding the Application of the Fair Labor Standards Act to Domestic Service (66 Fed. Reg. 5481 May 8, 2001) |
| 08/01/01 | DOA | Proposed Changes to the Livestock Mandatory Price Reporting Program. |
| 08/03/01 | EPA | Proposed Additional Regulation of Concentrated Animal Feeding Operations (66 Fed. Reg. 2960 January 12, 2001) |
| 08/14/01 | USPS | Proposed Rule on Delivery of Mail to a Commercial Mail Receiving Agency (66 Fed. Reg. 36224 July 11, 2001) |
| 08/14/01 | FRS | Board of Governors of the Federal Reserve System; Transactions Between Banks and their Affiliates (66 Fed. Reg. 24185 May 11, 2000) |
| 08/16/01 | DOA | Food Safety and Inspection Service Labeling of Natural or Regenerated Collagen Sausage Casing |
The following details rulemaking activities the Office of Advocacy was involved in during fiscal year 2001 that resulted in cost savings to small businesses. The combination of yearly savings and one-time savings during this period totals more than $4.4 billion.
Regulatory Cost Savings for Fiscal Year 2001| Agency | Subject Description | Cost Savings |
| BLM | 3809 Hardrock Mining Reclamation Bond Rule. This rule requires hardrock miners to provide reclamation bonds for mining on federal lands. The rule was the subject of the Northwest Mining v. Babbitt case, in which the court remanded the rule to BLM for its failure to comply with the RFA. Advocacy criticized BLM throughout subsequent rulemaking procedures for failing to comply with the RFA. BLM finalized the rule on January 20, 2001. In March 2001, BLM proposed suspending the January 20 regulation and reinstating the rule that was in effect prior to January 20, 2001. In October 2001, BLM announced it would be issuing a final rule overturning all but the bonding provision of the 3809 hardrock mining regulation. Although the bonding provisions are a part of the final rule, the costly "mine veto" provision and other costly sections are not. BLM said the mine veto provision was more costly than all other sections combined. | $877 million in annual savings Source: The Office of Advocacy, based on BLM estimation of economic impact. |
| EPA | Final Rule to Modify Reporting of Lead and Lead Compounds – Toxic Release Inventory Reporting - Section 313 of the Emergency Planning and Community Right-to-Know Act of 1996. This rule changed the reporting threshold for facilities from the current 10,000 pounds to 100 pounds of lead throughput per year. Based on Advocacy’s input, EPA changed the threshold from its proposal of 10 pounds to 100 pounds in the January 2001 final rule. | $41 million in annual savings in the 2002;
$20 million in annual savings in subsequent years. Source: The Office of Advocacy, based on EPA’s economic analysis in the rulemaking record. |
| EPA | Control of Sulfur in Highway Diesel Fuel. This rule limits the level of sulfur in highway diesel fuel. | $35 million in annual savings Source: The Office of Advocacy, based on EPA’s economic analysis in the rulemaking record. |
| EPA
FAR |
Control of Air Toxics from
Mobile Sources. This rule
sets standards for air pollution from cars, trucks, etc.
Contractor Responsibility, Labor Relations Cost, and Costs Relating to Legal and other Proceedings. This rule provides federal government contracting officers with additional clarification on the expansion of the categories of what constitutes a satisfactory record of integrity and business ethics in making contractor responsibility determinations for contract awards. The rule requires federal contractors to make certain certifications regarding compliance with laws and regulations promulgated by the federal government. It is based on the principle that the federal government should not enter into contracts with contractors who do not comply with the law. This rule was finalized, but the FAR Council stayed its implementation. |
$190 million in annual savings Source: The Office of Advocacy, based on Turner, Mason analysis of cost to reduce benzene for 1994 reformulated gasoline rule. $28 million in annual savings Source: The FAR Council |
| FS | Roadless Conservation Rule. This Forest Service rule prohibits the construction and reconstruction of roads on 58.5 million acres of national forest lands. Throughout the rulemaking process, Advocacy argued that the rule would have a significant economic impact on small businesses and communities. The Forest Service finalized the rule on January 12, 2001. Subsequently, FS was sued in Idaho. The District Court of Idaho issued an injunction against the implementation of the rule. In July 2001, the Bush administration reopened the issue and published an advance notice of proposed rulemaking in July 2001 to solicit additional public input on the nation’s future forest road policy. Advocacy contends that its vehement opposition to the rule throughout, and subsequent to, the rulemaking process may have played a role in the court’s decision to issue an injunction and the FS decision to revisit the rule. | $231.3 million in annual savings. Source: The Office of Advocacy, based on FS’ analysis in the rulemaking record. |
