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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

49 CFR Part 33

[Docket No. OST 2010-0298]

RIN 2105-AD83

Prioritization and Allocation Authority Exercised by the Secretary of Transportation Under the Defense Production Act

AGENCY: Office of the Secretary of Transportation (OST), DOT.
ACTION: Final rule; request for comments.
SUMMARY: This final rule clarifies the priorities and allocation authorities exercised by the Secretary of Transportation (Secretary) under title I of the Defense Production Act of 1950 (Defense Production Act), and establishes the administrative procedures by which the Secretary will exercise this authority. In addition, in this final rule the Department is seeking comments on certain revised definitions found in section 33.20. This rule complies with the requirement in the Defense Production Act Reauthorization of 2009 (Pub. L. 111-67) to issue final rules establishing standards and procedures by which the priorities and allocations authority is used to promote the national defense, under both emergency and nonemergency conditions, and is part of a multi-agency effort that forms the Federal Priorities and Allocations System.
DATES: This rule is effective on November 30, 2012.Comment Closing Date:Comments on the revised definitions are due on October 31, 2012.
ADDRESSES: *Federal eRulemaking Portal:Go towww.regulations.govand follow the online instructions for submitting comments.

*Mail:Docket Management Facility: U.S. Department of Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor, Room W12-140, Washington, DC 20590-0001.

*Hand Delivery or Courier:West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., between 9 a.m. and 5 p.m. ET, Monday through Friday, except Federal holidays.

*Fax:202-493-2251.

Note that all comments received will be posted without change towww.regulations.govincluding any personal information provided and will be available to internet users. You may review DOT's complete Privacy Act Statement in theFederal Registerpublished on April 11, 2000 (65 FR 19477) or you may visithttp://DocketsInfo.dot.gov.

Docket:For internet access to the docket to read background documents and comments received, go towww.regulations.gov. Background documents and comments received may also be viewed at the U.S. Department of Transportation, 1200 New Jersey Ave. SE., Docket Operations, M-30, West Building Ground Floor, Room W12-140, Washington, DC 20590, between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Donna L. O'Berry, Office of the General Counsel, Department of Transportation, 1200 New Jersey Avenue SE., Room W96-317, Washington, DC 20590; telephone: (202) 366-6136; email:donna.o'berry@dot.gov;or Lloyd E. Milburn, Office of Intelligence, Security and Emergency Response, Department of Transportation, 1200 New Jersey Avenue SE., Washington, DC 20590; telephone: (202) 366-4397; email:lloyd.milburn@dot.gov.
SUPPLEMENTARY INFORMATION: I. Executive Summary A. Purpose of the Regulatory Action

This final rule clarifies the priorities and allocation authorities exercised by the Secretary under title 1 of the Defense Production Act, and establishes the administrative procedures by which the Secretary will exercise this authority. In addition, in this final rule the Department is seeking comments on certain revised definitions found in section 33.20. This rule complies with the requirement in the Defense Production Act Reauthorization of 2009 (Pub. L. 111-67) to issue final rules establishing standards and procedures by which the priorities and allocations authority is used to promote the national defense, under both emergency and nonemergency conditions, and is part of a multi-agency effort that forms the Federal Priorities and Allocations System.

B. Summary of Major Provisions

The Defense Production Act Reauthorization of 2009 requires each Federal agency with delegated authority under section 101 of the Defense Production Act to issue final rules establishing standards and procedures by which the priorities and allocations authority is used to promote the national defense, under both emergency and non-emergency conditions. Congress further directed that, to the extent practicable, the Federal agencies should work together to develop a consistent and unified Federal priorities and allocations system.

In order to meet this mandate, the Department of Transportation (DOT) worked in conjunction with the Departments of Agriculture (USDA), Commerce (DOC), Defense (DoD), Energy (DOE), Health and Human Services (HHS), and Homeland Security (DHS) to develop common provisions that can be used by each Department in its own regulation. The six regulations to be promulgated by each Department with delegated Defense Production Act title I authority comprise the Federal Priorities and Allocations System (FPAS) of rules. DOT's regulation is known as the Transportation Priorities and Allocations System (TPAS). DOT published a Notice of Proposed Rulemaking (NPRM) establishing the proposed structure for TPAS on February 15, 2011 (76 FR 8675). DOT solicited comments on the proposed rule, but did not receive any comments.

C. Cost and Benefits

This regulation sets criteria under which DOT, or agencies to which DOT delegates authority, will authorize prioritization of certain orders or contracts, as well as criteria under which DOT will issue orders allocating materials, services, or facilities. Because the rule mainly affects larger commercial transportation operations, DOT believes that small organizations and small governmental jurisdictions are unlikely to be affected by this rule. To date, DOT has not exercised its existing priorities authority and has only exercised its existing allocations authority for one aviation program and one sealift program, both of which rely on voluntary engagement by industry. Therefore, DOT has no basis on which to estimate the number of small businesses that might be affected by promulgation of this rule.

Although DOT cannot determine precisely the number of small entities that are affected by this rule, for the reasons explained in section IV.D, DOT believes that the overall impact on such entities is not significant and, therefore, certifies that this rule will not have a significant economic impact on a substantial number of small entities.

II. Background

The Defense Production Act of 1950 (Defense Production Act) (50 U.S.C. App. § 2061et seq.) was enacted during the Korean War to ensure the availability of resources to meet national security needs. The Defense Production Act provides a number of important authorities to expedite and expand the supply of critical resources from the U.S. industrial base to support the national defense. While Defense Production Act provisions initially focused on DoD acquisition needs, several significant changes to the Defense Production Act's definition of national defense have been added over time to expand the definition from military, energy, and space activities, to include emergency preparedness activities conducted pursuant to title VI of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) (42 U.S.C. 5121et seq.) and the protection and restoration of critical infrastructure.

