40798 Federal Register / Vol. 76, No. 133 / Tuesday, July 12, 2011 / Rules and Regulations 

is certified this rule, when promulgated, 

will not have a significant economic 

impact on a substantial number of small 

entities under the criteria of the 

Regulatory Flexibility Act. The FAA’s 

authority to issue rules regarding 

aviation safety is found in Title 49 of the 

U.S. Code. Subtitle 1, section 106 

discusses the authority of the FAA 

Administrator. Subtitle VII, Aviation 

Programs, describes in more detail the 

scope of the agency’s authority. This 

rulemaking is promulgated under the 

authority described in subtitle VII, part 

A, subpart I, section 40103. Under that 

section, the FAA is charged with 

prescribing regulations to assign the use 

of airspace necessary to ensure the 

safety of aircraft and the efficient use of 

airspace. This regulation is within the 

scope of that authority as it establishes 

controlled airspace at Samaritan North 

Lincoln Hospital Heliport, Lincoln City, 

OR. 

List of Subjects in 14 CFR Part 71 

Airspace, Incorporation by reference, 

Navigation (air). 

Adoption of the Amendment 

In consideration of the foregoing, the 

Federal Aviation Administration 

amends 14 CFR part 71 as follows: 

PART 71—DESIGNATION OF CLASS A, 

B, C, D AND E AIRSPACE AREAS; AIR 

TRAFFIC SERVICE ROUTES; AND 

REPORTING POINTS 

■ 1. The authority citation for 14 CFR 

part 71 continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40103, 40113, 

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– 

1963 Comp., p. 389. 

§ 71.1 [Amended] 

■ 2. The incorporation by reference in 

14 CFR 71.1 of the Federal Aviation 

Administration Order 7400.9U, 

Airspace Designations and Reporting 

Points, dated August 18, 2010, and 

effective September 15, 2010 is 

amended as follows: 

Paragraph 6005 Class E airspace areas 

extending upward from 700 feet or more 

above the surface of the earth. 

* * * * * 

ANM OR E5 Lincoln City, OR [New] 

Samaritan North Lincoln Hospital Heliport, 

OR 

(Lat. 44°59′11′′ N., long. 123°59′39′′ W.) 

That airspace extending upward from 700 

feet above the surface within 3-mile radius of 

Samaritan North Lincoln Hospital Heliport. 

Issued in Seattle, Washington, on June 30, 

2011. 

Christine Mellon, 

Acting Manager, Operations Support Group, 

Western Service Center. 

[FR Doc. 2011–17202 Filed 7–11–11; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 121 

[Docket No.: FAA–2002–11301; Amendment 

No. 121–315] 

RIN 2120–AH14 

Antidrug and Alcohol Misuse 

Prevention Programs for Personnel 

Engaged in Specified Aviation 

Activities; Final Regulatory Flexibility 

Determination 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: On January 10, 2006, the FAA 

issued a final rule to require that each 

person who performs a safety-sensitive 

aviation function directly for an 

employer, including contractors and 

subcontractors, is subject to drug and 

alcohol testing. This document 

announces the completion and 

availability of the final regulatory 

flexibility certification for this final rule. 

The rule will not have a significant 

economic impact on a substantial 

number of small entities. 

DATES: Effective July 7, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Nicole Nance, Office of Aviation Policy 

and Plans, APO–300, Federal Aviation 

Administration, 800 Independence 

Avenue, SW., Washington, DC 20591; 

telephone (202) 267–3311; e-mail 

nicole.nance@faa.gov. For legal 

questions concerning this document, 

contact Anne Bechdolt, Regulations 

Division, AGC–220, Office of the Chief 

Counsel, Federal Aviation 

Administration, 800 Independence 

Avenue, SW., Washington, DC 20591; 

telephone (202) 267–7230; e-mail 

anne.bechdolt@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

On February 28, 2002, the FAA issued 

a notice of proposed rulemaking seeking 

to revise the drug and alcohol testing 

regulations by amending the definition 

of employee (67 FR 9366, 9377, Feb. 28, 

2002). The FAA action addressed those 

individuals performing safety-sensitive 

functions under contract who may not 

have been subject to testing under the 

drug and alcohol testing regulations 

established in 1988 and 1994, 

respectively. Upon review of comments, 

the FAA, in 2004, issued a 

supplemental notice of proposed 

rulemaking to seek comment regarding 

how small entities would be impacted 

by this rule (69 FR 27980, May 17, 

2004). From the comments received the 

FAA certified under 5 U.S.C. 605(b) that 

the rule would not have a significant 

impact on a substantial number of small 

entities. 

On January 10, 2006, the FAA issued 

the final rule (71 FR 1666). This rule 

requires that each person who performs 

a safety-sensitive aviation function 

directly for an employer is subject to 

testing and that each person who 

performs a safety-sensitive function at 

any tier of a contract for that employer 

is also subject to testing. This 

requirement includes contractors and 

subcontractors. Contracting companies 

have two testing options: Option one is 

for the contracting company to obtain 

and implement its own FAA drug and 

alcohol (D&A) testing programs. Under 

this option, the company would subject 

the individuals to testing. The other 

option is for the regulated employer to 

maintain its own testing programs and 

subject the individual to testing under 

these programs. To establish a D&A 

program a company would need to 

develop and maintain testing, training, 

and annual reporting requirements. 

To comply with the Regulatory 

Flexibility Analysis (RFA), and to 

evaluate the impact on small businesses, 

the FAA described and estimated the 

number of affected businesses and 

estimated the economic impact. In the 

certification for the final rule the FAA 

estimated that the costs were minimal, 

and that contractors would absorb some 

of these costs. In order to estimate the 

maximum impact of this regulation on 

regulated entities, the FAA assumed 

that all of the additional cost would be 

passed along to regulated employers. 

