43112 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations 

procedure thereon are impracticable, 

unnecessary, or contrary to the public 

interest.’’ 5 U.S.C. 553(b)(A) and (B). 

The APA also requires that rules 

generally be published not less than 30 

days before their effective date. See 5 

U.S.C. 553(d). As with the notice and 

comment requirement, however, the 

APA provides an exception when 

‘‘otherwise provided by the agency for 

good cause found and published with 

the rule.’’ 5 U.S.C. 553(d)(3). 

TILA does not require Board to 

provide notice or a hearing with respect 

to this rulemaking. See TILA Section 

105(a), 15 U.S.C. 1604(a). The revisions 

made to the commentary by this final 

rule are interpretative and merely 

explain that the April 1, 2011, 

mandatory compliance date that was 

specified in September 2010 was 

subsequently changed as a result of the 

Court’s issuance of a temporary 

administrative stay. The Board finds 

that there is good cause to conclude that 

providing notice and an opportunity to 

comment before issuing this final rule is 

unnecessary and that there is good 

cause for the final rule to be effective 

immediately. The change that is noted 

in this final rule has already occurred as 

a result of the Court’s prior order. The 

final rule merely makes conforming 

changes so that the commentary 

accurately reflects the effect that the 

Court’s order had on mandatory 

compliance date. 

List of Subjects in 12 CFR Part 226 

Advertising, Consumer protection, 

Federal Reserve System, Mortgages, 

Reporting and recordkeeping 

requirements, Truth in lending. 

Text of Final Revisions 

For the reasons set forth in the 

preamble, the Board amends Regulation 

Z, 12 CFR part 226, as set forth below: 

PART 226—TRUTH IN LENDING 

(REGULATION Z) 

■ 1. The authority citation for part 226 

continues to read as follows: 

Authority: 12 U.S.C. 3806; 15 U.S.C. 1604, 

1637(c)(5), and 1639(l); Pub. L. 111–24 § 2, 

123 Stat. 1734; Pub. L. 111–203, 124 Stat. 

1376. 

■ 2. In Supplement I to part 226, in 

Subpart E, under Section 226.36— 

Prohibited Acts or Practices in 

Connection With Credit Secured by a 

Dwelling, revise paragraph 2 to read as 

follows: 

Supplement I To Part 226—Official 

Staff Interpretations 

* * * * * 

Subpart E—Special Rules for Certain 

Home Mortgage Transactions 

* * * * * 

Section 226.36—Prohibited Acts or 

Practices in Connection with Credit 

Secured by a Dwelling 

* * * * * 

2. Mandatory compliance date for 

§§ 226.36(d) and (e). The final rules on loan 

originator compensation in § 226.36 apply to 

transactions for which the creditor receives 

an application on or after the effective date. 

For example, assume a mortgage broker takes 

an application on March 10, 2011, which the 

creditor receives on March 25, 2011. This 

transaction is not covered. If, however, the 

creditor does not receive the application 

until April 8, 2011, the transaction is 

covered. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, acting through the 

Director of the Division of Consumer and 

Community Affairs under delegated 

authority, July 14, 2011. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. 2011–18215 Filed 7–19–11; 8:45 am] 

BILLING CODE 6210–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 187 

[Docket No.: FAA–2010–0326; Amendment 

No. 187–35] 

RIN 2120–AJ68 

Update of August 2001 Overflight Fees 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: This final rule updates 

existing Overflight Fees using more 

current FAA cost accounting data and 

air traffic activity data. Overflight Fees 

are charges for aircraft flights that transit 

U.S.-controlled airspace, but neither 

land in nor depart from the United 

States. These fees have not been 

updated in nearly a decade and are 

based upon 1999 cost accounting and 

activity data. This action is necessary 

because operational costs have 

increased steadily since the fees were 

last updated. This adjustment of 

Overflight Fees will result in an 

increased level of cost recovery for the 

services being provided. 

DATES: Effective October 1, 2011. 

FOR FURTHER INFORMATION CONTACT: For 

technical questions concerning this final 

rule, contact David Rickard, Office of 

Financial Controls, Financial Analysis 

Division (AFC 300), Federal Aviation 

Administration, 800 Independence 

Avenue, SW., Washington, DC 20591; 

telephone (202) 493–5480; e-mail to 

david.rickard@FAA.gov. 

For legal questions concerning this 

final rule contact Michael Chase, AGC– 

240, Office of Chief Counsel, 

Regulations Division, Federal Aviation 

Administration, 800 Independence 

Avenue, SW., Washington, DC 20591; 

telephone: (202) 267–3110; e-mail to 

michael.chase@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Authority for This Rulemaking 

The FAA’s authority to establish these 

fees is found in Title 49 of the United 

States Code. This rulemaking has been 

conducted under the authority 

described in Chapter 453, Section 45301 

et seq. Under that Chapter, the FAA is 

charged with prescribing regulations for 

the collection of fees for air traffic 

control and related services provided to 

aircraft, other than military and civilian 

aircraft of the United States Government 

or a foreign government, that transit 

U.S.-controlled airspace, but neither 

take off from nor land in the United 

States (‘‘Overflights’’). This final rule is 

within the scope of that authority. 

Background 

The FAA’s Overflight Fees were 

initially authorized in the Federal 

Aviation Reauthorization Act of 1996 

(Pub. L. 104–264, enacted October 9, 

1996). Following enactment of the 

initial fee authority, and as mandated by 

that authority, the FAA issued an 

Interim Final Rule (IFR), ‘‘Fees for Air 

Traffic Services for Certain Flights 

through U.S.-Controlled Airspace’’ (62 

FR 13496), on March 20, 1997. Under 

the terms of the IFR, the FAA sought 

public comment on the IFR while 

concurrently beginning to assess 

Overflight Fees 60 days after its 

publication, on May 19, 1997. 

On July 17, 1997, petitions for judicial 

review of the IFR were filed in the U.S. 