Section 101(a) of title I of the Defense Production Act (50 U.S.C. App. § 2071) authorizes the President:

(1) To require that performance under contracts or orders (other than contracts of employment) which he deems necessary or appropriate to promote the national defense shall take priority over performance under any other contract or order, and, for the purpose of assuring such priority, to require acceptance and performance of such contracts or orders in preference to other contracts or orders by any person he finds to be capable of their performance, and (2) to allocate materials, services, and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to promote the national defense.

Executive Order 13603, National Defense Resources Preparedness (March 16, 2012),1 delegates the President's authority under section 101 of the Defense Production Act to the heads of several departments and agencies. The President has delegated this authority to the Secretary of Transportation with respect to all forms of civil transportation.2

1Executive Order 13603 replaced Executive Order 12919, National Defense Industrial Resource Preparedness, June 3, 1994. In addition to the noted definition modifications for which DOT is seeking comment, the issuance of Executive Order 13603 resulted in editorial changes that are reflected in this final rule.

2Section 201 of Executive Order 13603 also delegates Defense Production Act section 101 authority to:

(1) The Secretary of Agriculture with respect to food resources, food resource facilities, livestock resources, veterinary resources, plant health resources and the domestic distribution of farm equipment and commercial fertilizer;

(2) The Secretary of Energy with respect to all forms of energy;

(3) The Secretary of Health and Human Services with respect to health resources;

(4) The Secretary of Defense with respect to water resources; and

(5) The Secretary of Commerce for all other materials, services, and facilities, including construction materials.

Section 202 of Executive Order 13603 provides that this delegated authority may only be used to support programs that have been determined in writing as necessary or appropriate to promote the national defense by the Secretary of Defense with respect to military production and construction, military assistance to foreign nations, military use of civil transportation, stockpiles managed by the Department of Defense, space, and directly related activities; the Secretary of Energy with respect to energy production and construction, distribution and use, and directly related activities; or the Secretary of Homeland Security with respect to all other national defense programs, including civil defense and continuity of Government.

The Defense Production Act Reauthorization of 2009 (Pub. L. 111-67, September 30, 2009) requires each Federal agency with delegated authority under section 101 of the Defense Production Act to issue final rules establishing standards and procedures by which the priorities and allocations authority is used to promote the national defense, under both emergency and non-emergency conditions. Congress further directed that, to the extent practicable, the Federal agencies should work together to develop a consistent and unified Federal priorities and allocations system.

In order to meet this mandate, DOT worked in conjunction with USDA, DOC, DoD, DOE, HHS, and DHS to develop common provisions that can be used by each Department in its own regulation. The six regulations to be promulgated by each Department with delegated Defense Production Act title I authority comprise the FPAS rules.

DOT's regulation is known as TPAS.3 DOT published an NPRM establishing the proposed structure for TPAS on February 15, 2011 (76 FR 8675). DOT solicited comments on the proposed rule, but not did receive any comments. However, DOT determined that two non-significant changes, discussed below, were necessary for additional clarity. In addition, Executive Order 13603 updated certain definitions that are applicable to this rule and DOT has included those modifications, also discussed below, in this final rule. Therefore, subject to any comments on the revised definitions, DOT adopts the proposed rule with changes discussed below.

3The other parts that will make up FPAS are:

(1) Agricultural Priorities and Allocations System to be promulgated by the Department of Agriculture;

(2) Defense Priorities and Allocations System promulgated by the Department of Commerce;

(3) Energy Priorities and Allocations System to be promulgated by the Department of Energy;

(4) Health Resources Priorities and Allocations System to be promulgated by the Department of Health and Human Service; and

(5) Water Resources Priorities and Allocations System to be promulgated by the Department of Defense.

III. Section-by-Section Analysis Subpart A—General

Section 33.1Purpose of this part.This section explains that the purpose of this rule is to provide guidance and procedures for use of the Defense Production Act priorities and allocations authority with respect to civil transportation, in accordance with the delegation of authority provided in section 201 of Executive Order 13603. This section also lists other agency regulations that, along with this regulation, form FPAS.

Section 33.2Priorities and allocations authority.This section summarizes the delegations of priorities and allocations authority in section 201 of Executive Order 13603 and explains that these delegated authorities may only be used to support programs that have been determined in writing as necessary or appropriate to promote the national defense by the Secretaries of Defense, Energy, or Homeland Security in their respective areas of jurisdiction, as specified in section 202 of Executive Order 13603.

Section 33.3Program eligibility.This section lists the categories of programs eligible for priorities and allocations support, in accordance with the definition of “national defense” in section 702 of the Defense Production Act (50 U.S.C. App. § 2152).

Subpart B—Definitions

Section 33.20Definitions.This section contains definitions used in this part. Some definitions are drawn from other sources, as follows:

• Section 702 of the Defense Production Act (50 U.S.C. App. § 2152)—“critical infrastructure,” “facilities,” “homeland security,” “materials,” “national defense,” “person,” and “services.”

• Section 801 of Executive Order 13603—“civil transportation,” “energy,” “farm equipment,” “fertilizer,” “food resources,” “food resource facilities,” “health resources,” and “water resources.”

• The current Defense Priorities and Allocations System (DPAS) regulation—“allotment” (with technical modifications), “approved program” (with technical modifications), “construction,” “delegate agency,” “directive,” “item,” “maintenance and repair and operating supplies” or “MRO,” “official action” (with technical modifications), “rated order,” and “set-aside” (with technical modifications).

