Report on the Regulatory Flexibility Act FY 2006 Annual Report of the Chief Counsel for Advocacy on Im- plementation of the Regulatory Flexibility Act and Execu- tive Order 13272 February 2007 Report on the Regulatory Flexibility Act, FY 2006 Annual Report of the Chief Counsel for Advocacy on Im- plementation of the Regulatory Flexibility Act and Execu- tive 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 Execu- tive Order 13272, the Office of Advocacy reports annually on federal agency compliance. The RFA re- quires federal agencies, during the regulatory development process, to review the potential impact of pro- posed 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 Regula- tory 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 train- ing 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 un- derstanding 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 regula- tory 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 consulta- tion 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 busi- nesses 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 them- selves 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 govern- ments 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 PolicyHistory 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 bur- densome demands including legal, accounting and consulting costs upon small businesses, small organiza- tions, and small governmental jurisdictions with limited resources; [and] unnecessary regulations create entry barriers in many industries and discourage potential entrepreneurs from introducing beneficial prod- ucts and processes. (1) The 1980 passage of the RFA was intended to address this longstanding problem of the disproportion- ate 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 dispropor- tionate 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 flexi- bility analysis (IRFA) if it determines that a proposal may impose a “significant economic impact on a sub- stantial 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 certifica- tions 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 en- tities and contain the following information(4) A description of the reasons why the action by the agency is being considered. A succinct statement of the objectives of, and legal basis for, the proposed rule. A description—and, where feasible, an estimate of the number—of small entities to which the proposed rule will apply. 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 regu- latory 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 mini- mize the economic impact on small entities; give the factual, policy, and legal reasons for selecting the al- ternatives 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 pro- posing any rules expected to have a significant economic impact on those businesses.(9) These panels con- sist 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 in- formation 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 substan- tial number of small entities.(14) Under the executive order, each agency is required to give “every appro- priate 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 en- acted, 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 presi- dent and Congress on agency compliance with the law.(20) Executive Order 13272 further requires regula- tory 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 an- nual 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 execu- tive 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 signifi- cant 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) Advo- cacy 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 sys- tem 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 sys- tem 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 writ- ten 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 Advo- cacy 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 regula- tory 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 effective- ness 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, agen- cies 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 state- ments 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 analyz- ing 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 fin- gertips. 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 in- volvement in the rulemaking process. Under E.O. 13272, Advocacy has proven very successful in its ef- forts 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 communica- tions 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 meas- urement 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 effective- ness post-E.O. 13272. In future annual reports, Advocacy anticipates using new measurement tools to re- fine 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 put- ting the real-world concerns of small businesses directly in front of agency officials. Advocacy staff regu- larly 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 spe- cific regulations and issues, such as environmental, transportation, and industrial safety regulations. Advo- cacy 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 iden- tify 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, in- teragency 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 com- ment letters where appropriate. In FY 2006, Advocacy sent over 40 formal comment letters to federal agen- cies (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 re- view 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 Re- vision 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 Inju- rious 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 Com- panies’ 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 Des- ignation 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 Wash- ington 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 Amend- ments 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 Applica- tions, Requests for Continued Examination Practice, and Applications Con- taining 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 com- pliance 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 Avail- ability 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 Ex- change 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 En- gines/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 Domes- tic 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 Pro- posed Transportation Worker Identification Credential (TWIC) Implementa- tion 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 Des- ignation 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 Pur- poses 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 Administra- tion’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 Mate- rials, 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 Exten- sions 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 Con- trols Financial Reporting); 71 Fed. Reg. 40,865 (July 18, 2006). 09/15/06 EPA Comment letter regarding the Notice of Proposed Rulemaking on the Na- tional 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 Iden- tity Theft Red Flags and Address Discrepancies Under the Fair and Accu- rate 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 Regula- tory Flexibility Analysis on the Implementation of the Commercial Spec- trum Enhancement Act and Modernization of the Commission’s Competi- tive 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 voic- ing 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 pro- viders. 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 effec- tive date saved small HHAs $334 million. The December 2005 decision further netted an additional annual savings of $47.7 million. Source: National Associa- tion for Home Care & Hospice DOE Energy Conservation Standards for Distribution Transform- ers. 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 manufac- turers of liquid and medium-voltage dry distribution trans- formers are small businesses. In response to Advocacy’s informal interagency comments, DOE considered the im- pacts 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 mil- lion. 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 in- take flows typically do not cause aquatic losses, and EPA proposed an exemption for facilities that have a cooling wa- ter intake flow of 50 million gallons per day or less. This exemption, which is contained in the final rule, removes vir- tually all small businesses from the rule’s coverage. The recommendations of the SBREFA panel re- sulted in cost savings of $74 million for small enti- ties such as municipal utilities, pulp and paper companies, and chemical plants. Source: EPA and Ameri- can Public Power Associa- tion 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 require- ments. Facilities with oil-filled equipment are provided the option of preparing an oil spill contingency plan and a writ- ten commitment of manpower, equipment, and materials in lieu of providing expensive secondary containment around the equipment. These changes produced small business cost sav- ings 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 bioaccu- mulative 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 sav- ings 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 pro- posed Clean Air Act rule that would require petroleum refin- eries to reduce concentrations of benzene, an air toxic, in gasoline. The rule would also require portable gasoline con- tainer manufacturers and light-duty highway vehicles to re- duce 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 addi- tional lead time for compliance; allowing a benzene averag- ing, 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 implementa- tion is estimated to result in $12 million in first year cost savings and $12 mil- lion in annual cost savings for the following four years. Source: Advocacy esti- mate based on EPA regu- latory 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 re- sponse to recommendations from Advocacy and small busi- ness 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) pro- posed (in 2000) and then finalized (in 2003) a rule that estab- lished 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 in- tended 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 esti- mates. FDA Prescription Drug Marketing Act of 1987; Prescription Drug Amendments of 1992; Policies, Requirements, and Adminis- trative Procedures. In December 1999, the Food and Drug Administration (FDA) published a final rule that set forth requirements for the re-importation and wholesale distribu- tion 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 pub- lished 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 Feb- ruary 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 ex- cluded approximately 250,329 acres from this final designa- tion on the basis of potential disproportionately high eco- nomic cost. FWS’ decision to exclude these high-cost areas from its final designation re- sulted 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 Admini- stration (NHTSA) published Federal Motor Vehicle Safety Standard (FMVSS) No. 139, which contained new require- ments 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 manufac- turer of specialty radial tires and the only small manufac- turer) 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 af- fected by the new safety standard an estimated $1.6 million in the first year alone. Source: Specialty Equip- ment 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 reopen- ing 11 other national parks since 2003. Park openings will create $1 million in cost savings in the first year of the re- opening. 