Court of Appeals for the District of 

Columbia (the Court) by the Air 

Transport Association of Canada 

(ATAC) and seven foreign air carriers. 

Those petitions were consolidated into 

a single case (Asiana Airlines v. FAA, 

134 F.3d 393 (DC Cir. 1998)). The 

litigation proceeded throughout the 

remainder of 1997 while the FAA 

continued to collect fees pursuant to the 

statute. 

On January 30, 1998, the Court issued 

a decision, upholding the FAA on three 

process and procedure issues, but 

vacating the Rule because the Court 


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found that the methodology the FAA 

used to allocate costs did not conform 

to the statute. The FAA immediately 

suspended billing operations, and 

eventually refunded nearly $40 million 

in fees that had been collected. 

Although the 1997 IFR (62 FR 13496) 

had been set aside by the Court, the 

statutory requirement that the FAA 

establish Overflight Fees through an IFR 

remained in effect. One of the principal 

criticisms the FAA had received in the 

public comments on its 1997 IFR 

concerned the quality of the cost 

information upon which the Overflight 

Fees were based. The FAA had already 

begun developing a new Cost 

Accounting System (CAS) in 1996. Early 

data from the new CAS was becoming 

available in 1998. Thus, when the FAA 

decided, following the initial litigation, 

to issue a new IFR, a key element of that 

decision was that the fees would be 

derived from cost data from the new 

CAS. 

A new IFR was published in the 

Federal Register on June 6, 2000 (65 FR 

36002), with fees scheduled to go into 

effect on August 1, 2000. This new IFR 

was challenged in court by the ATAC 

and a slightly different group of seven 

foreign air carriers. The FAA began 

assessing and collecting the new 

Overflight Fees as scheduled on August 

1, 2000, while public comments were 

still being received by the FAA on its 

second IFR. The litigation proceeded 

concurrently, with oral arguments held 

on May 14, 2001. 

On July 13, 2001, the Court again 

vacated the FAA’s IFR, this time 

because the Court believed the FAA had 

failed to explain a key assumption in its 

costing methodology. (Air Transport 

Association of Canada vs. FAA; 00– 

1344, July 13, 2001). Under the Court’s 

order, there were 45 days before the IFR 

was to be vacated. As noted above, the 

FAA had solicited public comment on 

the IFR at the time it was published. 

The FAA had received many comments 

on the several issues raised in the 

litigation. At the time the Court’s 

decision was issued, the FAA was 

nearing completion of a Final Rule that 

would address these issues in the 

disposition of public comments section 

of the Rule. 

The FAA therefore proceeded on two 

fronts. It successfully petitioned the 

Court not to vacate the IFR while it 

proceeded concurrently with issuance 

of the Final Rule (‘‘Fees for FAA 

Services for Certain Flights,’’ 66 FR 

43680) on August 20, 2001, with revised 

fees effective immediately. In addition 

to addressing the public comments 

received on the IFR, the Final Rule 

reduced fees by about 15 percent due to 

adjustments in the original cost data. A 

new challenge to the revised fees was 

brought after the issuance of the Final 

Rule by ATAC and the same group of air 

carriers. The two cases, one challenging 

the IFR (65 FR 36002) issued in 2000 

and the other challenging the Final Rule 

(66 FR 43680) issued in 2001, were 

combined by the Court into a single 

case. 

While the litigation was still pending, 

on November 19, 2001, Congress 

enacted the Aviation and Transportation 

Security Act (ATSA), which included a 

provision that amended the Overflight 

Fee authorization: (1) To require that the 

fees be ‘‘reasonably’’ (rather than 

‘‘directly’’) related to costs; (2) to clarify 

that the Administrator has sole 

authority to determine the costs upon 

which the fees are based; and (3) to state 

explicitly that such cost determinations 

by the Administrator are not subject to 

judicial review. Meanwhile, the 

litigation proceeded into 2003, with the 

FAA continuing to collect the fees as 

required by statute. 

On April 8, 2003, the Court issued a 

decision setting aside the Final Rule and 

remanding it back to the FAA, finding 

that the agency had not adequately 

explained its handling of controller 

labor costs in deriving the fees. (Air 

Transport Association of Canada v. 

FAA, 323 F.3d 1093 (DC Cir. 2003)). The 

Court also found that the Overflight 

Fees amendments in the ATSA statute 

were inapplicable because of a generic 

‘‘savings’’ provision in the ATSA 

legislation that stated that nothing 

enacted in ATSA was applicable to any 

litigation ongoing prior to the date of 

enactment of ATSA. Fee collections 

were immediately suspended. 

On December 12, 2003, Congress 

enacted VISION 100—CENTURY OF 

AVIATION REAUTHORIZATION ACT, 

(Vision 100). Section 229 of that Act 

explicitly ‘‘adopted, legalized, and 

confirmed’’ both the IFR published in 

2000 and the Final Rule published in 

2001. In addition, the FAA was directed 

to hold a consultation meeting with 

users (those who pay the Overflight Fees 

to the FAA) and to submit a report to 

Congress addressing the issues that had 

been in dispute in the litigation before 

resuming the billing and collection of 

the Overflight Fees. 

Because there were ambiguous and 

potentially conflicting provisions in 

Vision 100 concerning Overflight Fees, 

the Administrator issued an Order on 

July 21, 2004, that set forth her 

interpretation of the language of the 

statute and, based on that interpretation, 

made determinations as to the ultimate 

disposition of Overflight Fees collected 

by the FAA under both the 2000 IFR 

and the 2001 Final Rule. The FAA 

retained a portion of the funds collected 

under the Final Rule, while either 

refunding or providing credits to the 

airlines for all of the fees collected 

under the IFR and a portion of the fees 

collected under the Final Rule. A copy 

of that Order, ‘‘Order Directing the 

Disposition of Certain Fees Collected by 

the Federal Aviation Administration 

Pursuant to 49 USC Section 45301,’’ was 

published in the Federal Register on 

August 4, 2004 (69 FR 47201). 