Since costs were minimal, the FAA 

again certified that the rule would not 

have a significant economic impact on 

a substantial number of small entities. 

71 FR 1666, 1674 (Jan. 10, 2006) 

The Aeronautical Repair Station 

Association, Inc., (ARSA) and other 

affected businesses challenged the final 

rule on several grounds, including the 

FAA’s compliance with the Regulatory 

Flexibility Act. The entities argued that 

contractors and subcontractors were 

directly affected by the final rule, and in 

failing to consider them as part of the 

basis for the certification, the FAA 

failed to comply with the RFA. Upon 

review, the U.S. Court of Appeals for the 


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Federal Register / Vol. 76, No. 133 / Tuesday, July 12, 2011 / Rules and Regulations 40799 

District of Columbia upheld ‘‘the 

substance of the 2006 final rule’’ and 

remanded ‘‘for the limited purpose of 

conducting the analysis required under 

the RFA, treating the contractors and 

subcontractors as regulated entities.’’ 

The Court found that contractors and 

subcontractors were directly affected by 

the final rule and that the FAA failed to 

comply with the RFA by not 

considering them in the analysis. To 

comply with the court’s order, the FAA 

extended the regulatory flexibility 

analysis to include contractors and 

subcontractors and published the 

analysis for comment on March 8, 2011 

(76 FR 12559). The FAA again certified 

that although the rule would affect a 

substantial number of small entities, the 

economic impact on these entities 

would not be significant. 

The FAA received comments from the 

U.S. Small Business Administration’s 

Office of Advocacy (SBA), Aeronautical 

Repair Station Association, Inc. (ARSA), 

Aviation Suppliers Association (ASA), 

Modification and Replacement Parts 

Association (MARPA), National Air 

Transportation Association (NATA), 

and four individuals. SBA noted that 

the March 2011 certification relied too 

heavily on the ARSA survey that was 

submitted in response to the analysis 

published for comment on August 24, 

2005, as well as the SBA analysis of 

which entities may be impacted by this 

rule. ARSA, ASA, MARPA, and NATA 

also questioned the use of the ARSA 

survey and whether the FAA had 

attempted to verify, through other data 

sources, the information provided by 

ARSA and SBA to identify the 

subcontractors that would be impacted 

by this rule. ARSA asserted that there 

was no factual basis for the FAA’s 

assumption that these entities 

employed, on average, 25 individuals, 

considering that 43% of the entities 

ARSA surveyed employed 11–50 

individuals. SBA stated that the FAA 

needed to identify all regulated small 

entities that would be covered by this 

final rule and provide additional 

analysis on the size and revenue 

characteristics of these entities. The 

FAA has addressed these issues below. 

SBA, ARSA, ASA, MARPA, and 

NATA also raised concerns that the 

source information for the projected 

wage, training, education, program 

development, and annual 

documentation costs was not provided. 

ASA and MARPA asserted that the cost 

estimates failed to account for travel 

costs for the employee to take the tests, 

as well as increased rates charged by 

contract companies for administering 

these programs, and testing that occurs 

after an accident. ARSA noted that the 

FAA should also consider the costs to 

change existing processes, conduct 

alcohol and drug testing background 

checks, as well as the revenue lost when 

the employee has to undergo testing. 

MARPA stated that the FAA 

underestimated the administrative costs 

of managing the program by assessing 

this cost based on the assumption that 

an administrative person on staff would 

oversee the program, rather than the 

costs of either outsourcing the 

administration of the program or 

assuming that a management employee 

would be assigned to administer the 

program. 

Finally, ARSA, ASA, and MARPA 

assert that this final rule does have a 

significant economic impact. MARPA 

and ASA noted that the FAA’s use of a 

2% threshold of annual revenues 

exceeds SBA’s 1% of annual revenues 

threshold for determining significant 

impact. ARSA asserts that if the FAA 

considers the profit margins of these 

entities, the impact is significant. The 

FAA has addressed these issues below. 

Upon review of the comments and 

further analysis provided below, the 

FAA certifies under 5 U.S.C. 605(b) that 

this rule will not have a significant 

impact on a substantial number of small 

entities. 

The Regulatory Flexibility Act of 1980 

(Pub. L. 96–354) (RFA) establishes ‘‘as a 

principle of regulatory issuance that 

agencies shall endeavor, consistent with 

the objectives of the rule and of 

applicable statutes, to fit regulatory and 

informational requirements to the scale 

of the businesses, organizations, and 

governmental jurisdictions subject to 

regulation.’’ To achieve this principle, 

the RFA requires agencies to solicit and 

consider flexible regulatory proposals 

and to explain the rationale for their 

actions to assure that such proposals are 

given serious consideration.’’ The RFA 

covers a wide-range of small entities, 

including small businesses, not-forprofit organizations and small 

governmental jurisdictions. 

Agencies must perform a review to 

determine whether a rule will have a 

significant economic impact on a 

substantial number of small entities. If 

the agency determines that it will, the 

agency must prepare a regulatory 

flexibility analysis as described in the 

RFA. However, if an agency determines 

that a rule is not expected to have a 

significant economic impact on a 

substantial number of small entities, 

section 605(b) of the RFA provides that 

the head of the agency may so certify 

and a regulatory flexibility analysis is 

not required. The certification must 

include a statement providing the 

factual basis for this determination, and 

the reasoning should be clear. Based on 

the analysis below, the FAA certifies 

that this rule does not have a significant 

economic impact on a substantial 

number of small entities. While there 

are a substantial number of affected 

small entities, the compliance cost is 

not a significant economic cost. A full 

discussion follows. 

