This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

38218

Vol. 65, No. 119

Tuesday, June 20, 2000

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection

Service

7 CFR Parts 300 and 353

[Docket No. 99–030–1]

Accreditation Standards for Laboratory

Seed Health Testing and Seed Crop

Field Inspection

AGENCY: Animal and Plant Health

Inspection Service, USDA.

ACTION: Proposed rule.

SUMMARY: We are proposing to amend

the export certification regulations to

provide specific standards under which

nongovernment facilities could become

accredited to perform laboratory seed

testing and seed crop field inspection

services that could serve as the basis for

the issuance of a Federal phytosanitary

certificate, export certificate for

processed plant products, or

phytosanitary certificate for reexport.

The accreditation standards for these

laboratory testing and field inspection

services were developed to provide the

basis for nongovernment facilities to

become accredited to perform the

testing or inspection services that may

be used as supporting documentation

for the issuance of certificates for certain

plants or plant products.

DATES: We invite you to comment on

this docket. We will consider all

comments that we receive by August 21,

2000.

ADDRESSES: Please send your comment

and three copies to: Docket No. 99–030–

1, Regulatory Analysis and

Development, PPD, APHIS, Suite 3C03,

4700 River Road, Unit 118, Riverdale,

MD 20737–1238. Please state that your

comment refers to Docket No. 99–030–

1.

You may read any comments that we

receive on this docket in our reading

room. The reading room is located in

room 1141 of the USDA South Building,

14th Street and Independence Avenue,

SW., Washington, DC. Normal reading

room hours are 8 a.m. to 4:30 p.m.,

Monday through Friday, except

holidays. To be sure someone is there to

help you, please call (202) 690–2817

before coming.

APHIS documents published in the

Federal Register, and related

information, including the names of

organizations and individuals who have

commented on APHIS dockets, are

available on the Internet at http://

www.aphis.usda.gov/ppd/rad/

webrepor.html.

FOR FURTHER INFORMATION CONTACT: Mr.

Narcy G. Klag, Program Manager,

Phytosanitary Issues Management,

Operational Support, PPQ, APHIS, 4700

River Road, Unit 140, Riverdale, MD

20737–1236; (301) 734–8262.

SUPPLEMENTARY INFORMATION:

Background

The export certification regulations

contained in 7 CFR part 353 (referred to

below as the regulations) set forth the

procedures for obtaining certification for

plants and plant products offered for

export or reexport. Export certification

is not required by the regulations;

rather, it is provided by the Animal and

Plant Health Inspection Service (APHIS)

as a service to exporters who are

shipping plants or plant products to

countries that require phytosanitary

certification as a condition of entry.

After assessing the condition of the

plants or plant products intended for

export relative to the receiving country’s

regulations, an inspector will issue an

internationally recognized

phytosanitary certificate (PPQ Form

577), a phytosanitary certificate for

reexport (PPQ Form 579), or an export

certificate for processed plant products

(PPQ Form 578), if warranted.

Since 1975, APHIS has participated

with State governments in the

Cooperative Phytosanitary Export

Certification Program, which allows

certain State and county officials, as

well as APHIS officials, to issue

phytosanitary certificates, phytosanitary

certificates for reexport, or export

certificates for processed plant products.

Because the number of Federal

inspectors is limited, the use of State

and county inspectors is a considerable

benefit to exporters of plants and plant

products in terms of both time and

convenience.

In a final rule published in the

Federal Register on January 8, 1999 (64

FR 1098–1106, Docket No. 95–071–2),

we amended the regulations to provide

for the establishment of a program

under which nongovernment facilities

(referred to below as facilities) could

become accredited to perform specific

laboratory seed testing or seed crop field

inspection services that could serve as

the basis for the issuance of a Federal

phytosanitary certificate, phytosanitary

certificate for reexport, or export

certificate for processed plant products.

That final rule broadened the options

for persons who needed to obtain

inspection and export certification

services.

The final rule stated that in order to

accredit facilities, standards would have

to be developed to evaluate the

capability of facilities to perform

various laboratory seed testing and seed

crop field inspection services. In

§ 353.8(b), the regulations state, ‘‘APHIS

will develop appropriate standards

applicable to accreditation in the area

for which the nongovernment facility is

seeking accreditation and publish a

notice of proposed rulemaking in the

Federal Register to inform the public

and other interested persons of the

opportunity to comment on and

participate in the development of those

standards.’’