• Section 602 of the Stafford Act (42 U.S.C. 5195a)—“emergency preparedness” and “hazard.”

• Section 18.3 of 49 Code of Federal Regulations—“local government” and “state.”

The definitions of “allocation,” “allocation authority,” and “allocation order” are based on language in section 101 of the Defense Production Act that describes the allocation authority of the President.

“Defense Production Act” means the Defense Production Act of 1950, as amended (50 U.S.C. App. § 2061et seq.).

“Planning order” defines an administrative tool used by DOT's Maritime Administration.

“Resource agency” refers to one of the six Federal departments that has been delegated Defense Production Act priorities and allocations authority under section 201 of Executive Order 13603.

“Secretary” refers to the Secretary of Transportation.

“Selective Service Act” refers to Section 18 of the Selective Service Act of 1948 (50 U.S.C. App. § 468).

“Stafford Act” refers to title VI (Emergency Preparedness) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5195-5197g).

Executive Order 13603 contains modifications to the following definitions: “civil transportation,” “energy,” “food resources,” “food resource facilities,” “health resources,” and “water resources.” The most significant change is the movement of potable water packaged in commercially marketable containers from the jurisdiction of the DoD to the jurisdiction of the USDA. All other modifications are intended to modernize or clarify existing definitions.

Subpart C—Placement of Rated Orders

Section 33.30Delegation of authority.This section describes the delegation of priorities and allocations authority from the President to the Secretary of Transportation for all forms of civil transportation.

Section 33.31Priority ratings.This section explains the following: “DO” and “DX” rating symbols; program identification symbols; order of precedence for directives and ratings;and priority ratings that consist of a rating symbol and a program identification symbol.

A “DX” rating is reserved for those services or items that are determined to support programs that are of the highest national defense urgency based on the requesting entity's mission objectives. A “DX” rating takes precedence over a “DO” rating. The Secretary of Transportation must approve all requests for a “DX” rating pertaining to civil transportation resources.

Program Identification Symbols (PIS) are used to identify approved programs, meaning a program that has been determined by the Secretaries of DoD, DHS, or DOE, as appropriate, as necessary to promote the national defense. DOT currently has no approved programs, but anticipates working with DOC, DHS, DoD or DOE, as appropriate, in the near future to develop approved programs and will update Schedule I to TPAS as necessary.

In the NPRM, DOT proposed a PIS for DOT-approved programs that would contain the letter “T” followed by a letter and a number; for example, T-L1. DOT solicited comments on this proposed PIS structure, but did not receive any comments. All other agencies issuing FPAS rules currently use or are proposing to use a four-digit symbol, consisting of a letter and number for the approved program, such as A1, that is preceded by the priority rating code, for example DO-A1 or DX-A1. In order to ensure consistency among the regulations and to reduce the likelihood of confusion on industry and stakeholders receiving rated orders under other FPAS regulations, DOT is adopting a four-digit symbol as well. DOT's PIS for approved programs will contain the letter “T” followed by a number, for example, T1. All approved programs will have equal status. The PIS will be combined with the appropriate priority rating authority, either DX or DO, to form the priority rating, for example DO-T1 or DX-T1.

Section 33.32Elements of a rated order.This section describes the four elements that must be included in a contract or order to make it a “rated order,” in accordance with the standards and procedures provided in this part. The four elements are: (1) A priority rating; (2) specific delivery date(s) for materials or services covered in the rated order; (3) the signature of an individual authorized to place the rated order; and (4) a statement describing what is required of the rated order recipient, in accordance with procedures provided in this part.

This section includes a provision for an additional statement to be included in a rated order involving emergency preparedness, which will require quicker action by the recipient to accept or reject the order. The justification for the expedited timeframes is explained below in the section 33.33 discussion.

Section 33.33Acceptance and rejection of rated orders.This section describes mandatory and optional conditions for acceptance or rejection of rated orders, as well as customer notification timeframes pertaining to acceptance or rejection. In general, a person is required to accept a rated order if the person normally supplies the materials or services covered by the rated order and must do so regardless of any other orders on hand. Persons are prohibited from charging higher prices, imposing different terms, or any other discriminatory practices for the rated order that are different from a comparable unrated order.

A person is required to reject a rated order if unable to fill the order by the specified delivery date(s) or if the order will interfere with delivery under another rated order with a comparable or higher priority rating. In addition, a person is required to reject a rated order if the person is prohibited by law from meeting the terms of the order; for example, the provider of the services contemplated in the order does not have current operating authority to perform the service. A person has the option of rejecting a rated order if any one of a number of other conditions set forth in the regulation exists.

In the NPRM, DOT proposed that under non-emergency conditions, the recipient of a rated order be required to accept or reject the rated order within fifteen calendar days for a “DO”-rated order or ten working days for a “DX”-rated order. (See § 33.33(d)). DOT proposed calendar days instead of working days in order to provide greater specificity for deadlines and sought public comment on the matter. DOT did not receive any comments. However, because of the potential for interaction and overlap with priority orders issued under other FPAS regulatory schemes, DOT believes that the timeframes should be consistent among the FPAS rules; therefore, DOT is adopting working days instead of calendar days to conform to the timeframes in the other FPAS rules. For purposes of this regulation, a working day is a day that the recipient of a rated order is open for business. Thus, if a recipient of a rated order normally closes its operations the week between Christmas and New Year's, that time would not be considered as working days and would not be counted against the rated order timeframe.

