[Federal Register Volume 72, Number 77 (Monday, April 23, 2007)]
[Rules and Regulations]
[Pages 20034-20036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-7605]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 204 and 399

[Docket No. OST-2003-15759]
RIN 2105-AD25


 Review of Data Filed by Certificated or Commuter Air Carriers To 
Support Continuing Fitness Determinations Involving Citizenship Issues

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

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SUMMARY: The Department is adopting its proposed editorial changes to 
its rules on Data to Support Fitness Determinations, 14 CFR part 204, 
and has determined to maintain its existing procedures for conducting 
reviews of the continuing fitness of air carriers. These actions 
complete this rulemaking. The Department had earlier withdrawn a 
proposal made in this rulemaking to modify the Department's standards 
for determining whether carriers remain under the actual control of 
U.S. citizens.

EFFECTIVE DATE: The rule is effective May 23, 2007.

FOR FURTHER INFORMATION CONTACT: William M. Bertram, Chief, Air Carrier 
Fitness Division (X-56), Office of Aviation Analysis, U.S. Department 
of Transportation, 400 7th Street, SW., Washington, DC 20590; (202) 
366-9721.

SUPPLEMENTARY INFORMATION:

Introduction

    By statute, only citizens of the United States may obtain and hold 
certificate authority under 49 U.S.C. 41102 or 41103 authorizing them 
to provide air transportation within the United States or operate as a 
U.S. air carrier on international routes. The statutory citizenship 
requirements require that at least 75 percent of the voting interest of 
a U.S. air carrier be owned and controlled by U.S. citizens, that the 
president and two-thirds of the board of directors and managing 
officers be U.S. citizens, and that U.S. carriers be subject to the 
actual control of U.S. citizens. 49 U.S.C. 40102(a)(15). In this 
proceeding, we invited public comment on three matters related to our 
consideration of citizenship issues: (i) We proposed technical changes 
to our rules governing citizenship and fitness determinations, 14 CFR 
part 204; (ii) we considered whether we should modify our procedures 
for reviewing whether a carrier is complying with the continuing 
citizenship requirement; and (iii) we proposed to modify the standards 
used for determining whether a carrier is actually controlled by U.S. 
citizens. We have withdrawn the proposal to modify our standards on 
actual control. 71 FR 71106 (December 8, 2006). In this final rule, we 
are resolving the other two matters. We are adopting the proposed 
technical changes to part 204, and we explain why we have decided to 
continue following our procedural practices in continuing fitness 
cases.

Background

    We examine carrier citizenship primarily in two situations. First, 
when a firm applies for authority to operate as a U.S. carrier, we 
conduct an initial fitness review, which necessarily includes a review 
of the carrier's citizenship. We conduct initial fitness reviews 
through docketed proceedings, where a public record of the pleadings is 
maintained; we publish all Department decisions in the case; and we 
give interested persons an opportunity to comment on the application. 
Second, we conduct a continuing fitness review if an existing carrier 
undergoes a substantial change in ownership, operations, or management. 
We usually conduct continuing fitness investigations without a public 
proceeding and therefore do not create a docket containing record 
material, publish a final decision, or provide an opportunity for 
public comment. In some continuing fitness cases, we may decide to use 
more formal public procedures. See 71 FR 26426-26427.

Rulemaking Notices

    We issued a Notice of Proposed Rulemaking (NPRM) that proposed to 
update our interpretation of actual control and to continue using our 
informal procedures in most continuing fitness reviews. 70 FR 67389 
(November 7, 2005). We also proposed changes to part 204 to correct 
minor typographical errors, update statutory references, and clarify 
some language. 70 FR 67395. We thereafter issued a Supplemental Notice 
of Proposed Rulemaking (SNPRM) to address the comments made on the 
NPRM, and to propose additional refinements to our proposed 
modification of our actual control standard. 71 FR 26425 (May 5, 2006). 
We again proposed to continue using our informal procedures in most 
continuing fitness reviews.
    In the NPRM and SNPRM, we stated that we had tentatively determined 
to continue using the same informal procedures for continuing fitness 
reviews that we have always used. 71 FR 26436; 70 FR 67392. We believed 
that significant potential harm could result if we made all substantial 
foreign investment cases subject to public notice and comment, and that 
using public proceedings in all significant cases appeared to be 
unnecessary for the protection of interested persons. We stated that we 
would have the option of beginning a public proceeding in any case if 
we found that doing so would be useful. 71 FR 26436.