There are two reasons for this

approach. First, it would be difficult, if

not impossible, for APHIS to develop a

single, one-size-fits-all set of

accreditation standards for the

numerous disciplines that play a role in

phytosanitary certification. Secondly,

this approach allows APHIS to develop

standards with the participation of those

best able to recommend valid scientific

criteria; i.e., the government, academic,

industry, research, and private-sector

individuals who have the experience

and expertise in the particular area for

which standards are being developed.

This proposed rule publishes for

comment standards to be used to

evaluate facilities for accreditation to

perform laboratory seed testing and seed

crop field inspection.

Laboratory seed testing and seed crop

field inspection comprise a wide variety

of technical tests and procedures,

including both laboratory tests and

visual inspection of plants growing in

fields. The laboratory tests include

procedures such as various forms of

microscopic examination, culturing

microorganisms in various media and

Federal Register / Vol. 65, No. 119 / Tuesday, June 20, 2000 / Proposed Rules 38219

subsequently identifying them, and

conducting serological and DNA probe

tests of organisms. Test protocols are

contained in the Reference Manual for

Laboratory Test and Phytosanitary

Inspection Methodologies, a publication

of the National Seed Health System

(referred to below as Reference Manual

B). A copy of Reference Manual B is

available on the APHIS Web site at

http://www.aphis.usda.gov/ppq/pim/

accreditation, and Reference Manual B

will be incorporated by reference into

the regulations when final action is

taken on this proposal.

In § 353.8(b)(3), the regulations state

that when evaluating the fitness of a

facility to be accredited, APHIS will

form an assessment team that will focus

on four major areas: Physical plant,

equipment, methods of testing or

inspection, and personnel. The

assessment team will compare the

facility’s performance in these four areas

against the accreditation standards that

have been identified for the particular

laboratory seed testing or seed crop field

inspection services for which the

facility is seeking accreditation. The

standards we propose to establish for

facilities to perform laboratory seed

testing and seed crop field inspection

are discussed below.

Physical Plant

The facility’s physical plant (e.g.,

laboratory space, office space,

greenhouses, vehicles, etc.) would have

to conform to all State and local zoning

and other ordinances, to ensure

consistency with State and local laws

and to prevent disruption of services

that might occur for exporters of plants

and plant products if the local

government found the facility’s physical

plant to be in violation of local

ordinances. The facility’s physical plant

would have to consist of a work area

that is dedicated to laboratory functions

and that has sufficient space to conduct

the required tests. Storage space for test

materials and samples would have to be

large enough to accommodate the

samples within a laboratory at any given

time and secure from contamination by

other samples within the laboratory and

other sources. The laboratory area

would have to be enclosed by walls and

have locking doors to prevent

unauthorized access.

Equipment

Equipment is the second major area

evaluated when considering a facility

for accreditation under the regulations.

We propose that the facility’s personnel

must possess or have unrestricted access

to the equipment identified as necessary

to properly conduct the laboratory seed

testing or seed crop field inspection

services in accordance with the

procedures contained in Reference

Manual B. Specific test methodologies,

materials, and the calibration and

monitoring of the equipment would

have to conform to Reference Manual B.

The general procedures proposed are

listed below.

1. Equipment for Seed Crop Field

Inspections: We propose to require that

facilities accredited for seed crop field

inspection services have direct access to

laboratories that are fully equipped to

carry out any required field sample

diagnostics. Field inspectors would

have to have accurate field maps and

transportation to the inspection site.

Field inspectors would also have to

have hand lenses and secure containers

for the collection, storage, and

transportation of samples.

2. Equipment for Direct Visual

Examination: We propose to require that

facilities accredited to conduct visual

examination of seed be equipped with

stereo microscopes. Facilities

conducting visual examination of

tissues would also have to be equipped

with compound light microscopes, and

those conducting visual examination of

loosely attached or accompanying

material would have to be equipped

with a centrifuge and shaker.

3. Equipment for Incubation: We

propose to require that facilities

accredited to conduct incubations be

equipped with incubation chambers,

laminar flow hoods, media preparation

equipment, scales, pH meters, distilled

and sterile water, gas burners, an

autoclave, and the appropriate media for

the specified tests.

4. Equipment for Grow Out Tests: We

propose to require that facilities

accredited to conduct grow out tests

have greenhouse or growth chambers or

an outdoor quarantine location, plus

access to a laboratory that is fully

equipped to carry out any required

diagnostic tests.

5. Equipment for Serological Tests:

We propose to require that facilities

accredited to conduct serological tests

be equipped with grinding, extraction,

and sample purification equipment;

fluorescent microscopes; plate readers;

spectrophotometers; and the appropriate

assay materials.