While the deadlines discussed above are appropriate for non-emergency circumstances, they are too long for emergency conditions when quick procurement actions may be needed to help save lives, protect property, or restore services. Transportation services are unique in that they are often the first services needed to move people out of harm's way and to move rescue and response personnel and supplies into a disaster area; thus, transportation services often must be marshaled on very short notice. Under TPAS, orders placed for the purpose of emergency preparedness must be accepted or rejected within 6 hours from receipt of the order if the order is issued in response to a hazard that has occurred and within 12 hours from receipt of the order if the order is issued to prepare for an imminent hazard.

As explained in the NPRM, prior to 2008, DOT was the lead Federal agency responsible for providing and managing emergency transportation services, including those necessary for mass evacuations.4 Our experiences while carrying out this mission, which included managing the massive transportation needs for the evacuation of persons and the movement of supplies, equipment and teams in response to Hurricanes Katrina and Rita, confirm that transportation providers can respond within these expedited timeframes. Specifically, the contract that DOT had in place for transportation services required the contractor to acknowledge an order for service within one hour of receiving the order and to make transportation equipment available at the shipment place of origin to begin moving cargo and passengers within four hours from receipt of the order for service.5

4In 2007 DOT and DHS entered into a Memorandum of Understanding transferring the responsibility for evacuations and commodity and equipment movements to the Federal Emergency Management Agency (FEMA). New authority given to FEMA in the Post-Katrina Emergency Management Reform Act of 2006 necessitated redefining DOT's role for providing emergency transportation services and for designating the Federal lead for planning, coordinating and conducting evacuations of the general population.

5DOT's contract with Landstar Express America, Inc. contained the following requirements for Rapid Response Capability:

Within one (1) hour of receiving the initial Order for Service (OFS) from the Contracting Officer, the Contractor (Landstar) shall acknowledge receipt of the OFS by electronic commerce or fax.

Within four (4) hours of receipt of an OFS, the Contractor shall make transportation equipment available at the shipment place of origin to commence movement of cargo and passengers, using air and surface modes of transportation. The Contractor shall meet all pickup and transit deadlines.

Note that DOT is only requiring acceptance or rejection of a rated order within an expedited timeframe and not the actual fulfillment of the order within that timeframe. The expedited response periods are necessary in order for DOT to rapidly identify and obtain sufficient transportation resources to meet emergency response needs.

DOT is mindful, however, that some circumstances may necessitate closer coordination between DOT and the potential recipient of a rated order. For example, if a rated order is placed in preparation for an imminent hazard, such as a hurricane that is projected to make landfall in 13 hours, DOT obviously does not wish to learn at the end of the 12-hour window that the proposed supplier is unable to accept the rated order. In these situations, DOT will work closely with industry to identify and resolve any potential issues in order to meet the transportation requirements.

Not all regulations promulgated under FPAS will contain such expedited notification requirements because, unlike transportation resources, those resources normally are not required immediately for emergency response. However, for any orders issued under TPAS that “flow down” from the prime contractor to a subcontracted supplier of a necessary service, component, or part, the requirements of TPAS will apply to all subcontractors in the procurement or distribution chain. Therefore, transportation service providers should work with their suppliers to ensure they are aware that they may be asked to provide necessary services, parts, or components on an expedited basis.

Section 33.34Preferential scheduling.This section describes: (1) When a recipient of a rated order must modify production or delivery schedules to satisfy the delivery requirements of a rated order; (2) the order of precedence for rated, unrated, and conflicting orders; and (3) the use of inventoried production items when needed to fill a rated order.

Section 33.35Extension of priority ratings.This section requires that the recipient of a rated order must, in turn, use rated orders with suppliers to obtain items or services needed to fill a rated order. The requirement applies to all contractors and subcontractors throughout the procurement chain necessary to fill the rated order.

Section 33.36Changes or cancellations of priority ratings and rated orders.This section describes the procedures for changing or cancelling a priority rating or the provisions of a rated order. In addition, this section lists types of modifications that do not constitute a new rated order.

Section 33.37Use of rated orders.This section describes the process and procedures for when the recipient of a rated order: (1) Must use rated orders to obtain items and services needed to fulfill the rated order; (2) may use a rated order to replace inventoried items that were used to fulfill the order; (3) may combine orders with different priority ratings or with unrated orders; and (4) may forgo use of rated orders for orders below certain thresholds.

In the NPRM, DOT proposed to use the letter “E” for combined programs, resulting in a PIS of DO-T-E plus the number. As previously mentioned, DOT is mindful of the need for consistency among the FPAS regulations, which will all use a four-digit symbol for combined programs. Therefore, although DOT did not receive any comments on its proposed PIS for combined programs, we are adopting “T9” as the PIS for combined programs. The “T9” will be combined with the appropriate priority rating resulting in a DO-T9 or a DX-T9 PIS for any combined program.

Section 33.38Limitations on placing rated orders.This section describes specific circumstances when the use of rated orders is prohibited. This section also prohibits the use of TPAS to obtain rated orders for a resource under the resource jurisdiction of other agencies with delegated Defense Production Act priorities and allocations authority, unless specifically authorized by the resource agency.

Subpart D—Special Priorities Assistance

Section 33.40General provisions.This section explains the circumstances and procedures under which DOT will provide assistance in resolving problems related to priority rated contracts and orders. This section also lists the DOT points of contact and the form to be used to request assistance.

Section 33.41Requests for priority rating authority.This section establishes the procedures to request rating authority under special circumstances. DOT may grant priority ratings for items and services not normally rated under the regulation in order to prevent a delay of a rated order. This section also specifies that rating authority for production or construction equipment must come from the Department of Commerce. Finally, this section explains when DOT may authorize the use of a priority rating on an order to a supplier in advance of the issuance of a rated prime contract, and the factors DOT will consider in deciding whether to grant such a request.

