Report on the Regulatory Flexibility Act
FY 2006
Annual Report of the Chief Counsel for Advocacy on Implementation of the Regulatory Flexibility Act and Executive Order 13272
February 2007
To the President and the Congress of the United States
I am pleased to present the fiscal year (FY) 2006 edition of the annual Report on the Regulatory Flexibility Act. Charged with overseeing implementation of the Regulatory Flexibility Act of 1980 (RFA) and Executive Order 13272, the Office of Advocacy reports annually on federal agency compliance. The RFA requires federal agencies, during the regulatory development process, to review the potential impact of proposed regulations on small businesses and other small entities and to examine significant alternatives that minimize small entity impacts while still meeting the purpose of the regulation. E.O. 13272, signed by President Bush in 2002, strengthened the implementation process by requiring agencies to post their RFA implementation procedures and policies publicly, ensuring Advocacy has an opportunity to review rules earlier in the process, and requiring Advocacy to train federal agencies in how to comply with the law.
Advocacy Attorney Keith Holman looked at the RFA’s record of success in an article, “The Regulatory Flexibility Act at 25: Is the Law Achieving its Goal?” published in the Fordham Urban Law Journal in May 2006. Holman noted that the task has been not only to enforce the law’s provisions, but to change the rule writing culture so that the agencies appreciate the importance of small businesses and the effects of their rules on them. Accordingly, we have taken the mandate to train federal agencies very seriously. We continue to receive requests to conduct more training sessions in agencies such as the Internal Revenue Service, the Fish and Wildlife Service, and the Department of State. In FY 2006, we also unveiled a training module that can be accessed online for new agency rule writers or those who may need a refresher.
Our efforts are showing results. Over the past several years, we have seen real progress in agency understanding of and compliance with the RFA and E.O. 13272. Nearly all Cabinet departments have posted their RFA policies on their websites and more agencies are routinely notifying us electronically of regulatory proposals. An increasing number of agencies are coming to us earlier in the regulatory development process to ensure that they have done the work needed to address small business concerns. And consultation with small businesses and their representatives about the effects of a proposed rule is more likely to occur early enough to make a difference. As a result of the law’s implementation in FY 2006, small businesses saved $7.25 billion in the first year and $117 million in annually recurring costs.
Cost savings are just one concrete measure that has been used by Advocacy for a number of years to show how enforcement of the law makes a difference to small entities. As agencies begin to see for themselves the importance of implementing the RFA early in the rulemaking process, the cost savings will be more difficult to calculate, and other measures of the law’s effectiveness may be needed. As a result, this fiscal year, we are continuing to analyze various methods of quantifying Advocacy’s effectiveness.
One measure of the federal RFA’s success that is apparent in FY 2006 is the number of state governments implementing laws modeled on it. The Office of Advocacy offered model legislation for the states in December 2002. With 19 state regulatory flexibility laws or executive orders already in effect as of FY 2005, 11 more states introduced RFA legislation in FY 2006, two states enacted it, and two more governors issued executive orders. A record of successful RFA implementation is now being built at the state level.
For the rest of the story, I will let the report speak for itself. The Office of Advocacy is committed to a regulatory culture that supports the continued growth of America’s vibrant small business community. We continue to be gratified by the support we receive for this effort from the Administration and the Congress, as well as the small business community.
Thomas M. Sullivan
Chief Counsel for Advocacy
Contents
To the President and the Congress of the United States
1 An Overview of the Regulatory Flexibility Act and Related Policy History
Analysis under the RFA
SBREFA, Judicial Review, Amicus AuthorityE
Executive Order 13272
2 Federal Agency Compliance and the Role of the Office of Advocacy
Agency Compliance with Executive Order 13272
RFA Training under E.O. 13272
Measuring Effectiveness
Overview of RFA Implementation
Chart 2.1 Advocacy Comments by Key RFA Compliance Issue, Fiscal Year 2006
Table 2.1 Regulatory Comment Letters Filed by the Office of Advocacy,
Fiscal Year 2006
Table 2.2 Regulatory Cost Savings, Fiscal Year 2006
Table 2.3 Summary of Cost Savings, Fiscal Year 2006
3 Advocacy Review of Agency RFA Compliance in Fiscal Year 2006
Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
Department of Homeland Security
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Department of Veterans Affairs
Environmental Protection Agency
Federal Acquisition Regulation Council
Federal Communications Commission
Federal Trade Commission
Securities and Exchange Commission
Small Business Administration|
Conclusion
4. Making the States Flexible: Small Business Regulatory Flexibility Model
Legislation Success Stories
Table 4.1 State Regulatory Flexibility Legislation, 2006 Legislative Activity
Table 4.2 State Regulatory Flexibility Legislation, Status as of October 2006
Chart 4.1 Mapping State Regulatory Flexibility Provisions, Fiscal Year 2006
Appendices
A Supplementary Tables
Table A.1 Cabinet Department RFA Procedures in Compliance with Section 3(a)
of E.O. 13272
Table A.2 Training in Federal Agencies, FY 2003-2006
Table A.3 SBREFA Panels through Fiscal Year 2006
B The Regulatory Flexibility Act
C Executive Order 13272
D Abbreviations
1. An Overview of the Regulatory Flexibility Act and Related Policy History
When Congress passed the Regulatory Flexibility Act (RFA) in 1980, it found, among other things, that laws and regulations designed for application to large scale entities have been applied uniformly to small businesses, small organizations, and small governmental jurisdictions even though the problems that gave rise to government action may not have been caused by those smaller entities; uniform Federal regulatory and reporting requirements have in numerous instances imposed unnecessary and disproportionately burdensome demands including legal, accounting and consulting costs upon small businesses, small organizations, and small governmental jurisdictions with limited resources; [and] unnecessary regulations create entry barriers in many industries and discourage potential entrepreneurs from introducing beneficial products and processes. (1)
The 1980 passage of the RFA was intended to address this longstanding problem of the disproportionate economic impact of federal regulations on small businesses. The RFA changed the process by which regulations were promulgated under the Administrative Procedures Act (APA). By requiring agencies to consider the impact of their regulations on small entities, the RFA simultaneously addressed the disproportionate effect of those regulations and promoted the participation of small businesses in the rulemaking process.
Analysis under the RFA
The RFA does not require special treatment or regulatory exemptions for small businesses, but mandates an analytical process for determining how best to achieve public policy objectives without unduly burdening small entities. During the preparation of a proposed rule, an agency must prepare an initial regulatory flexibility analysis (IRFA) if it determines that a proposal may impose a “significant economic impact on a substantial number of small entities.” The RFA requires agencies to publish the IRFA, or a summary thereof, in the Federal Register at the same time it publishes the proposed rulemaking.(2) An agency can waive the requirement for an IRFA if it can certify that the proposed rule will not have such an impact; such certifications must have a factual basis.(3)
Under section 603(b) of the RFA, an IRFA must describe the impact of the proposed rule on small entities and contain the following information(4)
1. A description of the reasons why the action by the agency is being considered.
2. A succinct statement of the objectives of, and legal basis for, the proposed rule.
3. A description—and, where feasible, an estimate of the number—of small entities to which the proposed rule will apply.
4. A description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirement and the types of professional skills necessary for preparation of the report or record.
An identification, to the extent practicable, of all relevant federal rules that may duplicate, overlap, or conflict with the proposed rule.
Each IRFA must also contain a description of any significant alternatives to the proposed rule that minimize the burden on small entities while still accomplishing the objective of the rule.(5) After the agency has collected the comments submitted in response to the proposed rule, it must publish a final regulatory flexibility analysis, or FRFA.(6) The FRFA must address, in light of the comments it has received, the same elements of the IRFA. The FRFA must also describe the steps followed by the agency to minimize the economic impact on small entities; give the factual, policy, and legal reasons for selecting the alternatives adopted in the final rule; and explain why other alternatives were rejected.(7)
By specifically analyzing the impact of proposed rules on small businesses and seeking their input, agencies can seek alternative measures to reduce or eliminate the disproportionate small business burden without compromising public policy objectives.
SBREFA, Judicial Review, Amicus Authority
In 1996, Congress passed the Small Business Regulatory Enforcement Fairness Act (SBREFA), which did several things to aid small businesses.(8) It increased the specificity of the already-required economic analysis, and it required the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) to convene panels to consult with small entity representatives before proposing any rules expected to have a significant economic impact on those businesses.(9) These panels consist of representatives of the agency, the Office of Advocacy (Advocacy), the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA), and small entity representatives.(10) In addition to considering the agency’s policies, data, and economic analysis, the panels also present this information to several small entity representatives, who provide written and verbal feedback to the agency. SBREFA also provided for small entities to seek judicial review of an agency’s rulemaking if the agency failed to comply with the rulemaking provisions of the RFA, and gave the Small Business Administration’s (SBA) chief counsel for advocacy enhanced authority to enter briefs in such cases as a friend of the court.(11)
Executive Order 13272
On August 13, 2002, President George W. Bush signed Executive Order 13272, which further spelled out the obligations of the RFA for the Office of Advocacy and federal agencies.(12) It required Advocacy to remind the heads of the agencies of their responsibilities under the RFA and to provide training to those agencies on how to comply. It further emphasized Advocacy’s authority to comment on draft rules to the agency or to OIRA.
E.O. 13272 directed the agencies to issue written procedures and policies on how they comply with the RFA. Most federal agencies have posted their RFA procedures on their websites.(13) It also directed the agencies to notify Advocacy when a proposed rule would have a significant economic impact on a substantial number of small entities.(14) Under the executive order, each agency is required to give “every appropriate consideration” to comments it receives from Advocacy on proposed rules, and publish its response to Advocacy’s comments with the final rule.(15)
2. Federal Agency Compliance and the Role of the Office of Advocacy
For more than 30 years, the Office of Advocacy has represented the concerns of small business before Congress and regulatory agencies. One of Advocacy’s primary functions is to “examine the role of small business in the American economy…”(16) Congress tasked Advocacy with being an independent voice for small business(17) in 1976, and mandated that Advocacy measure the “direct costs and other effects of government regulations on small business…”(18) Four years later, the Regulatory Flexibility Act was enacted, requiring federal agencies to consider the impact of their regulations on small businesses and other small entities.(19) The law gave the chief counsel for advocacy the responsibility of reporting to the president and Congress on agency compliance with the law.(20) Executive Order 13272 further requires regulatory agencies to share drafts of proposed rules that may have a significant impact on a substantial number of small entities and to consider Advocacy’s comments on those rules.(21)
The level of federal agency compliance with these two requirements continues to vary across agencies and departments. As this report indicates, fiscal year 2006 has led to numerous interventions by the Office of Advocacy on behalf of small businesses, saving them $7.25 billion in first year and $117 million in annual recurring savings.(22) Clearly some agencies have not yet incorporated the RFA analytical process into their regulatory development. However, the Office of Advocacy sees improvement across the board in many other agencies. Those agencies have approached Advocacy earlier in the decision making process in an effort to consider the regulatory impacts of their proposed regulations before a draft proposed rule is published in the Federal Register.