| OSHA | Ergonomics Standard. With this rule, the Occupational Safety and Health Administration required every business owner to have a plan in place to address musculoskeletal disorders as a result of repetitive stress injuries that occurred in or out of the workplace. OSHA's ergonomics program standard was issued November 14, 2000, and took effect January 16, 2001. However, on March 20, 2001, President Bush signed a joint resolution of Congress disapproving OSHA's ergonomics standard. Congress acted under authority of the Congressional Review Act of 1996. As a result, the standard is no longer in effect, and employers and workers are not bound by its requirements. The Office of Advocacy believes that both the SBREFA panel report and subsequent SBA cost analysis played a significant role in Congress’ decision to prevent the rule’s promulgation. | $3 billion in one-time savings
Source: OSHA’s estimate of the entire cost of the rule at the time of proposal. |
| Subtotals: | $1,402,300 in annual savings,
and $3 billion in one-time savings |
|
| Total Cost Savings: | $4,402,300 ( $4.4 billion) |
U.S. Department of Agriculture
Agricultural Marketing Service
Issue: Organic Food Production, Handling, and Labeling
The Office of Advocacy has worked with AMS and OMB on various versions of a regulation intended to provide a single national standard for organic food production, handling, and labeling. Congress ordered the agency to develop uniform standards because the label "organic" fell under a hodgepodge of state, regional, and private certifier standards, giving rise to confusion about the meaning of the label designation. After the rule was first proposed in 1997, AMS pulled it back after receiving about 300,000 mostly negative comments on issues ranging from economic impact to the controversial use of sewer-sludge fertilizer and irradiation. This rule marked the first time that AMS consulted with Advocacy proactively. The rule was re-proposed in March 2000 without the controversial elements and with a more transparent cost analysis, and a final rule was issued December 21, 2000. Overall, the final standard and its implementation included several changes to benefit organic producers, most of which are small:
Issue: Performance Standards for the Production of Ready-to-Eat Meat
The Food Safety Inspection Service (FSIS) published a proposed rule on the production of ready-to-eat (RTE) meat on February 27, 2001. The rule establishes food safety performance standards for all RTE and partially heat-treated meat and poultry products. The proposed standards set forth levels of pathogen reduction and limits on pathogen growth that official meat and poultry establishments must achieve in order to produce unadulterated products. The rule also contemplates environmental testing requirements intended to reduce the incidence of listeria monocytogenes in RTE meat and poultry products. This is a costly rule, with USDA’s own estimates topping $68 million over a 10-year period. Advocacy expressed concern to OMB that the rule was highly assumption-based and needed additional vetting. It also contained a non-SBA-approved small business size standard. Advocacy requested an extension of the comment period. When the proposal was published in February 2001, the comment period was extended and the agency pledged to hold technical conferences to acquire more scientific information. The agency is working with SBA to develop an appropriate size standard for a "small processor."
Issue: FSIS Labeling of Natural or Regenerated Collagen Sausage CasingsIn its rulemaking concerning labeling of natural or regenerated collagen sausage casings, the Food Safety Inspection Service (FSIS) failed to comply with RFA requirements to determine whether the rule would have adverse effects on small entities or to provide significant alternatives or exemptions that would minimize such effects, according to the Office of Advocacy’s August 16, 2001, comment letter. FSIS admitted that it "did not currently have all the data necessary for a comprehensive analysis of the effects of this rule on small entities," but said "associated labeling costs would be low because manufacturers would be able to defer the development of new labels until their existing stocks of labels were exhausted."
Forest ServiceIssue: Limitation on Road Construction in National Forests
Before fiscal year 2000, Advocacy's interaction with FS was limited. However, Advocacy became active in the Forest Service regulatory process when FS began its rulemaking concerning limiting road construction in national forests. The rule prohibited road construction and reconstruction in approximately 54 million acres of inventoried roadless areas. Advocacy's primary role in the interagency effort was to advise the agency on RFA compliance. Initially, FS held that an RFA analysis was not necessary because the initiative would not have a significant impact on a substantial number of small entities. Advocacy believed that the proposal could have an adverse impact on several small entities, including members of the timber industry, small natural-resource-dependent communities, members of the mining industry, recreation providers such as companies that rent snowmobiles and outfitters, and construction companies. As a result of Advocacy’s involvement, Public Law 106-387, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2001 (October 28, 2000) contained a provision funding the review of rules and regulations to determine FS’s consideration of small entities and the RFA. In 2001, the District Court of Idaho issued an injunction against the rule’s implementation. FS has indicated a willingness to work with Advocacy towards RFA compliance. It is hoped that the congressional mandate and court action will be incentives for FS to consider the impacts of its regulations on small entities and alternatives to its actions in the future. Cost savings amounted to $231.3 million annually.