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 par- ticipated 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 rec- ommendations, OSHA established a PEL (or concentration not to be exceeded) of 5 µg/m3 and excluded Portland ce- ment, chromium copper arsenate, and industries with very low exposures. OSHA also provided exceptions for intermit- tent users and large aircraft painting. Quantifiable cost savings to small business totaled $520 million. OSHA al- lowed a four-year phase-in of engineering controls, which provide other sig- nificant, but unquantified, cost savings. Source: OSHA PHMSA Wetlines. The Pipeline and Hazardous Materials Safety Ad- ministration (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 origi- nally 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 Inter- nal Control Reporting Requirement. In response to one rec- ommendation by the Securities and Exchange Commission’s (SEC) advisory committee on smaller public companies, on August 9, 2006, the SEC proposed to provide small busi- nesses 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 Fed- eral 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 re- quirements 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 gen- erates $129.2 million in small business cost sav- ings. 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. Recur- ring 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 com- ments, 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 signifi- cant 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 enti- ties. 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 pro- ficient 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 Advo- cacy comment; therefore, compliance with section 3(c) of E.O. 13272 cannot be assessed. APHIS has consis- tently 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 pro- posed 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 sug- gesting 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 sec- tion 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 sev- eral 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 imple- ments 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 moni- toring 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 Con- taining 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 subse- quent 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 con- cerns 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, Advo- cacy 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 final- ized 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 com- ments 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 submit- ted 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 pro- posed 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 represen- tatives 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 num- ber 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 Aeronau- tics 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 regula- tions. However, because the FAR Council and DOD regulatory processes are interrelated, DOD’s proce- dures 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 in- put 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 re- ceipts, 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 commu- nity 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 assis- tance 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 Con- tracts. 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 total- ing $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 noti- fied 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 as- sessed. 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 Ad- vocacy, 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 manu- facturers 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 Ad- vocacy pursuant to section 3(b) of E.O. 13272 in FY 2006 by the Centers for Medicare and Medicaid Ser- vices (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 signifi- cant 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 Medi- caid patients, adding to the time and cost required to comply with the rule. As a result of Advocacy’s in- volvement 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 Administra- tion (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 dis- tributors 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, sav- ing 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 indi- viduals 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 ves- sels 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 enti- ties, and prepared an initial regulatory flexibility analysis. On June 21, 2006, Advocacy hosted a small business roundtable on the proposed TWIC rule that in- cluded representatives of the maritime towing and passenger vessel, recreational boating, commercial truck- ing, charter bus, and aviation sectors. Advocacy subsequently submitted a public comment letter to the agen- cies 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 sub- sequent 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 sub- ject 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 sub- stantial number of small entities as required by section 3(b). DOI also utilized Advocacy’s email notifica- tion 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 enti- ties. 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 busi- ness 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 addi- tional 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 pro- posed 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 enti- ties 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. Ad- vocacy 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 Can- ada 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 designa- tion 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 dis- cussed 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 fre- quently 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 busi- nesses 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 representa- tives 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 pro- posed 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 re- lated to host employers and contractors, flame-resistant clothing, training, and electrical protective equip- ment. 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 permissi- ble 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 repre- sentatives 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. Advo- cacy also discussed this issue at several of its small business labor safety roundtables, which included pres- entations 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 rec- ommendations 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 ne- gotiated rulemaking process. Most of the contentious issues concerning the proposal had already been de- bated 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 alto- gether. 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 ex- pects 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 round- table. 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 con- sider a delayed compliance date for small entities, as well as penalty abatement for inadvertent noncompli- ance 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 ad- dressed Advocacy’s comments and plans to evaluate whether to abate penalties incurred because of inad- vertent 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. How- ever, 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 Edu- cational 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 com- ment 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 associ- ated with this proposed rule (particularly with respect to aviation flight training schools and foreign nation- als training to be pilots here) and deferred to the Department of State and others to assess the security im- plications 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 Admini- stration (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 Washing- ton, 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 indus- try within the affected area, they are needed for security reasons. Small businesses expressed serious con- cerns 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 lan- guage 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 discus- sions, 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 ex- empted 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 representa- tives estimated cost savings of $149 million ($74 million in certification costs and $75 million in invento- ried spare parts) from the revisions. National Highway Traffic Safety Administration Issue: Proposed Reporting of Early Warning Information Rule. In accordance with the Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act, the National Highway Traffic Safety Administration (NHTSA) promulgated regulations in 2003 that required manufacturers of more than 500 vehicles per year to report tire and other equipment warranty claims to the agency in order to identify potential defects. Manufacturers of trailers and other vehicles filed a petition for reconsideration requesting that more small businesses be exempt from the reporting requirements. While the petition for reconsidera- tion was denied by the agency, NHTSA did agree to reconsider the rule within two years of its implementa- tion date. On March 16, 2006, Advocacy hosted a small business regulatory roundtable to discuss the early warn- ing rule with manufacturers