The RFA has been in existence for 26 years. SBREFA, the major amendment to the RFA, is now 10 years old. E.O. 13272 has been in effect for four years. Despite the age of these congressional and executive directives, agencies remain in need of assistance when it comes to considering small business concerns and analyzing potential economic impacts of their draft regulations on the small businesses they regulate. Consideration of these impacts is becoming less an afterthought for some federal agencies, yet a full and consistent understanding of the requirements of these important mandates remains elusive to others.(23)
Agency Compliance with Executive Order 13272
E.O. 13272 contains three requirements for federal regulatory agencies. The first was completed, for the most part, in FY 2003, when Cabinet-level departments issued written policies and procedures describing how they will ensure that their regulations consider the potential impact on small entities. These documents were made publicly available on most department websites.(24)
The second requirement directs agencies to notify Advocacy of any draft rules that may have a significant economic impact on a substantial number of small entities under the RFA.(25) Such notifications are to be made either when the agency submits a draft rule to OIRA under Executive Order 12866 or, if no such submission is required, at a reasonable time before publication of the rule by the agency.(26) Advocacy established an email address,
notify.advocacy@sba.gov, to make it easier for agencies to comply electronically with the notice requirements of E.O. 13272 and the RFA. More agencies utilized the system in FY 2006. Instant communication enables agencies to work with Advocacy sooner rather than later, and Advocacy is committed to encouraging more agencies to abandon the paper notification system still used at a few remaining agencies.The third requirement under E.O. 13272 is to give appropriate consideration to Advocacy’s comments on a proposed rule.(27) In the final rule published in the Federal Register, an agency must respond to written comments submitted by Advocacy. Most agencies have either complied with this requirement or did not have an opportunity to comply in fiscal year 2006 because they did not issue a final rule on which Advocacy publicly commented.
RFA Training under E.O. 13272
One of the important requirements of the executive order is that Advocacy train every federal regulatory agency in how to comply with the RFA.(28) In FY 2006, the third year of training, economists, attorneys, and regulatory and policy staff at numerous agencies received detailed instruction on how to consider the impact of their regulations on small entities before they put pen to paper. This is an important step in helping them comply with the RFA and E.O. 13272.
Having identified 66 departments, agencies, and independent commissions that promulgate regulations affecting small businesses, the Office of Advocacy hopes to complete training of all 66 by FY 2008. Since the executive order was signed, Advocacy has trained more than 48 federal agencies, many on more than one occasion.(29) Some federal agencies are considering making this training mandatory for all of their regulatory staff, which can include as many as 1,500 employees in some large agencies. With classroom sessions ideally consisting of 25-30 students, it frequently takes many sessions at an agency to accomplish this task, but Advocacy has found that these smaller, more intensive sessions are the most productive for attendees.
Agency feedback following each training session continues to be excellent. A better test of the effectiveness of RFA training, however, is how agencies comply with the RFA once the training is complete. After training, most agencies are more willing to share draft documents with Advocacy in an effort to improve their RFA compliance. The difference is becoming apparent in regulatory certifications.(30) For the most part, agencies have learned that they must provide a factual basis for their assertion that a rule will not have a significant impact on a substantial number of small entities. It is now infrequent that these agencies issue boilerplate statements to that effect without an explanation in the proposed rule. This progress can be directly attributed to the RFA training sessions’ focus on providing more information to small entities in the proposed rule and analyzing small entity impacts as early as possible in the rulemaking process.
Online RFA Training Completed
In fiscal year 2006, efforts were concentrated on the development and rollout of an online component to the RFA classroom training. Federal agency rule writers can now access an online training site to take the RFA course. New employees and those that need a refresher have valuable information on the RFA at their fingertips. Advocacy is hopeful that this enhanced training tool will help more agency staff fully understand the RFA compliance requirements and consider the small entity impacts of their rules. The online RFA training can be accessed at
www.sba.gov/advo/rfaonlinetraining.html. (31)Measuring Effectiveness
Historically, Advocacy has measured its achievements under the RFA through a calculation of regulatory cost savings. However, the cost savings figure does not begin to capture the totality of Advocacy’s involvement in the rulemaking process. Under E.O. 13272, Advocacy has proven very successful in its efforts to have agencies analyze a rule’s impact on small businesses before the regulation is made public in the Federal Register. Many of Advocacy’s greatest successes cannot be recounted or quantified publicly because of the importance of maintaining the confidentiality of interagency communication. Preproposal oral and written communications between Advocacy and agencies are kept confidential, and that helps the prepublication exchange of information between Advocacy and agencies. Often preproposal communications are where the greatest benefits are achieved in agency compliance with the RFA and in the choice of alternatives that lessen the rule’s impact on small businesses.
The success of Advocacy’s early intervention in the rulemaking process and its agency training under E.O. 13272 presented Advocacy with an interesting conundrum. How can Advocacy modernize the measurement of its effectiveness to encompass its ongoing regulatory interventions, determine the benefits of earlier intervention in the rulemaking process, and evaluate the success of agency training under E.O. 13272? Theoretically, as Advocacy achieves more success utilizing these tools and agencies become more proficient in complying with the RFA, cost savings between the first public proposal and the final rule should diminish.
Advocacy has recently undertaken an exploration of ways to increase its ability to gauge its effectiveness post-E.O. 13272. In future annual reports, Advocacy anticipates using new measurement tools to refine and increase information about its effectiveness in persuading federal agencies to comply with the RFA.
Overview of RFA Implementation
Advocacy promotes agency compliance with the RFA and E.O. 13272 in several ways throughout the rulemaking process. Advocacy attorneys and economists regularly review proposed regulations and work closely with small entities, trade associations, and federal regulators to identify areas of concern and to work to ensure that the RFA’s requirements are fulfilled (Chart 2.1).
Advocacy provides a voice for the small business community early in the rulemaking process, by putting the real-world concerns of small businesses directly in front of agency officials. Advocacy staff regularly meet with small businesses and their trade associations regarding federal agency responsibilities under the RFA, factors to be addressed in agency economic analyses, and the judicial review provision enacted in the SBREFA amendments. Roundtable meetings with small businesses and trade associations focus on specific regulations and issues, such as environmental, transportation, and industrial safety regulations. Advocacy also plays a key role as a participant in SBREFA panels convened to review EPA and OSHA rules (see Table A.3 in Appendix A).
Advocacy’s Office of Economic Research continues to provide economic data to help agencies identify industrial sectors dominated by small firms. Advocacy makes statistics available on its website and maintains a database of information on trade associations that can be helpful to federal agencies seeking input from small businesses.
As regulatory proposals and final rules are developed, Advocacy provides preproposal consultation, interagency review under E.O. 12866, informal comments to the agency, congressional testimony, and “friend of the court” amicus briefs. Advocacy also continues to review proposed regulations and send formal comment letters where appropriate. In FY 2006, Advocacy sent over 40 formal comment letters to federal agencies (Table 2.1).(32)
As a result of Advocacy interventions, quantifiable cost savings were achieved for small businesses in 16 regulations in FY 2006 (Table 2.2). Efforts to reduce the regulatory burden of these 16 rules resulted in FY 2006 regulatory cost savings of $7.25 billion in the first year and $117 million in annually recurring savings (Table 2.3).
Chart 2.1 Advocacy Comments by Key RFA Compliance Issue, FY 2006 (percent)
In fiscal year 2006, the Office of Advocacy provided comments to several agencies on how to comply with the RFA. Chart 2.1 illustrates key concerns raised by Advocacy’s comment letters and prepublication review of draft rules. The chart highlights areas for improved compliance based on Advocacy’s analysis of its FY 2006 comment letters and other regulatory interventions summarized in this report.