Section 33.42Examples of assistance.This section lists examples of when special priority assistance may be provided.

Section 33.43Criteria for assistance.This section requires that a request for special priorities assistance be timely, that there be an urgent procurement need for the item, and that the applicant make a reasonable effort to resolve the problem for which assistance is needed.

Section 33.44Instances where assistance may not be provided.This section lists examples of when special priority assistance will not be provided.

Section 33.45Assistance programs with other nations.Reserved.

Subpart E—Allocation Actions

Section 33.50Policy.This section explains the policy of the Federal Government regarding use of the allocations authority, which is based on the statutory language in section 101 of the Defense Production Act and the legislative history of section 101.6 Specifically, allocation authority will be used only when priority authority is unable to provide a sufficient supply of a material, service, or facility to meet the national defense, or when the use of priority authority would cause a severe and prolonged disruption in the supply of materials, services, or facilities available to support normal U.S. economic activities.

6Legislative history indicates that Congress was concerned that national defense requirements, during times of emergency, could consume much of the output of key industrial sectors and selected producers within some sectors. Allocations authority was viewed as a means to ensure an equitable distribution of national defense demand among potential suppliers to avoid disproportionate impacts on each supplier's share of the civilian market.

Allocation authority will not be used to ration materials or services at the retail level. In other words, allocation authority will not be used to control how much of a product or service a person may have for personal use. For example, DOT could use allocation authority to require the nation's bus companies to dedicate 40% of their bus fleet to a designated emergency, but DOT not could use allocation authority to tell a bus company how to distribute its buses to serve its commercial customers or to tell a bus company how many tickets it could sell to persons in a given month.

Allocation orders will be distributed equitably among similarly situated suppliers of the resources being allocated and will not require any person to relinquish a disproportionate share of the civilian market. Allocation authority will not apply to resources owned by the Federal Government, asthose resources may be used by the controlling Federal entity in accordance with other governing laws. Nor, generally speaking, will allocation authority apply to resources owned by States, local governments or Native American tribes, as that could potentially undermine other Federal laws. For example, the Stafford Act is designed “to provide an orderly and continuing means of assistance by the Federal Government to States and local governments in carrying out their responsibilities to alleviate the suffering and damage which results from * * * disasters * * *.” 42 U.S.C. 5121(b). Thus, it would be counterproductive for the Federal Government to consider allocating for its own use the very resources the State, local or tribal government could be counting on as part of its response efforts.

The Civil Reserve Air Fleet (CRAF) and the Voluntary Intermodal Sealift Agreement (VISA) are two examples of DOT's use of its allocation authority.7 Concerning CRAF, under the terms of a Memorandum of Understanding, DOT develops plans and allocates aircraft to the CRAF program based on DoD requirements. DOT advises DoD if it intends to allocate fewer aircraft than requested by DoD, notifies DoD if a particular level of CRAF activation will have a serious adverse impact on the civil air carrier's ability to provide essential service, and works with DoD to identify alternatives or determine ways to minimize the impact. DOT publishes a periodic allocation of aircraft, by registration or “N” number, of each airline participating in the CRAF program.

7CRAF was formed through a joint agreement between DoD and the Department of Commerce. Executive Order 10999 placed responsibility for administration of the CRAF program in the Department of Commerce as a function of the Office of Emergency Transportation. In 1967, the Office of Emergency Transportation transferred in its entirety with its mission, functions and staff into the new Department of Transportation. Responsibility for carrying out the Secretary's role with respect to the CRAF program now resides with the Office of Intelligence, Security and Emergency Response.

The VISA program is a preparedness program designed to make intermodal shipping services and systems available to DoD as required to support the emergency deployment and sustainment of U.S. military forces. This is done through cooperation among the maritime industry, DOT and DoD pursuant to a voluntary agreement entered into in accordance with Section 708 of the Defense Product Act (50 U.S.C. App. § 2158). During a Stage III activation, the Secretary of DoD will request the Secretary of DOT to allocate sealift capacity based on DoD requirements.

Section 33.51General procedures.The procedures set out in this section and in section 33.52 are intended to provide a reasonable assurance that allocation authority will be used only in situations where such authority is justified. Section 33.51 sets out the specific requirements and findings that DOT must meet before it can use its allocation authority.

One requirement is for DOT to obtain a written determination from either DoD, DHS or DOE, as appropriate, that the program DOT intends to support through its allocation authority is necessary or appropriate to support the national defense. As previously mentioned, section 202 of Executive Order 13603 requires such a finding before DOT can take an allocation action. Additionally, DOT is required to provide a detailed description of the situation creating the need for allocation and the specific objectives to be obtained through the allocation action; a list of the materials, services, or facilities to be allocated, and of the sources that will be subject to the allocation action; a detailed description of the requirements to be contained in the allocation action, to include the percentage or quantity of capacity to be allocated and the duration of the allocation action; and an evaluation of the potential impact on the civilian market and proposed actions to mitigate any disruption of the civilian market.