Comments

    The comments on the NPRM and SNPRM focused on our proposed change 
to our standard for defining when U.S. citizens had actual control of a 
U.S. carrier. None of the commenters opposed our proposed changes to 
part 204. While several commenters discussed the procedural issues in 
their responses to our NPRM, only Continental commented in any detail 
on our SNPRM's proposed decision to continue using informal procedures 
in most continuing fitness reviews. Continental asserted that the 
informal procedures enable us to resolve citizenship matters after 
negotiating only with the carrier and its foreign investors, not with 
other persons affected by the transaction. Continental Comments at 9.

Decision on Procedures

    We have determined to continue following our existing procedures 
for continuing fitness reviews for the reasons stated in our earlier 
notices. We can, of course, always choose to use public procedures in 
any continuing fitness review, and interested persons have the right to 
ask us to do so. See 71 FR 26436.

[[Page 20035]]

    We think that our procedures give the public a significant amount 
of information on our decisions in fitness cases, notwithstanding 
Continental's assertion to the contrary, although we will be 
considering whether they can be improved. First, we decide all initial 
fitness cases in public orders that explain the basis for our decision 
on all significant issues. If such a case presents a significant 
citizenship issue, the order deciding the case will discuss why we find 
that the applicant is (or is not) actually controlled by U.S. citizens. 
Second, in continuing fitness reviews where we begin public 
proceedings, any final decision on the merits would be a public order 
that would explain the basis for that decision.
    When we use the more informal procedures in continuing fitness 
reviews, we do not publish our final decision explaining our analysis 
of any citizenship issues. However, we will be following the same 
procedures in such cases that we use in other situations where we 
believe that a carrier or other person may have violated our 
regulations or statute. Continental has presented no reason why we 
should treat continuing fitness reviews differently from all other 
enforcement investigations, which are typically done informally unless 
the enforcement office determines that there is a need for a formal 
enforcement proceeding.
    Nevertheless, we think it may be helpful if carriers, potential 
investors, and the public generally had additional information on our 
analyses in citizenship cases. We will consider developing procedures 
that would give the public more information on our decisions in 
citizenship matters, and we are actively exploring whether there are 
practicable means of doing so in appropriate cases.
    Airports Council International--Europe (``ACI''), bmi, and Virgin 
Atlantic Airways would like us to make commitments on the timetable for 
the completion of our review of citizenship issues in initial fitness 
cases. bmi Comments at 2; Virgin Atlantic Comments at 4; ACI Comments 
at 2. We appreciate the interest of a carrier and its investors, 
officers, and employees in obtaining a prompt decision from us on any 
application for operating authority. We intend to complete our 
decisions in such cases as promptly as possible and with the aim of 
imposing the minimum administrative burden consistent with ensuring 
that the standards we have set forth are met. However, we do not 
proceed on an initial application for operating authority until the 
record is complete, and the applicant has the responsibility of 
providing us with a complete record. 14 CFR 302.209. Citizenship, 
moreover, is but one of several matters that must be addressed in 
determining whether a carrier is fit, for we must also review the 
applicant's financial fitness, managerial competence, and compliance 
disposition. In initial fitness cases deadlines for the completion of 
our decision-making process are set by 49 U.S.C. 41108 and 14 CFR part 
302, subpart B.