I. Basis for the Final Rule 

This final rule amends the FAA 

regulations governing drug and alcohol 

testing to clarify that each person who 

performs a safety-sensitive function for 

a regulated employer by contract, 

including by subcontract at any tier, is 

subject to testing. These amendments 

are necessary because in the 1990s, the 

FAA issued conflicting guidance about 

which contractors were subject to drug 

and alcohol testing. The FAA did not 

consider any alternatives to this rule 

because the rule was designed to clarify 

that the FAA intended that each person 

who performs a safety-sensitive function 

for a regulated employer by contract, 

including by subcontract at any tier, is 

subject to testing. The FAA specifically 

addressed this issue in the final rule 71 

FR 1666 (January 10, 2006). The 

applicability of the drug and alcohol 

requirements to sub-contractors, 

including those not certificated by the 

FAA is the sole purpose of the rule. 

Accordingly, the agency determined in 

2006 that no other alternative was 

available, a decision upheld by the court 

in the subsequent lawsuit. These 

matters were addressed by the FAA 

when publishing the final rule when we 

said: 

[T]he level of the contractual relationship 

should not limit the requirement for all 

safety-sensitive work to be performed by 

drug-free and alcohol-free employees. If 

individuals are performing safety-sensitive 

functions for a regulated employer, the 

individuals must be subject to testing, 

regardless of the tier of contract under which 

they are performing. 

It would be inconsistent with aviation 

safety for individuals performing 

maintenance work within the certificated 

repair station to be subject to testing, while 

individuals performing the same 

maintenance work under a subcontract 

would not be subject to drug and alcohol 

testing.’’ 

71 FR 1670. 

Additionally, the FAA expressly 

discussed comments that subcontractors 

that are not primarily aviation-related 

businesses should not be subject to 

testing. In the preamble to the final rule, 

the FAA rejected this premise, noting 

that ‘‘[w]hen subcontractors choose to 

perform safety-sensitive functions for 

regulated employers, they are choosing 


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1http://www.sba.gov/content/summary-sizestandards-industry. 

2Aircraft Repair Station Security (49 CFR Part 

1520 and 1554). Regulatory and Economic Analysis: 

Transportation Security Administration Department 

of Homeland Security, October 15, 2009 [Docket 

No. TSA–2004–17131] http://www.nbaa.org/ops/ 

security/programs/repair-station/part-145-securitynprm-20091118.pdf. 

to comply with the FAA drug and 

alcohol testing regulations. The impact 

these subcontractors have on aviation 

safety is not related to whether they 

hold a repair station certificate. Instead, 

they have an impact because they 

actually perform safety-sensitive 

functions.’’ 71 FR 1673. The FAA went 

on to note that the commenters 

provided no data to support the premise 

that non-certificated subcontractors 

would cease providing service to the 

aviation industry. Indeed, in the final 

regulatory evaluation, the data provided 

by the commenters showed the majority 

of such contractors would continue 

doing business with the aviation 

industry after the final rule became 

effective. Id. 

For safety reasons, the FAA wanted to 

ensure that all persons performing 

safety-sensitive functions were tested. 

This remains the case today and as 

such, there are no alternatives to the 

final rule that could have been 

considered and implemented. 

The final rule is promulgated under 

the authority described in 49 U.S.C. 

45102, which charges the FAA with 

prescribing regulations to establish 

programs for drug and alcohol testing of 

employees performing safety-sensitive 

functions for air carriers and to take 

certificate or other action when an 

employee violates the testing 

regulations. The final rule does not 

duplicate or otherwise conflict with 

another provision of law. A description 

and an estimate of the number of small 

entities to which the rule will apply, as 

well as a description of the projected 

reporting, record keeping and other 

compliance costs, is provided below 

and forms the basis for the FAA’s 

certification under 5 U.S.C. 605(b). 

II. Description of Small Entities 

Impacted by This Rule 

The entities impacted by this rule are 

repair stations certificated under 14 CFR 

part 145, and their subcontractors. The 

size standards for determining whether 

these entities constitute small 

businesses vary and the FAA offers the 

following discussion to support the 

definition of a small business for this 

certification. 

A. Size Standard 

The Small Business Administration 

(SBA) has established small business 

size standards pursuant to the Small 

Business Act (Act) (Pub. L. 85–236, as 

amended) and related legislative 

guidelines. The SBA classifies ‘‘small’’ 

businesses based on their employment 

or annual revenue as set forth in the 

North American Industrial 

Classification System (NAICS) 

classifications. See 13 CFR 121.201. 

Under NAICS 488190 ‘‘Other Support 

Activities for Air Transport’’, repair 

stations, which constitute some of the 

entities affected by this final rule, are 

defined as small businesses if they have 

annual revenues of $7 million or less. 

Subcontractors, conversely, overlap 

several industries and have multiple 

NAICS classifications. In attempting to 

identify all of the subcontractors 

impacted by this rule, the FAA 

examined the submitted list of 21 

NAICS codes provided by SBA and 

ARSA. Using these NAICS codes, the 

definition of a small business for 

subcontractors could range, based on 

the number of employees alone, from 

500 to 1,000 employees, or based on 

annual revenues of $7 million or less. 

The FAA reviewed all of the NAICS 

codes and notes that the SBA defines 

the average industry as having the 

following standards for a small 

business: 500 employees for most 

manufacturing and mining industries, 

and $7 million in average annual 

receipts for most non-manufacturing 

industries.1 Given the variance in these 

NAICS codes, the FAA has determined 

that the appropriate definition for 

determining whether a subcontractor is 

a small business under this rule is to use 

the most conservative criteria set forth 

in NAICS classification. Thus, the FAA 

will classify a subcontractor as a small 

business if it employs 500 employees or 

fewer, or has annual revenues of $7 

million or less. The FAA uses both 

criteria to analyze the impact on 

subcontractors. 