6. Equipment for DNA Probes: We

propose to require that facilities

accredited to conduct DNA probe tests

be equipped with polymerase chain

reaction (PCR) equipment, including

thermal cyclers, electrophoresis and gel

blotting equipment, and the reagents

and DNA polymerases necessary to

conduct PCR.

Reference Manual B will contain the

complete testing protocols and will be

updated with new and improved test

protocols from time to time in order to

keep abreast of the latest technologies,

new diagnostic methods, and

equipment.

Methods of Testing or Inspection

The third major area to be evaluated

when considering a facility for

accreditation under the regulations

would be methods of testing or

inspection. For testing and inspection to

be reliable, they must be conducted in

accordance with a quality system. The

generally accepted definition of a

quality system is that it is the

organizational structure, procedures,

processes and resources needed to

ensure quality in the operation and

products of a business. The regulations

already require that a facility establish

a quality system and follow procedures

recorded in a quality manual developed

by the facility, or equivalent

documentation, to ensure that the

facility employs scientifically valid and

up-to-date methodology to conduct its

laboratory seed testing or seed crop field

inspection activities. We propose that,

when evaluating a facility for

accreditation, the assessment team

would review the facility’s quality

manual or other equivalent

documentation that describes the

system in place at the facility for the

conduct of the laboratory seed testing or

seed crop field inspection services for

which the facility seeks accreditation.

The assessors would verify that the

quality manual was available to, and in

use by, the facility personnel who

perform the tests or services.

We propose that the quality system

and other controls on test and

inspection methods at the facility would

have to meet the following

requirements.

The quality system would have to

follow the general guidelines described

in ANSI/ASQC Q9001–1994, ‘‘American

National Standard: Quality SystemsModel for Quality Assurance in Design,

Development, Production, Installation

and Servicing.’’ This is an

internationally accepted guideline for

effective quality systems and is

available from the American Society for

Quality Control (ASQC), 611 East

Wisconsin Avenue, Milwaukee, WI

53202. Acceptable models for quality

systems for accredited facilities are also

described in detail in the ‘‘Reference

Manual for Procedures and Policies’’

(also known as Reference Manual A),

published by the National Seed Health

System. Reference Manual A describes

quality systems that meet the

38220 Federal Register / Vol. 65, No. 119 / Tuesday, June 20, 2000 / Proposed Rules

requirements of ANSI/ASQC Q9001–

1994, but with particular emphasis on

how quality systems would be designed

for seed laboratories. Reference Manual

A will be incorporated by reference

when final action is taken on this

proposal and is available on the APHIS

Web site at http://www.aphis.usda.gov/

ppq/pim/accreditation. Reference

Manual A describes the industryaccepted structure, administration,

procedures, policies, and working

practices of facilities engaged in seed

testing and field inspection.

We also propose that the facility

would have to document its procedures

and maintain records that will show it

is following its quality system. These

records will help APHIS representatives

when they visit the facility for audit

purposes. The facility would have to

maintain documented procedures for

identification, collection, indexing,

access, filing, storage, maintenance, and

disposition of quality system records.

The purpose of these records would be

to demonstrate conformance to the

quality manual and the effective

operation of the quality system.

Personnel

Personnel would be the fourth major

area evaluated when considering a

facility for accreditation under the

regulations. We propose to require that

facilities have a selection procedure and

a training system to ensure technical

competence of all staff members. The

education, technical knowledge, and

experience required to perform assigned

test and inspection functions would

have to be documented and clearly

defined. In particular:

1. Evaluation of plant or tissue

samples would have to be undertaken

by a plant pathologist or by laboratory

technicians under the supervision of a

plant pathologist. Where personnel are

required to be trained at a facility to

evaluate the particular types of plants or

tissue samples handled by the facility,

the training program would have to be

evaluated by APHIS and determined to

be effective.

2. All staff would have to have access

to and be familiar with the reference

materials, guides, and manuals required

for the routine performance of the tests

and inspections they conduct.