Table 2.1 Regulatory Comment Letters Filed by the Office of Advocacy,
Fiscal Year 2006*
| Date | Agency | Comment Subject |
| 10/03/05 | SEC | Comment letter regarding the Notice of Proposed Rulemaking extending small public company compliance deadlines for internal control reporting under the Sarbanes-Oxley Act of 2002, Section 404; 70 Fed. Reg. 56,825 (Aug. 30, 2005). |
| 10/14/05 | DOL | Comment letter regarding the Notice of Proposed Rulemaking on Form 5500 E-Filing Regulation; 70 Fed. Reg. 51,542 (Aug. 30, 2005). |
| 10/28/05 | FCC | Response letter to Public Notice Seeking Comment Regarding Possible Revision or Elimination of Rules under the Regulatory Flexibility Act, 5 U.S.C. Section 610; DA-05-154. |
| 10/28/05 | OSHA | Response letter to Public Notice of Regulatory Flexibility Act Section 610 Review of Lead in Construction Standard; 70 Fed. Reg. 32,739 (June 6, 2005). |
| 10/31/05 | DHS | Comment letter regarding the Advance Notice of Proposed Rulemaking on Documents Required for Travel within the Western Hemisphere; 70 Fed. Reg. 52,037 (Sept. 1, 2005). |
| 11/14/05 | EPA | Report of the Small Business Advocacy Review Panel convened for the Notice of Proposed Rulemaking on the Control of Hazardous Air Pollutants from Mobile Sources or Mobile Source Air Toxics (MSAT). |
| 12/16/05 | FWS | Comment letter regarding the Notice of Proposed Rulemaking for the Injurious Wildlife Species, the Black Carp; 70 Fed. Reg. 61,933 (Oct. 27, 2005). |
| 01/03/06 | IRS | Comment letter regarding the Notice of Proposed Rulemaking on Income Attributable to Domestic Production Activities; 70 Fed. Reg. 67,220 (Nov. 4, 2005). |
| 01/06/06 | OMB | Response letter to the Notice and Request for Comments on OMB’s Proposed Bulletin for Good Guidance Practices; 70 Fed. Reg. 71,866 (Nov. 30, 2005). |
| 01/09/06 | OSHA | Comment letter regarding the Notice of Proposed Rulemaking on Electric Power Generation, Transmission, and Distribution, Electrical Protective Equipment Rule; 70 Fed. Reg. 34,822 (June 15, 2005). |
| 01/13/06 | EPA | Comment letter regarding the Notice of Proposed Rulemaking on the Toxics Release Inventory (TRI) Burden Reduction Rulemaking- Phase II; 70 Fed. Reg. 57,822 (Oct. 4, 2005). |
| 01/18/06 | FCC | Comment letter regarding the Notice of Proposed Rulemaking on the Junk Fax Prevention Act of 2005; CG Dkt. No. 05-338. |
| 01/26/06 | SEC | Response letter to the SEC’s
Advisory Committee on Smaller Public Companies’ Draft Recommendations to
Reform Section 404 of the Sarbanes- Oxley Act of 2002. |
| 02/01/06 | FWS | Comment letter regarding the Notice of Proposed Rulemaking on the Designation of Critical Habitat of California Red-Legged Frog; 70 Fed. Reg. 66,906 (Aug. 4, 2005). |
| 02/06/06 | FAA | Comment letter regarding the Notice of Proposed Rulemaking on the Washington D.C. Metropolitan Area Special Flight Rules Area Rule; 70 Fed. Reg. 45,250 (Aug. 4, 2005). |
| 02/10/06 | EPA | Comment letter regarding the Notice of Proposed Rulemaking on Amendments to the Spill Prevention, Control and Countermeasure (SPCC) Rule; 70 Fed. Reg. 75,324 (Dec. 12, 2005). |
| 03/14/06 | EPA | Comment letter regarding the Proposed 2006 Multi-Sector General Permit (MSGP) for Industrial Facilities; 70 Fed. Reg. 72,116 (Dec. 1, 2005). |
| 03/14/06 | FCC | Notice of ex parte presentation of recommendations to the FCC regarding the Junk Fax Prevention Act of 2005; CG Dkt. No. 05-338. |
| 04/27/06 | PTO | Comment letter regarding the Notice of Proposed Rulemaking on Changes to Practice for the Examination of Claims in Patent Applications; 71 Fed. Reg. 61 (Jan. 3, 2006); and Changes to Practice for Continuing Applications, Requests for Continued Examination Practice, and Applications Containing Patentably Indistinct Claims; 71 Fed. Reg. 48 (Jan. 3, 2006). |
| 04/27/06 | SEC | Response letter to Notice of Roundtable on Internal Control Reporting and Request for Comments on compliance experience with Section 404 of the Sarbanes-Oxley Act of 2002, File No. 4-511. |
| 05/03/06 | SEC | Statement to the House Committee on Government Reform regarding compliance experience with Section 404 of the Sarbanes-Oxley Act of 2002. |
| 05/04/06 | FSIS | Comment letter regarding the Notice of Proposed Rulemaking on the Availability of Lists of Retail Consignees during Meat or Poultry Recalls; 71 Fed. Reg. 11,326 (Mar. 7, 2006). |
| 05/08/06 | DOT/IRS | Comment letter regarding the Notice of Proposed Rulemaking on Escrow Accounts, Trusts and Other Funds Used During Exchanges of Like-Kind Property; 71 Fed. Reg. 6,231 (Feb. 7, 2006). |
| 05/25/06 | EPA | Comment letter regarding the Notice of Proposed Rulemaking on Lead; Renovation, Repair, and Painting Program; 71 Fed. Reg. 1,587 (Jan. 10, 2006). |
| 05/30/06 | State | Comment letter regarding the Notice of Proposed Rulemaking on the Exchange Visitor Program, Training and Internship Programs; 71 Fed. Reg. 17,768 (Apr. 7, 2006). |
| 06/08/06 | EPA | Response letter to EPA notification of May 26, 2006, regarding the Small Business Advocacy Review Panel for Non-Road Spark-Ignition Engines/Equipment; List of Additional Small Entity Representatives (SERS). |
| 06/08/06 | OMB | Response letter regarding the OMB’s Proposed Risk Assessment Bulletin; 71 Fed. Reg. 2,600 (Jan. 17, 2006). |
| 06/09/06 | IRS | Comment letter regarding the Final Rule on Income Attributable to Domestic Production; 71 Fed. Reg. 31,268 (June 1, 2006). |
| 06/15/06 | FCC | Response letter to proceeding on the Federal-State Joint Board on Universal Service, before the adoption of the final rule imposing Universal Service obligations on Voice over Internet Protocol providers; CC Dkt. No. 96-45;WC Dkt. No. 04-36. |
| 07/05/06 | TSA/ Coast Guard |
Comment letter regarding the Notice of Proposed Rulemaking on Joint Proposed Transportation Worker Identification Credential (TWIC) Implementation in the Maritime Sector Rule; 71 Fed. Reg. 29,396 (May 22, 2006). |
| 07/06/06 | FWS | Comment letter regarding the Notice of Availability of Draft Economic Analysis for the Proposed Designation of Critical Habitat for the Spikedace and Loach Minnow; 71 Fed. Reg. 32,496 (June 6, 2006). |
| 07/17/06 | SBA | Comment letter regarding the Notice of Proposed Rulemaking on the Women-Owned Small Business Federal Contract Assistance Program; 71 Fed. Reg. 34,550 (June 15, 2006). |
| 08/02/06 | FWS | Comment letter regarding the Notice of Proposed Rulemaking on the Designation of Critical Habitat for the Five Endangered and Two Threatened Mussels in Four Northeast Gulf Mexico Drainages; 71 Fed. Reg. 32,745 (June 6, 2006). |
| 08/03/06 | PTO | Response letter to PTO’s Request for Comments on Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations; 71 Fed. Reg. 38,388 (July 6, 2006). |
| 08/08/06 | FCC | Comment letter regarding the Notice of Proposed Rulemaking and Initial Regulatory Flexibility Analysis on the Universal Service Contribution Methodology; WC Dkt. No. 06-122. |
| 08/10/06 | FWS | Comment letter regarding the Notice of Proposed Rulemaking on the Amended Designation of Critical Habitat for the Wintering Population of the Piping Plover; 71 Fed. Reg. 33,703 (June 12, 2006). |
| 08/21/06 | FCC | Notice of ex parte presentation of recommendations to the FCC regarding the Children’s Television Obligations of Digital Television Broadcasters; CG Dkt. No. 00-167. |
| 08/25/06 | OSHA | Response letter to the notification (Aug. 16, 2006) on the Small Business Advocacy Review Panel on the Occupational Safety and Health Administration’s draft proposal for Cranes and Derricks in Construction. |
| 09/05/06 | EPA | Comment letter regarding the Control Techniques Guidelines in Lieu of Regulations for Lithographic Printing Materials, Letterpress Printing Materials, Flexible Packaging Printing Materials, Flat Wood Paneling Coatings, and Industrial Cleaning Solvents; 71 Fed. Reg. 44,521 (Aug. 4, 2006). |
| 09/07/06 | FWS | Comment letter regarding the Notice of Revised Proposed Rulemaking and Notice of Availability of Draft Economic Analysis for the Designation of Critical Habitat for the Alabama Beach Mouse; 71 Fed. Reg. 44,976 (Aug. 8, 2006). |
| 09/14/06 | SEC | Comment letter regarding the Notice of Proposed Rulemaking on Extensions of Compliance Deadlines for Non-Accelerated Filers (Smaller Public Companies) for Section 404 of the Sarbanes-Oxley Act of 2002 (Internal Controls Financial Reporting); 71 Fed. Reg. 47,060 (Aug. 15, 2006). |
| 09/15/06 | SEC | Response letter to SEC’s Concept Release on Forthcoming Management Guidance on Section 404 of the Sarbanes-Oxley Act of 2002 (Internal Controls Financial Reporting); 71 Fed. Reg. 40,865 (July 18, 2006). |
| 09/15/06 | EPA | Comment letter regarding the Notice of Proposed Rulemaking on the National Primary Drinking Water Regulations for Lead and Copper; 71 Fed. Reg. 40,827 (July 18, 2006). |
| 09/18/06 | FTC | Comment letter regarding the Notice of Proposed Rulemaking on the Identity Theft Red Flags and Address Discrepancies Under the Fair and Accurate Credit Transactions Act of 2003; 71 Fed. Reg. 40,785 (July 18, 2006). |
| 09/20/06 | FCC | Comment letter on the Notice of Proposed Rulemaking and Initial Regulatory Flexibility Analysis on the Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission’s Competitive Bidding Rules and Procedures; WT Dkt. No. 05-211. |
Table 2.2 Regulatory Cost Savings, Fiscal Year 2006
| Agency | Subject Description | Cost Savings |
| CMS | Outcome and Assessment Information Set: The Centers for Medicare and Medicaid Services (CMS) published a final rule in 1999 requiring home health agencies (HHAs) that participate in the Medicare program to provide CMS with patient data called the Outcome and Assessment Information Set (OASIS). Advocacy commented in 1999 and 2000 voicing concern that implementation of the rule would increase the administrative and cost burden for a significant number of HHAs, the majority of which were small health care providers. On December 23, 2005, CMS published another final rule (70 Fed. Reg. 76,199) revising the requirements of the rule so that HHAs were no longer required to input patient-care data on non-Medicare/non-Medicaid patients. | CMS’s delay of the effective
date saved small HHAs $334 million. The December 2005 decision further
netted an additional annual savings of $47.7 million.