of small trailers and recreational and marine vehicles, as well as agency per- sonnel, to discuss how the reporting requirements could be made less costly and burdensome. As a result, NHTSA proposed a rule that would eliminate the reporting of product evaluation field reports, revise the definition of fire to eliminate two precursors to fire (sparks and smoldering) and add one term (melt), mod- ify the reporting of fuel systems for medium-heavy vehicles and buses, and limit certain time periods for data elements. The cost savings from this rule are unknown at this time. The revisions could change the annual report- ing costs for some manufacturers. In addition, NHTSA has agreed that it will issue a second proposed rulemaking that will look at the more complicated issues of whether reporting thresholds can be adjusted or eliminated. The second, forthcoming rulemaking has the potential to result in more significant cost savings. Pipeline and Hazardous Materials Safety Administration Issue: Hazardous Materials Safety Requirements for External Product Piping on Cargo Tanks Transporting Flammable Liquids. The Pipeline and Hazardous Materials Safety Administration (PHMSA), formerly the Research and Special Programs Administration (RSPA), issued a proposed rule on December 20, 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. Advo- cacy worked with small businesses and trade associations to analyze the potential impacts of the proposed regulation. As part of this process, Advocacy held a roundtable to discuss the proposal and obtain data from industry personnel on March 24, 2005. In April 2005, Advocacy sent interagency comments to PHMSA on this proposed regulation. On June 7, 2006, having determined that “further regulation would not produce the level of benefits we originally expected and that the quantifiable benefits of proposed regulatory ap- proaches would not justify the corresponding costs,”(34) the agency withdrew its notice of proposed rule- making. 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 for small entities. Department of the Treasury E.O. 13272 Compliance The Department of the Treasury (Treasury) made its policies and procedures available to the public online in compliance with section 3(a) of E.O. 13272. Three agencies within Treasury create regulations of most concern to small businesses: the Internal Revenue Service (IRS), the Office of the Comptroller of the Cur- rency (OCC), and the Office of Thrift Supervision (OTS). While Treasury and the IRS have not notified Advocacy of any draft proposed rules under section 3(b), Advocacy has been invited to, and has participated in, several prepublication and some predrafting meet- ings on IRS regulatory proposals regarding potential effects on small businesses. Both OCC and OTS no- tify Advocacy in accordance with the requirements of section 3(b). During FY 2006, Advocacy has had a vigorous ongoing conversation with IRS about the RFA. Spe- cifically, Advocacy has met with the IRS chief counsel and plans regular meetings to ensure improved RFA compliance by the IRS. As a result of ongoing discussions, the IRS has planned several RFA trainings for its staff in early FY 2007. Treasury and the IRS published one final rule in FY 2006 on which Advocacy commented. Treasury and the IRS addressed Advocacy’s comments (without specific reference to Advo- cacy) thereby complying with section 3(c). Advocacy did not file any comments with OCC or OTS in FY 2006. Issue: Income Attributable to Domestic Production Activity. On November 4, 2005, Treasury and the IRS published a proposed rule under section 199 of the Internal Revenue Code to inform taxpayers that engage in domestic production, as defined in section 199, how to calculate allowable deductions for such activities. Advocacy did not receive this rule from Treasury and the IRS before the rule’s publication. On November 30, 2005, Advocacy held a roundtable to discuss the impact of the proposed rule on small entities. The consensus was that the simplified calculation method should be made more widely available. The stakeholder participants also expressed great concern about the complexity of the rule. On January 3, 2006, Advocacy submitted a public comment letter to Treasury and the IRS. The pro- posed rule provided that employer taxpayers with $25 million or less in annual revenue could use a simpli- fied process for calculating the deduction. As a result of recommendations from Advocacy, Treasury and the IRS increased the accessibility of the simplified deduction method calculation by expanding it to in- clude employers that generate annual gross receipts of $100 million or less, generating cost savings for small businesses. The amount of savings was not possible to calculate. The issue of complexity was not addressed. Issue: Escrow Accounts, Trusts, and Other Funds Used During Deferred Exchanges of Like-Kind Property. On February 7, 2006, Treasury and the IRS published a proposed rule that affects qualified in- termediaries that facilitate exchanges of like-kind property. An initial regulatory flexibility analysis was part of the proposed rule. On March 23, 2006, Advocacy hosted a roundtable attended by small business stakeholders and personnel from Treasury and the IRS. Business owners described the potential financial consequences of the proposed rule on their current operations, explaining that they could lose, on average, 50 percent of their gross revenue if the proposed rule were finalized. On May 8, 2006, Advocacy submitted a public comment to Treasury and the IRS, noting that the IRFA did not provide significant alternatives to the proposed rule, nor did it describe the economic impact on the regulated entities. Advocacy’s comment encouraged Treasury and the IRS to publish an amended IRFA in the Federal Register. Currently Treasury and the IRS are working with Advocacy to explore options for improving and publishing an amended IRFA subject to comments. As of September 30, 2006, Treasury and the IRS had not published an amended IRFA or final rule. Department of Veterans Affairs E.O. 13272 Compliance The Department of Veterans Affairs (VA) provides its RFA policies to the public online to comply with section 3(a) of E.O. 13272, while continuing to take a position that most of its regulations do not affect small entities. The VA fully complies with section 3(b) of E.O. 13272, by notifying Advocacy of proposed regulatory actions that may have a significant impact on a substantial number of small entities. Advocacy has reviewed these notifications for FY 2006, and verifies that most of this year’s regulations did not affect small entities. The VA did not publish any final rules in FY 2006 that were the subject of Advocacy com- ment; therefore, VA’s compliance with section 3(c) cannot be assessed. Environmental Protection Agency E.O. 13272 Compliance The Environmental Protection Agency (EPA) has complied with section 3(a) of E.O. 13272 by making its policies and procedures with respect to the Regulatory Flexibility Act publicly available on its website. In FY 2006, EPA provided Advocacy with all of its draft rules before or at the time they were sent to OMB for review, in compliance with section 3(b) of E.O. 13272. Advocacy provided seven public comment let- ters to EPA in FY 2006, and EPA adequately responded to Advocacy’s comments in accordance with sec- tion 3(c) of E.O. 13272. Issue: Resource Conservation and Recovery Act, Burden Reduction Rule. On April 4, 2006, EPA pub- lished a final rule designed to reduce some recordkeeping, reporting, and inspection burdens imposed on hazardous waste generators, transporters, and disposal facilities by the Resource Conservation and Recov- ery Act (RCRA). EPA promulgated the burden reduction rule in response to recommendations from Advo- cacy and small business representatives on ways to streamline burdensome requirements that have little corresponding environmental benefit. The final rule reduces the amount of time some records must be re- tained, allows additional types of professionals to certify compliance with waste handling rules, decreases the frequency of some self-inspections, and eases reporting requirements. The final rule is estimated to re- sult in annual cost savings of $3 million per year. Issue: 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 concentra- tions of benzene, an air toxic, in gasoline. The rule would also require portable gasoline container manufac- turers and light-duty highway vehicles to reduce the amount of benzene that is lost through evaporation. EPA convened a SBREFA review panel on September 7, 2005, with 11 small entity representatives. As a result of the recommendations of the panel, EPA proposed several flexibilities for small refiners, small gasoline container manufacturers, and light-duty vehicle manufacturers. These flexibilities include giving small refiners more lead time to achieve compliance, establishing a program for benzene averaging, bank- ing, and trading among refiners, and allowing a refiner or manufacturer that can demonstrate economic hardship to have additional time to comply with the standard. The delayed implementation of the MSAT standard for small businesses is estimated to result in $12 million in first-year cost savings, with an addi- tional $12 million in recurring annual cost savings for the following four years. Issue: Clean Water Act Section 316(b), Phase III Cooling Water Intake Structures. On June 1, 2006, the U.S. Environmental Protection Agency 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 more than 700 facilities to install devices to prevent aquatic losses, including an estimated 82 facilities owned by small entities. Following the completion of a SBREFA review panel in early 2004, EPA concluded that facilities with relatively low intake flows typi- cally do not cause aquatic losses and proposed an exemption for facilities that have a cooling water intake flow of 50 million gallons per day or less. The exemption contained in the final rule removes virtually all small businesses from the rule’s coverage. According to estimates prepared by the American Public Power Association, the recommendations of the SBREFA panel have resulted in cost savings of $74 million for small entities such as municipal utilities, pulp and paper companies, and chemical plants. Issue: Toxics Release Inventory Rule. On October 4, 2005, EPA published a proposed rule providing the first significant small business relief from toxics release inventory (TRI) reporting since 