Application Procedures, Certification of

Accreditation, Monitoring, and Costs

A facility would have to apply to be

accredited to perform laboratory seed

testing or seed crop field inspection, or

to renew such accreditation, by

submitting an application in accordance

with the procedures already established

in § 353.8(b)(2). In addition to the

information required in that section, the

application would have to be

accompanied by a copy of the facility’s

quality manual and a nonrefundable

application fee of $1,000. We would set

this application fee at $1,000 based on

our experience that processing an

application would take 3 days time by

employees or contractors with base

hourly salary rates of at least $56, a base

rate we have used in the past to

calculate user fees for activities by

employees of Plant Protection and

Quarantine, APHIS. We also believe that

an initial fee of $1,000, which would go

toward the cost of APHIS services for

accrediting the facility, would be high

enough to prevent frivolous applications

or applications from facilities that are

not yet ready to qualify for

accreditation. We believe the total cost

of APHIS services (site visits, evaluation

of facility equipment and quality and

recordkeeping systems, etc.) required to

accredit a facility would always be

substantially more than $1,000.

Therefore, the applicant would have to

make additional deposits into a trust

fund, upon request by the

Administrator, to cover the costs of

gaining and maintaining accreditation.

If the cost of approving the initial

application comes to less than $1,000,

any remainder would be deposited into

this trust fund and would be applied

toward future costs of maintaining

accreditation. However, it is most

unlikely that the cost of the initial

approval would be less than $1,000.

APHIS will adjust the amount of this

application fee in future rulemaking if

experience in processing the

applications for this program indicates

that the application fee should be

increased or decreased to more closely

match actual costs. The procedures for

APHIS to recover the costs of its

services, and for deposits into a trust

fund, are already established in

§ 353.8(c).

Upon determining that a facility is

eligible for accreditation, the

Administrator would issue the facility a

certificate of accreditation.

Accreditation would be for a period of

3 years from the date of issuance of the

certificate of accreditation and could be

renewed upon request and the

submission of a new application and

application fee. We believe that

requiring reaccreditation every 3 years

would be a valuable tool, along with the

monitoring audits discussed below, to

ensure that accredited facilities

continue to meet the requirements for

accreditation.

The existing regulations state that the

Administrator could deny or withdraw

accreditation in accordance with the

procedures in § 353.8(a)(2). A facility

could appeal denial or withdrawal of

accreditation in accordance with

§ 353.8(a)(2)(i) and (ii).

We propose to require that a facility

that has been denied accreditation or

had accreditation withdrawn must wait

at least 60 days from the date the facility

was notified in writing that

accreditation was denied or withdrawn

before applying again. We believe this

delay is justified because accreditation

would not be denied or withdrawn

unless there were flaws in the facility or

its procedures that required time to

correct.

We propose to require facilities that

are accredited to allow APHIS access to

the facility and all of its equipment and

records for the purpose of audits to

determine the facility’s continuing

eligibility for accreditation. Such audits

would occur as necessary, based on

quality system criteria contained in

Reference Manual A. These monitoring

audits would ensure that facilities

continue to meet the requirements for

accreditation throughout their period of

accreditation.

Executive Order 12866 and Regulatory

Flexibility Act

This proposed rule has been reviewed

under Executive Order 12866. The rule

has been determined to be not

significant for the purposes of Executive

Order 12866 and, therefore, has been

reviewed by the Office of Management

and Budget.

This proposed rule would amend the

export certification regulations to

provide standards under which facilities

could become accredited to perform

laboratory seed testing or seed crop field

inspection services that could serve as

the basis for the issuance of Federal

phytosanitary certificates for export,

phytosanitary certificates for reexport,

or export certificates for processed plant

products. Accrediting such facilities is

currently allowed under 7CFR 353.8.

The existing regulations provide a

framework upon which accreditation

programs could be established, but they

do not, in and of themselves, entail any

costs to APHIS or any facility. However,

if facilities are accredited under the

accreditation criteria proposed here for

seed laboratories and field inspection

facilities, that action would entail costs

to both the entities being accredited and

the accrediting body; i.e., APHIS. Those

costs, and the benefits expected from

the accreditation program, are

summarized below and were fully

evaluated in the economic analysis

section of the previous final rule that

established a program for accrediting

facilities, published in the Federal

Federal Register / Vol. 65, No. 119 / Tuesday, June 20, 2000 / Proposed Rules 38221

Register on January 8, 1999 (64 FR

1098–1106, Docket No. 95–071–2).

The accreditation program is expected

to be self-supporting, and any costs to

APHIS would be recouped through

accreditation fees. Costs for establishing

each accredited facility will vary

depending on the range of activities for

which a facility seeks accreditation, the

initial cost of the APHIS preaccreditation assessment, the type and

number of any proficiency tests that will

have to be conducted, and the frequency

with which post-accreditation

evaluation activities such as check tests

and site visits will have to be

conducted. It is expected that, like any

business, seed testing laboratories will

recoup these expenses by appropriate

structuring of the fees they set for their

services.