Section 33.52Controlling the general distribution of a material in the civilian market.This section provides procedures for making the findings required by section 101(b) of the Defense Production Act and section 201(e) of Executive Order 13603. Defense Production Act section 101(b) states that the priorities and allocations authority shall not be used to control the general distribution of any material in the civilian market unless the President finds (1) that such material is a scarce and critical material essential to the national defense, and (2) that the requirements of the national defense for such material cannot otherwise be met without creating a significant dislocation of the normal distribution of such material in the civilian market to such a degree as to create appreciable hardship. Section 201(e) of Executive Order 13603 directs each Secretary with delegated authority under section 101 of the Defense Production Act to make the finding required by section 101(b) and submit the finding for the President's approval through the Assistant to the President and National Security Advisor and the Assistant to the President for Homeland Security and Counterterrorism. By definition under the Defense Production Act, services, including transportation services, are not considered a “material” as contemplated in section 101(b) of the Defense Production Act or section 201(e) of Executive Order 13603.

Section 33.53Types of allocation orders.This section describes the three types of allocation orders DOT will issue: A set-aside; an allocation directive; or an allotment. Aset-asideis an official action that requires a person to reserve a resource capacity in anticipation of receipt of rated orders. Anallocation directiveis an official action that requires a person to take or refrain from taking certain actions in accordance with its provisions. For example, an allocation directive could require a person to stop or reduce production of an item or service; prohibit the use of selected materials, services or facilities; divert supply of one type of material, service or facility to another; or supply a specific quantity, size, shape, and type of an item or service within a specific time period. Anallotmentis an official action that specifies the maximum quantity of a material, service, or facility authorized for use in a specific program or application.

Section 33.54Elements of an allocation order.This section describes the minimum elements of an allocation order. These elements are: (1) A detailed description of the required allocation action(s); (2) specific start and end calendar dates for each required allocation action; (3) the written signature on a manually placed order, or the digital signature or name on an electronically placed order, of the Secretary of DOT, which will certify that the order is authorized under this regulation and that the requirements of this part are being followed; (4) a statement that the order is certified for national defense use and that recipients are required to comply with the order; and (5) a copy of the TPAS regulation.

Section 33.55Mandatory acceptance of an allocation order.This section requires a person to accept and comply with allocation orders if the person is capable of complying. If a person is unable to comply fully with the required actions specified in an allocation order, the person is required to notify DOT immediately, explain the extent to which compliance is possible, and give reasons why full compliance is not possible. Furthermore, notifying DOT of possible non-compliance does not release the person from complying with the allocation order to the extent possible.

This section also states that a person may not discriminate against an allocation order in any manner, such as by charging higher prices or imposing terms and conditions on allocation orders that are different from what the person imposed on contracts or orders for the same resource prior to receiving the allocation order.

Section 33.56Changes or cancellations of an allocation order.This section states that DOT may modify or cancel an allocation order.

Subpart F—Official Actions

Section 33.60General provisions.This section sets out the specific official actions that DOT may take to implement the provisions of this regulation. These official actions include Rating Authorizations, Directives, Planning Orders, and Memoranda of Understanding.

Section 33.61Rating authorizations.This section defines a rating authorization as an official action granting priority rating authority.

Section 33.62Directives.This section defines a directive as an official action that requires a person to take or refrain from taking certain actions in accordance with its provisions. A priority directive takes precedence over rated orders, and allocation directives take precedence over a priority directive.

Section 33.63Memoranda of Understanding.This section explains that a Memorandum of Understanding is an official action that may be issued to reflect an agreement resolving a request for special priorities assistance. A Memorandum of Understanding may not be used to alter scheduling between rated orders, authorize the use of priority ratings, impose restrictions under this regulation, or take other official actions.

Subpart G—Compliance

Section 33.70General provisions.This section clarifies that DOT has the authority to enforce or administer the Defense Production Act, this regulation, or an official action. Additionally, this section states that willful violations of title I or section 705 of the Defense Production Act, this regulation, or an official DOT action, are criminal acts, punishable as provided in the Defense Production Act, and as set forth in § 33.74 below.

Section 33.71Audits and investigations.This section provides the procedures for conducting audits and investigations to ensure that the provisions of the Defense Production Act and other applicable statutes, this regulation, and official actions have been properly followed. This provision is limited to activities conducted under DPA authorities and does not limit the authority of DOT elements to initiate and conduct audits, investigations, or other inquiries under their specific statutes or authorities, nor does it affect the process for such audits, investigations or inquiries.

Section 33.72Compulsory process.This section explains the procedures DOT may use to seek a compulsory process if a person refuses to permit a duly authorized DOT representative to have access to any premises or any necessary information. For purposes of this regulation, compulsory process means the institution of appropriate legal action, including ex parte application for an inspection warrant or its equivalent in any forum of appropriate jurisdiction. Furthermore, compulsory process under this regulation may be sought in advance of an audit or investigation if DOT believes a person will refuse to comply with the audit or investigation.

Section 33.73Notification of failure to comply.This section provides procedures for notification of failure to comply with the Defense Production Act, other applicable statutes, this regulation, or an official DOT action.

Section 33.74Violations, penalties, and remedies.This section sets out the penalties and related actions the Government may take for violations of the provisions of title I or sections 705 or 707 of the Defense Production Act, the priorities provisions of the Selective Service Act, when applicable, this regulation, or an official DOT action.

Section 33.75Compliance conflicts.This section require persons to immediately notify DOT if compliance with any provision of the Defense Production Act, other applicable statutes, this part, or an official action will prevent a person from filling a rated order or from complying with another provision of the Defense Production Act, other applicable statutes, this regulation, or an official action.

Subpart H—Adjustments, Exceptions, and Appeals

Section 33.80Adjustments or exceptions.This section describe the procedures necessary to request an adjustment or exception to a provision of this regulation or an official action on the grounds that it will create an undue or exceptional hardship or compliance is contrary to the intent of the Defense Production Act or this regulation. Such requests must be submitted in writing and the submission of a request for adjustment or exception does not relieve the requester from compliance while the request is being considered by DOT.