U.S. Department of Health and Human ServicesIssue: Health Care Information Privacy
A final rule imposing strict requirements on all health care providers and their business partners with respect to the handling of confidential, individually identifiable patient information was issued on December 28, 2000.(3) The rule was promulgated in response to requirements outlined in the Health Insurance Portability and Accountability Act of 1996. The rule requires 1) patients to give written consent before their medical information can be given out; 2) health care providers to provide only the "minimum necessary" information when information is requested; 3) health care providers to ensure that their business partners (e.g., billing companies) do not release confidential patient information; etc. These rules apply to all types of records—electronic, paper and oral—even though the authorizing statute pertained only to electronic records. It was Advocacy’s opinion that the rules were overly cumbersome and onerous. The final rule reflected much higher— and more accurate—cost estimates than those originally proposed by the agency (up from $613 million in the proposed rule to $3.54 billion in the final rule). The final rule also reflected greater emphasis on working with industry to provide sample forms and guidance. On March 30, 2001, Advocacy submitted formal comments to the agency expressing continued concerns about a number of issues. The primary concern was that small offices and clinics of doctors and dentists would bear 47.5 percent (almost $1 billion) of the cost in the first year, and 49 percent (about $5.6 billion) of the cost over 10 years. The comments urged the agency to reassess the small business burden, especially in light of the fact that, in spite of the rule’s cost and complexity, patient privacy is still not assured. The final rule was placed on hold when the new administration took office in January 2001. The comment period for the rule was reopened and, in addition to Advocacy’s comments, about 6,000 new comments were received. Congress also reviewed the regulation.
Centers for Medicare and Medicaid Services / Health Care Financing AdministrationIssue: One-Hour Rule
The Health Care Financing Administration, recently renamed the Centers for Medicare and Medicaid Services (CMS) proposed a regulation intended to reduce the incidence of possible injury associated with restraining or secluding individuals under the age of 21 in psychiatric residential treatment facilities. The rule would require that face-to-face assessments be made within one hour of initiating restraint or seclusion. Advocacy commented formally in January 2001, raising concerns about the burden associated with the one-hour requirement, recommended alternatives such as video/audio monitoring and suggested that the biannual staff training requirements for CPR and other techniques were excessive. On May 21, 2001, HCFA released an amended interim final rule to address comments received in response to the January 2001 interim final rule:
Issue: Juice HACCP
On April 24, 1998, the Food and Drug Administration published a proposed rule to establish requirements relating to the processing of juice and juice products under a hazard analysis and critical control points (HACCP) system. The proposal required the application of HACCP principles by processors and importers to ensure juice safety to the maximum extent practicable. The rule was proposed in response to reported food hazards and illnesses associated with unpasteurized juice products. Advocacy commented on the companion rule to require warning labels on juice that is not pasteurized.(4) Advocacy also worked with OMB during the final rule stage to ensure that small business concerns were addressed to the greatest degree possible. In the final rule published on January 19, 2001, FDA made a number of significant changes to benefit small businesses, among them the following:
Bureau of Land Management
Issue: Hardrock Mining
The Bureau of Land Management’s (BLM) section 3809 hardrock mining regulation requires miners to obtain a reclamation bond when mining on government lands. The court remanded the regulation to the agency in 1998 after finding that BLM failed to comply with the RFA (see the Northwest Mining v. Babbitt case). The Office of Advocacy has submitted comments at various phases of the regulatory process. On January 20, 2001, the Bureau of Land Management implemented the final rule, which contained a new "mine veto" provision, and did not provide an opportunity for notice and comment. On March 23, 2001, after four lawsuits were filed alleging that the final rule violates not only the RFA, but also the Administrative Procedure Act (APA), the National Environmental Policy Act (NEPA), the Federal Land Policy and Management Act, and the General Mining Law, BLM published a proposal to suspend the final regulations to amend the section 3809 rules. In lieu of the new rules, BLM proposed reinstating the rules that were in effect on January 19, 2001. The estimated economic impact of the final rule with the new provision was $305-$877 million. In October 2001, BLM published another final rule. It removed the costly "mine veto" provision, but did not implement the less costly alternatives that were suggested by the NRC report. Concurrently, BLM published a new proposed rule for public comment on 3809 hardrock mining reclamation.