1994, when EPA introduced the first short form, called the “Form A,” replacing the longer (five-page) “Form R.” Section 313 of the Emergency Planning and Community Right to Know Act established the TRI reporting require- ment that facilities which process, use, or manufacture a listed chemical file an annual Form R, describing the amounts of chemicals handled by the facility. Small businesses have long been concerned that the an- nual reporting requirement imposes a large paperwork burden with little environmental benefit, particularly for thousands of filers with zero discharges or emissions. The TRI reporting requirement has been a small business priority environmental issue over the last decade and more. The October 2005 EPA proposal al- lows more small firms to use the shorter Form A, saving them time and money. EPA first issued the Form A in November 1994. At that time, EPA reserved the form for reports with a 500-pound “reportable amount” threshold, or the total production-related wastes. In October 2005, EPA found that it could cover more than 99 percent of toxic releases and other waste management activities by raising the 500-pound threshold to 5,000 pounds, allowing an additional 12,200 forms of a total of nearly 82,000 forms to use Form A. Furthermore, the Form A was made available for the first time to reporters of a special category of chemicals accounting for an additional 2,703 reports. This proposal, representing the culmination of Advocacy TRI activity over the past 10 years, is ex- pected to save 165,000 hours per year in filing and processing of reports, by EPA’s estimate. Advocacy recommended that EPA expand the eligibility of reports for Form A to provide relief to small firms, and EPA’s proposal does exactly that. EPA estimates cost savings of about $7.4 million per year. A final rule was expected by December 2006. Issue: Spill Prevention Control and Countermeasure Rule. On December 12, 2005, EPA proposed streamlining requirements for small facilities that handle below a certain threshold of oil as well as facili- ties with oil-filled equipment under the Spill Prevention, Control, and Countermeasure (SPCC) rule. The SPCC rule requires facilities that manage above 1,320 gallons of oil to implement measures to prevent and contain oil discharges. The 2002 amendments promulgated by the agency created widespread problems for the regulated industry, and EPA took steps to review the SPCC requirements, in collaboration with Advo- cacy. EPA’s notice of data availability regarding small facilities in November 2004 was based in large part on the Office of Advocacy’s June 2004 letter to EPA. EPA was expected to issue a final rule by December 2006. EPA utilized Advocacy’s recommendations for revisions in two distinct 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 to allow the facilities to self-certify compliance, instead of using a pro- fessional engineer and to permit additional flexibility for tank integrity testing and security requirements. With respect to small facilities, EPA’s proposal is estimated to save $22.5 million per year for all busi- nesses annualized at a 3 percent discount rate. Since it is estimated that 80 percent of the facilities would be owned by small businesses, these revisions would result in $17.6 million in small business savings. Facilities with oil-filled equipment would have 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. For oil-filled equipment, EPA estimates savings of $56.7 million per year for all businesses. Advocacy estimates that these revisions would result in $28.4 million per year in small business savings. Federal Acquisition Regulation Council E.O. 13272 Compliance The policies and procedures required by section 3(a) that were provided by DOD apply also to the Federal Acquisition Regulation Council (FAR Council). This regulatory entity has not provided Advocacy with notification as required by section 3(b) of E.O. 13272. However, Advocacy has an open invitation to attend the regulatory council’s deliberations and has access to the predecisional deliberative rulemaking process. Advocacy has made significant input on several other predecisional regulations this past fiscal year. The Office of Advocacy worked very closely with OIRA and the FAR Council to improve the regulatory analy- sis process. The FAR Council has had several RFA training sessions to increase its awareness and under- standing of the RFA requirements. The FAR Council did not publish final rules in FY 2006 that were the subject of Advocacy comments; therefore, the FAR Council’s compliance with section 3(c) cannot be as- sessed. Federal Communications Commission E.O. 13272 Compliance In FY 2005, the Federal Communications Commission sent Advocacy a letter stating its commitment to up- hold the spirit of E.O. 13272 and review its rules for impacts on small entities while maintaining that as an independent agency, it is not covered by the executive order. The FCC maintained this position through FY 2006. The FCC consistently mails Advocacy proposed and final rules that have a significant impact on a substantial number of small entities after the rule has been adopted and released to the general public, but before it is sent to the Federal Register. This provides Advocacy with additional time to review proposed rules before the comment deadline, but does not necessarily meet the requirements of E.O. 13272 section 3(b).(35) In FY 2006, the agency addressed Advocacy’s comments in its final rules as required by section 3(c) of E.O. 13272. The FCC’s compliance with the RFA improved this past year but is still inconsistent, varying between bureaus and across subject matter. The two major telecommunications issues that Advocacy engaged on this year are examples of this dichotomy. In its implementation of the Junk Fax Prevention Act, the FCC did an admirable job of considering small business impacts and taking steps to minimize them. However, the FCC’s compliance with the RFA in the Universal Service proceeding was less than desirable. Advocacy continues to attempt to engage the FCC early in the rulemaking process, but the FCC has not taken advan- tage of the offer. Advocacy has made repeated offers to train the FCC’s media bureau on how to comply with the RFA. The FCC has not responded and no training is currently scheduled. As stated in previous reports, Advocacy believes one of the reasons the FCC has not had consistent compliance with the RFA is its tendency to issue vague proposed rulemakings or even a series of hypo- thetical questions to the public, which would be more appropriate for a notice of inquiry. Without specific rules, the agency cannot accurately estimate the impacts and assess alternatives to the rule, nor can small businesses comment meaningfully. The FCC has continually rejected Advocacy’s recommendations to propose more concrete rules. Issue: Junk Fax Prevention Act. On January 18, 2006, Advocacy filed a public comment letter on the FCC’s proposed rule implementing the Junk Fax Prevention Act of 2005 (JFPA), which codified an exemp- tion to the FCC’s do-not-fax rules for unsolicited commercial faxes sent to recipients with whom a business has an established business relationship (EBR). Advocacy recommended that the FCC not limit the EBR duration to 18 months following a purchase or transaction and three months after an inquiry, as the neces- sary recordkeeping would be burdensome to small businesses. While small businesses track their transac- tions, many small businesses do not have systems in place to track inquiries by customers. Advocacy rec- ommended that the FCC exempt small businesses from the requirement to provide a cost-free mechanism for recipients of unsolicited fax advertisements to send do-not-fax requests because it is economically bur- densome. Advocacy recommended that if the FCC were to decide that small businesses should not be ex- empt, it should allow small businesses to use alternatives to toll-free numbers such as email, Web-based systems, or the designation of a third party to receive do-not-fax requests. On March 13, 2006, Advocacy met with the FCC to present a list of recommendations that the FCC (1) grant an exemption for small businesses from the requirement to provide a cost-free mechanism for recipi- ents of unsolicited fax advertisements to send do-not-fax requests, (2) not establish a time limit on an estab- lished business relationship at this time, and (3) allow 30 days to respond to a do-not-fax request. In addition, Advocacy made the following recommendations. While the burden of proof for an EBR should be on the sender, the FCC should allow senders to rely on general records to prove an EBR and not require any particular form of recordkeeping. The FCC should create a safe harbor for communications of fax numbers that would be presumed to be voluntary, such as business cards, letterhead, email footers, ad- vertisements, brochures, and websites. The JFPA requires a “clear and conspicuous notice” that the fax recipient can opt out of receiving any more faxes from the sender. The FCC should adopt the same defini- tion for “clear and conspicuous notice” that the FCC uses in its rules on mobile services commercial mes- sages. On April 6, 2006, the FCC issued final rules that adopted almost all of the recommendations proposed by Advocacy. Advocacy believes that the rule achieves the FCC’s regulatory goal of preventing transmis- sion of unsolicited commercial faxes while minimizing the regulatory burdens on small businesses. Issue: Universal Service Rule. On June 15, 2006, Advocacy filed a public comment letter with the FCC to urge the agency to conduct an IRFA before it adopts a rule changing the safe harbor percentage for small wireless carriers and imposing Universal Service obligations on Voice over Internet Protocol (VoIP) pro- viders. Universal Service is a program that defrays the cost of providing basic telecommunications service in high-cost areas. VoIP providers are telecommunications companies that provide service over the Internet instead of using the conventional telephone network. The FCC had announced that it intended to require VoIP providers to contribute for the first time to Universal Service, and the rate chosen for VoIP contributions was higher than for other types of telecom- munications. The FCC based this final rule on a proposed rule issued in 2004 that asked broad questions about whether IP-enabled services (such as VoIP) should be regulated and whether they should contribute to Universal