Section 33.81Appeals.This section provides procedures and timeframes for appealing a decision denying relief from a request for an adjustment or exception under this regulation. This section provides for an expedited procedure for appeals involving a rated order placed for the purpose of emergency preparedness.

Subpart I—Miscellaneous Provisions

Section 33.90Protection against claims.This section provides that a person shall not be held liable for damages or penalties for any act or failure to act resulting directly or indirectly from compliance with any provision of this regulation or an official action. This “hold harmless” provision applies even if any provision of this regulation or action is subsequently declared to be invalid by judicial or other competent authority.

Section 33.91Records and reports.This section requires persons to create and preserve for at least three years accurate and complete records of any transaction covered by this regulation or an official action. This section also details the various requirements pertaining to the required records and reports. In addition, this section describes the confidentiality provision of the Defense Production Act pertaining to information submitted under the Defense Production Act or this regulation.

Section 33.92Applicability of this part and official actions.This section establishes the jurisdictional applicability of this regulation.

Section 33.93Communications.This section provides DOT contact information for communications concerning this regulation.

IV. Public Comments Received

DOT received no comments on these proposed regulations or on the proposed Form OST F 1254. With the exceptions discussed above, DOT finalizes the rule without change.

V. Regulatory Analyses and Notices A. Executive Orders 12866 and 13563—Regulatory Planning and Review

This final rule is a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review. Executive Order 13563 is supplemental to and reaffirms the principles, structures, and definitions governing regulatory review that were established in Executive Order 12866. In addition, Executive Order 13563 specifically requires agencies to:(1) Involve the public in the regulatory process; (2) promote simplification and harmonization through interagency coordination; (3) identify and consider regulatory approaches that reduce burden and maintain flexibility; (4) ensure the objectivity of any scientific or technological information used to support regulatory action; consider how to best promote retrospective analysis to modify, streamline, expand, or repeal existing rules that are outmoded, ineffective, insufficient or excessively burdensome. While the requirements under title I of the Defense Production Act have been in existence for years, these regulations are new to the transportation industry and could be considered to raise novel legal or policy issues under section 3(f)(4) of Executive Order 12866. The rule is not economically significant, however, as it would not have an annual economic impact of over $100 million.

B. Executive Order 13132—Federalism

This final rule has been analyzed in accordance with the principles and criteria contained in Executive Order 13132, Federalism. This final rule will not have a substantial direct effect on, or sufficient federalism implications for, the States, nor will it limit the policymaking discretion of the States. Therefore, the consultation requirements of Executive Order 13132 do not apply.

C. Executive Order 13175—Consultation and Coordination With Indian Tribal Governments

This final rule has been analyzed in accordance with the principles and criteria contained in Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. Because this final rule does not significantly or uniquely affect the communities of the Indian tribal governments and does not impose substantial direct compliance costs, the funding and consultation requirements of Executive Order 13175 do not apply.

D. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601et seq.) requires an agency to review regulations to assess their impact on small entities unless the agency determines that a rule is not expected to have significant impact on a substantial number of small entities.

Potentially Affected Small Entities

Small entities include small businesses, small organizations and small governmental jurisdictions. For purposes of assessing the impacts of this final rule on small entities, a small business, as described in the Small Business Administration's Table of Small Business Size Standards Matched to North American Industry Classification System Codes (August 2008 Edition), has a maximum annual revenue of $33.5 million and a maximum of 1,500 employees (for some business categories, these number are lower). A small governmental jurisdiction is a government of a city, town, school district or special district with a population of less than 50,000. A small organization is any not-for-profit enterprise that is independently owned and operated and is not dominant in its field.

This regulation sets criteria under which DOT, or agencies to which DOT delegates authority, will authorize prioritization of certain orders or contracts, as well as criteria under which DOT will issue orders allocating materials, services, or facilities. Because the rule mainly affects larger commercial transportation operations, DOT believes that small organizations and small governmental jurisdictions are unlikely to be affected by this rule. To date, DOT has not exercised its existing priorities authority and has only exercised its existing allocations authority for one aviation program and one sealift program, both of which rely on voluntary engagement by industry. Therefore, DOT has no basis on which to estimate the number of small businesses that might be affected by promulgation of this rule.

Impacts

Although DOT cannot determine precisely the number of small entities that are affected by this rule, DOT believes that the overall impact on such entities is not significant. There are two components in the rule: prioritization and allocation. Under prioritization, DOT or its Delegate Agency designates certain orders as one of two possible rating levels. Once designated, the order is considered a “rated order.” A recipient of a rated order must give it priority over an unrated order or an order with a lower priority rating. A recipient of a rated order may place orders at the same priority level with suppliers and subcontractors for supplies and services necessary to fulfill the recipient's rated order and the suppliers and subcontractors must treat the request from the rated order recipient as a rated order with the same priority level as the original rated order. This rule does not require recipients to fulfill rated orders if the price or terms of sale are not consistent with the price or terms of sale of similar non-rated orders. In addition, the rule provides a defense from liability for damage or penalties for actions taken in, or inactions required for, compliance with the rule.

Although rated orders could require a company to fill one order prior to filling another, this would not necessarily require a reduction in the total volume or orders filled. In fact, in most instances rated orders will be fulfilled in addition to other (unrated) contracts and this could actually increase the total amount of business for a firm that receives a rated contract. Additionally, this rule does not require the recipient of a rated order to reduce prices or provide a rated order with more favorable terms than a similar non-rated order. Thus, the economic effects on the rated order recipient of having to substitute a rated order for a non-rated order are likely to be mutually offsetting, resulting in no net economic impact.