National Park Service
Issue: Snowmobiles
On January 22, 2001, the U.S. Department of the Interior, through the National Park Service (NPS), published a final rule in the Federal Register phasing out snowmobile use in Yellowstone National Park, on the John D. Rockefeller, Jr. Parkway, and, with some exceptions, in Grand Teton National Park.(5) Only snow coaches (minivans on tracks) would be allowed under the new rule. On April 16, 2001, the Office of Advocacy submitted comments on the rule to be implemented in Yellowstone and recommended that the NPS reopen the rulemaking. The NPS’s economic analysis suggested that some 70 small businesses depended on snowmobile rental revenue in the areas covered. Advocacy’s view was that it was not clear what would be lost in environmental benefits if the NPS banned just the dirtiest and noisiest snowmobiles. The industry had already taken reasonable steps toward addressing problems caused by snowmobiles, like the recent introduction of the four-stroke snowmobile engine. The NPS’s claim that it must immediately enforce the law also lacked credibility because the NPS had overlooked its legal obligation for 30 years. Advocacy did not believe that the NPS had the statutory authority to ban snowmobiles whenever and wherever it wishes, but even if it did, the NPS failed to justify taking such an action. Despite the comments filed by Advocacy and others, the rule became final on April 22, 2001. Suit was then filed by snowmobile manufacturers, enthusiasts, and the State of Wyoming against the U.S. National Park Service. A settlement agreement was reached in which the NPS committed to reexamine its closure in light of new, environmentally friendly snowmobile technology and other information provided by Advocacy and the public. As part of the settlement agreement, the NPS must issue a proposed new rule, incorporating all content from a supplemental environmental impact by March 15, 2002. The final decision and new rule is to be published by November 15, 2002.
Occupational Safety and Health Administration
Because of the potential regulatory burden, Congress mandated that the Occupational Safety and Health Administration (OSHA) follow special requirements under SBREFA when it considers regulations that will have a significant impact on small entities. The small business advocacy review panel process requires OSHA and the Environmental Protection Agency to convene special panels whenever the agencies cannot certify under the RFA that a regulatory proposal will not have a significant economic impact on a substantial number of small entities. To date, OSHA has convened three such panels. Advocacy’s experience in working with OSHA small business advocacy review panels has demonstrated that small business input early in the regulatory process improves the rule. None of the OSHA rules subjected to a SBREFA panel has been finalized. However, the SBREFA panel process itself (and the reports developed as a result of the process) has added to the knowledge of the agency and its understanding of the realistic impact these rules may have on small entities.
Issue: Ergonomics Standard
The purpose of the ergonomics standard was to reduce the number of repetitive stress disorders and other musculoskeletal injuries employees receive as a result of their regular work activity. The proposal covered every industry and business in the United States except those in construction, maritime industries, and agriculture. Twenty small entity representatives were chosen to advise the panel and provide input on the draft standard. The group included 13 owners or operators recommended by the Office of Advocacy to represent the interests of the many small businesses concerned about the potential impact of this rule. OSHA's ergonomics program standard was issued November 14, 2000, and took effect January 16, 2001. Small businesses continued to have grave concerns about the standard, especially with respect to the cost estimates. Most small businesses and their representatives previously indicated their disbelief in OSHA’s estimation of the time and money the rule would require for businesses to comply. An economic study of the cost impacts of the pre-proposed ergonomics regulation commissioned by the Office of Advocacy showed that OSHA had grossly underestimated the cost of the proposal to small business. After OSHA revised its cost estimates and provided some relief to small businesses in the final rule, Advocacy continued to work with interested businesses, trade associations, OSHA, and OMB to ensure that these and many other concerns of small businesses were heard and taken into consideration. The Congress, acting under authority of the Congressional Review Act of 1996, heard the concerns of businesses and passed a joint resolution of disapproval of OSHA’s ergonomics standard. On March 20, 2001, President George W. Bush signed the resolution. As a result, the standard is no longer in effect, and employers and workers are not bound by its requirements. Businesses have saved more than $3 billion as a result.
U.S. Department of the Treasury
Employee Benefits Working Group
The Employee Benefits Working Group of the Department of the Treasury has made a special effort to respond to the small business community. During fiscal year 2001, the Office of Advocacy worked with the group to resolve major initiatives including comparability testing for defined contribution plans’ contributions and benefits.
Issue: New Comparability Testing
Comparability testing allows the age and service of employees to be considered in a formula that sets benefit levels. Because abuses had been reported, the IRS and Treasury intended to strengthen regulations to prevent abuse. As they began to consider drafting such regulations, questions arose: How far should they go? What was the scope of the problem, if any? In a breakthrough based on a good working relationship, Treasury and the IRS alerted the Office of Advocacy’s pension group that Treasury was preparing a rule in the area of comparability testing. The Office of Advocacy set up a meeting for them to gauge the attitudes of small business plan organizers and practitioners. Throughout FY 2000, the pension working group met with Treasury officials to provide additional background and information about what standards should be set for the controversial plans. Treasury followed the advice of the pension group and stated that any rule promulgated would not take effect before 2002. This calmed the pension and small business community, assuring them of the chance to adjust their markets to the regulations. The proposed regulation, incorporating the changes recommended by the working group, was published October 6, 2000.