B. Repair Stations Impacted by This 

Rule 

Certificate holders, such as part 121, 

135 and 145 have operating certificates 

issued by the FAA, allowing the FAA to 

determine the number of certificate 

holders impacted by this rule. The FAA 

National Vital Information Subsystem 

(NVIS) Air Agency records indicate 

there are 4,105 part 145 certificated 

domestic repair stations. To determine 

how many of these repair stations 

would be classified as small business 

under NAICS 488180, the FAA 

reviewed a recent study completed by 

the U.S. Transportation Security 

Administration.2

In this study, TSA compiled both 

revenue and employment records from 

Dun & Bradstreet for approximately 

2,276 domestic repair stations. From 

this total, they identified 2,123 repair 

stations that meet the small business 

size standard reflected in NAICS 

488190. This analysis indicates that 

most repair stations are small 

businesses. Accepting the TSA 

percentage of small entities for domestic 

repair stations, the FAA has estimated 

that out of 4,105 domestic U.S. 

certificated repair stations, 3,829 are 

small businesses with revenues of $7 

million or less. The FAA has 

determined that this rule would impact 

a substantial number of small business 

repair stations. 

C. Subcontractors Impacted by This 

Rule 

After estimating the number of small 

entity repair stations, we now focus on 

describing subcontractors impacted by 

this rule. Many of the subcontracting 

companies impacted by this rule are not 

certificated by the FAA. Their primary 

function is not aviation related, but 

rather a business outside of aviation. 

Because these businesses are based on 

NAICS codes from other industries, the 

FAA could not easily determine the 

appropriate codes. The FAA first 

reviewed the comments submitted by 

SBA and ARSA in response to the 

Antidrug and Alcohol Misuse 

Prevention Programs Regulatory 

Evaluation including a preliminary list 

of 21 NAICS codes for suppliers, parts 

fabricators and metal finishers, and 

others that may perform safety sensitive 

repairs and would be considered a 

subcontractor under the rule. The FAA 

examined the submitted list of 21 

NAICS codes to determine which 

activities would be covered by this rule. 

There was some duplication in the 

codes, reducing the actual number of 

codes to be examined. The results of 

this analysis are presented in Table 1. 

In addition to the list of NAICS codes, 

ARSA also provided information on a 

Non-Certificated Maintenance 

Subcontractor (NCMS) Survey it 

conducted. Some of the information 

from the survey proved to be useful in 

determining the small business impact 

on subcontractors, particularly the 

responses to questions 1 (number of 

employees), 2 (annual revenue), 3 (an 

existing contract with a US air carrier to 

perform maintenance), 4 (type of work). 

These responses are used, in this 

analysis, to determine the 

characteristics of these companies. 

The FAA finds it appropriate to start 

with the responses to question 4, which 

deals with the work-related functions of 


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Federal Register / Vol. 76, No. 133 / Tuesday, July 12, 2011 / Rules and Regulations 40801 

the respondents, as a snapshot of some 

of the types of companies that, would 

need to be included in this analysis. The 

FAA grouped the responses to question 

4 into the NAICS codes that both ARSA 

and the SBA provided and the FAA was 

able to correlate 98 of the 134 survey 

respondents with these codes; these 98 

are shown in Table 1 below. While there 

are discrepancies with regard to the 

count, we can validate 98 of the 134 

responses. This shows the wide 

spectrum of businesses providing 

contracting support. 

TABLE 1—SURVEY RESULTS—NAICS CODES AND WORK FUNCTIONS

Number of 

NCMS NAICS code Work functions Require D&A program? 

1 ........................ 313311 Fireproofing of fabrics ............................................................................................................... Y 

14 ...................... 313320 Metallizing (including plating) ................................................................................................... S 

9 ........................ 332322 Manufacturing airframe parts (mostly sheet metal) .................................................................. N 

Manufacturing per approved drawing or data .......................................................................... N 

Manufacturing small parts; some of which are used by part 121 operators ........................... N 

23 ...................... 332710 Chemical milling (reduction of weight) ..................................................................................... S 

Machining .................................................................................................................................. S 

Machining and welding of ground support parts for planes ..................................................... N 

Machining of turbine engine components ................................................................................ S 

Machining; chrome plating; anodize; metal finishing; shot peening ........................................ S 

3 ........................ 332722 Manufacturer of miniature turned parts. Screws and like ........................................................ N 

2 ........................ 332811 Heat treating ............................................................................................................................. Y 

1 ........................ 332812 Painting ..................................................................................................................................... Y 

8 ........................ 332813 Chrome plating; nickel plating (metal finishing) ....................................................................... S 

Machining; chrome plating; anodize; metal finishing; shot peening ........................................ S 

Metal finishing (grinding) (zinc plating) ..................................................................................... S

Plating; precision grinding; non-destructive testing .................................................................. S 

3 ........................ 332999 Die-cut parts—shims; washers; gaskets; etc ........................................................................... N 

1 ........................ 334511 Rebuild electro-mechanical switches for aviation use ............................................................. N 

1 ........................ 336412 Overhauling of engine blocker doors ....................................................................................... Y 

22 ...................... 488190 Minor maintenance ................................................................................................................... Y 

Maintenance on 135 charter aircraft line .................................................................................. Y 

Overhauling of engine blocker doors ....................................................................................... Y 

5 ........................ 541380 Calibration and repair of test and measuring equipment ......................................................... N 

Hydrostatic testing .................................................................................................................... N 

Inspection .................................................................................................................................. N 

Machining & fabrication of test fixtures & equipment used in repair processes ...................... N 

Non-destructive testing ............................................................................................................. N 

1 ........................ 561740 Cleaning seat covers ................................................................................................................ N 

4 ........................ 811310 Machining and welding of ground support parts for planes ..................................................... N 

Manufacturing & precision grinding and testing of various fuel & hydraulic/pneumatic valve 

assemblies.