Source: National Association for Home Care & Hospice |
| DOE | Energy Conservation Standards for Distribution Transformers. On August 4, 2006, the Department of Energy (DOE) published a proposed rule on energy conservation standards for distribution transformers. More than half of the manufacturers of liquid and medium-voltage dry distribution transformers are small businesses. In response to Advocacy’s informal interagency comments, DOE considered the impacts on small business manufacturers when it proposed the least costly required efficiency standard from among five alternatives. DOE met with small businesses in designing the new efficiency standard and specifically chose a standard that would allow regulated manufacturers to make use of readily available techniques and materials. | This proposed standard
results in one-time cost savings of at least $5 million. Source: DOE |
| EPA | Clean Water Act Section 316(b), Phase III Cooling Water Intake Structures. On June 1, 2006, the U.S. Environmental Protection Agency (EPA) signed a final Clean Water Act rule designed to protect fish and other aquatic species from being killed when they are pulled into cooling water intakes. As originally planned by EPA, the rule would have required over 700 facilities to install devices to prevent aquatic losses, including an estimated 82 facilities owned by small entities. As a result of conducting a SBREFA review panel in early 2004, EPA concluded that facilities with relatively low intake flows typically do not cause aquatic losses, and EPA proposed an exemption for facilities that have a cooling water intake flow of 50 million gallons per day or less. This exemption, which is contained in the final rule, removes virtually all small businesses from the rule’s coverage. | The recommendations of the
SBREFA panel resulted in cost savings of $74 million for small entities
such as municipal utilities, pulp and paper companies, and chemical
plants.
Source: EPA and American Public Power Association estimates. |
| EPA | Spill Prevention Control and Countermeasures (SPCC). EPA proposed a rule in December 2005 that would streamline requirements for oil spill prevention and planning for some facilities that store and use oil. EPA adopted Advocacy’s recommendations for revisions in two areas: small facilities (under 10,000 gallons aggregate capacity for oil) and oil-filled equipment. EPA proposed that the requirements for small facilities be streamlined, which allows the facilities to self-certify compliance with the SPCC requirements, instead of using a professional engineer. It also permits additional flexibility for tank integrity testing and security requirements. Facilities with oil-filled equipment are provided the option of preparing an oil spill contingency plan and a written commitment of manpower, equipment, and materials in lieu of providing expensive secondary containment around the equipment. | These changes produced small
business cost savings amounting to $46 million annually. Source: EPA |
| EPA | Toxics Release Inventory - Phase II Burden Reduction. EPA proposed a rule in October 2005 that would allow short-form annual reporting of over 650 chemicals and classes of chemicals by industrial facilities. EPA adopted Advocacy’s recommendation to reduce small business reporting burden by expanding the availability of the short form (Form A) to a larger universe of reporters of non-PBT (persistent bioaccumulative and toxic) chemicals, raising the threshold of the “annual reportable amount” from 500 pounds to 5,000 pounds. EPA also made Form A available to PBT reporters with zero total releases, and less than 500 pounds PRA (PBT reportable amount). These changes reduce small business reporting burden while maintaining the integrity of the Toxic Release Inventory database. | These changes created small
business cost savings amounting to $7.4 million in the first year and
annually. Source: EPA |
| EPA | Clean Air Act Requirements to Control Mobile Source Air Toxics (MSAT). On March 29, 2006, EPA published a proposed Clean Air Act rule that would require petroleum refineries to reduce concentrations of benzene, an air toxic, in gasoline. The rule would also require portable gasoline container manufacturers and light-duty highway vehicles to reduce the amount of benzene that is lost through evaporation. As a result of the recommendations from a SBREFA panel in September 2005, EPA proposed several flexibilities for small refiners, small gasoline container manufacturers, and light-duty vehicle manufacturers. These flexibilities include additional lead time for compliance; allowing a benzene averaging, banking, and trading program for refiners; and allowing a refiner or manufacturer that can demonstrate economic hardship additional time to comply with the standard. | The delayed implementation is
estimated to result in $12 million in first year cost savings and $12
million in annual cost savings for the following four years. Source: Advocacy estimate based on EPA regulatory impact analysis |
| EPA | Resource Conservation and Recovery Act; RCRA Burden Reduction Rule. On April 4, 2006, EPA published a final rule that reduces many of the paperwork burdens currently imposed by the Resource Conservation and Recovery Act (RCRA). EPA promulgated the burden reduction rule in response to recommendations from Advocacy and small business representatives to streamline burdensome requirements that have little corresponding environmental benefit. | The final rule is estimated to
result in annual cost savings of $3 million per year. Source: EPA |
| FAA | Thermal/Acoustic Insulation Installed on Transport Category Airplanes. The Federal Aviation Administration (FAA) proposed (in 2000) and then finalized (in 2003) a rule that established new flammability and fire protection standards for thermal/acoustic insulation in transport category airplanes. FAA issued guidance on the new rule in 2005 that would have rendered whole inventories of spare parts unusable, and also required testing and certification of all new, conforming parts before they could be installed on an aircraft. FAA agreed that the language in the rule was broader than intended and they issued this new final rule to narrow its scope. The new rule specifically limits the scope to (1) newly manufactured aircraft and (2) only the thermal blankets and insulation around the ventilation ducts in existing aircraft. All other existing spare parts were excluded. | $74 million was saved in
certification and testing costs, and $75 million in inventoried spare
parts.
Source: Industry estimates. |
| FDA | Prescription Drug Marketing Act of 1987; Prescription Drug Amendments of 1992; Policies, Requirements, and Administrative Procedures. In December 1999, the Food and Drug Administration (FDA) published a final rule that set forth requirements for the re-importation and wholesale distribution of prescription drugs in the United States. The rule was to become effective on December 4, 2000. Advocacy filed comments suggesting that the rule would negatively affect small distributors and wholesalers of prescription drugs who were required to provide and maintain information on the pedigree of the drugs. FDA chose to delay the effective date of the rule several times. On June 14, 2006, the FDA published a notice that the effective date will be December 1, 2006. Advocacy has generated cost savings to stakeholders from December 4, 2000 to February 2004, the last date on which the FDA delayed the effective date of the rule, but no data are available on the cost savings generated. | No data are available on cost savings. |
| FWS | Critical Habitat, Canada Lynx. On November 9, 2005, the Fish and Wildlife Service (FWS) proposed to designate 26,935 square miles of land as critical habitat for the Canada lynx. Advocacy met with FWS to discuss this rule. On February 16, 2006, the agency revised this proposed designation by decreasing the critical habitat designation (CHD) to 18,031 square miles. The proposed CHD excludes land in the state of Washington (1,693 square miles) and in Idaho and Montana (7,211 square miles). | FWS’s proposed decision to
exclude these high-cost areas from its CHD will result in $6 million in
cost savings.
Source: FWS |
| FWS | Critical Habitat, Red Legged Frog. On April 13, 2006, the FWS published a final rule as part of its final designation of critical habitat for the California red-legged frog. Following the issuance of a proposed rule in November 2005 revising the designation of the critical habitat for the California red-legged frog, Advocacy recommended in a comment letter on February 1, 2006, that FWS give meaningful consideration to excluding high-cost areas from its final designation. In its final rule, FWS addressed Advocacy’s concerns and excluded approximately 250,329 acres from this final designation on the basis of potential disproportionately high economic cost. | FWS’ decision to exclude these
high-cost areas from its final designation resulted in $396 million in
cost savings over 20 years. Source: FWS |
| NHTSA | Federal Motor Vehicle Safety Standard (FMVSS) No. 139. In June 2003, the National Highway Traffic Safety Administration (NHTSA) published Federal Motor Vehicle Safety Standard (FMVSS) No. 139, which contained new requirements for passenger car tires and other vehicles with a gross weight of 10,000 pounds or less. NHTSA received several petitions for reconsideration of the final rule; among those petitions was a request by Denman Tires (the only manufacturer of specialty radial tires and the only small manufacturer) that such tires be subject to a less expensive testing requirement. Denman’s petition was supported by comments submitted by the Specialty Equipment Market Association and by Advocacy. Upon reconsideration, the agency found that the more rigorous testing procedures under FMVSS 139 would have been prohibitively expensive, and that Denman’s products could remain subject to the testing procedures of other motor vehicle safety standards. | This decision saved the only
small business affected by the new safety standard an estimated $1.6
million in the first year alone. Source: Specialty Equipment Market Association |
| NPS | Personal Watercraft Rule. On September 8 and 21, 2006, the National Park Service (NPS) reopened the Cape Lookout National Seashore and the Curecanti National Recreation Area to personal watercraft use. On March 21, 2000, the NPS created regulations that banned personal watercraft use in all national parks, which took effect in 2002. Advocacy has worked with NPS and representatives of the personal watercraft industry to reopen the national parks to personal watercraft use since 2002, and has been successful in reopening 11 other national parks since 2003. | Park openings will create $1
million in cost savings in the first year of the reopening. Source: NPS |
| OSHA | Occupational Exposure to Hexavalent Chromium. OSHA proposed (in 2004) and then finalized (in 2006) a rule that lowers the permissible exposure limit (PEL) for airborne exposure to hexavalent chromium. Advocacy was highly involved throughout the rulemaking process. Advocacy participated in a SBREFA panel that reviewed the draft rule before it was published and recommended several changes to reduce the cost to small businesses. Because of these recommendations, OSHA established a PEL (or concentration not to be exceeded) of 5 µg/m3 and excluded Portland cement, chromium copper arsenate, and industries with very low exposures. OSHA also provided exceptions for intermittent users and large aircraft painting. | Quantifiable cost savings to
small business totaled $520 million. OSHA allowed a four-year phase-in
of engineering controls, which provide other significant, but
unquantified, cost savings.