Internal Revenue Service
Since passage of the SBREFA, the IRS has worked with the Office of Advocacy to learn more about complying with the RFA. The IRS is performing more certifications and has done IRFAs with more frequency. In FY 2001, the IRS was responsive to the Office of Advocacy’s questions, and arranged meetings when requested with concerned small business groups to discuss controversial rules. The IRS Taxpayer Advocate has done an excellent job of gathering information on trouble spots, and her annual report is very useful for the small business community. The new Small Business / Self-Employed Division (SB/SE) contains a research unit that should provide regulation writers with solid data to assess regulatory choices. On very sensitive issues this year, such as electronic filing or the offer-in-compromise program, the IRS’s awareness of the RFA has resulted in creating an outreach effort that has elements of the panel process the RFA requires of OSHA and EPA. The result is better rulemaking.
Issue: Overseeing the Implementation of the IRS Restructuring and Reform Act that Requires the IRS to Reduce Regulatory Burdens on Small Business
With the passage of the IRS Restructuring and Reform Act of 1998, the IRS has undertaken a massive project to reshape the agency. The IRS is composed of four divisions, one of which is the Small Business and Self-Employed Operating (SB/SE) division, designed to serve the millions of small business taxpayers. The IRS recognizes that these taxpayers often face complicated tax issues, but may lack the financial resources to understand and address them. A primary focus of the SB/SE will be to educate small businesses and work with them to develop less burdensome and more practical means of compliance. The new SB/SE division is in place and working well. The Office of Advocacy and countless other small business stakeholders have been involved in a continuing process of briefings and comments on the proposed structure and guidelines. The IRS has sought Advocacy’s opinions and those of small business groups recruited by Advocacy to help analyze IRS plans. Although effort expended on this is not a regulatory activity per se, the restructuring involves changes in the culture of the IRS that will make it more sensitive to the needs of small businesses. The IRS has welcomed and implemented recommendations made by Advocacy, such as the following:
Issue: Simplified Tax and Wage Reporting System
Advocacy continues to work with the IRS to establish one simple form that would satisfy the wage and tax reporting obligations of the very smallest businesses under both federal and state tax law. The overall program is called the Simplified Tax and Wage Reporting System (STAWRS). This major multi-agency effort involving the IRS, the Labor Department, the Social Security Administration, and the SBA aims at burden reduction for small businesses. STAWRS could significantly reduce the paperwork and compliance costs for business owners using the following tools:
Environmental Protection Agency
Issue: Toxic Release Inventory Reporting – Revision of Reporting Threshold for Lead and Lead Compounds
The Environmental Protection Agency (EPA) issued a proposed rule in August 1999 to reduce the reporting threshold for lead from 10,000 pounds to 10 pounds, which would dramatically increase the number of small businesses required to report the use of lead at their manufacturing facilities. This rule is part of the community-right-to-know requirements to inform the public about releases of chemicals into the environment. The reduction in the threshold was justified by the agency’s designation of lead as a "persistent bioaccumulative toxic" (PBT) chemical. However, the Office of Advocacy pointed out that the agency could not identify any new reporting facility in the country at which any risk reductions would likely occur. In other words, the new information, in Advocacy’s view, was unlikely to contribute to the community’s right to know, since there were not significant releases of lead at those sites, and thus no risks needed to be addressed. Also, EPA’s designation of lead as a PBT did not appear to be based on sound science, nor had the agency followed its own required agency peer review procedures. The Office of Advocacy recommended that the agency set the threshold instead at 1,000 pounds, based on the relative toxicity of lead compared with other reportable TRI chemicals. Based on the criticism of its previous scientific determination, in January 2001, the agency promulgated the standard at 100 pounds instead of 10 pounds, eliminating about one-half of the small businesses from the new reporting scheme, for an estimated savings of about $20 million annually. The first report is due in July 2002, and EPA is planning to review the scientific basis of the lead PBT determination during the early part of 2002.
Issue: Concentrated Animal Feeding Operations Proposal
Concentrated animal feeding operations (CAFOs) are operations that confine and feed in a limited area a large number of animals over a certain period of time. Among the more controversial elements of EPA’s proposal is a provision that would regulate pollution from crops and groundwater and one that would require that "co-permits" be issued to both the livestock owner and livestock grower that raises the livestock for the owner, although typically, the two businesses are separate and the grower is responsible for disposal of the manure. This billion-dollar rule also prohibits any pollution from production areas without sound science to support this prohibition, removes a permit exemption for operations that do not pollute except during unusually large storms, and makes it easier to regulate the smallest farms, although EPA previously agreed not to do this. The Office of Advocacy was successful in preserving several significant alternatives in this proposal and has since submitted comments on the proposal to reinforce arguments in favor of appropriate small-entity flexibility. Since then, the EPA has moved in a positive direction by publishing a supplemental notice, providing additional data, and describing and soliciting comment on additional approaches to provide regulatory flexibility, consistent with the Clean Water Act. The EPA has until December 2002 under a court order to take final action on this rule, and Advocacy will continue to work with EPA on this issue.