The seed industry is expected to

benefit from this action because

domestic seed exporters routinely

require the services of inspectors and

agents in order to obtain the

phytosanitary certification required by

most, if not all, importing countries;

benefits can be realized in terms of more

timely certifications, which in turn can

lead to reduced costs as well as

increased U.S. exports.

The value of seed exported from the

United States to other countries

continues to grow rapidly, from $665

million in 1994–95 (July to June), to

$705 million in 1995–96, to more than

$800 million in 1996–97. There has

been a concomitant rise in demand for

laboratory testing and seed crop field

inspection services to meet other

countries’ import requirements. The

ability of Federal, State, and county

testing and inspection services to meet

this growing demand will be

increasingly strained. Already there are

instances in which the accreditation of

facilities would have prevented the loss

of export sales.

For example, some seed export

opportunities have been forfeited

because the results of preharvest field

inspections are usually not known until

after harvest, due to the limited number

and heavy workload of government

laboratories available to perform seed

testing. It is common for seed from

several fields to be blended after harvest

and before shipment. If the sample from

one field is subsequently reported to

contain an actionable pest, then none of

the blended seed—which may have

been harvested from as many as eight or

nine fields—could be exported. In one

case in which this occurred, the affected

seed company lost foreign sales worth

$250,000. Such losses are much less

likely to occur if there is more timely

reporting of pre-harvest inspections;

accredited inspection facilities may be

able to make such timely reports. In

general, nongovernment testing and

inspection services are expected to be

completed with minimal delay, leading

to greater marketing flexibility and

lower risk of lost sales.

Overall, the economic benefits that

would result from the availability of

accredited nongovernmental seed

laboratories and field inspection

facilities would greatly exceed the costs.

By providing access to the accreditation

needed to issue the phytosanitary

certificates that many trading partners

require as a condition of entry for U.S.

goods, this action would greatly

enhance export opportunities for U.S.

producers.

Under these circumstances, the

Administrator of the Animal and Plant

Health Inspection Service has

determined that this action would not

have a significant economic impact on

a substantial number of small entities.

Executive Order 12372

This program/activity is listed in the

Catalog of Federal Domestic Assistance

under No. 10.025 and is subject to

Executive Order 12372, which requires

intergovernmental consultation with

State and local officials. (See 7 CFR part

3015, subpart V.)

Executive Order 12988

This proposed rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. If this proposed rule is

adopted: (1) All State and local laws and

regulations that are inconsistent with

this rule will be preempted; (2) no

retroactive effect will be given to this

rule; and (3) administrative proceedings

will not be required before parties may

file suit in court challenging this rule.

Paperwork Reduction Act

This proposed rule contains no new

information collection or recordkeeping

requirements under the Paperwork

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

et seq.).

List of Subjects

7 CFR Part 300

Incorporation by reference, Plant

diseases and pests, Quarantine.

7 CFR Part 353

Exports, Plant diseases and pests,

Reporting and recordkeeping

requirements.

Accordingly, we propose to amend 7

CFR parts 300 and 353 as follows:

PART 300—INCORPORATION BY

REFERENCE

1. The authority citation for part 300

would continue to read as follows:

Authority: 7 U.S.C. 150ee, 154, 161, 162

and 167; 7 CFR 2.22, 2.80, and 371.2(c).

2. In § 300.1, new paragraphs (c) and

(d) would be added to read as follows:

§ 300.1 Materials incorporated by

reference.

* * * * *

(c) Reference Manual A. The

Reference Manual for Procedures and

Policies, published by the National Seed

Health System (NSHS), has been

approved for incorporation by reference

in 7 CFR chapter III by the Director of

the Office of the Federal Register in

accordance with 5U.S.C. 552(a) and 1

CFR part 51. Copies of Reference

Manual A:

(1) Are available for inspection at the

Office of the Federal Register Library,

800 North Capitol Street NW, Suite 700,

Washington, DC; or,

(2) May be obtained by writing to

Phytosanitary Issues Management,

Operational Support, PPQ, APHIS, 4700

River Road, Unit 140, Riverdale, MD

20737–1236, and on the APHIS Web site

at http://www.aphis.usda.gov/ppq/pim/

accreditation.

(d) Reference Manual B. The

Reference Manual for Laboratory Test

and Phytosanitary Inspection

Methodologies, published by the

National Seed Health System (NSHS),

has been approved for incorporation by

reference in 7 CFR chapter III by the

Director of the Office of the Federal

Register in accordance with 5 U.S.C.