The FAA met with users in September 

2004 and submitted a report to Congress 

at the same time, as mandated by the 

Vision 100 statute. This cleared the way 

for the FAA to resume the billing and 

collection of Overflight Fees. In most 

cases, amounts previously collected by 

the FAA under the IFR and under the 

Final Rule up until the date of the 

ATSA enactment were provided as 

credits to frequent payers. These 

amounts were, in most cases, roughly 

offset by amounts owed by the carriers 

and other users for the 1-year period 

from March 2003 through February 

2004. The carriers had not been billed 

for this period while the litigation was 

ongoing, but were ultimately 

determined by the Administrator to be 

liable for those fees. 

Since that time, the FAA has followed 

the normal process of issuing monthly 

bills for the services provided to 

Overflights. The fees currently being 

charged were derived from cost and 

activity data for FY 1999. This Final 

Rule updates the existing fees by using 

cost and activity data for FY 2008 to 

derive the fees. The cost methodology 

applied in this Final Rule is applied in 

the same manner as in 2001, except that 

overhead has been included in the cost 

base for the fees this time as a direct 

result of the ATSA amendment that 

changed the previous statutory 

requirement that fees be ‘‘directly’’ 

related to costs to a less stringent 

requirement that the fees be 

‘‘reasonably’’ related to costs. 

The FAA’s CAS has been evolving 

and improving over time. The CAS has 

always relied on the best available data, 

and as new systems and techniques 

have evolved, the quality and accuracy 

of the data has improved. There are 

areas, such as the reporting of labor 

costs, where costs were allocated or 

assigned in the past based on estimates, 

but today are determined by actual data. 

This is not a difference in how the data 

are gathered, but rather an improvement 

in the quality and accuracy of the basic 

data. A detailed explanation of how the 

CAS data were assembled can be found 

in the ‘‘Costing Methodology Report, FY 


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2008,’’ which has been placed in the 

docket for this rulemaking. 

The evolution and improvement of 

the FAA’s financial management 

practices over time, including its cost 

accounting, is worth noting. Following 

several years in the early days of the 

CAS, in which the FAA’s auditors 

reported material weaknesses in areas 

including cost accounting information 

and accounting for property, plant, and 

equipment, the FAA received 

unqualified audit opinions on its 

financial statements in 9 of the last 10 

years (FYs 2001–2010). The auditor’s 

opinion for FY 2006 was initially 

qualified due to untimely processing of 

transactions and accounting for 

construction in progress, but was 

revised the following year to an 

unqualified audit opinion after the FAA 

corrected and restated its FY 2006 

financial statements. Thus, following 

the restatement and revised auditor’s 

opinion, the FAA’s financial statements 

have been unqualified for 10 years. It is 

also significant that, in 5 of those 10 

years, including the last 3, those 

unqualified opinions were ‘‘with no 

material weaknesses.’’ 

This continuing improvement in the 

quality and transparency of the FAA’s 

financial statements is a significant 

contributing factor to the fact that the 

Association of Government Accountants 

has awarded the Certificate of 

Excellence in Accountability Reporting 

(CEAR) to the FAA for its Performance 

and Accountability Reports in 7 of the 

last 8 years (FYs 2003–2010). The CEAR 

is considered the highest form of 

recognition for Federal Government 

financial management reporting. 

Overflight Fees Aviation Rulemaking 

Committees (ARC) 

In 2004, the FAA established an 

Overflight Fees ARC. That Committee 

held two meetings in early 2005, but 

never issued a report or made a 

recommendation to the FAA before its 

Charter expired. Subsequently, on 

December 17, 2008, the FAA issued a 

new Charter for an Overflight Fees ARC 

to advise and make recommendations to 

the FAA on the updating of its 

Overflight Fees. At the same time, the 

FAA initiated a rulemaking project to 

update the Overflight Fees, with the 

expectation that the activities and the 

end product(s) of the ARC deliberations 

would likely become an integral part of 

this rulemaking. The Overflight Fees 

ARC met several times in 2009 and 

issued its report and recommendations 

to the FAA on August 26, 2009. A copy 

of this report has been placed in the 

docket. The report contains three 

principal recommendations: (1) That the 

FAA pursue the updating of its 

Overflight Fees through the normal 

notice and comment type of rulemaking, 

rather than through the interim final 

rule process previously mandated by 

Congress; (2) that, in updating the fees, 

the FAA abide by the policies of the 

International Civil Aviation 

Organization (ICAO), whereby the 

principle of gradualism is applied so 

that any substantial fee increase (as in 

this case where a 9-year update is 

involved) is spread over several years; 

and (3) that, in this instance, the 

specific increases be accomplished over 

4 increments, on October 1st of each 

year from 2011 through 2014, with 

annual increases of 14% for Enroute and 

8% for Oceanic. 

After a careful and thorough review 

by the FAA of the ARC report and 

recommendations, the FAA concluded 

that the ARC recommendations provide 

a reasonable and workable framework 

for moving forward on a consensus basis 

to update the Overflight Fees. Thus, the 

FAA proceeded to draft a notice of 

proposed rulemaking (NPRM) to update 

the fees by implementing the three 

recommendations of the ARC. 