N 

Table 1 also indicates whether a 

specific function would require a D&A 

program. The last column is either 

marked with ‘‘Y’’ meaning yes, ‘‘N’’ 

meaning no, and ‘‘S’’ meaning some in 

this grouping might need such a 

program, as this work function 

conceivably could mandate such a 

program. Companies that have work that 

is strictly manufacturing will not be 

required to comply with the D&A testing 

rules. Several companies mentioned in 

their survey responses that they do not 

perform maintenance, and would not be 

included among companies required to 

set up and implement D&A testing. For 

example, the 14 companies 

characterized as 313320, which involves 

metal finishing including plating, may 

need to conduct D&A testing if any of 

the work they perform is considered 

maintenance under 14 CFR part 43. 

The responses to questions 1 and 2 

address the number of employees and 

the annual revenue reported by the 

surveyed companies. These responses 

are helpful in establishing the type of 

impact that this program will have on 

these companies. Question 1 asked 

‘‘How many employees does your 

company have?’’ Table 2 summarizes 

the responses provided by the ARSA 

survey. All but two of the responses are 

in the category of 750 or below. The two 

responses for ‘‘1501+’’ are outliers and, 

for computational purposes, can be 

ignored. Approximately 75 of the 

respondents stated that they employed 

between 1 and 50 employees, indicating 

that the majority of subcontracting 

companies are small entities. 

TABLE 2—SURVEY RESULTS— 

EMPLOYEES BY COMPANY

Response Count Percent 

1 to 10 .......................... 43 32.09 

11 to 50 ........................ 58 43.28 

51 to 100 ...................... 10 7.46 

101 to 500 .................... 18 13.43 

501 to 750 .................... 3 2.24 

751 to 1000 .................. 0 0.00 

1001 to 1500 ................ 0 0.00 

TABLE 2—SURVEY RESULTS— 

EMPLOYEES BY COMPANY—Continued 

Response Count Percent 

1501+ ............................ 2 1.49 

Total ....................... 134 100.00 

Question 2 of the survey asked about 

the company’s annual revenues; Table 3 

summarizes the survey responses: 

TABLE 3—SURVEY RESULTS—ANNUAL

REVENUE BY COMPANY

Response Count Percent 

Under $750,000 ............ 43 32.09 

$750,000 to $1 million .. 14 10.45 

$1 million to $2 million .. 20 14.93 

$2 million to $6 million .. 24 17.91 

$6 million to $10.5 million ............................. 8 5.97 

$10.5 million to $21.5 

million ........................ 7 5.22 

$21.5 million to $25 million ............................. 1 0.75 


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3 49–1011 First-Line Supervisor/Managers of 

Mechanics, Installers, and Repairers; Bureau of 

Labor Statistics, http://www.bls.gov—In May 2009, 

the Employee Benefit Research Institute, using a 

Bureau of Labor Statistics Survey of employee 

benefits estimated the total 2009 benefit as a 

percentage of payroll at 30.2 percent; http:// 

www.ebri.org/pdf/publications/books/databook/ 

DB.Chapter2003.pdf. 

4 49–3011 Aircraft Mechanics and Service 

Technicians; Bureau of Labor Statistics, http:// 

www.bls.gov. 

5Two of the costs described below, testing costs 

and employee training costs, involve all employees, 

both supervisors and non-supervisors. For these 

two sets of calculations, the FAA uses a weighted 

wage rate from the maintenance supervisor and 

maintenance employee salary that is applicable to 

all employees. 

6 25–3099 Teachers and Instructors, All Other; 

Bureau of Labor Statistics, http://www.bls.gov. 

7 43–0000 Office and Administrative Support 

Occupations; Bureau of Labor Statistics, http:// 

www.bls.gov. 

TABLE 3—SURVEY RESULTS—ANNUAL

REVENUE BY COMPANY—Continued 

Response Count Percent 

$25 million to $30 million ............................. 4 2.99 

More than $30 million ... 13 9.70 

Total ....................... 134 100.00 

Most of these companies reported 

average annual revenue of $7 million or 

less. 

As noted above, given the fact that the 

contractors and subcontractors are not 

certificated entities and the variety of 

work that these contractors perform for 

repair stations, the FAA believes that 

this study represents only a fraction of 

the total number of NCMS that may be 

impacted by this rule. Given the SBA’s 

average criteria for defining small 

business as an entity having either 500 

employees or less, or having revenue of 

$7 million or less, depending on the 

NAICS code, and that most of the 

businesses in the ARSA survey satisfy 

these criteria, the FAA has determined 

that a substantial number of 

subcontractors will be small entities 

impacted by this rule. 