552(a) and 1 CFR part 51. Copies of

Reference Manual B:

(1) Are available for inspection at the

Office of the Federal Register Library,

800 North Capitol Street NW, Suite 700,

Washington, DC; or,

(2) May be obtained by writing to

Phytosanitary Issues Management,

Operational Support, PPQ, APHIS, 4700

River Road, Unit 140, Riverdale, MD

20737–1236, and on the APHIS Web site

at http://www.aphis.usda.gov/ppq/pim/

accreditation.

PART 353—EXPORT CERTIFICATION

3. The authority citation for part 353

would continue to read as follows:

Authority: 7 U.S.C. 147a; 21 U.S.C. 136

and 136a; 7 CFR 2.22, 2.80, and 371.2(c).

4. In § 353.1, definitions of Reference

Manual A and Reference Manual B

would be added, in alphabetical order,

to read as follows:

38222 Federal Register / Vol. 65, No. 119 / Tuesday, June 20, 2000 / Proposed Rules

§ 353.1 Definitions.

* * * * *

Reference Manual A. The Reference

Manual for Procedures and Policies,

published by the National Seed Health

System (NSHS). Reference Manual A

describes the structure, administration,

procedures, policies, and working

practices of the NSHS and also contains

relevant documentation, forms, and

references for the NSHS. Reference

Manual A is incorporated by reference

at § 300.1 of this chapter, and is

available by writing to Phytosanitary

Issues Management, Operational

Support, PPQ, APHIS, 4700 River Road,

Unit 140, Riverdale, MD 20737–1236,

and on the APHIS Web site at http://

www.aphis.usda.gov/ppq/pim/

accreditation.

Reference Manual B. The Reference

Manual for Laboratory Test and

Phytosanitary Inspection

Methodologies, published by the

National Seed Health System (NSHS).

Reference Manual B contains the

detailed seed health testing, seed

sampling, and seed crop field inspection

procedures for the NSHS. Reference

Manual B is incorporated by reference at

§ 300.1 of this chapter, and is available

by writing to Phytosanitary Issues

Management, Operational Support,

PPQ, APHIS, 4700 River Road, Unit 140,

Riverdale, MD 20737–1236, and on the

APHIS Web site at http://

www.aphis.usda.gov/ppq/pim/

accreditation.

§ 353.8 [Amended]

5. Section 353.8 would be amended

by adding a new sentence at the end of

the section to read as follows:

‘‘(Approved by the Office of

Management and Budget under control

number 0579–0130.)’’.

6. A new § 353.9 would be added to

read as follows:

§ 353.9 Standards for accreditation of

nongovernment facilities to perform

laboratory seed testing and seed crop field

inspection.

(a) Application for accreditation,

certification of accreditation, and

monitoring of accredited facilities. A

facility may apply to be accredited to

perform laboratory seed testing or seed

crop field inspection, or to renew such

accreditation, by submitting an

application in accordance with

§ 353.8(b)(2). The application must be

accompanied by a copy of the facility’s

quality manual and a nonrefundable

application fee of $1,000. The applicant

must make additional deposits to cover

the costs of gaining and maintaining

accreditation into a trust fund

established in accordance with

§ 353.8(c) upon request by the

Administrator.

(1) Upon determining that a facility is

eligible for accreditation, the

Administrator will issue the facility a

certificate of accreditation.

Accreditation will be for a period of 3

years from the date of issuance of the

certificate of accreditation and may be

renewed by submitting a new

application and application fee in

accordance with this paragraph.

(2) The Administrator may deny or

withdraw accreditation in accordance

with § 353.8(a)(2). A facility may appeal

denial of accreditation in accordance

with § 353.8(a)(2)(i), and may appeal

withdrawal of accreditation in

accordance with § 353.8(a)(2)(ii).

(3) A facility that has been denied

accreditation or had its accreditation

withdrawn may not reapply within 60

days of the date the facility was notified

in writing that accreditation was denied

or withdrawn.

(4) After a facility is accredited, the

facility must allow APHIS access to the

facility and all of its equipment and

records for the purpose of conducting

unannounced audits to determine the

facility’s continuing eligibility for

accreditation. Such audits will occur at

least once a year and may be performed

more frequently at the discretion of the

Administrator.