Summary of the Notice of Proposed 

Rulemaking (NPRM) 

The NPRM laid out an explicit plan 

to update the Overflight Fees by 

implementing the three ARC 

recommendations. This would be 

accomplished by increasing the fees in 

four annual increments to the amounts 

that would have produced full cost 

recovery in FY 2008. The fee levels that 

would eventually be achieved reflect 

increases above current levels of 69% in 

the Enroute environment and 36% in 

Oceanic. This would be accomplished 

by increasing the fees on October 1 in 

each of the years 2011 through 2014 at 

annual compounded rates of 14% for 

Enroute and 8% for Oceanic. The actual 

dollar amounts of each fee as of each of 

the four October 1st fee revision dates 

would be as follows: 

Fee revision date 

Enroute 

(per 100 nautical 

miles) 

Oceanic 

(per 100 nautical 

miles) 

October 1, 2011 ............................................................................................................................................... $38.44 $17.22 

October 1, 2012 ............................................................................................................................................... 43.82 18.60 

October 1, 2013 ............................................................................................................................................... 49.95 20.09 

October 1, 2014 ............................................................................................................................................... 56.86 21.63 

The NPRM was published in the 

Federal Register on September 28, 2010, 

with public comments due in 90 days, 

on December 27, 2010 (75 FR 59661). A 

more detailed discussion of the specifics 

of the fee update proposal can be found 

in that document. 

Disposition of Comments 

The FAA received only one letter of 

comment on the NPRM. That letter was 

from Lufthansa German Airlines, and 

was signed by the individual who had 

served as the Lufthansa representative 

on the aforementioned ARC on 

Overflight Fees. While the letter stated 

clearly that Lufthansa supports the ARC 

process and the recommendations of the 

ARC, it nevertheless went on to identify 

four topics that it believed should be 

further examined by the FAA before 

proceeding with any increase of the 

existing Overflight Fees. Those four 

topics are listed below, followed in each 

case by the FAA’s response to the 

comment. 

1. Enroute Costs for Air Traffic Control 

(ATC) Services in Lower Airspace 

Noting that there are low activity 

airports and airfields that are not served 

by a terminal radar approach control 

(TRACON) or an air traffic control tower 

and that, in these instances, ATC 

services are provided by Enroute 

controllers, Lufthansa asserts that the 

costs of these Enroute controllers should 

be removed from the Enroute (and thus 

the Overflight Fee) cost base. 

The FAA does not agree with 

Lufthansa’s assertion. The FAA notes 

that while there are low activity airports 

and airfields where traffic is controlled 

by Enroute controllers, the level of such 

activity is low enough that it does not 

require increased staffing and thus the 

costs of such services are de minimis. 

This issue was addressed by the FAA’s 

cost accounting team at the time the 

Cost Accounting System was being 

developed. This information was 


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derived from conversations between the 

cost accounting team and the Air Route 

Traffic Control Center (ARTCC) 

managers. The team determined that 

there was not a significant amount of 

Enroute controller time spent on aircraft 

in lower airspace. 

The FAA’s Air Traffic Organization 

(ATO) costs do not vary with the 

altitude of an aircraft. The infrastructure 

costs are mostly fixed (e.g., the building 

is there, the radars are operational, the 

communication lines are open, the 

automation system processes the radar 

targets, and the environmental systems 

are operational). The costs of controllers 

in the short term are also fixed. They are 

paid based on the volume and 

complexity of the work at the facility to 

which they are assigned, whether they 

work a single aircraft or numerous 

aircraft in a given period of time, and 

whether those aircraft are in straight and 

level flight or are in transition. The fact 

that the job may be more complex at the 

moment because of crossing traffic or 

transitioning traffic does not drive their 

costs. The workload is very dynamic in 

the radar environment, but a controller 

costs the same to the ATO whether he 

or she is working a complex sector at a 

busy time of day or a less busy sector 

after the push of traffic is over. 

2. Costs of Flow Control 

Lufthansa states that there are 

controllers in most, and possibly all, 

FAA Centers who are working ‘‘flow 

control’’ and that the work of these 

controllers does not benefit the 

overflight traffic and should therefore be 

removed from the Enroute (and thus the 

Overflight Fee) cost base. 

The FAA disagrees. As discussed at 

some length in the Introduction, 

Overview, and Background sections of 

the current Final Rule on Overflight 

Fees (66 FR 43680–43681), the FAA air 

traffic control system is a large, 

complex, integrated system with many 

components, all of which must work 

together for the benefit of all users, 

whether they be overflights or nonoverflights. Flow control is a small but 

important and integral part of that 

system, and benefits all users, including 

overflights. For example, when weather 

conditions necessitate changes in the 

routing and management of air traffic, it 

is all traffic, overflights and nonoverflights, that are affected. There is no 

rational reason for excluding flow 

control costs from the Enroute cost base. 

Moreover, the costs of air traffic flow 

management are an explicitly allowable 

item of cost for cost recovery purposes 

under the International Civil Aviation 

Organization’s (ICAO) Policies on 

Charges for Airports and Air Navigation 

Services (See ICAO Document 9082). 

3. Overhead Costs 

Lufthansa notes that the FAA is a 

large, multi-faceted organization, and 

suggests, for that reason, it is difficult to 

properly allocate the correct amount of 

overhead to the air navigation activity, 

and suggests that FAA the ‘‘only 

allocate overhead using a marginal cost 

approach.’’ 

The FAA does not agree with 

Lufthansa’s suggestion. The FAA 

believes the allocation of FAA overhead 

costs is in accordance with generally 

accepted accounting practices. The 

Lufthansa comments on this topic 

suggest a possible misunderstanding of 

how FAA overhead is allocated and 

assigned, although it was discussed in 

meetings of the ARC and was addressed 

in a set of questions given to the FAA 

by the ARC and answered by the FAA. 

For example, Lufthansa appears to 

believe that the presence of other 

aviation related activities, such as 

Airport Grants and Standards and 

Aviation Safety, results in the 

assignment of some of their costs to the 

air traffic control activity. That is not 

the case. Both Airports and Aviation 

Safety are separate FAA Lines of 

Business (LOB) that are themselves the 

recipient of their own shares of 

overhead, and their costs are kept 

separate and are not allocated or 

assigned to the air traffic cost pool. The 

specific details of how FAA overhead is 

allocated and assigned to the Air Traffic 

LOB are set forth in the next several 

paragraphs, and all of this is explained 

in greater detail in the Costing 

Methodology Report that has been 

placed in the docket for this rulemaking. 