Service. The proposed rule did not propose any specific regulations, and the IRFA released with the proposal reflected this lack of specificity. Advocacy was not notified by the FCC before the rule was published. Advocacy’s letter cautioned the FCC that it had not analyzed the economic impacts on small busi- nesses of increasing the safe harbor percentage or imposing Universal Service obligations on VoIP provid- ers. Advocacy recommended that the FCC postpone adopting a final rule on this issue until it has had an opportunity to complete an IRFA. The FCC declined to postpone the rule and adopted a final rule on June 27, 2006, requiring VoIP providers to contribute to Universal Service. Concurrent with that order, the FCC released a proposed rule asking for comment on the regulatory requirements it had just adopted. Advocacy was not notified prepublication of this action. After further discussion with small businesses and Advocacy, the FCC revised its reporting requirements on July 27, 2006, allowing small VoIP contributors to file a reduced set of information in conjunction with its Universal Service contributions, thus lowering the regu- latory burden. In response to the proposed rule, Advocacy spoke with representatives of small telecommunications car- riers and small interconnected VoIP providers and held a roundtable to discuss the small business implica- tions of the plans. On August 8, 2006, Advocacy filed a public comment letter responding to the proposed rule. Advocacy asked the agency to consider the impact of several issues upon small businesses: the safe harbor rate for both wireless and VoIP providers, the reporting requirements for contributing to the USF, and the timeframe in which they were required to comply. Advocacy also presented significant alternatives in- cluding a lower safe harbor rate, removing the requirements for preapproval of traffic studies, waiving penal- ties for incorrectly estimating future revenue, simplifying reporting forms, raising the de minimis exemption, and choosing a different contribution methodology. As of September 30, 2006, the FCC had not issued a final rule in response to this supplemental rulemaking. Issue: Section 610 Review. On October 27, 2005, Advocacy filed a letter with the FCC in response to its public notice asking for comment on a review of rules adopted by the agency in 1993 through 1995, and whether they should be continued without change, amended, or rescinded, consistent with Section 610 of the Regulatory Flexibility Act. Section 610 requires each federal agency to plan for, and conduct, the peri- odic review of its rules that have or will have a significant economic impact on a substantial number of such small entities. Advocacy was not notified prepublication. Advocacy commended the FCC for the steps it has taken to comply with Section 610 and encouraged the agency to consider the comments presented and respond to the recommendations made by small busi- nesses. Advocacy found several of the comments of particular note because of the potential significant im- pact on small businesses. The FCC provided no electronic means of filing comments. Advocacy encour- aged the FCC to allow small businesses to file comments electronically in response to future Section 610 reviews. As of September 30, 2006, the FCC had not responded to this letter. Issue: Children’s Television Obligations of Digital Television Broadcasters. On August 18, 2006, Ad- vocacy met with officials of the FCC to discuss the agency’s initial regulatory flexibility analysis (IRFA) for its proposed Children’s Television Obligations of Digital Television Broadcasters rule. The proposal addressed the obligation of television licensees to provide educational programming for children and the requirement that television licensees protect children from excessive and inappropriate commercial mes- sages. Advocacy was not notified prepublication. Advocacy noted that the FCC neglected to publish the IRFA for the proposed rule and recommended that the agency do so for a reasonable comment period. Advocacy also recommended that the FCC consider the following alternatives: exempting small broadcasters who already provide public affairs content from the educational and informational programming requirements under the proposed rule, allowing broadcast- ers to rely on certifications from programming providers that website addresses displayed during core pro- gramming requirements meet the FCC requirements, and allowing broadcasters to certify that at least 50 percent of the core programming that counts toward meeting the new requirements has not aired within the previous seven days. On September 29, 2006, the FCC issued a final rule that declined to limit the applicability of the new educational and informational programming requirements to multicast streams that do not already offer educational or public affairs programming. The FCC stated that the revised processing guideline translates the existing three-hour guideline to the digital environment in a manner that is both fair to broadcasters and meets the needs of the child audience. Further, the FCC does not expect compliance to be burdensome, but Advocacy will revisit this issue if there is evidence that it imposes an undue burden on broadcasters. The FCC did allow broadcasters to certify compliance with the revised limitation on the repeat of educational and informational digital programming adopted under the multicasting guideline rather than requiring them to identify each program episode. Broadcaster licensees instead must retain records sufficient to document the accuracy of their certification, including records of actual program episodes aired, and must make such documentation available to the public upon request. Issue: Wireless Spectrum Auctions. On September 20, 2006, Advocacy filed a public comment letter with the FCC in response to a proposal addressing the eligibility of spectrum auction applicants for “desig- nated entity” benefits. The FCC regularly auctions off spectrum licenses, which grant the right to operate a wireless service (such as cellphones or pagers) at a certain frequency. Designated entities are small busi- nesses, businesses owned by minorities and/or women, and rural telephone companies. The principal bene- fit given to designated entities is bidding credit, which exempts a small business from paying a percentage of the entities’ bid. The FCC is seeking to balance two goals given to it by Congress: (1) to provide desig- nated entities with reasonable flexibility to obtain financing from investors, and (2) to prevent ineligible entities from receiving designated entity benefits by circumventing the intent of the rules to obtain those benefits indirectly. Advocacy was not notified prepublication. Advocacy supported the FCC’s effort to promote small business participation in spectrum auctions and urged the FCC to analyze the impact on small businesses and explore regulatory alternatives. The measures discussed by the FCC will have a significant impact on small businesses, as they will add reporting re- quirements, impose regulatory mandates, or place restrictions on a designated entity’s ability to negotiate and contract with third parties. Advocacy recommended that the FCC publish an analysis of these burdens in a supplemental initial regulatory flexibility analysis giving small businesses an opportunity to comment on the impact and alternatives. As of September 30, 2006, the FCC had not issued a final rule or supple- mental rulemaking. Federal Trade Commission E.O. 13272 Compliance The Federal Trade Commission (FTC) has made its policies and procedures publicly available as required by section 3(a) of E.O. 13272. The FTC has notified Advocacy through Advocacy’s email notification sys- tem 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. The FTC did not publish any final rules in FY 2006 that were the subject of any Advocacy comment; therefore, the FTC’s compliance with section 3(c) cannot be assessed. FTC staff have not yet received RFA training. Issue: Identity Theft. On September 18, 2006, Advocacy filed a public comment letter with the Federal Trade Commission to discuss the regulatory impacts and available alternatives in response to the FTC’s pro- posed rule on identity theft red flags. The FTC sought comment on guidelines for creditors on identity theft “red flags,” which are patterns, practices, and specific forms of activity that indicate the possible existence of identity theft. The proposed rule requires financial institutions and creditors to establish reasonable policies and procedures for implementing the red flag guidelines as well as how to address discrepancies on credit reports. Advocacy spoke with representatives of small businesses from a variety of different industries to de- termine the impact of the proposed rule. Small businesses believe that the economic impact of the rule will be significant. While they are supportive of the overall goals of the rulemaking, they believe that it will take a substantial amount of time for them to review the 31 red flags identified by the FTC and determine which are relevant to their businesses, develop the policy, write the policy, and train employees. Advocacy presented significant alternatives based on its outreach. These alternatives included: delay the implementa- tion, create a shortened red flag list, and provide a certification form. Advocacy also recommended that the FTC issue a compliance guide for small businesses to walk them through each step in the program. As of September 30, 2006, the FTC had not issued a final rule or a supplemental rulemaking. Securities and Exchange Commission E.O. 13272 Compliance The Securities and Exchange Commission (SEC) has not made its RFA compliance procedures available as required by section 3(a) of E.O. 13272. However, the SEC utilizes Advocacy’s email notification system to provide its draft and final rules on a regular basis, complying with section 3(b) of E.O 13272. The SEC did not publish any final rules in FY 2006 that were the subject of any Advocacy comment; therefore, the SEC’s compliance with section 3(c) cannot be assessed. The SEC has demonstrated a commitment to working with the public and the Office of Advocacy to balance the impacts of its regulatory actions on small businesses. In particular, Advocacy has worked with the SEC and its Office of Small Business Policy on the small business impacts of the Sarbanes-Oxley Act of 2002 (SOX), which introduced a new requirement of