Issue: Diesel Final Rule
EPA’s rule to control sulfur in highway diesel fuel is one of several regulations with which the small businesses in the petroleum refining industry will have to comply in virtually the same timeframe. The rule limits air pollution from trucks and restricts the level of sulfur in highway diesel fuel to enable pollution reduction. EPA was able to offer only additional lead time for the small refiners. While this would allow a small refiner to delay compliance with one of two rules (the sulfur in gasoline rule or the sulfur in diesel fuel rule), it is not clear that many small refiners will be able to afford the rules that can’t be delayed. Therefore, Advocacy has recommended that Congress provide tax relief to help defray the costs of compliance and restore the competitive imbalance created by this rule. Without this help, Advocacy believes that the loss of competition in this industry could ultimately be more expensive. If this tax relief is provided, Advocacy believes that most of the small refiners will be able to take advantage of the flexibility in the diesel rule, and the annual savings would be $35 million.
Issue: Mobile Source Air Toxics Rule
This EPA rule set standards for air toxic pollution from trucks and cars. The initial approach under consideration would have imposed millions of dollars in compliance costs on small businesses in the petroleum refining sector, which is already required to comply with several EPA rules virtually in the same timeframe. After additional analysis and discussion with Advocacy, EPA decided in principle to propose a "no-cost" approach requiring only that refiners maintain current levels of benzene in gasoline. To ensure that the rule would impose no costs, EPA agreed to finalize an even more flexible approach, which allows refiners to increase their fuel’s benzene content if the increase is offset by decreases in other air toxics, maintaining current average levels of "air toxics" such as benzene, formaldehyde, etc. Advocacy estimates that these modifications to the rule will save small refiners $190 million annually.
Federal Acquisition Regulation Council
Issue: Regulation on Contractor Responsibility
On December 20, 2000, the Federal Acquisition Regulation Council issued its final rule on contractor responsibility, labor relations costs, and costs relating to legal and other proceedings, FAR case 1999-010. This issue started in 1999 with the FAR Council proposing to provide the contracting officer with authority to reject an apparent successful bid if the contractor has been the subject of a specified conviction, judgment, or adverse decision in the previous three years. In spite of continuing concerns expressed by the Office of Advocacy, small businesses, and procuring agency officials, the FAR Council on December 20, 2000, published its final rule with an implementation date of January 19, 2001. This final rule was so controversial that some agencies issued "class deviations." The Federal Acquisition Regulation controls the standards for "class deviations." Subpart 1.401(a) states that a deviation is the issuance or use of a policy, procedure, solicitation provision, contact clause, method, or practice of conducting acquisition actions of any kind at any stage of the acquisition process inconsistent with the FAR. FAR Subpart 1.402 states, "that unless precluded by law, executive order, or regulation, deviations from the FAR may be granted." This action delayed the implementation date. The Civilian Agency Acquisition Council (CAAC) a component of the FAR Council, also delayed the implementation of the rule until July 19, 2001. Subsequently, the FAR Council published FAR case 2001-014 on April 3, 2001, a rule to revoke the final rule in FAR case 1999-010. This action by the FAR Council stopped the implementation of the final contractor responsibility rule, for annual savings of $28 million.
Ongoing RFA Compliance ConcernsAgricultural Marketing Service
Issue: USDA’s Proposed Changes to the Livestock Mandatory Price Reporting Program
In August 2001, Advocacy commented to the USDA about proposed changes to the livestock mandatory reporting program that would move away from the 3/60 guidelines for mandatory price reporting to a 3/70/20 reporting system. The change means that larger firms would possess confidential and proprietary information that would allow them to discover the quantity of meat being sold by a small business and undercut the small business’s prices. This possibility is particularly likely in the live market where the larger companies may have access to regional reports—and it is exactly the type of situation the RFA is designed to prevent. The proposed change is in direct conflict with the legislative intent of the mandatory price reporting statute, which protects the confidentiality of the program participants. The Office of Advocacy had participated in interagency meetings with OMB before the rule’s release in late 2001. At that time, Advocacy expressed the view that the untested program was burdensome for small businesses that would be required to report thousands of prices daily, and that there was no evidence the rule would remedy the alleged problems with the voluntary system of reporting.