The FAA overhead allocation can be 

described in two steps: (1) FAA 

Headquarters and Regional Overhead; 

and (2) ATO Overhead. 

(1) FAA Headquarters and Regional 

Overhead. A series of pro rata 

allocations are performed in the Cost 

Accounting System (CAS) to assign the 

FAA headquarters indirect costs to 

projects, service delivery points (SDPs), 

and services within each LOB and other 

Regional and Center Operations. Then, 

a series of pro rata allocations are made 

to assign the Aeronautical Center (AMC) 

indirect costs to projects, SDPs, and 

services within each LOB located at the 

Aeronautical Center. Note that not all 

LOBs track costs at a service and/or SDP 

level. In these cases, costs are assigned 

at the project level. 

The FAA Headquarters Overhead 

(excluding human resources) is assigned 

to projects, SDPs, and services within 

each LOB based on a percentage of total 

direct cost. Human resources services 

indirect costs are assigned to projects, 

SDPs, and services within each LOB 

based on the percentage of direct labor 

cost. The portion of the AMC cost 

assigned to each LOB is based on the 

percentage of total cost assigned to each 

LOB. 

FAA Regional Overhead costs 

represent the indirect cost of FAA 

general and administrative services 

provided to the lines of business by 

personnel residing at FAA regional 

headquarters offices. A series of pro rata 

allocations are performed in the CAS to 

assign the FAA regional overhead costs 

to projects, SDPs, and services based on 

a percentage of total direct cost within 

the regions. 

(2) ATO Overhead. The ATO 

overhead allocation can be described in 

three kinds of allocation steps: (i) 

Service Area Indirect, (ii) Service Unit 

Indirect and (iii) ATO Indirect. 

(i) Service Area Indirect. A pro rata 

allocation is performed in the CAS to 

assign each Service Area’s indirect costs 

to the direct projects, SDPs, and services 

that they support. The portion of the 

cost that is assigned to each project, 

SDP, and service is determined based on 

the percentage of total direct cost that is 

assigned to each project, SDP, and 

service for that Service Area. 

(ii) Service Unit Indirect. A pro rata 

allocation is performed in the CAS to 

assign each Service Unit’s Headquarters’ 

indirect costs to the direct projects, 

SDPs, and services that they support. 

The portion of the cost that is assigned 

to each project, SDP, and service is 

determined based on the percentage of 

total direct cost that is assigned to each 

project, SDP, and service for that 

Service Unit. 

(iii) ATO Indirect. A pro rata 

allocation is performed in the CAS to 

assign each of ATO’s staff offices’ 

indirect costs to the projects, SDPs, and 

services of all Service Units. The 

portion of the cost that is assigned to 

each project, SDP, and service is 

determined based on the percentage of 

total direct cost that is assigned to each 

project, SDP, and service of each Service 

Unit. 

As a final point on the subject of 

inclusion of overhead in the cost base 

for Overflight Fees, it should be noted 

that all overhead costs were excluded 

from the cost base for the previous Final 

Rule because the applicable statutory 

standard at that time required that the 

fees be ‘‘directly related’’ to the costs of 

the ATC services provided or made 

available. Congress has since changed 

that statutory standard to ‘‘reasonably 

related.’’ In light of this change, the 

FAA believes it is reasonable to include 


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43116 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations 

overhead in the cost base. That is in 

accordance with generally accepted 

accounting practices as well as with 

guidance on fee setting issued by ICAO 

(Policies on Charges for Airports and 

Air Navigation Services, Document 

9082). 

4. Overflight Fees and the ‘‘Fairness’’ of 

the International Aviation Tax 

Lufthansa asserts that, based on its 

own analysis of its international transAtlantic flights to and from the United 

States (non-overflights), the passengers 

on those flights are ‘‘overpaying’’ taxes 

into the Airport & Airway Trust Fund by 

at least a factor of four. For that reason, 

they argue that charging an ‘‘increased 

overflight fee renders the system even 

more unfair.’’ 

The FAA believes this comment is 

beyond the scope of this rulemaking. 

The ‘‘fairness’’ of the international 

aviation taxes has nothing to do with 

the validity of, or justification for, an 

increase in Overflight Fees. The two are 

unrelated. Aviation tax levels are set by 

the U.S. Congress and are beyond the 

control of the FAA. Similarly, Congress 

has directed the FAA to establish costbased Overflight Fees. Therefore, to 

retain the cost-based relationship, the 

FAA must periodically review and 

revise its Overflight Fees. Fairness of the 

aviation taxes notwithstanding, the FAA 

is obliged to update its Overflight Fees. 

In conclusion, the FAA does not 

believe any of the four points raised by 

Lufthansa and discussed in this section 

require any change in the process and 

specificity of the Overflight Fee update 

proposed in the NPRM. Accordingly, 

the FAA is adopting the amendment to 

Appendix B to Part 187—Fees for FAA 

Services for Certain Flights as proposed 

in the NPRM without change. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3507(d)) requires that the 

FAA consider the impact of paperwork 

and other information collection 

burdens imposed on the public. The 

FAA has determined that there is no 

new requirement for information 

collection associated with this final 

rule. The information used to track 

overflights (including the information 

collection necessary to implement this 

final rule) can be accessed from the 

flight plans filed with the FAA. The 

collection of information from the 

Domestic and International Flight Plans 

is approved under OMB Collection 

Control #2120–0026. 

International Compatibility 

In keeping with U.S. obligations 

under the Convention on International 

Civil Aviation, it is FAA policy to 

conform to International Civil Aviation 

Organization (ICAO) Standards and 

Recommended Practices to the 

maximum extent practicable. The FAA 

has reviewed the corresponding ICAO 

Standards and Recommended Practices 

and has identified no differences with 

these regulations. 