Part 204 Modifications

    Part 204 of our rules governs the data needed for fitness 
determinations. We proposed minor changes to that part to correct 
typographical errors, clarify some language, and update references to 
the applicable statutory language. 71 FR 26436. In section 204.2, we 
are amending the definition of ``citizen of the United States'' to 
mirror the language that is now contained in 49 U.S.C. 40102(a)(15). We 
believe that the regulations should mirror the text of the statute as 
it is currently written. Finally, we are making minor changes to 
section 204.5 to clarify language in paragraph (a)(2); deleting a 
typographical error in paragraph (b); revising the address in paragraph 
(c); and adding a new paragraph (d) that would replace the last 
sentence of paragraph (c). These amendments to part 204 should make the 
regulations easier to understand for carriers consulting the sections. 
Because we have withdrawn the proposed policy statement on our 
standards for determining actual control, we will not adopt the 
proposal to include a cross-reference to that policy statement in part 
204.
    No commenter opposed these changes, and we find that they should be 
made for the reasons given in the SNPRM.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review) and DOT 
Regulatory Policies and Procedures

    Executive Order 12866, Regulatory Planning and Review, directs the 
Department to assess both the costs and the benefits of a regulatory 
change. This rulemaking was initially considered significant under DOT 
Policies and Procedures and E.O. 12866 because of significant public 
interest in our proposal to adopt a policy statement modifying our 
standards for determining actual control. The NPRM and the SNPRM were 
reviewed by the Office of Management and Budget under Executive Order 
12866. In the NPRM and SNPRM, we tentatively concluded that the 
benefits of our proposed rule would outweigh its costs, which would be 
minimal because the rule would not impose any new costs on the affected 
certificated and commuter air carriers. 70 FR 67389, 67395; 71 FR 
26440.
    Commenters had an opportunity to submit comments on our tentative 
analysis. None of the commenters submitted comments on our tentative 
regulatory evaluation.
    We have withdrawn the proposed policy statement, 71 FR 71106 
(December 8, 2006), and there is no significant public interest in the 
technical changes that we are adopting for part 204, which will not 
make any substantive changes. In this proceeding we are not changing 
our procedures for resolving continuing fitness issues.
    This final rule is not considered significant under Executive Order 
12866 and was not reviewed by the Office of Management and Budget. This 
rule would result in little, if any cost.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
requires federal agencies, as part of each rule, to consider regulatory 
alternatives that minimize the impact on small entities while achieving 
the objectives of the rulemaking. This rule makes only editorial 
amendments to part 204 that do not change its substance. We certify 
that this action will not have a significant economic impact on a 
substantial number of small entities.

Trade Impact Assessments

    The Trade Agreement Act of 1979 prohibits federal agencies from 
establishing any standards or engaging in related activities that 
create unnecessary obstacles to the foreign commerce of the United 
States. Legitimate domestic objectives, such as safety, are not 
considered unnecessary obstacles. The statute also requires 
consideration of international standards and, where appropriate, that 
U.S. standards be compatible. The Department has assessed the potential 
effect of this rule and has determined that it will have no effect on 
any trade-sensitive activity.

International Compatibility

    In keeping with U.S. obligations under the Convention on 
International Civil Aviation, it is the Department's policy to comply 
with International Civil Aviation Organization (ICAO) Standards and 
Recommended Practices to the maximum extent practicable. The Department 
has determined that there are no ICAO Standards and

[[Page 20036]]

Recommended Practices that correspond to these regulations.

Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1955 (the Act) is intended, 
among other things, to curb the practice of imposing unfunded Federal 
mandates on State, local, and tribal governments. Title II of the Act 
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 (adjusted 
annually for inflation) in any one year by State, local, and tribal 
governments, in the aggregate, or by the private sector; such a mandate 
is deemed to be a ``significant regulatory action.'' This rule does not 
contain such a mandate. The requirements of Title II of the Act, 
therefore, do not apply.