Source: OSHA |
| PHMSA | Wetlines. The Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a proposed rule in December 2004 regulating external product piping (wetlines) on cargo tank motor vehicles. The rule limited to one liter the amount of flammable liquid that could remain in each wetline after drainage. Advocacy worked with small businesses and trade associations to analyze the potential impacts of the proposed regulation. In June 2006, having determined that “further regulation would not produce the level of benefits we originally expected and that the quantifiable benefits of proposed regulatory approaches would not justify the corresponding cost,” the agency withdrew its notice of proposed rulemaking. | PHMSA’s decision to withdraw
the rule resulted in $39.4 million in first-year cost savings and $1.15
million in recurring annual savings. Source: PHMSA |
| SEC | Section 404 of the Sarbanes-Oxley Act of 2002. Extension of Small Public Company Compliance Deadline for New Internal Control Reporting Requirement. In response to one recommendation by the Securities and Exchange Commission’s (SEC) advisory committee on smaller public companies, on August 9, 2006, the SEC proposed to provide small businesses an extension of time to implement Section 404 of the Sarbanes-Oxley Act of 2002. Advocacy has worked with the SEC on the act since 2002. This rule was discussed in the OMB 2004 Report to Congress on the Costs and Benefits of Federal Regulations as a candidate for regulatory reform because of its impact on small business. | SEC’s proposed action is
estimated to save smaller public companies $5.53 billion in compliance
costs. Source: Industry estimates |
| TSA/ USCG |
Transportation Worker Identification Credential (TWIC). On August 21, 2006, the Transportation Security Administration (TSA) and the U.S. Coast Guard issued a notice in the Federal Register indicating that facility and vessel owners will not be required to purchase or install card readers during the initial implementation of the TWIC in the maritime sector. While the notice references letters from Congress, the issues of the cost and technological feasibility of the reader requirements were raised during Advocacy’s small business roundtable on the subject and in its comment letter to the agencies on the proposed rule. | The removal of the card
“reader” requirements generates $129.2 million in small business cost
savings. Source: TSA |
Table 2.3 Summary of Cost Savings FY 2006 (Dollars) 1
| Rule/Intervention |
First-Year Costs |
Annual Cost |
| CMS OASIS 2 | 333,995,252 |
47,713,607 |
| DOE Energy Conservation Standards for Distribution Transformers 3 | 5,000,000 |
|
| EPA Cooling Water 4 |
74,000,000 |
|
| EPA SPCC Rule-Proposal 5 |
46,000,000 |
46,000,000 |
| EPA Toxics Release Inventory—Phase II Burden Reduction—Proposal 6 |
7,400,000 |
7,400,000 |
|
EPA Clean Air Act Requirements to Control Mobile Source Air Toxics
(MSAT)6 |
12,000,000 |
12,000,000 |
|
EPA Resource Conservation and Recovery Act—RCRA Burden Reduction Rule 7 |
3,000,000 |
3,000,000 |
|
FAA Thermal/Acoustic Insulation Installed on Transport Category Airplanes Final 8 |
149,000,000 |
|
| FWS Critical Habitat—Canada Lynx 9 |
6,000,000 |
|
| FWS Critical Habitat—Red Legged Frog 10 |
396,000,000 |
|
| NHTSA Federal Motor Vehicle Safety Standard (FMVSS) No. 139 11 |
1,600,000 |
|
| NPS Personal Watercraft Rule 12 |
1,000,000 |
|
| OSHA Occupational Exposure to Hexavalent Chromium 13 |
519,915,259 |
|
| PHMSA Wet Lines 14 |
39,358,025 |
1,149,785 |
| SEC Section 404 Sarbanes-Oxley Act of 2002—17-month extension 15 |
5,528,973,325 |
|
| TSA Transportation Worker Identification Credential 16 |
129,214,189 |
|
| TOTAL |
7,252,506,050 |
117,263,392 |
|
1. The Office of Advocacy generally bases its cost savings estimates on agency estimates. Cost savings for a given rule are captured in the fiscal year in which the agency agrees to changes in the rule as a result of Advocacy’s intervention. Where possible, the savings are limited to those attributable to small business. These are best estimates. First-year cost savings consist of either capital or annual costs that would be incurred in the rule’s first year of implementation. Recurring annual cost savings are listed where applicable. |
||
|
2 Source: Advocacy calculations based on industry data from the National Association for Home Care & Hospice |
||
|
3 Source: DOE |
||
|
4 Source: EPA and APPA |
||
|
5 Source: EPA |
||
|
6 Source: Office of Advocacy estimate based on EPA regulatory impact analysis |
||
|
7 Source: Industry estimates |
||
|
8 Source: FWS |
||
|
9 Source: Specialty Equipment Market Association |
||
|
10 Source: NPS |
||
|
11 Source: OSHA |
||
|
12 Source: PHMSA |
||
|
13 Source: SEC data (updated in 2005) and Advocacy’s 2002 calculation |
||
|
14 Source: TSA |
||
3. Advocacy Review of Agency RFA Compliance in Fiscal Year 2006
The Regulatory Flexibility Act celebrated a milestone 25th anniversary in 2005. Over the years, the Office of Advocacy has been an independent voice for small business in policy deliberations, working with agencies to examine the impact of their regulatory proposals on small entities. Advocacy has helped agencies comply with the RFA and Executive Order 13272 by providing written interagency communications, public comments, and RFA training, and by hosting RFA panels and roundtables. In monitoring agency compliance, Advocacy has noticed an increase in the number of agencies that make a good-faith effort to comply with the RFA.
Department of Agriculture
E.O. 13272 Compliance
The U.S. Department of Agriculture (USDA) has made its policies for considering small business impacts when promulgating regulations publicly available online, in compliance with section 3(a) of E.O. 13272. Three agencies within USDA consistently notify the Office of Advocacy of rules that may have a significant economic impact on small entities, as required by section 3(b) of E.O. 13272: the Animal and Plant Health Inspection Service (APHIS), Agricultural Marketing Service (AMS), and the Grain Inspection, Packers, and Stockyard Administration (GIPSA). The Food Safety and Inspection Service (FSIS) does not, although it did publish a rule in 2006 that is expected to have significant economic impacts on small entities.
APHIS has successfully worked with Advocacy on its regulations, often engaging the office early in the process by including Advocacy staff in interagency briefings on rulemakings. Although not always proficient in its certifications and RFA analyses, APHIS accepted Advocacy’s suggestions to improve their RFA compliance.
Neither APHIS, AMS, nor GIPSA published final rules in FY 2006 that were the subject of any Advocacy comment; therefore, compliance with section 3(c) of E.O. 13272 cannot be assessed. APHIS has consistently responded to interagency comments submitted by Advocacy in the rulemaking process.
Food Safety and Inspection Service
Issue: Availability of Lists of Retail Consignees During Meat and Poultry Product Recalls.
On March 7, 2006, the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) published a proposed rule seeking to make available to the public lists of the retail consignees of meat and poultry products that have been voluntarily recalled by an establishment if the product has been distributed to the retail level. While aware of the public policy behind such a rule, Advocacy disagreed with FSIS’s certification that the rule would not have a significant impact on a substantial number of small entities and filed comments suggesting that FSIS analyze the economic impact of the rule in compliance with the requirements of the Regulatory Flexibility Act. FSIS consequently agreed to reopen and extend the comment period to obtain additional public information on the rule’s impact on the industry.Department of Commerce
E.O. 13272 Compliance
The Department of Commerce (DOC) has made its RFA policies publicly available online, in compliance with section 3(a) of E.O. 13272. Two DOC agencies, the National Marine Fisheries Service (NMFS) and the U.S. Patent and Trademark Office (PTO), routinely submit draft and final rules to Advocacy pursuant to section 3(b) of E.O. 13272.
NMFS published a final rule on fisheries in the exclusive economic zone off Alaska and acknowledged Advocacy’s comments regarding an inadequate size standard, in compliance with section 3(c) of E.O. 13272.
The PTO aggressively pursued patent reform initiatives to address the rising number of patent claim applications pending in FY 2006. Advocacy worked with the agency and small entity stakeholders on several rules arising out of the agency’s reform efforts. In March 2006, Advocacy conducted its first patent law roundtable, and subsequently developed important small entity contacts in the patent law arena. In advance of the roundtable, PTO personnel met with Advocacy staff to provide an overview of the patent application process.
National Marine Fisheries Service
Issue: Fisheries of the Exclusive Economic Zone Off Alaska; Implementing an Annual Groundfish Retention Standard. On June 16, 2005, NMFS published a proposed rule to carry out Amendment 79 to the Fisheries Management Plan for Groundfish of the Bering Sea and Aleutian Islands. This rule implements an annual groundfish retention standard (GRS), as well as monitoring and enforcement measures for trawl catcher/processors longer than 125 feet. The purpose of the action was to improve utilization of groundfish harvested by catcher/processor trawl vessels and reduce bycatch (the portion of a commercial fishing catch that consists of marine animals caught unintentionally).
The catcher/processors in the groundfish industry contacted Advocacy regarding the size standard used for determining a small catcher/processor. Instead of using the Small Business Administration’s 500-employee size standard for floating factory ships in its initial regulatory flexibility analysis, NMFS used the $3.5 million annual volume size standard for fish harvesting operations. Advocacy submitted comment in August 2005 arguing that to the extent that NMFS used an inappropriate size standard, it was impossible to know whether the agency was correct in determining that none of the industry participants were small. The industry was also concerned about aspects of the proposal that were not recommended, such as new monitoring and enforcement measures, a new observer schedule, and the installation of a new NMFS-approved scale. Advocacy asked NMFS to perform an economic analysis on the new aspects of the rule and publish the analysis for public comment.
NMFS finalized the rule in April 2006. In the final rule, NMFS acknowledged that the $3.5 million size standard was inappropriate. NMFS stated that it is reviewing the catcher/processor size standard, but would continue to use the $3.5 million size standard until new guidance is adopted. The industry filed a lawsuit challenging the rulemaking in May 2006. The case was pending at the end of the fiscal year.
United States Patent and Trademark Office
Issue: Changes to Practice for Examination of Claims in Patent Applications; Changes to Practice for Continuing Applications, Requests for Continued Examination Practice, and Applications Containing Patentably Indistinct Claims. On January 3, 2006, the United States Patent and Trademark Office (PTO) published two proposed rules that would significantly change the patent application and prosecution process. The proposed regulations would limit to 10 the number of representative claims contained in an initial examination of a patent application, as well as restrict an applicant to one continuation application. Current rules of practice limit neither the number of claims reviewed on initial examination nor the number of permissible continuation applications. The PTO certified that the two proposed rules would not have a significant economic impact on a substantial number of small entities in accordance with section 605(b) of the RFA.
On March 8, 2006, Advocacy hosted a roundtable to discuss the two proposals and obtain data on the economic impact of the proposals. Present at the roundtable were independent inventors, patent attorneys, trade association representatives, the PTO, and Advocacy staff. PTO staff gave a presentation on the two proposed regulations, listened, and participated in the discussion. During the roundtable and through subsequent discussions, Advocacy was informed by small entity stakeholders that the proposed rules would have a significant impact on small entities seeking patents. Taken together, the two proposals would increase the cost of patent application preparation and hinder the patent prosecution process. Small entities raised concerns that the regulations would have significant impacts on the most valuable and commercially viable patents, which typically involve a higher number of continuations. Small entities asserted that compliance with the proposals would be much more costly than PTO estimates, would inhibit their ability to enhance their applications, would force them to seek review through the very expensive appeals process, and could weaken their ability to protect their patents.