Regulatory Evaluation, Regulatory 

Flexibility Determination, International 

Trade Impact Assessment, and 

Unfunded Mandates Assessment 

Changes to Federal regulations must 

undergo several economic analyses. 

First, Executive Order 12866 and 

Executive Order 13563 direct that each 

Federal agency shall propose or adopt a 

regulation only upon a reasoned 

determination that the benefits of the 

intended regulation justify its costs. 

Second, the Regulatory Flexibility Act 

of 1980 (Pub. L. 96–354) requires 

agencies to analyze the economic 

impact of regulatory changes on small 

entities. Third, the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4) 

requires agencies to prepare a written 

assessment of the costs, benefits, and 

other effects of proposed or final rules 

that include a Federal mandate likely to 

result in the expenditure by State, local, 

or Tribal governments, in the aggregate, 

or by the private sector, of $100 million 

or more annually (adjusted for inflation 

with base year of 1995). This portion of 

the preamble summarizes the FAA’s 

analysis of the economic impacts of this 

proposed rule. 

Department of Transportation Order 

DOT 2100.5 prescribes policies and 

procedures for simplification, analysis, 

and review of regulations. If the 

expected cost impact is so minimal that 

a proposed or final rule does not 

warrant a full evaluation, this order 

permits a statement to that effect and 

the basis for it to be included in the 

preamble if a full regulatory evaluation 

of the cost and benefits is not prepared. 

Such a determination has been made for 

this final rule. The reasoning for this 

determination follows: 

Benefit 

The benefit of this final rule will be 

that the overflight fees will be more 

closely related to the actual costs of 

providing FAA’s services for these 

flights. 

Costs 

Taxes and government fees are 

transfer payments, and, by OMB 

directive, transfers are not considered a 

societal cost. Therefore, this rule 

imposes no costs. We do provide an 

estimate of the transfers. There will be 

a 4-year phase-in of fees with yearly 

increases (14% Enroute and 8% 

Oceanic). Increases would begin in 2011 

and end in 2014. We have determined 

that approximately 80% of Overflight 

Fees for domestic operators will be 

Enroute and 20% will be Oceanic (see 

Table 1). 

Most of the transfers from this final 

rule will be borne by foreign operators. 

The estimated transfers from this final 

rule from foreign operators to the FAA 

are about $73 million ($52 million, 

present value). See Table 2. 

The FAA estimates that the total 

transfers resulting from this final rule 

from U.S. entities to the FAA over 5 

years will be about $1.1 million ($0.8 

million, present value). Again, 

government fees and taxes are 

considered transfers and not societal 

costs, so this final rule does not increase 

society’s costs. 


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Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations 43117 

The FAA has, therefore, determined 

that this final rule is not an 

economically ‘‘significant regulatory 

action’’ as defined in section 3(f) of 

Executive Order 12866 and is not 

‘‘significant’’ as defined in DOT’s 

Regulatory Policies and Procedures. 

Regulatory Flexibility Determination 

The Regulatory Flexibility Act of 1980 

(RFA) establishes ‘‘as a principle of 

regulatory issuance that agencies shall 

endeavor, consistent with the objective 

of the rule and of applicable statutes, to 

fit regulatory and informational 

requirements to the scale of the 

business, organizations, and 

governmental jurisdictions subject to 

regulation.’’ To achieve that principle, 

the RFA requires agencies to solicit and 

consider flexible regulatory proposals 

and to explain the rationale for their 

actions. The RFA covers a wide-range of 

small entities, including small 

businesses, not-for-profit organizations 

and small governmental jurisdictions. 

Agencies must perform a review to 

determine whether a proposed or final 

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 Act. 

The FAA ranked in descending order 

all domestic entities based on their 

Overflight Fees. Then we identified 5 

small entities having publicly-available 

financial information (using a size 

standard of 1,500 or fewer employees) 

in the top 20 percent of the ranking. We 

retrieved their annual revenue from 

World Aviation Directory and compared 

it to their annualized compliance costs. 

Of these 5 entities, all of them have 

annualized compliance costs as a 

percentage of annual revenues lower 

than 0.1 percent. We believe this 

economic impact is not significant. 

Furthermore, we received no comments 

from small entities in response to the 

NPRM. Consequently, as the FAA 

Administrator, I certify that the final 

rule will not have a significant 

economic impact on a substantial 

number of small entities. 

International Trade Impact Analysis 

The Trade Agreements Act of 1979 

(Pub. L. 96–39), as amended by the 

Uruguay Round Agreements Act (Pub. 

L. 103–465), prohibits Federal agencies 

from establishing standards or engaging 

in related activities that create 

unnecessary obstacles to the foreign 

commerce of the United States. 

Pursuant to these Acts, the 

establishment of standards is not 

considered an unnecessary obstacle to 

the foreign commerce of the United 

States, so long as the standard has a 

legitimate domestic objective, such as 

the protection of safety, and does not 

operate in a manner that excludes 

imports that meet this objective. The 

statute also requires consideration of 

international standards and, where 

appropriate, that they be the basis for 

U.S. standards. The FAA has assessed 

the potential effect of this final rule and 

determined that it will primarily affect 

foreign users, generally commercial 

operators. Foreign operators are charged 

a fee only if they overfly (do not land 

in) the United States. The FAA believes 

it is highly unlikely that foreign 

commercial users will alter their 

behavior to avoid paying the fees. We 

believe that the final rule could enhance 

the competitiveness of domestic 

commercial operators relative to 

international carriers. 

Unfunded Mandates Assessment 

Title II of the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4) 

requires each Federal agency to prepare 

a written statement assessing the effects 

of any Federal mandate in a proposed or 

final agency rule that may result in an 

expenditure of $100 million or more (in 

1995 dollars) in any one year by State, 


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43118 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations 

local, and Tribal governments, in the 

aggregate, or by the private sector; such 

a mandate is deemed to be a ‘‘significant 

regulatory action.’’ The FAA currently 

uses an inflation-adjusted value of 

$140.8 million in lieu of $100 million. 