Food Safety Inspection Service
Issue: FSIS Proposed Rule for Increases in Fees for Meat, Poultry and Egg Products Inspection Services in FY 2000 and FY 2001
On August 31, 2000, Advocacy submitted comments to FSIS on a final rule seeking to increase the fees for the inspection of meat, poultry, and egg products for FY 2000.(8) FSIS acknowledged that the rate increase is significant and did not dispute that the increased fees will cost egg producers an additional $13,700 annually. However, the agency would not consider a phase-in approach so that firms could more easily cover the increased costs. The Office of Advocacy was concerned that the increased fees would likely have an adverse effect on egg producers’ profitability since FSIS also published a proposed rule seeking to increase the fees for overtime and holiday inspection of meat, poultry, and egg products for fiscal year 2001. If implemented, the proposed increase was to become effective on October 8, 2000, essentially the same timeframe within which egg-producing firms would be required to pay increased overtime fees. Despite FSIS certifications, Advocacy was concerned that the rules would have a significant impact on a substantial number of small businesses, especially if they were made effective simultaneously. The Office of Advocacy recommended that FSIS republish the final and proposed regulations with a fact-based certification. To date the agency has not complied.
U.S. Department of Health and Human Services
Food and Drug Administration
Issue: Proposed Rule for Current Good Manufacturing, Packing, or Holding Dietary Ingredients and Dietary Supplements
On July 16, 2001, the Office of Advocacy filed comments on the Food and Drug Administration’s (FDA) proposed rule for current good manufacturing practices (CGMP), packing, or holding of dietary ingredients and dietary supplements.(9) The largest cost associated with the rule is for production and processing of dietary supplements; the second largest cost is for paperwork. The FDA acknowledged that the rule would result in the highest costs for small establishments. Further, the average burden on small businesses was expected to be at least 14 percent of annual revenue (around $71,000 annually). The simulated mean total costs were about $238 million for the first year and $178 million for later years. The FDA estimated that the benefit of the rule is $230 million the first year and $180 million thereafter. While the proposed rule identified potential alternatives, including a small business exemption and a phase-in of the rule for small businesses, the FDA dismissed the alternatives primarily because consumers will not be able to distinguish non-CGMP products from products that were produced using CGMP. As a result, the FDA concluded that affected small businesses have the option of incurring the cost of complying with the rule, changing product lines, or going out of business. In outreach meetings held by the FDA, small business representatives expressed concern about the cost and time involved in complying: the requirements contained in the rule, coupled with the anticipated hiring requirements necessary to comply, would cripple small businesses that manufacture dietary supplements. Advocacy’s view was that the FDA should allow small businesses flexibility in maintaining and complying with CGMP as long as the individual business’s manufacturing process is validated. FDA should take steps to reduce the overwhelming burden this rule imposes on small businesses.
U.S. Department of the Interior
The U.S. Department of the Interior’s RFA compliance historically has been problematic. In the past, DOI’s regulatory flexibility analyses consisted of either a single sentence stating "no significant impact on a substantial number of small entities" or a recitation of the RFA compliance requirements. Although the agencies within the DOI are now less likely to make such unqualified assertions, the analyses provided do not necessarily indicate an understanding of the potential impact the actions may have on small entities.
Fish and Wildlife Service
The Fish and Wildlife Service (FWS) of DOI is charged to conserve, protect, and enhance fish and wildlife and their habitats. FWS implements provisions of the Endangered Species Act (ESA). The Office of Advocacy continues to be concerned about FWS’ failure to provide the required RFA and ESA economic analysis at the time of proposed rulemakings. Although FWS showed some improvement in FY 2001 and is starting to provide more information at the time of proposal, its performance is inconsistent.
Issue: Interim Strategy for Watercraft Access Projects that May Impact the West Indian Manatee
The West Indian manatee has been listed as an endangered species since 1967. In Florida, watercraft-related manatee mortalities have increased since the collection of manatee mortality data began in 1974. More than 1 million watercraft vessels use Florida’s waterways each year. The ability of a manatee to elude oncoming watercraft is largely determined by the speed of the oncoming watercraft. Although Florida has watercraft speed zones, studies indicate that compliance rates range from 50.9 percent to 78.7 percent and that the low level of compliance is attributable to low levels of law enforcement, poor signage, lack of law enforcement officers on the water, and few citations issued. From the information available, FWS concluded that the addition of new watercraft in Florida’s waters has the potential to adversely affect manatees. In March 2001, FWS published a Notice of Availability of Interim Strategy on Section 7 Consultations Under the Endangered Species Act for the Watercraft Access Projects in Florida that may Indirectly Affect the West Indian Manatee. The strategy required applicants to provide conservation measures in project descriptions when applying for a permit to build a new facility. In addition, the strategy required applicants to make a financial contribution to an entity that funds manatee conservation. Although the strategy was not a rulemaking and was not subject to the RFA, Advocacy submitted comments on May 14, 2001, arguing that while the strategy would have little effect on the mortality rate of the manatee, it would have a negative impact on the construction of docks and on small dock builders. Advocacy asserted that FWS needed to consider other alternatives, such as increasing fines, requiring a special permit to operate in certain waterways, and requiring that watercraft operators read handouts on the danger of watercraft to the manatee.