(b) Standards for accreditation. A

facility that, in accordance with

§ 353.8(b)(2), applies to be accredited to

perform laboratory seed testing or seed

crop field inspection will be evaluated

for accreditation against these

standards:

(1) Physical plant. The facility’s

physical plant (e.g., laboratory space,

office space, greenhouses, vehicles, etc.)

must:

(i) Have laboratory and office spaces

enclosed by walls and locking doors to

prevent unauthorized access;

(ii) Conform to all State and local

zoning and other ordinances; and

(iii) Provide a work area that is

dedicated to laboratory functions and

has sufficient space to conduct the

required tests and store the materials

and samples required for the tests in a

manner that prevents contamination by

other samples in the laboratory and

from other sources.

(2) The facility must use the

equipment required to conduct the

laboratory testing or seed crop field

inspections for which it is accredited.

Specific test methodologies, materials,

and the calibration and monitoring of

the equipment must conform to

Reference Manual B, which is

incorporated by reference at § 300.1 of

this chapter. The general requirements

for each test category are as follows:

(i) Seed crop field inspections. Field

inspectors must use accurate field maps,

hand lenses, and secure containers for

the collection, storage, and

transportation of samples. Field

inspectors must have direct access to a

laboratory that is fully equipped to carry

out any necessary diagnostic tests

needed for field samples.

(ii) Direct visual examination. Visual

examination of seed requires a stereo

microscope. Visual examination of

tissue requires a compound light

microscope. Visual examination of

loosely attached or accompanying

material requires a centrifuge and

shaker.

(iii) Incubation. Required equipment

includes incubation chambers, laminar

flow hoods, media preparation

equipment, scales, pH meters, distilled

and sterile water, gas burners, an

autoclave, and the appropriate media for

the specified tests.

(iv) Grow-out tests. Grow-out tests

require a greenhouse, growth chamber,

or an outdoor quarantine location, and

access to a laboratory that is fully

equipped to carry out any required

diagnostic tests.

(v) Serological tests. These tests

require grinding, extraction, and sample

purification equipment; fluorescent

microscopes; plate readers;

spectrophotometers; and the appropriate

assay materials.

(vi) DNA probes. To conduct these

tests, a laboratory must be equipped

with polymerase chain reaction (PCR)

equipment, including thermal cyclers,

electrophoresis and gel blotting

equipment, and the reagents and DNA

polymerases necessary to conduct the

PCR.

(3) Methods of testing and inspection.

The facility must conduct its laboratory

seed testing and seed crop field

inspection procedures in accordance

with Reference Manual B. The facility

must have a quality manual

documenting its quality system for

laboratory seed testing and seed crop

field inspection procedures. The quality

system must follow the general

guidelines described in ANSI/ASQC

Q9001–1994, American National

Standard: Quality Systems-Model for

Quality Assurance in Design,

Development, Production, Installation

and Servicing. Acceptable models for

quality systems for accredited facilities

are also described in detail in Reference

Manual A, which is incorporated by

reference at § 300.1 of this chapter. The

personnel who perform the testing and

inspection services must comply with

the quality manual, and management

Federal Register / Vol. 65, No. 119 / Tuesday, June 20, 2000 / Proposed Rules 38223

must enforce this compliance. The

facility must maintain documented

procedures for identification, collection,

indexing, access, filing, storage,

maintenance, and disposition of quality

system records. The facility must

maintain quality system records to

demonstrate conformance to the quality

manual and the effective operation of

the quality system.

(4) Personnel. There must be a

selection procedure and a training

system to ensure technical competence

of all staff members. The education,

technical knowledge, and experience

required to perform assigned test and

inspection functions must be

documented and clearly defined. In

addition:

(i) Evaluation of plant or tissue

samples must be undertaken by a plant

pathologist or by laboratory technicians

under the supervision of a plant

pathologist. Where personnel are

required to be trained at a facility to

evaluate the particular types of plants or

tissue samples handled by the facility,

the training program must be evaluated

by APHIS and determined to be

effective.

(ii) All staff must have access to and

be familiar with the reference materials,

guides, and manuals required for the

routine performance of the tests and

inspections they conduct.

(Approved by the Office of Management

and Budget under control number 0579–

0130.)

Done in Washington, DC, this 14th day of

June 2000.

Richard L. Dunkle,

Acting Administrator, Animal and Plant

Health Inspection Service.

[FR Doc. 00–15493 Filed 6–19–00; 8:45 am]

BILLING CODE 3410–34–U

SMALL BUSINESS ADMINISTRATION

13 CFR Part 107

Small Business Investment Companies

AGENCY: Small Business Administration.

ACTION: Proposed rule.

SUMMARY: This proposed rule would

implement a provision of Public Law

106–9, enacted April 5, 1999, under

which certain types of consideration

paid to a small business investment

company (SBIC) by a small business are

excluded from ‘‘cost of money’’

limitations.