III. Economic Impact 

Having determined that both a 

substantial number of small business 

repair stations and subcontractors will 

be impacted by this rule, the next step 

is to estimate the economic impact on 

these entities. The FAA rule requires 

small businesses to administer random 

drug tests to those employees who 

perform safety-sensitive functions. A 

subcontractor company can obtain 

coverage under another established 

program, lowering the cost compared to 

implementing its own program. In 

response to SBA’s concerns that the 

program costs were underestimated for 

subcontractors in the March 2011 

certification, the FAA based costs on 

subcontractors initiating and then 

implementing their own programs. It is 

important to note that these costs are 

much higher than when repair stations 

or contractors at higher tiers absorb 

some of the cost of D&A testing for the 

smaller firms. Moreover, most repair 

stations have drug and alcohol programs 

and therefore would not experience a 

cost burden based on the amendments 

to this rule. However, to estimate the 

maximum impact of this regulation on 

these employers, the FAA assumes that 

all of the additional cost for D&A testing 

is absorbed by each NCMS. The costs 

include: (1) Program development and 

maintenance, (2) training and education, 

(3) testing, and (4) annual 

documentation. The assumptions and 

calculations are described below and 

represent the costs associated with a 

fully-approved DOT drug and alcohol 

testing program: 

General Cost and Salary 

Assumptions: 

Maintenance supervisor salary 3— 

$39.35/hour 

Maintenance employee salary 4— 

$34.38/hour 

Blended Wage 5—$34.96/hour 

Instructor salary 6—$26.68/hour 

Administrative employee 7—$21.41/ 

hour 

1 Supervisor for every 8 employees 

1 Instructor for every 20 employees 

Program Development and Maintenance 

Each subcontractor will have to 

devote resources to developing an 

antidrug and alcohol misuse prevention 

testing program. In addition, each of 

these subcontractors will have to spend 

time to produce information required 

for their registration and submit it to the 

FAA. At the FAA, this information will 

have to be processed, and entered into 

the appropriate database. The FAA 

estimates that development and 

maintenance of a drug program would 

require a minimum of 16 additional 

administrative hours at $21 per hour for 

a total of $336 per company per year. 

Data provided by the Office of 

Aerospace Medicine shows that most 

companies have administrative support 

staff administering the program, 

however, in response to comments from 

MARPA and ARSA, the FAA also 

estimated costs using a supervisor 

($39.35/hour) as the responsible party. 

For a supervisor with a minimum of 16 

hours, the FAA estimates that the 

development and maintenance of a drug 

program would be $629 per year. The 

FAA believes that the administrative 

burden on subcontractors will be less 

than or equal to those of small part 121- 

or 135-certificate holders. Moreover, to 

be conservative and not underestimate 

costs, the FAA used 16 hours of a 

supervisor’s time for administering the 

program to compute startup program 

development costs. 

Training and Education 

Training costs are a combination of 

supervisor and employee training costs, 

plus the cost to establish and maintain 

a training program. For both the 

antidrug and alcohol misuse prevention 

programs, the employer will train 

supervisors to make reasonable cause/ 

suspicion determinations. In addition, 

supervisors and employees will receive 

training on the effects and consequences 

of drug use on personal health, safety, 

and work environment, as well as the 

manifestations and behavioral cues that 

may indicate drug use and abuse. For 

supervisors, the FAA requires an initial 

two hours of training; an hour for the 

drug program and another hour for the 

alcohol program. For the initial training, 

adding the supervisor salary ($39.35) for 

2 hours to the instructor salary ($26.68) 

for the same 2 hours of instruction sums 

to $132 per supervisor. The FAA also 

requires recurring supervisory training 

for the drug program. Although there is 

no time requirement for this training; 

the FAA expects that the recurring 

training will be similar to the initial 

training. Therefore, the FAA estimates 

that companies will provide an annual 

hourly refresher course for supervisors. 

The recurring annual training would be 

half the cost of the initial training at $66 

per supervisor per year. However, the 

recurring training costs are weighted to 

include any additional initial 

supervisory training for an actual 

recurring cost of $73 per supervisor per 

year. To include the cost of initial 

training and the recurring training the 

FAA averaged these costs over the 10 

years analyzed in the Regulatory 

Evaluation for this rule. The average 

training costs per year per supervisor is 

$84. 

For employees, companies are only 

required to provide initial training 

explaining the program and 

expectations for employees; a refresher 

course is recommended but not 

required. Training for employees is an 

hour. Cost to train employees is 

approximately an hour of an employee’s 

time at $34.38 per hour and an hour of 

the instructor’s time ($26.68) for a total 

of $61.06 per employee per year. 

Companies must also establish an 

education program that includes 

informational material, videos, etc. 

Training materials are generally an 

expense incurred during the start-up 


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Federal Register / Vol. 76, No. 133 / Tuesday, July 12, 2011 / Rules and Regulations 40803 

8https://secure2.airbase1.com/faadrug/ 

results.asp. 

9The source for the information on the drug and 

alcohol tests is the Office of Drug and Alcohol 

Policy and Compliance, in the Office of the 

Secretary of Transportation. This cost covers, 

among other things, collection of specimens, 

reporting, recordkeeping, and chain-of-custody 

procedures, as well as the cost of the technician. 

10The FAA and the other DOT modes are 

directed by DOT to price record creation at $1.145, 

record filing at $0.118, and record storage at 

$0.0228 for all documents related to the alcohol 

misuse prevention program and the antidrug 

program. 

11Report on the Regulatory Flexibility Act, FY 

2010; http://www.sba.gov/sites/default/files/files/ 

10regflx.pdf. 

phase of a drug and alcohol testing 

program. Employers can buy a single 

package of materials, and/or a video, 

which will be used for both supervisors 

and employees. There is also an option 

to use the Internet and/or our Agency 

materials to provide this training. From 

information provided by the Office of 

Aerospace Medicine and the cost of 

training materials on several Web sites, 

the FAA estimates that companies could 

incur an upfront cost for training 

material of $199 to $400 per company.8

Since companies reuse these videos, the 

costs for materials are actually spread 

out over several years. Spreading the 

material cost over the same 10 year 

period as above, the FAA estimates that 

companies will spend approximately 

$40 per company per year on training 

material. 

Testing Cost 

Drug and alcohol tests are required 

periodically for all employees 

performing safety sensitive functions. 