internal controls reporting for companies that sub- mit audited financial reports. Issue: Advisory Committee on Smaller Public Companies. Based on recommendations by small busi- ness representatives and Advocacy, the SEC chartered the Advisory Committee on Smaller Public Compa- nies on March 23, 2005, to assess the recent changes to securities law and changed circumstances required by SOX. On April 23, 2006, the advisory committee published its final report and recommendations, and advised the SEC to defer the implementation of the new section 404 internal control audit requirements until there is an adequate framework in place to account for the size differences between smaller and larger companies. Advocacy wrote a public comment letter supporting the advisory committee’s recommenda- tions. On April 27, 2006, Advocacy submitted another comment letter to the SEC in response to an SEC request for comments on compliance experience with section 404 internal control reporting requirements. Advocacy cited evidence solicited by the advisory committee establishing that section 404 reporting re- quirements would impose a disproportionate cost on smaller public companies and are likely to present major barriers for those companies seeking capital. Advocacy urged the SEC to provide flexibility for small companies to comply with SOX, as recommended by the advisory committee. Issue: Proposed Extension of Small Public Company Compliance Deadline for New Internal Control Reporting Requirements. In response to one recommendation by the SEC’s advisory committee, the SEC proposed to provide small businesses an additional extension of time for implementation of section 404 of the Sarbanes-Oxley Act. This proposed rule would give smaller public companies a five-month extension for a management assessment report and a 17-month extension for an auditor’s attestation report. Small public companies would submit a management report with their first annual report the first fiscal year ending on or after December 17, 2007. These entities would not be required to submit an auditor’s attestation report until the next year’s annual report, or the fiscal year ending on or after December 15, 2008. Advocacy submitted two comment letters to the SEC in September 2006 supporting the proposed extension of time for section 404 compliance and providing input on a section 404 management guidance the SEC is developing. SEC’s proposed action is estimated to save nonaccelerated filers (smaller public companies) approximately $5.5 billion in compliance costs. Small Business Administration E.O. 13272 Compliance The Small Business Administration (SBA) has made its RFA policies and procedures available online and provides Advocacy notification of draft rules that may have a significant impact on a substantial number of small entities, as required by sections 3(a) and 3(b) of E.O. 13272. As a result of RFA training and contin- ued discussions on draft rules, SBA personnel have sought Advocacy input earlier in the regulatory devel- opment process. SBA did not publish any final rules in FY 2006 that were the subject of Advocacy com- ment; therefore, SBA’s compliance with section 3(c) cannot be assessed. Issue: The Women-Owned Small Business Federal Contract Assistance Program. On June 15, 2006, SBA issued a proposed rulemaking in the Federal Register to implement the Women-Owned Small Busi- ness Federal Contract Assistance Program as authorized under the Small Business Reauthorization Act of 2000. The Small Business Reauthorization Act of 2000 authorizes contracting officers to restrict competi- tion to eligible women-owned small businesses (WOSBs) for certain federal contracts in industries in which SBA has determined that WOSBs are underrepresented or substantially underrepresented in federal procurement. This section further requires SBA to conduct a study to identify the industries in which WOSBs are underrepresented and substantially underrepresented in federal procurement. Based on conversations with affected WOSBs, Advocacy filed a public comment letter on July 17, 2006. While SBA complied with the RFA by providing an IRFA, Advocacy urged SBA to consider revis- ing its IRFA based on the findings of the statutorily mandated study. Conclusion The RFA provides federal agencies with specific procedures to address the economic impacts of their regu- lations on small entities, and consider regulatory alternatives to reduce those impacts. Advocacy has wit- nessed a change in the culture of federal and state agencies, as more officials have become aware of their regulations’ unintended effects on small entities and the economy. This progress can be directly attributed to RFA training, as Advocacy has trained more than 48 agencies in RFA compliance in three years. Advo- cacy anticipates that the new online RFA training introduced in FY 2006 can increase the number of agen- cies and federal agency rule writers trained. In FY 2006, Advocacy staff noticed continued improvement in agency compliance with E.O. 13272 and the RFA. Most agencies notify Advocacy of rules that may have a significant impact on a substantial number of small entities and respond to Advocacy’s comments when they publish the final rules in the Federal Register. Advocacy continued to be involved more often at the prepublication stage, enabling agencies to write better rules that reflect the real-world concerns voiced by small businesses. Advocacy’s Office of Economic Research provided data on small businesses, such as the number of entities and industry sectors affected by a particular rule. Advocacy held SBREFA panels and roundtables to give small businesses and their trade as- sociations a forum to discuss rulemakings on topics such as industrial safety and environmental regulations. Advocacy staff regularly reviewed proposed regulations and provided preproposal consultation, interagency review under E.O. 12866, interagency and formal comments to the agency, and congressional testimony on regulations. Advocacy’s interventions and assistance helped produce more than $7.25 billion in first-year cost savings and $117 million in annual savings for small businesses in FY 2006. These savings demonstrate that the RFA is succeeding in persuading many agencies to take actions and implement alternatives that reduce the regula- tory burden on small entities. Although some agencies do not yet fully comply with the RFA, great progress has been made since the law’s enactment in 1980. Educating agencies on RFA compliance will be a continu- ing priority for Advocacy in FY 2007. Advocacy is hopeful that this training will help agencies fully under- stand the requirements of the RFA and the importance of including small entitiy impacts in their rulemaking process. 4 Making the States Flexible: Small Business Regulatory Flexibility Model Legislation Initiative In December 2002, Advocacy presented model regulatory flexibility legislation for the states based on the federal Regulatory Flexibility Act. The intent of the model legislation is to foster a climate for entrepreneu- rial success in the states so that small businesses will continue to create jobs, produce innovative new prod- ucts and services, bring more Americans into the economic mainstream, and broaden the tax base. “This legislation is a win-win for small business and for effective government. It’s good practice to make sure regulations don’t pinch our efforts to grow economically.” –Peter C. Groff, Colorado Senate President Pro Tem The American Legislative Exchange Council (ALEC) adopted the legislation as a model bill, and nu- merous state legislators, stakeholders, and small business advocacy organizations have pursued its passage in various states.(36) According to Advocacy’s state model legislation, successful state-level regulatory flexibility laws address the following areas: 1) a small business definition that is consistent with state prac- tices and permitting authorities; 2) a requirement that state agencies perform an economic impact analysis on the effect of a rule on small business before they regulate; 3) a requirement that state agencies consider less burdensome alternatives for small businesses that still meet the agency’s regulatory goals; 4) a provi- sion that requires state governments to review all of their regulations periodically; and 5) judicial review to give the law “teeth.” “Governor Bredesen’s executive order establishing regulatory flexibility for small business owners will ensure entrepreneurs spend less time cutting red tape and more time creating jobs in Tennessee.” –Todd Stottlemyer, President and CEO, National Federation of Independent Business In 2006, 11 states introduced regulatory flexibility legislation (Alabama, Colorado, Illinois, Kansas, Michigan, Mississippi, Nebraska, New Jersey, Pennsylvania, South Dakota, Washington), and two states enacted it (Colorado and South Dakota) to enhance their current rulemaking system (Table 4.1). Georgia Governor Sonny Perdue and Tennessee Governor Phil Bredesen implemented regulatory flexibility through executive orders in 2006. Since 2002, 34 state legislatures have considered regulatory flexibility legislation,(37) and 19 states have implemented regulatory flexibility through executive orders or legislation.