Advocacy submitted a public comment letter to the PTO on April 27, 2006. In its comments, Advocacy relayed concerns expressed by small entity stakeholders. Advocacy also encouraged the agency to perform an initial regulatory flexibility analysis with a more complete discussion of the potential economic impact of the proposed rules and an evaluation of viable regulatory alternatives. The PTO has not yet finalized the proposed rules. Advocacy will continue to monitor this issue and work with the agency to address small entity concerns.
Issue: Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations. In July 2006, the PTO published a notice and request for comments outlining a proposed size standard for use in the agency’s Regulatory Flexibility Act (RFA) analyses. The notice proposed taking the existing SBA size standard currently used for paying reduced patent fees(33) and broadening its application for use in all of the agency’s RFA analyses. In a public comment letter submitted on August 3, 2006, Advocacy commended the PTO for seeking to identify an appropriate size standard to ensure agency compliance with the RFA. However, Advocacy questioned whether the proposed size standard was appropriate for use in all of the agency’s RFA analyses.
Advocacy convened a regulatory roundtable on July 19, 2006, to discuss the PTO’s proposed size standard. Participants at the roundtable included personnel representing the interests of small businesses and independent inventors, the PTO, the SBA’s Office of Size Standards, and Advocacy. Because the proposed size standard tabulates only the number of applicants claiming small entity status, and not actual small entities, Advocacy expressed concern that it would be an inadequate measure. Small entity representatives expressed concern that the proposed RFA size standard would exclude a significant number of small entities. Further, they were concerned that the standard would not provide an accurate estimate of the number of small entities affected by the PTO’s regulations because the agency does not count or collect data on the specific entities submitting a patent application.
In its comment letter, Advocacy supported PTO’s decision to seek public comment on the proposed size standard and encouraged the agency to continue working with Advocacy and small entity stakeholders to identify a more appropriate size standard for use in its RFA analyses. The PTO has not published a final notice.
Department of Defense
E.O. 13272 Compliance
The Federal Acquisition Regulation Council (FAR Council) promulgates procurement regulations that are government-wide and affect small businesses. The FAR Council statutorily includes representation from the Department of Defense (DOD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA). The DOD regulations, called the Defense Federal Acquisition Regulation Supplement (DFARS), are specific to DOD and can only supplement the FAR Council regulations. However, because the FAR Council and DOD regulatory processes are interrelated, DOD’s procedures comply with section 3(a) of E.O. 13272. DOD submits prepublication rulemakings for Advocacy consideration in compliance with section 3(b) of E.O. 13272. DOD did not publish any final rules in FY 2006 that were the subject of any written Advocacy comments; therefore, DOD compliance with section 3(c) cannot be assessed. DOD’s staff received RFA training in FY 2005.
Advocacy worked closely with OIRA’s Defense regulatory team, providing significant interagency input on several regulations in fiscal year 2006.
Issue: Radio Frequency Identification. On April 21, 2005, DOD issued a proposed regulation to amend DFARS by adding a requirement that packages be marked with passive radio frequency identification (RFID) tags, replacing existing military shipping labels. By increasing the accuracy of shipments and receipts, and reducing the number of logistic “touch points,” these tags decrease the time required to deliver materiel to the troops. DOD has developed a three-year rollout plan for supplier implementation of RFID requirements. Advocacy worked closely with DOD to provide a detailed cost/benefit analysis of the impact of this regulation on small entities. DOD has conducted outreach and training to the small business community on this regulation. The rule was implemented in September 2005.
On May 19, 2006, DOD issued an interim rule for the second year of the rollout, which would expand the numbers of applicable DOD depots and of commodities required to have RFID tags. The rule requires contractors to affix passive RFID tags when shipping packaged petroleum, lubricants, oils, preservatives, chemicals, additives, construction and barrier materials, and medical materials to specified DOD locations. As a result of Advocacy’s involvement in the regulatory process, DOD continues to provide training assistance to aid small businesses in converting to the RFID technology for shipments to DOD installations. The final rule was implemented in July 2006.
Issue: Transition of Prototype Projects to Follow-on Contracts. Another predecisional deliberative rulemaking this fiscal year was the DFARS rule on the Transition of Prototype Projects to Follow-On Contracts. Other transaction agreements (OTA) is an acquisition tool that has been authorized by Congress, and is not within the regulatory acquisition framework of the FAR. In FY 2005, DOD awarded 78 OTAs totaling $150 million. Small businesses were awarded 22 of these for a value of nearly $40 million. As a result of Advocacy’s work with the DFARS and OIRA teams in FY 2006, the final regulatory flexibility analysis for this case complies with the RFA.
Department of Education
E.O. 13272 Compliance
The Department of Education (Education) made its RFA policies and procedures available online and notified Advocacy of draft rules that may have a significant impact on a substantial number of small entities, in compliance with section 3(a) and 3(b) of E.O. 13272. Education did not finalize any rules in FY 2006 on which Advocacy has filed comments; therefore, Education’s compliance with section 3(c) cannot be assessed.
Department of Energy
E.O. 13272 Compliance
The Department of Energy (DOE) continues to comply with section 3(a) of E.O. 13272 by maintaining its policies and procedures concerning the Regulatory Flexibility Act on its website. In FY 2006, all of DOE’s draft rules that were sent to the Office of Management and Budget (OMB) for review were also sent to Advocacy, in compliance with section 3(b) of E.O. 13272. DOE proposed one rule in FY 2006 that was the subject of informal Advocacy comments, on distribution transformer energy conservation standards, and DOE fully responded to Advocacy’s comments in accordance with section 3(c) of Executive Order 13272.
Issue: Distribution Transformer Energy Efficiency Standards. On August 4, 2006, DOE published a notice of proposed rulemaking on energy conservation standards for distribution transformers. Advocacy submitted informal interagency comments to DOE requesting clarification of the costs and benefits of the regulatory alternatives under consideration. More than half of the manufacturers of liquid and medium-voltage dry distribution transformers are small businesses. Advocacy met with DOE to discuss various regulatory options, and DOE considered the impacts on small business manufacturers when it proposed the least costly required efficiency standard from among five alternatives. DOE met with small businesses in designing the new efficiency standard and specifically chose a standard that would allow regulated manufacturers to make use of readily available techniques and materials. This proposed standard, relative to the next more expensive standard, is anticipated to result in one-time cost savings of at least $5 million.
Department of Health and Human Services
E.O. 13272 Compliance
The Department of Health and Human Services (HHS) made its policies and procedures publicly available online, in compliance with section 3(a) of E.O. 13272. Draft rules were not consistently submitted to Advocacy pursuant to section 3(b) of E.O. 13272 in FY 2006 by the Centers for Medicare and Medicaid Services (CMS) or the Food and Drug Administration (FDA), two agencies that often promulgate rules that affect small businesses. Neither CMS nor FDA published final rules in FY 2006 that were the subject of any public Advocacy comment; therefore, compliance with section 3(c) of E.O. 13272 cannot be assessed.
Centers for Medicare and Medicaid Services
Issue: Medicare and Medicaid Programs: Reporting Patient Outcome and Assessment Information Data as Part of the Conditions of Participation for Home Health Agencies. In January 1999, the Health Care Financing Administration (HCFA), now known as the Centers for Medicare and Medicaid Services (CMS), published a final rule requiring home health agencies (HHAs) to submit all patient data through the Outcome and Assessment Information Set (OASIS). CMS certified that the rule would not have a significant impact on a substantial number of small entities. Advocacy worked closely with OIRA and CMS to identify several concerns with the rule’s requirements that were expected to have a negative effect on small home health care agencies, most of which are considered small under SBA size standards. Advocacy was particularly concerned that HHAs would have to submit data on all patients, not just Medicare and Medicaid patients, adding to the time and cost required to comply with the rule. As a result of Advocacy’s involvement and the comments filed by stakeholders, CMS published a final rule in January 2006 that did not require HHAs to transmit data for non-Medicare and non-Medicaid patients.
Food and Drug Administration
Issue: Prescription Drug Marketing Act of 1987; Prescription Drug Amendments of 1992; Policies, Requirements, and Administrative Procedures. On December 3, 1999, the Food and Drug Administration (FDA) published a final rule in the Federal Register that set forth requirements for the re-importation and wholesale distribution of prescription drugs in the United States. The rule was to become effective on December 4, 2000. Advocacy filed comments suggesting that the rule would negatively affect small distributors and wholesalers of prescription drugs who were required to provide and maintain information on the drugs’ pedigrees. Pursuant to Advocacy’s involvement and industry assurances that it would voluntarily implement electronic trace technology, FDA chose to delay the effective date of the rule several times, saving small businesses considerable revenue. On June 14, 2006, the FDA published a notice that the effective date will be December 1, 2006.
Department of Homeland Security
E.O. 13272 Compliance
The Department of Homeland Security (DHS) continues to make progress in complying with E.O. 13272. DHS has posted its procedures for considering the small business impacts of its regulations on its website, in compliance with section 3(a) of E.O. 13272. However, DHS still does not submit draft rules to Advocacy as required by section 3(b). DHS published one final rule in FY 2006 that was the subject of Advocacy comments and revised it to reflect Advocacy’s concerns; therefore, it complied with section 3(c) of E.O. 13272.
Issue: Homeland Security Acquisition Regulation. DHS published an interim rule in December 2003 that codified its acquisition system, and Advocacy submitted a public comment letter in January 2004. Among several comments, Advocacy urged DHS to revisit its mentor-protégé program and the incentives to large businesses that participated as mentors.
On May 2, 2006, DHS published its final rule and acknowledged Advocacy’s comments, but disagreed with the assessment of the mentor-protégé program. Notwithstanding, DHS revised its final regulation to reflect the concerns of Advocacy. DHS clarified the Homeland Security Acquisition Regulations regarding the limitations of the individual mentor-protégé agreements. Based on Advocacy’s comment letter, this change in the final regulation will benefit small businesses by not allowing large businesses to satisfy their subcontracting goals through the mentor-protégé program. To meet small business subcontracting goals, large businesses will be required to use other small businesses in addition to those in the mentor-protégé program.