This final rule does not contain such a 

mandate; therefore, the requirements of 

Title II of the Act do not apply. 

Executive Order 13132, Federalism 

The FAA has analyzed this final rule 

under the principles and criteria of 

Executive Order 13132, Federalism. We 

determined that this action will not 

have a substantial direct effect on the 

States, or the relationship between the 

Federal Government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government, and, therefore, 

does not have federalism implications. 

Environmental Analysis 

FAA Order 1050.1E identifies FAA 

actions that are categorically excluded 

from preparation of an environmental 

assessment or environmental impact 

statement under the National 

Environmental Policy Act in the 

absence of extraordinary circumstances. 

The FAA has determined this 

rulemaking action qualifies for the 

categorical exclusion identified in 

paragraph 312d and involves no 

extraordinary circumstances. 

Regulations That Significantly Affect 

Energy Supply, Distribution, or Use 

The FAA analyzed this final rule 

under Executive Order 13211, Actions 

Concerning Regulations that 

Significantly Affect Energy Supply, 

Distribution, or Use (May 18, 2001). We 

have determined that it is not a 

‘‘significant energy action’’ under the 

executive order and it is not likely to 

have a significant adverse effect on the 

supply, distribution, or use of energy. 

Availability of Rulemaking Documents 

You can get an electronic copy of 

rulemaking documents using the 

Internet by— 

1. Searching the Federal eRulemaking 

Portal (http://www.regulations.gov); 

2. Visiting the FAA’s Regulations and 

Policies Web page at http:// 

www.faa.gov/regulations_policies/ or 

3. Accessing the Government Printing 

Office’s Web page at http:// 

www.gpoaccess.gov/fr/index.html. 

You can also get a copy by sending a 

request to the Federal Aviation 

Administration, Office of Rulemaking, 

ARM–1, 800 Independence Avenue, 

SW., Washington, DC 20591, or by 

calling (202) 267–9680. Make sure to 

identify the notice, amendment, or 

docket number of this rulemaking. 

Anyone is able to search the 

electronic form of all comments 

received into any of our dockets by the 

name of the individual submitting the 

comment (or signing the comment, if 

submitted on behalf of an association, 

business, labor union, etc.). You may 

review DOT’s complete Privacy Act 

statement in the Federal Register 

published on April 11, 2000 (Volume 

65, Number 70; Pages 19477–78) or you 

may visit http://DocketsInfo.dot.gov. 

Small Business Regulatory Enforcement 

Fairness Act 

The Small Business Regulatory 

Enforcement Fairness Act (SBREFA) of 

1996 requires FAA to comply with 

small entity requests for information or 

advice about compliance with statutes 

and regulations within its jurisdiction. If 

you are a small entity and you have a 

question regarding this document, you 

may contact your local FAA official, or 

the person listed under the FOR FURTHER

INFORMATION CONTACT heading at the 

beginning of the preamble. You can find 

out more about SBREFA on the Internet 

at http://www.faa.gov/ 

regulations_policies/rulemaking/ 

sbre_act/. 

List of Subjects in 14 CFR Part 187 

Administrative practice and 

procedure, and Air transportation. 

The Amendment 

In consideration of the foregoing, the 

Federal Aviation Administration 

amends Chapter I of Title 14, Code of 

Federal Regulations, as follows: 

PART 187—FEES 

■ 1. The authority citation for part 187 

continues to read as follows: 

Authority: 31 U.S.C. 9701, 49 U.S.C. 

106(g), 49 U.S.C. 106(l)(6), 40104–401–5, 

40109, 40113–40114, 44702. 

■ 2. In part 187, Appendix B is amended 

by revising paragraph (e)(2) to read as 

follows: 

Appendix B to Part 187—Fees for FAA 

Services for Certain Flights 

* * * * * 

(e) * * * 

(2) A User (operator of an Overflight) is 

assessed a fee for each 100 nautical miles (or 

portion thereof) flown in each segment and 

type of U.S.-controlled airspace. Separate 

calculations are made for transiting Enroute 

and Oceanic airspace. The total fee charged 

for an Overflight between any entry and exit 

point is equal to the sum of these two 

charges. This relationship is summarized as: 

Rij = X*DEij + Y*DOij, 

Where: 

Rij = the fee charged to aircraft flying between 

entry point i and exit point j, 

DEij = total great circle distance traveled in 

each segment of U.S.-controlled Enroute 

airspace expressed in hundreds of 

nautical miles for aircraft flying between 

entry point i and exit point j for each 

segment of Enroute airspace. 

DOij = total great circle distance traveled in 

each segment of U.S.-controlled Oceanic 

airspace expressed in hundreds of 

nautical miles for aircraft flying between 

entry point i and exit point j for each 

segment of Oceanic airspace. 

X and Y = the values respectively set forth 

in the following schedule: 

Time period X 

(enroute) 

Y 

(oceanic) 

Through September 30, 2011 ......................................................................................................................... $33.72 $15.94 

October 1, 2011 through September 30, 2012 ............................................................................................... 38.44 17.22 

October 1, 2012 through September 30, 2013 ............................................................................................... 43.82 18.60 

October 1, 2013 through September 30, 2014 ............................................................................................... 49.95 20.09 

October 1, 2014 and beyond ........................................................................................................................... 56.86 21.63 


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Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations 43119 

* * * * * 

Issued in Washington, DC, on July 13, 

2011. 

J. Randolph Babbitt, 

Administrator. 

[FR Doc. 2011–18285 Filed 7–19–11; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Part 878 

[Docket No. FDA–2011–N–0499] 

Medical Devices; General and Plastic 

Surgery Devices; Classification of the 

Focused Ultrasound Stimulator 

System for Aesthetic Use 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Final rule. 