Employment Standards Administration
The Employment Standards Administration administers and directs employment standards programs with minimum wage and overtime standards; registers farm labor contractors; determines prevailing wage rates to be paid on government contracts and subcontracts; implements nondiscrimination and affirmative action programs for minorities, women, veterans, and handicapped government contract and subcontract workers; and carries out workers’ compensation programs for federal and certain private employers and employees.
Issue: Application of the Fair Labor Standards Act to Domestic Service
On January 19, 2001, the Employment Standards Administration published a proposed rule on the application of the Fair Labor Standards Act (FLSA) to domestic service designed to amend the existing regulations on the exemption for companionship services. Under current law, domestic companions are exempt from FLSA minimum wage and overtime requirements. The proposed rule amended the regulations to revise the definition of companionship services; clarified the criteria used to judge whether employees qualify as trained personnel; and amended the regulations to require third-party providers of companionship services to pay the minimum wage and overtime. It also extended the FLSA to live-in domestics if employed by someone other than a member of the family in whose home they reside and work. ESA performed an initial regulatory flexibility analysis and determined that the rule would not have a significant economic impact on a substantial number of small entities. The Office of Advocacy commented on the proposal on July 20, 2001, citing industry contentions that the proposal would be harmful to small home health care providers. Advocacy argued that the proposal could result in increased rates that would be beyond the financial means of the members of the public that use companionship services. Also, the information provided was insufficient to meet the requirements of the RFA and the proposed rule lacked fundamental elements of an IRFA.
U.S. Department of Transportation
The U.S. Department of Transportation (DOT) shapes and administers policies and programs to protect and enhance the safety, adequacy, and efficiency of the national transportation system and services. DOT has continued to make progress over the past year in considering small business effects when drafting regulations. However, more work needs to be done to ensure that small business concerns are being addressed uniformly throughout the department. During fiscal year 2001, DOT issued numerous regulations affecting small businesses, and the Office of Advocacy maintained a productive relationship with various DOT agencies regarding pre-proposal regulatory analysis.
Issue: Participation by Disadvantaged Business Enterprises in Department of Transportation Financial Assistance Programs
On May 8, 2001, the Department of Transportation published a proposed rule that would, among other things, make substantive changes to its disadvantaged business enterprise (DBE) program. Several provisions include personal net worth, retainage, the size standard, proof of ethnicity, confidentiality, and proof of economic disadvantage. The agency certified that this proposed rule would not have a significant impact on a substantial number of small entities. On June 7, 2001, the Office of Advocacy commented that the certification lacked documentation to support this conclusion and asked DOT to conduct an IRFA before proceeding further.
Federal Aviation Administration
The FAA is responsible for air safety in the United States and promulgates many regulations to ensure the safety of the nation’s skies. Most FAA regulations promulgated during the past year have been tailored for problems experienced by larger airline companies. As a consequence, in another example of the "one-size-fits-all" syndrome, the Office of Advocacy has heard from small businesses that feel they are unduly burdened by "big airline" regulations. Advocacy continues to work with these businesses and the FAA to buttress the agency’s compliance with the RFA. An additional complaint Advocacy heard during the year concerned FAA’s issuance of policy guidance. Small airlines are concerned that these actions are not mere guidance and supplemental information, but directives mandated by the FAA without public comment in violation of the Administrative Procedure Act. The Office of Advocacy will be examining these issues further to ensure FAA’s full compliance with the RFA in all of its regulatory actions. The FAA has made great strides in its analysis of the small business impacts of some of the agency’s rules over fiscal year 2001; however, more work needs to be done.
Federal Motor Carrier Safety Administration
Issue: Hours of Service of Drivers
On May 2, 2000, FMCSA published a proposed rulemaking revising its hours of service regulations for drivers of motor carriers. The proposal was designed to require motor carriers to provide drivers with better opportunities to sleep, thereby reducing the risk of drivers operating commercial motor vehicles while drowsy, tired, or fatigued, with the objective of reducing collisions. The proposed rule also mandates the purchase and use of costly electronic on-board recording devices. Before the proposal was published, the Office of Advocacy held meetings and discussions with FMCSA in an effort to bring the agency into compliance with the RFA. Since the rule was proposed, Advocacy has responded to numerous requests for participation in meetings, roundtables and discussions about the rule. Small motor carrier operators have indicated that the rule would have a devastating impact on them. Industry representatives have said that the rule would necessitate more than 40,000 new truck drivers on the road. Small business complaints have focused on the sleeper berth requirements, communications during rest periods, end of workweek rest periods, hours of work permitted each day, and the mandatory purchase and use of an electronic on-board recording device. A congressional hearing was held to discuss the severity of the proposal’s impact on the industry as a whole. After a number of comment deadline extensions, FMCSA closed the comment period on December 15, 2