Transportation Security Administration and U.S. Coast Guard
Issue: Transportation Worker Identification Credential. On May 22, 2006, the Transportation Security Administration (TSA) and the U.S. Coast Guard jointly issued the proposed rule for the Transportation Worker Identification Credential (TWIC) Implementation in the Maritime Sector. The proposed rule would implement Section 102 of the Maritime Transportation Security Act (MTSA) and other statutory provisions that require the Secretary of Homeland Security to issue a biometric transportation security card to individuals with unescorted access to secure areas of ports, vessels, and other facilities. The agency proposed an identification card that would include a computer chip with a digital photograph and fingerprints of the holder capable of being scanned on a card reader. The MTSA already requires owners and operators of these maritime facilities to submit to the Coast Guard detailed security assessments of their respective vessels and facilities to identify security vulnerabilities. The agencies stated that they could not determine whether the proposed rule would have a significant economic impact on a substantial number of small entities, and prepared an initial regulatory flexibility analysis.
On June 21, 2006, Advocacy hosted a small business roundtable on the proposed TWIC rule that included representatives of the maritime towing and passenger vessel, recreational boating, commercial trucking, charter bus, and aviation sectors. Advocacy subsequently submitted a public comment letter to the agencies expressing small business concerns. These concerns included the need to include missing information in the economic analysis, such as costs to small businesses utilizing seasonal or temporary workers. Small businesses were also concerned that the proposal was too complex, required technology for readers that does not exist, and required an additional card without preempting other already required credentials. TSA agreed in a Federal Register notice that it will bifurcate the proposed rule to eliminate the requirement for biometric card readers at this time, thereby reducing the burden on small entities. The agency has stated that any subsequent rulemaking concerning card readers will be done through a full notice and comment rulemaking process. The estimated savings from the elimination of the reader requirement total nearly $130 million.
Department of Housing and Urban Development
E.O. 13272 Compliance
The RFA policies and procedures of the Department of Housing and Urban Development (HUD) were made available to the public online, in compliance with section 3(a) of E.O. 13272. This fiscal year, HUD continued to notify Advocacy of rules that may have a significant impact on a substantial number of small entities as required by section 3(b) of E.O. 13272. HUD consistently contacts Advocacy to review draft rulemakings to ensure RFA compliance. HUD did not publish any final rules in FY 2006 that were the subject of any Advocacy comment; therefore, HUD’s compliance with section 3(c) cannot be assessed.
Department of the Interior
E.O. 13272 Compliance
The Department of the Interior (DOI) has a departmental manual listing the requirements and guidance to promote RFA compliance and has made it publicly available in compliance with section 3(a) of E.O. 13272. DOI continues to notify Advocacy of rules that could have a significant economic impact on a substantial number of small entities as required by section 3(b). DOI also utilized Advocacy’s email notification system to inform Advocacy of draft rules that may affect small businesses. The National Park Service (NPS) also complies with section 3(b) by sending Advocacy its draft rules.
The Fish and Wildlife Service (FWS) is not in compliance with section 3(b), because it does not send Advocacy its draft rules that could have a significant impact. FWS also repeatedly has not determined whether its proposed rules will have a significant economic impact on a substantial number of small entities. Advocacy filed five comment letters to FWS in FY 2006 citing the agency’s failure to prepare an IRFA or certify the rule during the proposed rule stage as required by the RFA. Advoacy believes that these delays in completing the necessary RFA analysis thwart the ability of affected small entities to provide meaningful comment on the proposal’s impact.
Both NPS and FWS had final rules and responded to comments by Advocacy, complying with section 3(c) of E.O. 13272. However, FWS continued to have problems complying with the RFA requirements. In its final rule for the critical habitat designation of the California red-legged frog, FWS certified that the rule would not have a significant economic impact on a substantial number of small entities, despite small business views to the contrary voiced during the process. FWS did not complete an IRFA or FRFA for this rule. Advocacy is working with FWS to improve its E.O. 13272 and RFA compliance, and has planned additional RFA training in FY 2007. Advocacy’s internal recommendations prompted FWS to submit an IRFA at the end of FY 2006 for the critical habitat designation of the Canada lynx.
U.S. Fish and Wildlife Service
Issue: Designation of Critical Habitat for the California Red-Legged Frog. On November 3, 2005, FWS proposed to designate more than 737,912 acres of critical habitat for the California red-legged frog in 23 California counties. Under section 605 of the RFA, FWS certified that the proposed rule would not have a significant economic impact on a substantial number of small entities.
Advocacy conducted outreach to small entities potentially affected by the proposed rule. As a result of these conversations, Advocacy recognized that the proposed rule should not have been certified because it would likely have a significant economic impact on a substantial number of small entities in the home building industry in a number of the affected counties. On February 1, 2006, Advocacy submitted a public comment letter to FWS, recommending that they revisit the economic impacts of the proposed designations and consider less burdensome alternatives. In particular, Advocacy recommended that FWS not designate areas it had identified as most likely to affect small businesses because of their high commercial value for home building. FWS took Advocacy’s comments under advisement as it prepared its final rule. On April 13, 2006, FWS issued a final rule that excluded high-cost areas and eliminated 250,000 acres of proposed critical habitat. Based on FWS’s economic analysis, Advocacy believes that the decision to eliminate these high-cost areas from its final designation resulted in $396 million in cost savings over 20 years.
Issue: Designation of Critical Habitat for the Alabama Beach Mouse. On February 1, 2006, FWS proposed to designate approximately 1,298 acres in coastal lands of Alabama for the critical habitat of the Alabama beach mouse. On August 8, 2006, FWS published its draft economic analysis and reopened the period for comments. FWS did not provide an IRFA or certify the rule in either of these notices.
Advocacy believed that the draft economic analysis provided by FWS overlooked sectors of small entities that may be significantly affected, such as developers and builders. On September 7, 2006, Advocacy cited these concerns in a public comment letter, and recommended that FWS complete an IRFA for the proposed rule and subject the analysis to public comment prior to moving forward with the final rule. Advocacy will continue to monitor this issue and work with FWS to address small entity concerns.
Issue: Designation of Critical Habitat for the Canada Lynx. On November 9, 2005, FWS proposed to designate 26,935 square miles of land in Idaho, Maine, Minnesota, Montana, and Washington as the Canada lynx’s critical habitat. Advocacy spoke with stakeholder groups concerned that this critical habitat would have significant impacts on small businesses. Advocacy worked closely and had meetings with FWS and outside economists to discuss these concerns and ways to analyze the economic impacts. On February 16, 2006, FWS revised the proposed designation by decreasing the critical habitat designation (CHD) to 18,031 square miles. FWS’s proposed decision to exclude these high-cost areas from its CHD will result in more than $6 million in cost savings. FWS did not provide an IRFA or certify that this rule would have a significant impact on a substantial number of small entities. After working with Advocacy, FWS published an IRFA and an economic analysis. A court order required FWS to complete a final critical habitat designation by November 1, 2006.
National Park Service
Issue: Personal Watercraft Rules. On March 21, 2000, the NPS created regulations that banned personal watercraft use in all national parks, which took effect in 2002. Advocacy met and worked with NPS and representatives of the personal watercraft industry to reopen the national parks to personal watercraft use, and has been successful in reopening 11 other national parks since 2003. On September 8 and 21, 2006, the National Park Service (NPS) reopened the Cape Lookout National Seashore and the Curecanti National Recreation Area to personal watercraft use. NPS’s decision to reopen these two national parks will result in more than $1 million in cost savings in the first year of the reopening.
Department of Justice
E.O. 13272 Compliance
The Department of Justice (DOJ) has made its policies and procedures publicly available as required by section 3(a) of E.O. 13272. DOJ continues to use the email notification system to notify Advocacy of draft rules that may have a significant impact on a substantial number of small entities, as required by section 3(b) of E.O. 13272. DOJ did not publish any final rules in FY 2006 that were the subject of any Advocacy comment; therefore, DOJ’s compliance with section 3(c) cannot be assessed.
Department of Labor
E.O. 13272 Compliance
The Department of Labor (DOL) posts its RFA policies and procedures online, complying with section 3(a) of E.O. 13272. The Employee Benefits Security Administration (EBSA) notified Advocacy by mail and email of rules that may have a significant impact on a substantial number of small entities as required by section 3(b) of E.O. 13272. The Mine Safety and Health Administration (MSHA) and the Occupational Safety and Health Administration (OSHA) sent Advocacy drafts via mail, in compliance with 3(b).
All three agencies published final rules in FY 2006 that were the subject of Advocacy comment and discussed Advocacy’s comments with specificity, in compliance with Section 3(c) of E.O. 13272. Advocacy submitted comments to OSHA on its Notice of a Regulatory Flexibility Act Review of Lead in Construction standard and its Proposed Electric Power Generation, Transmission, and Distribution; Electrical Protective Equipment Rule; however, no further action has been taken on these initiatives. OSHA and MSHA frequently participate in Advocacy small business regulatory roundtables on occupational safety and health, and mine safety and health issues. OSHA’s Office of Small Business Assistance has been proactive in discussing small business issues with Advocacy. As part of the SBREFA process, OSHA has contacted Advocacy to discuss rules that may have a significant economic impact on a substantial number of small entities and where a SBREFA panel is expected. In FY 2006, EBSA submitted a final rule on electronic filing of Form 5500. EBSA delayed the annual filing requirement in this final rule, directly addressing and implementing Advocacy’s recommended regulatory alternative.
Occupational Safety and Health Administration
Issue: Section 610 Review of Lead in Construction Standard. On June 6, 2005, the Occupational Safety and Health Administration (OSHA) announced a review of its lead in construction standard in accordance with Section 610 of the RFA, which requires federal agencies to review their regulations periodically to determine whether they should be continued without change, amended, or rescinded in order to minimize any significant economic impacts of the rule on a substantial number of small entities. Many small businesses in the residential and commercial renovation businesses are affected by the OSHA requirements, and face potentially duplicative and overlapping requirements with other federal regulations.
Advocacy hosted a small business regulatory roundtable on September 22, 2005, to discuss the impact of OSHA’s current regulation on small businesses. The roundtable featured presentations from OSHA, HUD, and EPA, each of which has regulations governing lead hazards. Many small business representatives in attendance believed that OSHA should open a formal notice and comment rulemaking process to revise its lead in construction standard to make it less costly and burdensome. Following the roundtable, Advocacy filed a public comment letter on October 28, 2005, with OSHA, recommending that it begin a formal notice and comment rulemaking process to develop a final lead in construction standard, since its existing interim final standard was issued in 1993 without such a process. OSHA is currently reviewing the comments it received and has yet to announce its intentions for further action.