Allocations could be used to control the general distribution of materials or services in the civilian market. Specific allocation actions that DOT might take are as follows:

Set-aside: an official action that requires a person to reserve resource capacity in anticipation of receipt of rated orders.

Allocations directive: an official action that requires a person to take or refrain from taking certain actions in accordance with its provisions. An allocation directive can require a person to stop or reduce production of an item, prohibit the use of selected items, or divert supply of one type of product to another, or to supply a specific quantity, size, shape, and type of an item within a specific time period.

Allotment: an official action that specifies the maximum quantity of an item authorized for use in a specific program or application.

Allocations will be ordered only in extraordinary circumstances, other than in the two well-established, voluntary programs discussed above. Furthermore, DOT believes that the provisions of section 701(e) of the Defense Production Act, which requires that small businesses be considered in allocations, indicate that any impact on small business will not be significant and may, in fact, provide an economic benefit to small businesses.

Conclusion

Although DOT cannot precisely determine the number of small entities that would be affected by this rule, DOT believes that the overall impact on such entities will not be significant and, therefore, for the reasons set forth above, I certify that this rule will not have a significant economic impact on a substantial number of small entities.

E. Paperwork Reduction Act

This rule contains an information collection requirement that is subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The Office of Management and Budget (OMB) is reviewing the information collection requirement and will provide an OMB control number upon completion. DOT will publish a separate notice in theFederal Registeronce the collection is approved and a control number is assigned. The public reporting burden for submission of Form OST F 1254 is an average of 30 minutes per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.

OMB is required to make a decision concerning the collection of information requirements contained in this final rule between 30 and 60 days after publication of this document in theFederal Register. Therefore, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication.

Send comments on this burden estimate or any other aspect of the collection of information to the Office of Management and Budget, Attention: Desk Officer for the Office of the Secretary of Transportation, Office of Information and Regulatory Affairs, Washington, DC 20505. Comments should also be sent to the Department of Transportation, Attn: Defense Production Act Activities Coordinator, Office of Intelligence, Security, and Emergency Response, 1200 New Jersey Avenue SE., Washington DC 20590.

No person is required to respond to or shall be subject to a penalty for failure to comply with a collection of information subject to the Paperwork Reduction Act, unless that collection of information displays a currently valid OMB Control Number.

List of Subjects in 49 CFR Part 33

Administrative practice and procedure, Business and industry, Government contracts, National Defense, Reporting and recordkeeping requirements, Strategic and critical materials, Transportation.

Issued in Washington, DC on September 20, 2012. Ray LaHood, Secretary of Transportation.

In consideration of the foregoing, the Department is adding Part 33 of Title 49, Code of Federal Regulations, to read as follows:

PART 33—TRANSPORTATION PRIORITIES AND ALLOCATION SYSTEM Subpart A—General Sec. 33.1 Purpose of this part. 33.2 Priorities and allocations authority. 33.3 Program eligibility. Subpart B—Definitions 33.20 Definitions. Subpart C—Placement of Rated Orders 33.30 Delegation of authority. 33.31 Priority ratings. 33.32 Elements of a rated order. 33.33 Acceptance and rejection of rated orders. 33.34 Preferential scheduling. 33.35 Extension of priority ratings. 33.36 Changes or cancellations of priority ratings and rated orders. 33.37 Use of rated orders. 33.38 Limitations on placing rated orders. Subpart D—Special Priorities Assistance 33.40 General provisions. 33.41 Requests for priority rating authority. 33.42 Examples of assistance. 33.43 Criteria for assistance. 33.44 Instances where assistance may not be provided. 33.45 Assistance programs with other nations. [Reserved] Subpart E—Allocation Actions 33.50 Policy. 33.51 General procedures. 33.52 Controlling the general distribution of a material in the civilian market. 33.53 Types of allocation orders. 33.54 Elements of an allocation order. 33.55 Mandatory acceptance of an allocation order. 33.56 Changes or cancellations of an allocation order. Subpart F—Official Actions 33.60 General provisions. 33.61 Rating Authorizations. 33.62 Directives. 33.63 Memoranda of Understanding. Subpart G—Compliance 33.70 General provisions. 33.71 Audits and investigations. 33.72 Compulsory process. 33.73 Notification of failure to comply. 33.74 Violations, penalties, and remedies. 33.75 Compliance conflicts. Subpart H—Adjustments, Exceptions, and Appeals 33.80 Adjustments or exceptions. 33.81 Appeals. Subpart I—Miscellaneous Provisions 33.90 Protection against claims. 33.91 Records and reports. 33.92 Applicability of this part and official actions. 33.93 Communications. Appendix I to Part 33—Sample Form OST F 1254 Schedule 1 to Part 33—Approved Programs Authority:

Defense Production Act of 1950, as amended, 50 U.S.C. 82; 50 U.S.C. App. §§ 2061-2171; 50 U.S.C. App § 468; Executive Order 12742, (56 FR 1079, January 8, 1991); Executive Order 13603, (77 FR 16651, March 16, 2012).

Subpart A—General
§ 33.1 Purpose of this part.

This part provides guidance and procedures for use of the Defense Production Act priorities and allocations authority with respect to all forms of civil transportation. The guidance and procedures in this part are generally consistent with the guidance and procedures provided in other regulations issued under EO 13603 authority.

§ 33.2 Priorities and allocations authority.

(a) Section 201 of Executive Order 13603 (77 FR 16651, March 16, 2012) delegates the President's authority under section 101 of the Defense Production Act to require acceptance and priority performance of