(38) (See Table 4.2 and Chart 4.1 for current status.) In states that have passed regulatory flexibility laws, the Office of Advocacy works with the small busi- ness community, state legislators, and state government agencies to assist with implementation and to ensure the law’s effectiveness. The implementation stage brings new challenges and opportunity to the model legisla- tion initiative. The Office of Advocacy is strengthened by regional advocates located in the Small Business Admini- stration’s 10 regions across the country. These are the chief counsel for advocacy’s direct link to small business owners, state and local government bodies, and organizations that support the interests of small entities. The regional advocates help identify regulatory concerns of small businesses by monitoring the impact of federal and state policies at the grassroots level. Their work goes far to develop programs and policies that encourage fair regulatory treatment of small businesses and help ensure their future growth and prosperity. The text of Advocacy’s model legislation, updated versions of the state regulatory flexibility legislative activity map, and regional advocate contact information can be found on the Advocacy website at http://www.sba.gov/advo/laws/law_modeleg.html. Success Stories Arkansas: The Importance of Regulatory Flexibility for Arkansas’ Small Businesses In February 2005, Arkansas Governor Mike Huckabee signed Executive Order (EO) 05-04, requiring agen- cies to evaluate the economic impact of proposed regulations on small businesses and to consider less bur- densome alternatives. Also under the executive order, agencies must submit this analysis to the Arkansas Department of Economic Development (ADED) Small and Minority Business Unit, which is responsible for the oversight of the state’s regulatory flexibility program. During the 2005 General Assembly, a law passed requiring the Arkansas Department of Labor (DOL) to license elevator contractors, elevator mechanics and elevator inspectors. Additionally, the Elevator Safety Board, within the DOL, was in the process of updating its regulations for the first time in 10 years. Outdated regulations often resulted in contractors having to obtain variances through a cumbersome proc- ess simply to utilize newer technologies recognized in the latest American Society of Mechanical Engi- neers’ (ASME) safety codes for elevators and escalators. “Small businesses employ almost half the workforce and provide valuable ownership opportunities for women and minorities. This executive order establishing regulatory flexibility for small business owners is a way for state government to ensure that the concerns of the small business community are addressed and that small business are protected.” –Arkansas Governor Mike Huckabee As the Elevator Safety Board and the agency proceeded through the regulatory flexibility process, two expensive small business compliance issues became apparent. First, elevators installed from 1963 to 1973, which previously had not been required to install fire service, were going to be required to do so under the revised rules. The Safety Division found that approximately 337 elevators in Arkansas could be affected, and of those, 200 were located in small businesses. The cost to install the fire service was estimated at approxi- mately $10,000 per elevator. The second compliance issue dealt with a retrofit requirement for hydraulic elevators that have a flat- bottom hydraulic jack, or a single-bottom cylinder. The most recent ASME code required the replacement of the cylinder with a double cylinder or one with a safety bulkhead to prevent the elevator from falling if an in-ground cylinder ruptured. The agency intially estimated that approximately 350 elevators installed prior to 1980 might be affected, and of those, 208 were located in small businesses. The least expensive retrofit would cost approximately $10,000 per elevator. As the agency received input from the ADED Small and Minority Business Unit, a third issue was identified. Small speciality installation contractors felt that it was overly burdensome to license and test their employees in the same manner as a mechanic working for a larger company. They argued that eleva- tor mechanics who only install wheelchair accessibility lifts should not be subject to the same stringent testing required of those who install commercial elevators in high-rise buildings. As a result of the Arkansas regulatory flexibility law, the Elevator Safety Board and DOL received comments and input from the ADED Small and Minority Business Unit and a number of other small busi- nesses. Each party recognized the public safety issues involved and approached the process cooperatively. The final regulations, effective September 1, 2006, reflected this collaborative process and flexible regula- tory methods. Owners of elevators without fire service or with a flat-bottom hydraulic jack were given five years to come into compliance. The regulations allow for an exception from these requirements in cases of demon- strated undue hardship where reasonable safety is assured. Also, a restricted class of license with a less stringent testing requirement was created for elevator mechanics that exclusively install wheelchair acces- sibility lifts. This example demonstrates a how a strong regulatory flexibility law facilitates a working relationship between small business stakeholders and regulating agencies. The result is a set of rules that will be less harmful to small businesses while accomplishing the agency goal of elevator safety. Table 4.1 State Regulatory Flexibility Legislation, 2006 Legislative Activity Four states enacted regulatory flexibility legislation or an executive order in 2006 Colorado (HB 1041) South Dakota (SB 74, SB 75) Georgia (EO) Tennessee (EO) Eleven states introduced regulatory flexibility legislation in 2006 Alabama (HB 320) Michigan (HB 5849 /HB 5850/ HB 5812) Pennsylvania (HB 236/SB 842) Connecticut (HB 1041) Mississippi (HB 1113/ SB 2881) South Dakota (SB 74/SB 75) Illinois (HB 5388) Nebraska (LB 1170) Washington (HB 1445) Kansas (HB 2821) New Jersey (A 2327/SB 1335) Table 4.2 State Regulatory Flexibility Legislation, Status as of October 2006 13 states and one territory have active regulatory flexibility statutes Arizona Missouri Oklahoma Virginia Connecticut Nevada Oregon Wisconsin Hawaii New York Puerto Rico Indiana North Dakota South Carolina 29 states have partial or partially used regulatory flexibility statutes Alaska Iowa New Hampshire Texas Arkansas (EO) Kentucky New Jersey Utah California Maine New Mexico Vermont Colorado Maryland North Carolina Washington Delaware Massachusetts Ohio West Virginia Florida Michigan Pennsylvania Georgia Minnesota Rhode Island Illinois Mississippi South Dakota 7 states, 2 territories, and the District of Columbia have no regulatory flexibility statutes Alabama Idaho Montana Wyoming District of Columbia Kansas Nebraska Guam Louisiana Virgin Islands Chart 4.1 Mapping State Regulatory Flexibility Provisions, FY 2006 Appendix A Supplementary Tables Table A.1 Cabinet Department RFA Procedures in Compliance with Section 3(a) of E.O. 13272 Department Document made available at: Agriculture http://www.ocio.usda.gov/directives/doc/DR1512-001.pdf Commerce www.ogc.doc.gov/ogc/legreg/testimon/108f/guidelines.htm Defense DOD has not submitted procedures separate from the FAR Council/ GSA’s submission. Education www.ed.gov/legislation/FedRegister/finrule/2003-2/051203d.html Energy www.gc.doe.gov/rulemaking/eo13272.pdf Health and Human Services www.hhs.gov/execsec/smallbus.html Homeland Security www.tsa.gov/assets/pdf/Regulatory-Flexibility-Act%20-EO- 13272_signed.pdf Coast Guard www.uscg.mil/hq/g-m/regs/reghome.html Housing and Urban Development www.hud.gov/offices/osdbu/policy/impact.cfm Interior http://elips.doi.gov/elips/release/3207.htm Justice www.usdoj.gov/olp/execorder13272.pdf Labor www.dol.gov/dol/regs/guidelines.htm State The Department of State has not submitted written procedures. Transportation http://regs.dot.gov/docs/eo-13272.pdf Treasury www.treas.gov/regs/2002-rfa- compliance.pdf?IMAGE.X=24\&IMAGE.Y=8 Veterans Affairs www.va.gov/osdbu/resources/index.htm Note: The following independent agencies that regulate small entities have not submitted written procedures under Section 3(a) of E.O. 13272: the Export-Import Bank of the United States, the Farm Credit Administration, the Federal Communi- cations Commission (submitted a letter saying not covered by executive orders), the Federal Emergency Management Agency, the Federal Housing Finance Board, the Federal Maritime Commission, the Federal Reserve System, and the Se- curities and Exchange Commission. Table A.2 RFA Training in Federal Agencies, FY 2003-2006 In fulfillment of E.O. 13272, Advocacy trained regulatory staff from the following federal departments and agencies on how to comply with the Regulatory Flexibility Act from July 2003 through September 2006. Department of Agriculture Animal and Plant Health Inspection Service Department of Commerce National Oceanic and Atmospheric Administration Manufacturing and Services Patent and Trademark Office Department of Education Department of Energy Department of Health and Human Services Centers for Medicare and Medicaid Services Food and Drug Administration Department of Homeland Security Bureau of Citizenship and Immigration Services Bureau of Customs and Border Protection Transportation Security Administration United States Coast Guard Department of Housing and Urban Development Community Planning and Development Fair Housing and Equal Opportunity Manufactured Housing Public and Indian Housing Department of the Interior Bureau of Indian Affairs Bureau of Land Management Fish and Wildlife Service Minerals Management Service National Park Service Office of Surface Mining, Reclamation, and Enforcement Department of Justice Bureau of Alcohol, Tobacco, and Firearms Department of Labor Employee Benefits Security Administration Employment and Training Administration Employment Standards Administration Mine Safety and Health Administration Occupational Safety and Health Administration Department of Transportation Federal Aviation Administration Federal Highway Administration Federal Motor Carrier Safety Administration Federal Railroad Administration National Highway Traffic Safety Administration Research and Special Programs Administration Department of the Treasury Financial Crimes Enforcement Network Financial Management Service Internal Revenue Service Office of the Comptroller of the Currency Tax and Trade Bureau Department of Veterans Affairs Independent Federal Agencies Access Board Environmental Protection Agency Federal Communications Commission Federal Deposit Insurance Corporation Federal Election Commission General Services Administration/FAR Council Securities and Exchange Commission Small Business Administration Table A.3 SBREFA Panels through Fiscal Year 2006 Rule Subject Date Convened Report Completed NPRM1 Final Rule Published Environmental Protection Agency Non-Road Diesel Engines 03/25/97 05/23/97 09/24/97 10/23/98 Industrial Laundries Effluent Guideline 06/06/97 08/08/97 12/12/97 Withdrawn2 Stormwater Phase 2 06/19/97 08/07/97 01/09/98 12/08/99 Transport Equipment Cleaning Effluent Guideline 07/16/97 09/23/97 06/25/98 08/14/00 Centralized Waste Treatment Effluent Guideline 11/06/97 01/23/98 01/13/99 12/22/00 Underground Injection Control Class V Wells 02/17/98 04/17/98 07/29/98 12/07/99 Ground Water 04/10/98 06/09/98 05/10/00 11/08/06 Federal Implementation Plan for Regional Nitrogen Oxides Reductions 06/23/98 08/21/98 10/21/98 04/28/06 Section 126 Petitions 06/23/98 08/21/98 09/30/98 05/25/99 Radon in Drinking Water 07/09/98 09/18/98 11/02/99 Long