Issue: Electric Power Generation, Transmission and Distribution Rule. On June 15, 2005, OSHA proposed to update the existing standard for the construction of electric power transmission and generation installations to make them more consistent with the more recently promulgated general industry standard. The proposal would also make miscellaneous changes to both standards, including adding provisions related to host employers and contractors, flame-resistant clothing, training, and electrical protective equipment.
Advocacy participated in the SBREFA panel process in 2003 and hosted a conference call of the small entity representatives following publication of the proposed rule to obtain their input. Further, Advocacy filed a public comment letter on January 9, 2006, and attended an OSHA public hearing on the proposed rule. Advocacy recommended that OSHA consider changes to the proposal, consistent with the finding of the SBREFA panel, concerning the host-contractor provisions, training, and protective clothing. OSHA is currently reviewing the comments it received and has yet to announce it intentions for further action.
Issue: Proposed Occupational Exposure to Hexavalent Chromium Rule. OSHA issued its final rule for occupational exposure to hexavalent chromium on February 28, 2006. The final rule lowered the permissible exposure level (PEL) from 52 micrograms per cubic meter of air (for an 8-hour time-weighted average) to 5, with an action level of 2.5. The new rule will require many small businesses to implement engineering and other controls to reduce employee exposures.
Advocacy was involved in the rulemaking process from the initiation of a SBREFA panel in 2003 through promulgation of the final rule. Advocacy participated on the SBREFA panel, conferred with representatives of small businesses likely to be affected in several industries (including chemical, alloy, and pigment manufacturing, electroplating, welding, and aerospace), and filed a public comment letter. Advocacy also discussed this issue at several of its small business labor safety roundtables, which included presentations by small business representatives likely to be affected by the standard. The Office of Advocacy also communicated directly with OMB and OSHA on an interagency basis.
OSHA’s final rule, issued on February 28, 2006, established a PEL of 5 µg/m3. However, based on recommendations from the SBREFA panel, the agency excluded uses of Portland cement, chromium copper arsenate, and certain industries with very low exposures, and provided exceptions for intermittent users and large aircraft painting. OSHA estimates that the cost savings to small businesses from changing the PEL and excluding Portland cement is $520 million. In addition, OSHA allowed a four-year phase-in of engineering controls, which provides other significant but unquantified cost savings.
Issue: Cranes and Derricks in Construction Rule. OSHA initiated a SBREFA panel on August 18, 2006, on the cranes and derricks in construction rule, a draft proposed rule that had been produced through a negotiated rulemaking process. Most of the contentious issues concerning the proposal had already been debated at length and resolved to the extent possible. The panel report due by October 2006 was expected to recommend that OSHA review and submit for public comment a number of recommendations made by small entity representatives, including whether the certification of crane operators should be required and whether some small boom cranes and building material vendors could be exempted from the standard altogether.
Advocacy participated in the SBREFA panel, conferring with representatives from affected small businesses. Advocacy also discussed this issue at several of its small business labor safety roundtables, including presentations by small business representatives likely to be affected by the standard. OSHA expects to issue a proposed rule for formal comment in 2007.
Issue: Electronic Filing of Annual Reports. On August 30, 2005, EBSA published a proposed rule to implement the agency’s announced intention to require a wholly electronic filing system for submission of Form 5500 filings for plan years beginning January 1, 2007, with the first due in 2008. EBSA provided Advocacy a prepublication copy for review and comment on the rule’s IRFA.
On September 29, 2005, Advocacy hosted a roundtable to obtain the input of small businesses and stakeholders on the proposed rule’s potential economic impact. Personnel from EBSA attended the roundtable. The roundtable participants voiced concern that requiring electronic filing may inhibit some firms from providing benefits to their employees and that the cost of implementing electronic filing would be cost prohibitive.
As a result of the comments received from small businesses, Advocacy submitted a public comment letter to EBSA on October 14, 2005. Advocacy’s comment letter encouraged EBSA to consider additional significant alternatives to the implementation of the rule. Specifically, Advocacy encouraged EBSA to consider a delayed compliance date for small entities, as well as penalty abatement for inadvertent noncompliance during the initial year of implementation.
EBSA published the final rule on July 21, 2006. The final rule requires the electronic filing of Form 5500, beginning with plans years starting on January 1, 2008, with the first filings being submitted in 2009. EBSA has estimated that the delayed implementation will result in $3 million in cost savings. EBSA addressed Advocacy’s comments and plans to evaluate whether to abate penalties incurred because of inadvertent noncompliance during the initial year of implementation.
Department of State
E.O. 13272 Compliance
The Department of State (State) has not made its policies and procedures publicly available as required by section 3(a) of E.O. 13272. State did not submit any draft rules to Advocacy in FY 2006, because the agency did not believe that any rule would have a significant impact on a substantial number of small entities. However, Advocacy submitted a comment letter on the proposed exchange visitor program, noting that the State Department’s certification was improper because it lacked a factual basis. State has not published final rules in FY 2006 that were the subject of Advocacy comments; therefore, it compliance with section 3(c) of E.O. 13272 cannot be assessed. Advocacy anticipates training staff from State in FY 2007.
Issue: Proposed Exchange Visitor Program; Training and Internship Programs Rule. The Department of State issued proposed new regulations on April 7, 2006, for designating U.S. government, academic, and private sector entities to conduct educational and cultural exchange programs pursuant to the Mutual Educational and Cultural Exchange Act of 1961, as amended (also known as the Fulbright-Hays Act). Under this statute, designated program sponsors under the J-1 visa program across a variety of industries facilitate the entry into the United States of more than 275,000 exchange participants each year. The proposed rule would impose a variety of new requirements on designated program sponsors before they could accept a participant into their exchange program. For example, designated program sponsors would have to verify the participant’s prior academic/work experience, English proficiency, and finances; conduct in-person interviews with potential trainees in their home country; develop a detailed individualized training plan (Form DS-7002); and provide oversight, counseling, and evaluations during the course of the exchange program. In addition, the proposed rule includes special provisions related to aviation flight training schools that limit the ratio of on-the-job training to classroom study (to a ratio of one month to four) and reduce the maximum duration of the training program from 24 to 18 months. Small business aviation flight schools operating as designated J-1 sponsors claim the proposed rule would be economically detrimental to them.
The issue of the State Department’s proposed rule was raised during Advocacy’s regular aviation safety roundtable on April 20, 2006. Representatives of small aviation flight schools operating under the J-1 visa program claimed that the rule would have a significant economic impact on these businesses. The Department of State had certified the rule under the RFA. On May 30, 2006, Advocacy filed a public comment letter stating that the certification was improper because it lacked a factual basis and may be incorrect. Advocacy recommended that the State Department either provide a factual basis for its RFA certification or prepare and publish an initial regulatory flexibility analysis (IRFA) for public comment before proceeding with this rule. Advocacy noted that it understood that that there are important security implications associated with this proposed rule (particularly with respect to aviation flight training schools and foreign nationals training to be pilots here) and deferred to the Department of State and others to assess the security implications of this and other programs.
Department of Transportation
E.O. 13272 Compliance
The Department of Transportation (DOT) has made progress in complying with E.O. 13272. DOT has posted its RFA policy on its website, in compliance with section 3(a) of E.O. 13272. DOT submitted draft rules electronically to Advocacy in 2006, as required by 3(b) of E.O. 13272. Advocacy has established strong working relationships with a few key personnel who seek Advocacy’s participation or input on agency rulemakings. In fact, some DOT offices routinely request Advocacy’s attendance at briefings on rulemaking they believe may have an impact on small entities. No agencies in the DOT published final rules in FY 2006 that were the subject of Advocacy comments; therefore, DOT’s section 3(c) compliance with E.O. 13272 cannot be assessed.
Federal Aviation Administration
Issue: Washington, DC, Metropolitan Area Special Flight Rules Area. The Federal Aviation Administration (FAA) issued the proposed rule on the Washington, DC, metropolitan area special flight rules area on August 4, 2005. This proposed rule would essentially codify current flight restrictions for certain aircraft operating in the Washington, DC, metropolitan area that were adopted in the wake of the terrorist attacks of September 11, 2001. The proposed rule would create a special flight rules area (SFRA) around Washington, DC, and impose flight operation requirements on aircraft operations within that area. These provisions would generally require aircraft operators to: 1) file and activate a flight plan before entering (or re-entering) the restricted area; 2) maintain radio communication with air traffic control; and 3) obtain and display a discrete transponder code while operating within the area. The FAA has concluded that while these restrictions are likely to cause considerable burdens to both air traffic control and the aviation industry within the affected area, they are needed for security reasons. Small businesses expressed serious concerns about the impact of the proposed rule on small aviation businesses operating within the area.
This proposed rule was discussed during Advocacy’s regular aviation safety roundtable on October 20, 2005. In response to comments raised by small businesses, Advocacy filed a public comment letter with the agency on February 6, 2006, recommending that the FAA carefully consider small business comments and alternatives to its proposed rule, and publish a revised IRFA for additional comment before finalizing the rule.
Issue: Thermal/Acoustic Insulation Installed on Transport Category Airplanes Rule. The FAA issued its final Thermal/Acoustic Insulation rule in 2003, with a compliance date of September 2, 2005. The rule was intended to apply to the replacement of thermal insulation blankets used on the fuselage of airplanes. However, before the final compliance date, industry representatives became aware that some of the language in the rule was ambiguous and that the rule, as written, would have had a much broader impact than originally envisioned. This would have meant that far more airplanes and components would have been subject to the rule, and that entire inventories of spare parts would have been rendered unusable.
Small business representatives raised the issue of FAA’s final Thermal/Acoustic Insulation rule during Advocacy’s regular aviation safety roundtable on July 14, 2005. In response, Advocacy helped organize a meeting with FAA personnel to discuss the rule and the ambiguities in the language. Based on these discussions, the agency agreed that the rule required clarification and agreed to issue a revised regulation.
On December 30, 2006, FAA issued a revised final rule that narrowed the original rule’s scope and exempted certain airplanes and components. Because the final rule narrowed the scope (and therefore the cost) of the original rule, the agency did not perform an economic analysis. However, industry representatives estimated cost savings of $149 million ($74 million in certification costs and $75 million in inventoried spare parts) from the revisions.