DATES: Submit comments on or before

July 20, 2000.

ADDRESSES: Address comments to Don

A. Christensen, Associate Administrator

for Investment, U.S. Small Business

Administration, 409 3rd Street, SW,

Suite 6300, Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT:

Leonard W. Fagan, Investment Division,

at (202) 205–7583.

SUPPLEMENTARY INFORMATION: This

proposed rule would implement a

provision of Public Law 106–9, enacted

April 5, 1999, that amended section

308(i)(2) of the Small Business

Investment Act of 1958. The

amendment provided that certain types

of consideration paid to an SBIC by a

small business are excluded from the

regulatory limitations on ‘‘Cost of

Money’’ established by the Small

Business Administration (SBA). The

amendment excluded from these Cost of

Money limits any consideration

consisting of ‘‘contingent obligations’’

granting the SBIC an interest in the

‘‘equity or increased future revenue’’ of

the small business.

To implement this change, SBA is

proposing to broaden one of the

exclusions from Cost of Money in

§ 107.855(g) and to add another. First,

§ 107.855(g)(12) would be revised to

allow the exclusion of royalty payments

for all SBIC financings. Currently, this

exclusion applies only to ‘‘LMI

Investments’’ as defined in § 107.50. To

qualify for the exclusion, the royalty

must be based on improvement in the

performance of the small business after

the date of the financing. The royalty

could be expressed, for example, as a

percentage of any increase in an

underlying unit of measurement (e.g.,

revenues or sales) after the date of the

financing. As discussed in the preamble

to the final rule establishing the original

provision for LMI Investments (64 FR

52641), the royalty can be based on an

increase in more than one unit of

measurement. For example, a royalty

could provide for payment to the SBIC

if either the revenue or the profits of the

small business increased.

If an SBIC makes an investment

through a holding company or an

investment vehicle, as permitted under

§ 107.720(b), performance

improvements will be evaluated in the

same manner already established for

LMI Investments. In determining

whether a business’s performance has

improved, SBA will look through any

holding company or investment vehicle

to the performance of the operating

business itself.

SBA is proposing one additional

change with respect to royalty

payments. In § 107.815(a), the definition

of a Debt Security would be revised to

include a loan with a right to receive

royalties that are excluded from the Cost

of Money. The effect of this change is

that a financing of this type will be

subject to the lower Cost of Money

ceiling applicable to Debt Securities,

rather than the higher ceiling applicable

to Loans with no upside potential.

SBA also proposes to add

§ 107.855(g)(13), which would exclude

from Cost of Money any gains realized

by an SBIC from the disposition of

Equity Securities issued by a small

business. This provision has been added

as a clarification, since SBA’s

longstanding practice has been to

exclude such gains from the Cost of

Money limits. For example, if an SBIC

receives warrants that qualify as Equity

Securities, or converts debt to an Equity

Security, any gains realized on the

disposition of these interests do not

count against the Cost of Money ceiling.

Finally, SBA proposes to remove

paragraph § 107.855(i). This paragraph

allows an SBIC that is lending to a small

business to receive a one-time ‘‘bonus’’

at the end of the loan term, contingent

upon one or more factors reflecting the

performance of the business during the

loan period. Such bonus payments are

excluded from the Cost of Money. The

proposed revision of § 107.855(g)(12),

which would provide a broader

exclusion of contingent payments from

the Cost of Money, renders the bonus

provision redundant.

Compliance With Executive Orders,

12866, 12988, and 13132, the

Regulatory Flexibility Act (5 U.S.C. 601,

et seq., and the Paperwork Reduction

Act (44 U.S.C. Ch. 35)

SBA has determined that this

proposed rule does not constitute a

significant rule within the meaning of

section 3(f) of Executive Order 12866.

Under the Regulatory Flexibility Act,

5 U.S.C. 601, et seq., SBA has

determined that this proposed rule will

not have a significant economic impact

on a substantial number of small

entities. The purpose of the proposed

rule is to implement a provision of

Public Law 106–9 allowing small

business investment companies (SBICs)

to realize contingent payments, such as

royalties, from small businesses without

being subject to regulatory limits on the

amount of consideration received.

Interest and other non-contingent

payments made to SBICs by small

businesses would continue to be subject

to the existing Cost of Money

regulations. This provision is expected

to be attractive primarily to SBICs

considering investments in small

businesses that are seeking to grow, but

whose owners do not want to give

substantial equity interests to outside

investors. In such cases, the SBIC can