SUMMARY: The Food and Drug 

Administration (FDA) is classifying the 

focused ultrasound stimulator system 

for aesthetic use into class II (special 

controls). The special control(s) that 

will apply to the device is the guidance 

document entitled ‘‘Class II Special 

Controls Guidance Document: Focused 

Ultrasound Stimulator System for 

Aesthetic Use.’’ The Agency is 

classifying the device into class II 

(special controls) in order to provide a 

reasonable assurance of safety and 

effectiveness of the device. 

DATES: This rule is effective August 19, 

2011. The classification was effective on 

September 11, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Richard Felten, Center for Devices and 

Radiological Health, Food and Drug 

Administration, 10903 New Hampshire 

Ave., Bldg. 66, Rm. 1436, Silver Spring, 

MD 20993–0002, 301–796–6392. 

SUPPLEMENTARY INFORMATION: 

I. Background 

In accordance with section 513(f)(1) of 

the Federal Food, Drug, and Cosmetic 

Act (the FD&C Act) (21 U.S.C. 

360c(f)(1)), devices that were not in 

commercial distribution before May 28, 

1976 (the date of enactment of the 

Medical Device Amendments of 1976), 

generally referred to as postamendments 

devices, are classified automatically by 

statute into class III without any FDA 

rulemaking process. These devices 

remain in class III and require 

premarket approval, unless and until 

the device is classified or reclassified 

into class I or II, or FDA issues an order 

finding the device to be substantially 

equivalent, in accordance with section 

513(i) of the FD&C Act, to a predicate 

device that does not require premarket 

approval. The Agency determines 

whether new devices are substantially 

equivalent to predicate devices by 

means of premarket notification 

procedures in section 510(k) of the 

FD&C Act (21 U.S.C. 360(k)) and part 

807 of the regulations (21 CFR part 807). 

Section 513(f)(2) of the FD&C Act 

provides that any person who submits a 

premarket notification under section 

510(k) of the FD&C Act for a device that 

has not previously been classified may, 

within 30 days after receiving an order 

classifying the device into class III 

under section 513(f)(1) of the FD&C Act, 

request FDA to classify the device under 

the criteria set forth in section 513(a)(1) 

of the FD&C Act. FDA will, within 60 

days of receiving this request, classify 

the device by written order. This 

classification will be the initial 

classification of the device. Within 30 

days after the issuance of an order 

classifying the device, FDA must 

publish a notice in the Federal Register 

announcing this classification. 

In accordance with section 513(f)(1) of 

the FD&C Act, FDA issued an order on 

March 14, 2008 classifying the 

UltheraTM Focused Ultrasound 

Stimulator System for Aesthetic Use 

into class III, because it was not 

substantially equivalent to a device that 

was introduced or delivered for 

introduction into interstate commerce 

for commercial distribution before May 

28, 1976, or a device which was 

subsequently reclassified into class I or 

class II. On April 11, 2008, Ulthera, Inc. 

submitted a petition requesting 

classification of the UltheraTM Focused 

Ultrasound Stimulator System for 

Aesthetic Use under section 513(f)(2) of 

the FD&C Act. The manufacturer 

recommended that the device be 

classified into class II (Ref. 1). 

In accordance with section 513(f)(2) of 

the FD&C Act, FDA reviewed the 

petition in order to classify the device 

under the criteria for classification set 

forth in section 513(a)(1) of the FD&C 

Act. FDA classifies devices into class II 

if general controls by themselves are 

insufficient to provide reasonable 

assurance of safety and effectiveness, 

but there is sufficient information to 

establish special controls to provide 

reasonable assurance of the safety and 

effectiveness of the device for its 

intended use. After review of the 

information submitted in the petition, 

FDA determined that the device can be 

classified into class II with the 

establishment of special controls. FDA 

believes these special controls will 

provide reasonable assurance of the 

safety and effectiveness of the device. 

The device is assigned the generic 

name Focused Ultrasound Stimulator 

System for Aesthetic Use and it is 

identified as a device using focused 

ultrasound to produce localized, 

mechanical motion within tissues and 

cells for the purpose of producing either 

localized heating for tissue coagulation 

or for mechanical cellular membrane 

disruption intended for noninvasive 

aesthetic use. 

FDA has identified the following risks 

to health associated specifically with 

this type of device and the 

recommended measures to mitigate 

these risks. 

• Thermal injury from focused 

ultrasound exposure (thermal damage), 

such as erythema, edema, pigmentary 

changes, and pain. These are commonly 

seen risks associated with any energy 

delivery system that creates tissue 

heating. This risk is addressed by 

recommended treatment parameters that 

have been shown to be safe with little 

or no adverse effects. In addition, the 

recommended labeling includes 

warnings related to patient reaction in 

terms of pain and information to user in 

terms of observable skin reactions that 

are known to be precursors to the 

potential thermal adverse effects. 

• Mechanical injury from focused 

ultrasound exposure (mechanical 

damage) induced by either cavitation or 

noncavitation means. Notable effects are 

pain and petechial hemorrhage (red 

spots). Further, skin contour changes 

due to scar formation are possible. This 

risk is addressed by recommended 

treatment parameters that have been 

shown to be safe with little or no 

adverse effects. 

• Ocular injury represents a 

potentially unique serious risk from 

inadvertent ultrasound exposure. The 

mitigation of this risk is addressed by 

labeling recommendations to warn the 

user not to expose the eye to ultrasound 

radiation, as well as specific directions 

intended to ensure complete handpiece 

skin contact, which further reduces the 

risk of scattered ultrasound energy 

reaching the eye. 

• Electrical shock is addressed by 

recommended testing of the device 

according to recognized U.S. and 

International Standards specifically 

designed to determine and measure 

potential electrical safety. Again, the 

recommended device labeling also 

includes specific warnings for the user 

in terms of device placement, 

appropriate electrical wiring needs, 

reminders to periodically check device 

wiring and accessories for damage, and 

avoidance of use of the device in 


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