The test costs approximately $45 9 or 

$35, respectively. Several commenters 

stated that testing costs range anywhere 

from $60–$95 because most businesses 

contract out the administration of the 

program, including the testing, which 

results in higher costs. Here the testing 

cost is smaller because it does not 

include outsourcing the administration 

of the program, rather the 

administration of the program is done 

internally and those costs are listed 

under program development, 

maintenance and annual documentation 

below. The test includes specimen 

collection, laboratory processing, and 

MRO (medical review officer) 

verification. Testing takes place during 

an employee’s shift. This is time not 

worked but still paid by the company 

and is included as part of the testing 

cost. In the March 2011 certification the 

FAA estimated that the testing process 

would take approximately 2 hours. The 

FAA adopted this standard based on 

comments to the initial regulatory 

evaluation published for comment on 

August 24, 2005. Originally, the FAA 

estimated that it would only take 45 

minutes to conduct these tests. The 45 

minutes is composed of 30 minutes of 

total travel time, and 15 minutes for the 

drug test. Commenters asserted that this 

45 minute timeframe failed to 

adequately account for travel time. In 

consideration of these comments, the 

FAA estimated in the certification 

published for comment in March 2011 

that the total cost of testing is calculated 

by adding the 2-hour blended wage paid 

to the employee to the cost of the test. 

Thus, the total cost of a drug test, which 

includes the 2-hour testing process with 

the employee’s labor wage for this time 

as well as travel costs, sums to $113 per 

employee and $102 per employee for an 

alcohol testing. This is consistent with 

previous FAA methodology for 

determining labor costs attributable to a 

rule. In its comments to this 

certification, ARSA suggested that the 

FAA should not use the employee’s 

wage but rather, should use the labor 

rate that the company would charge its 

customers to account for lost revenue 

while the test is being conducted. The 

difference between the wage rate and 

the labor rate is a transfer from the 

customer to the company and transfers 

are not to be included as compliance 

costs based on OMB guidance. 

Moreover, this is not included because 

companies are being compensated by 

their customers. 

Annual Documentation 

Each subcontractor has to periodically 

submit documentation. Subcontractors 

will be required to report or submit the 

following documents; training records, 

reasonable suspicion cases of drug and 

alcohol misuse, a positive drug or 

alcohol test, an employee’s refusal to 

submit to a drug or alcohol test, postaccident alcohol tests, and if a postaccident alcohol test is not promptly 

administered documentation stating the 

reasoning behind the delay. The FAA 

estimates that it will cost 10 $1.29 to 

report each training record, to document 

each reasonable suspicious case, or to 

submit every rationale behind tests not 

being promptly administered. 

Notification of a positive drug or alcohol 

test or an employee’s refusal to be tested 

is estimated to take 0.25 administrative 

hours at an hourly rate of $21 totaling 

roughly $5 per notification. The FAA 

projects that these documents will be 

submitted annually, but each company 

on average only submits a certain 

number of reports. Using this average, 

documentation cost is estimated at $50 

per company for the first year and $4.50 

per company for subsequent years. 

As stated above, for this rule the FAA 

defines a small business as a company 

having 500 employees or fewer, or 

having revenue of $7 million or less. To 

determine if there would be a significant 

economic impact on small businesses, 

the FAA estimated the cost for what is 

believed to be one of the smallest 

companies under this definition: A 

company with 2 employees and 1 

supervisor. The FAA summed the cost 

information provided above for testing, 

training and education, program 

maintenance and development, and 

annual documentation for a total cost of 

$2280er year. Detailed information on 

how this number was calculated is 

provided below. 

2 Employees and Annual Revenue 

Under $750,000 

Cost of Drug Testing Program 

$113 Testing Cost × 2 Employees = $226 

$84 Supervisor Training × 1 Supervisors 

= $84 

$61 Employee Training × 2 Employees 

= $122 

$40 per Company for Training Material 

$629 Program Development per 

Company 

+ $50 for Annual Documentation per 

Company 

Total Cost = $1,151 per Company 

Cost of Alcohol Testing Program 

$102 Testing Cost × 2 Employees = $204 

$84 Supervisor Training × 1 Supervisors 

= $84 

$61 Employee Training × 2 Employees 

= $122 

$40 per Company for Training Material 

$629 Program Development per 

Company 

+$50 for Annual Documentation per 

Company 

Total Cost = $1,129 per Company 

Per SBA guidance, ‘‘in the absence of 

statutory specificity, what is significant 

or substantial will vary depending on 

the problem being addressed, the rule’s 

requirements, and the preliminary 

assessment of the rule’s impact. The 

agency is in the best position to gauge 

the small entity impacts of its 

regulations. Thus, Advocacy relies on 

legislative history of the RFA for general 

guidance in defining these terms.’’ 11

Historically, the FAA uses costs equal to 

or exceeding 2 percent of annual 

revenue as a measure of a significant 

economic impact. For a $2,280 cost to 

be a significant economic impact, a 

company would need to have annual 

revenues of less than $103,000. Given 

the wages of a supervisor and two 

employees, these companies would 

need revenue substantially higher than 


jdjones on DSK8KYBLC1PROD with RULES
40804 Federal Register / Vol. 76, No. 133 / Tuesday, July 12, 2011 / Rules and Regulations 

$100,000 to stay in business. ARSA 

maintains that measuring the impact on 

small businesses based on annual 

revenues is not appropriate. ARSA 

asserts that the FAA should measure 

economic impact based on profits. The 

FAA has reviewed ARSA’s suggestion 

and determined that it is not 

appropriate for this analysis. Use of 

annual revenues is consistent with the 

SBA’s measure of the impact on small 

businesses. See 13 CFR 121.106; 

121.201. Thus, based on the projected 

costs for the smallest of entities that 

could be affected by this final rule, the 

FAA concludes no firm would incur a 

significant economic impact. 