Executive Order 13132, Federalism

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132, dated August 4, 1999 (64 
FR 43255). This rule does not have a substantial direct effect on, or 
significant federalism implications for the States, nor would it limit 
the policymaking discretion of the States.
    This rule would not directly preempt any State law or regulation, 
nor impose burdens on the States. This action would not have a 
significant effect on the States' ability to execute traditional State 
governmental functions. The agency has, therefore, determined that this 
proposal does not have sufficient federalism implications to warrant 
either the preparation of a federalism summary impact statement or 
require consultations with State and local governments.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.) 
requires Federal agencies to obtain approval from the Office of 
Management and Budget (OMB) for each collection of information they 
conduct, sponsor, or require through regulation. The agency has 
determined that the rule would not impose any additional requirements 
and does not change the paperwork collection that currently exists.

List of Subjects

14 CFR Part 204

    Air carriers, Reporting and recordkeeping requirements.

14 CFR Part 399

    Administration practice and procedure, Air carriers, Consumer 
protection.

0
For the reasons stated in the preamble, the Department amends 14 CFR 
part 204 as set forth below:

PART 204--DATA TO SUPPORT FITNESS DETERMINATIONS

0
1. The authority citation for part 204 continues to read as follows:

    Authority: 49 U.S.C. Chapters 401, 411, 417.


0
2. Revise Sec.  204.1 to read as follows:


Sec.  204.1  Purpose.

    This part sets forth the fitness data that must be submitted by 
applicants for certificate authority, by applicants for authority to 
provide service as a commuter air carrier to an eligible place, by 
carriers proposing to provide essential air transportation, and by 
certificated air carriers and commuter air carriers proposing a 
substantial change in operations, ownership, or management. This part 
also contains the procedures and filing requirements applicable to 
carriers that hold dormant authority.

0
3. Revise Sec.  204.2(c)(3) to read as follows:


Sec.  204.2  Definitions.

* * * * *
    (c) Citizen of the United States means:
* * * * *
    (3) A corporation or association organized under the laws of the 
United States or a State, the District of Columbia, or a territory or 
possession of the United States, of which the president and at least 
two-thirds of the board of directors and other managing officers are 
citizens of the United States, which is under the actual control of 
citizens of the United States, and in which at least 75 percent of the 
voting interest is owned or controlled by persons that are citizens of 
the United States.
* * * * *

0
4. Amend Sec.  204.5 as follows:
0
A. Revise paragraph (a)(2) to read as set forth below;
0
B. Amend paragraph (b) to remove the ``s'' after ``Carrier'' in the 
third sentence in the reference to ``Air Carrier Fitness Division'';
0
C. Revise paragraph (c) to read as set forth below; and
0
D. Add a new paragraph (d) to read as set forth below.
    The revisions read as follows:


Sec.  204.5  Certificated and commuter air carriers undergoing or 
proposing to undergo a substantial change in operations, ownership, or 
management.

    (a) * * *
    (2) The change substantially alters the factors upon which its 
latest fitness finding is based, even if no new authority is required.
* * * * *
    (c) Information filings pursuant to this section made to support an 
application for new or amended certificate authority shall be filed 
with the application and addressed to Docket Operations, M-30, U.S. 
Department of Transportation, Washington, DC 20590, or by electronic 
submission at [http://dms.dot.gov].
    (d) Information filed in support of a certificated or commuter air 
carrier's continuing fitness to operate under its existing authority in 
light of substantial changes in its operations, management, or 
ownership, including changes that may affect the air carrier's 
citizenship, shall be addressed to the Chief, Air Carrier Fitness 
Division, Office of the Secretary, U.S. Department of Transportation, 
Washington, DC 20590.

    Issued in Washington, DC, on April 16, 2007.
Andrew B. Steinberg,
Assistant Secretary for Aviation and International Affairs.
 [FR Doc. E7-7605 Filed 4-20-07; 8:45 am]
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