Term 1 Enhanced Surface Water Treatment 08/21/98 10/19/98 04/10/00 01/14/02 Filter Backwash Recycling 08/21/98 10/19/98 04/10/00 06/08/01 Light Duty Vehicles/Light Duty Trucks Emissions And Sulfur in Gasoline 08/27/98 10/26/98 05/13/99 02/10/00 Arsenic in Drinking Water 03/30/99 06/04/99 06/22/00 01/22/01 Recreational Marine Engines 06/07/99 08/25/99 10/05/01 08/14/02 11/08/02 Diesel Fuel Sulfur Control Requirements 11/12/99 03/24/00 06/02/00 01/18/01 Lead Renovation and Remodeling Rule 11/23/99 03/03/00 01/10/06 Metal Products and Machinery Effluent Guideline 12/09/99 03/03/00 01/03/01 05/13/03 Concentrated Animal Feedlots Effluent Guideline 12/16/99 04/07/00 01/12/01 02/12/03 Reinforced Plastics Composites 04/06/00 06/02/00 08/02/01 04/21/03 Stage 2 Disinfection Byproducts 04/25/00 06/23/00 Long Term 2 Enhanced Surface Water Treatment 04/25/00 06/23/00 08/11/03 08/18/03 01/04/06 01/05/06 Emissions from Non-Road and Recreational Engines and Highway Motorcycles 05/03/01 07/17/01 10/05/01 08/14/02 11/08/02 Construction and Development Effluent Guideline 07/16/01 10/12/01 06/24/02 Withdrawn³ Aquatic Animal Production Industry 01/22/02 06/19/02 09/12/02 08/23/04 Lime Industry—Air Pollution 01/22/02 03/25/02 12/20/02 01/05/04 Non-Road Diesel Emissions— Tier 4 Rules 10/24/02 12/23/02 05/23/03 06/29/04 Cooling Water Intake Structures— Phase III Facilities 02/27/04 04/27/04 11/24/04 06/15/06 Section 126 Petition (2005 Clean Air Implementation Rule) 04/27/05 06/27/05 08/24/05 04/28/06 Federal Implementation Plan for Regional Nitrogen Oxides (2005 Clean Air Implementation Rule) 04/27/05 06/27/05 08/24/05 04/28/06 Mobile Source Air Toxics – Control of Hazardous Air Pollutants From Mobile Sources 09/07/05 11/08/06 03/29/06 Occupational Safety and Health Administration Tuberculosis 09/10/96 11/12/96 10/17/97 Withdrawn4 Safety and Health Program Rule 10/20/98 12/19/98 Withdrawn Ergonomics Program Standard 03/02/99 04/30/99 11/23/99 11/14/005 Electric Power Generation, Transmission, and Distribution 04/01/03 06/30/03 06/15/05 Confined Spaces in Construction 09/26/03 11/24/03 Occupational Exposure to Respirable Crystalline Silica Dust 10/21/03 12/19/03 Occupational Exposure to Hexavalent Chromium 01/30/04 04/20/04 10/04/04 02/28/06 Cranes and Derricks in Construction 06/18/06 1 Notice of proposed rulemaking (NPRM). 2 Proposed rule was withdrawn August 18, 1999. EPA does not plan to issue a final rule. 3 Proposed rule was withdrawn on April 26, 2004. EPA does not plan to issue a final rule. 4 Proposed rule was withdrawn on December 31, 2003. OSHA does not plan to issue a final rule. 5 President Bush signed Senate J. Res. 6 on March 20, 2001, which eliminated this final rule under the Congressional Re- view Act. Appendix B The Regulatory Flexibility Act The following text of the Regulatory Flexibility Act of 1980, as amended, is taken from Title 5 of the United States Code, Sections 601–612. The Regulatory Flexibility Act was originally passed in 1980 (P.L. 96-354). The act was amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (P.L. 104-121). Appendix C Executive Order 13272 Appendix D Abbreviations ADED Arkansas Department of Economic Development ALEC American Legislative Exchange Council AMS Agricultural Marketing Service APA Administrative Procedure Act APPA American Public Power Association APHIS Animal and Plant Health Inspection Service ASME American Society of Mechanical Engineering CMS Centers for Medicare and Medicaid Services CHD critical habitat designation DFARS Defense Federal Acquisition Supplement DHS Department of Homeland Security DOC Department of Commerce DOD Department of Defense DOE Department of Energy DOI Department of the Interior DOJ Department of Justice DOL Department of Labor DOT Department of Transportation EBR established business relationship EBSA Employee Benefits Security Administration Education Department of Education E.O. Executive Order EPA Environmental Protection Agency FAA Federal Aviation Administration FAR Federal Acquisition Regulation FCA Farm Credit Administration FCC Federal Communications Commission FDA Food and Drug Administration FDIC Federal Deposit Insurance Corporation FHFB Federal Housing Finance Board FMC Federal Maritime Commission FMVSS Federal Motor Vehicle Safety Standard FRFA final regulatory flexibility analysis FRS Federal Reserve System FSIS Food Safety and Inspection Service FTC Federal Trade Commission FWS Fish and Wildlife Service FY fiscal year GRS groundfish retention standard GSA General Services Administration GIPSA Grain Inspection, Packers and Stockyard Administration HCFA Health Care Financing Agency, now renamed, see CMS HHA home health agency HHS Department of Health and Human Services HUD Department of Housing and Urban Development IP Internet Protocol IRFA initial regulatory flexibility analysis IRS Internal Revenue Service JFPA Junk Fax Protection Act MSAT mobile source air toxics MSHA Mine Safety and Health Administration MTSA Maritime Transportation Security Act NASA National Aeronautics and Space Administration NASE National Association for the Self-Employed NFIB National Federation of Independent Business NHTSA National Highway Traffic Safety Administration NMFS National Marine Fisheries Service NPRM notice of proposed rulemaking NPS National Park Service OASIS Outcome and Assessment Information Set OCC Office of the Comptroller of the Currency OIRA Office of Information and Regulatory Affairs OMB Office of Management and Budget OTA other transaction agreements OSHA Occupational Safety and Health Administration OTS Office of Thrift Supervision PBT persistent, bioaccumulative, and toxic PEL permissible exposure limit PHMSA Pipeline and Hazardous Materials Safety Administration P.L. Public Law PTO Patent and Trademark Office RCRA Resource Conservation and Recovery Act RFA Regulatory Flexibility Act RFID radio frequency identification RSPA Research and Special Programs Administration, now renamed, see PHMSA SBA Small Business Administration SBEC Small Business & Entrepreneurship Council SBREFA Small Business Regulatory Enforcement Fairness Act SEC Securities and Exchange Commission SER small entity representative SFRA special flight rules area SOX Sarbanes-Oxley Act SPCC Spill Prevention Control and Countermeasures State Department of State TREAD Transportation Recall Enhancement, Accountability, and Documentation Act Treasury Department of the Treasury TRI toxics release inventory TSA Transportation Security Administration TWIC transportation worker identification credential USDA United States Department of Agriculture U.S.C. United States Code VA Department of Veterans Affairs VoIP Voice over Internet Protocol WOSB women-owned small business ENDNOTES 1. Regulatory Flexibility Act, Pub. L. No. 96-354 § 2, 94 Stat. 1164 (1980) (codified at 5 U.S.C. § 601). The full law as amended appears as Appendix B of this report. 2. 5 U.S.C. § 603. 3. 5 U.S.C. § 605(b). This certification must be published with the proposed rule or at the time of the publication of the final rule in the Federal Register and is subject to public comment in order to ensure that the certification is warranted. 4. 5 U.S.C. § 603(b). 5. 5 U.S.C. § 603(c). 6. 5 U.S.C. § 604. 7. Id. at § 604(a). 8. 5 U.S.C. §§ 601-612 (2000). 9. 5 U.S.C. §§ 609 (b), (d). 10. Id. 11. 5 U.S.C. §§ 611(a), 612(b). 12. Exec. Order No. 13272, 67 Fed. Reg. 53,461 (Aug. 16, 2002), available on the Office of Advocacy website at http://www.sba.gov/advo/laws/eo13272.pdf. The full order is reprinted in this report as Appendix C. 13. Id. § 3(a). A list of Cabinet Department agencies that have made their RFA procedures available online pursuant to Sec- tion 3(a) of E.O. 13272 is listed in Table A.1 of this report. 14. Id. § 3(b). 15. Id. §3(c). 16. 15 U.S.C. § 634(b). 17. 15 U.S.C. § 631(a) (DECLARATION OF POLICY) 18. 15 U.S.C. § 634(b)(3). 19. See supra, note 1. 20. 5 U.S.C. § 612(a). 21. See supra, note 3. 22. See Table 2.2 for a detailed summary of cost savings for FY 2006. 23. See Chapter 3 for a detailed discussion of federal agency compliance and interventions by the Office of Advocacy in fiscal year 2006. 24. Exec. Order No. 13272 § 3(a). See Table A.1 in Appendix A for a summary of compliance with section 3(a) of E.O. 13272. 25. Id. at § 3(b). 26. Exec. Order No. 12866, 58 Fed. Reg. 51,735 (Sept. 30, 1993) subjects any “significant regulatory action,”which gener- ally means a rule that will have an annual effect on the economy of $100 million or more, to review by the OIRA. E.O. 12866 requires the agency to select the regulatory alternative that imposes the least burden on society consistent with maintaining an agency’s regulatory objectives. 27. Id. at §3(c). 28. Exec. Order No. 13272 § 2(b). 29. A list of the RFA training sessions conducted since FY 2003 can be found in Appendix A, Table A.2 of this report. 30. A regulatory certification is a promise by the head of an agency under 605(b) of the RFA that the rule when promulgated will not have a significant economic impact on a substantial number of small entities. 31. Advocacy’s online training is designed for federal government employees, but has also been made available to the general public. Online visitors to the URL will be prompted to obtain a password from the Office of Advocacy prior to further ac- cessing the training site. 32. Advocacy sent formal letters to agencies in response to a variety of agency actions including proposed rules, public no- tices, agency meetings, guidance documents, and requests for comments. Advocacy also sent letters to introduce reports and information from Small Business Advocacy Review Panels and to highlight congressional testimony by Advocacy staff. 33. 13 CFR §121.802. See also 37 CFR §1.27. 34. 71 Fed.Reg. 32,909 (June 7, 2006). 35. The FCC’s position is that their ex parte rule does not permit them to provide Advocacy drafts in a manner consistent with section 3(b). 36. Organizations include the National Federation of Independent Business (NFIB), state chambers of commerce, the U.S. Chamber of Commerce, the Small Business & Entrepreneurship Council (SBEC), and the National Association for the Self-Employed (NASE). 37. These states are Alabama, Alaska, California, Colorado, Connecticut, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, and Wisconsin. 38. These states are Alaska, Arkansas, Colorado, Connecticut, Georgia, Indiana, Kentucky, Massachusetts, Missouri, North Dakota, New Mexico, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Virginia, West Virginia, and Wis- consin.