Accordingly, although a substantial 

number of small businesses are 

impacted by this rule, because the 

economic impact is not significant, 

under 5 U.S.C. 605(b), I certify, as the 

FAA Administrator, that this rule will 

not have a significant economic impact 

on a substantial number of small 

entities. 

Issued in Washington, DC, on July 7, 2011. 

J. Randolph Babbitt, 

Administrator, Federal Aviation 

Administration. 

[FR Doc. 2011–17472 Filed 7–7–11; 4:15 pm] 

BILLING CODE P 

DEPARTMENT OF COMMERCE 

Bureau of Industry and Security 

15 CFR Part 748 

[Docket No. 110413240–1255–02] 

RIN 0694–AF23 

Technical Amendment to the 

Authorization Validated End-User 

Regulations of the Export 

Administration Regulations 

AGENCY: Bureau of Industry and 

Security, Commerce. 

ACTION: Final rule. 

SUMMARY: In this rule, the Bureau of 

Industry and Security (BIS) amends the 

Export Administration Regulations 

(EAR), Supplement No. 7 to Part 748— 

Authorization Validated End-User 

(VEU): List of Validated End-Users, 

Respective Items Eligible for Export, 

Reexport and Transfer, and Eligible 

Destinations—to add a column that lists 

Federal Register citations for the 

respective entries. This rule does not 

make any substantive changes to 

Supplement No. 7 or elsewhere in the 

EAR. 

DATES: This rule is effective July 12, 

2011. 

FOR FURTHER INFORMATION CONTACT: 

Karen Nies-Vogel, Chair, End-User 

Review Committee, Bureau of Industry 

and Security, U.S. Department of 

Commerce, 14th Street & Pennsylvania 

Avenue, NW., Washington, DC 20230; 

by telephone: (202) 482–5991, fax: (202) 

482–3911, or e-mail: ERC@bis.doc.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

Authorization Validated End-User 

(VEU) 

BIS amended the EAR in a final rule 

on June 19, 2007 (72 FR 33646), creating 

a new authorization for ‘‘validated endusers’’ (VEUs) located in eligible 

destinations to which eligible items may 

be exported, reexported, or transferred 

(in-country) under a general 

authorization instead of a license, in 

conformance with section 748.15 of the 

EAR. 

VEUs may obtain eligible items that 

are on the Commerce Control List, set 

forth in Supplement No. 1 to Part 774 

of the EAR, without having to wait for 

their suppliers to obtain export licenses 

from BIS. Eligible items may include 

commodities, software, and technology, 

except those controlled for missile 

technology or crime control reasons. 

The VEUs listed in Supplement No. 7 

to Part 748 of the EAR were reviewed 

and approved by the U.S. Government 

in accordance with the provisions of 

section 748.15 and Supplement Nos. 8 

and 9 to Part 748 of the EAR. The EndUser Review Committee (ERC), 

composed of representatives from the 

Departments of State, Defense, Energy 

and Commerce, and other agencies, as 

appropriate, is responsible for 

administering the VEU program. A 

unanimous vote by the ERC is required 

to authorize VEU status for a candidate 

or to add eligible items to an existing 

authorization. Majority vote of the ERC 

is required to remove VEU authorization 

or to remove eligible items from an 

existing authorization. 

In addition to U.S. exporters, 

Authorization VEU may be used in 

accordance with the provisions of the 

EAR by foreign reexporters and by 

persons transferring in-country, and it 

does not have an expiration date. VEUs 

are subject to regular reviews, based on 

information available to the United 

States government, to ensure that items 

shipped under Authorization VEU are 

used for civilian purposes. In addition, 

VEUs are subject to on-site reviews as 

warranted. 

As of the date of this rule, pursuant 

to section 748.15(b) of the EAR, VEUs 

are only located in the PRC and India. 

Amendment to Supplement No.7 to Part 

748 of the EAR 

In this final rule, BIS amends the 

EAR, Supplement No.7 to Part 748 

Authorization Validated End-User 

(VEU): List of Validated End-Users, 

Respective Items Eligible for Export, 

Reexport and Transfer, and Eligible 

Destinations to add a column that lists 

Federal Register citations for the 

respective entries. This rule does not 

make any substantive changes to 

Supplement No.7 or elsewhere in the 

EAR. 

The Federal Register citation that 

appears first for each VEU in the new 

column added to Supplement No. 7 

indicates the initial date on which the 

authorization for that listed VEU and its 

respective list of approved ‘‘Eligible 

Items’’ and ‘‘Eligible Destinations’’ were 

published in the Federal Register and 

became effective. Subsequent citations 

indicate the dates on which 

amendments to a VEU’s authorization 

were published in the Federal Register 

and became effective. 

Since August 21, 2001, the Export 

Administration Act has been in lapse 

and the President, through Executive 

Order 13222 of August 17, 2001 (3 CFR, 

2001 Comp. p. 783 (2002)), as extended 

most recently by the Notice of August 

16, 2010 (75 FR 50681, August 16, 

2010), has continued the EAR in effect 

under the International Emergency 

Economic Powers Act. BIS continues to 

carry out the provisions of the Act, as 

appropriate and to the extent permitted 

by law, pursuant to Executive Order 

13222. 

Rulemaking Requirements 

1. Executive Orders 13563 and 12866 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been determined to be not 

significant for purposes of Executive 

Order 12866. 

2. Notwithstanding any other 

provisions of law, no person is required 

to respond to nor be subject to a penalty 

for failure to comply with a collection 

of information, subject to the 

requirements of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501, 

et seq.) (PRA), unless that collection of 


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