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 Small Business Administration 13 CFR Part 121
RIN 3245-AH10
 AGENCY: U.S. Small Business Administration.
 ACTION: Final rule.
 SUMMARY: The U.S. Small Business Administration (SBA) is increasing its receipts-based and employee-based small business size definitions (commonly referred to as “size standards”) for North American Industry Classification System (NAICS) sectors related to Wholesale Trade and Retail Trade. Specifically, SBA is increasing size standards for 57 industries in those sectors, including 22 industries in NAICS Sector 42 (Wholesale Trade) and 35 industries in NAICS Sector 44-45 (Retail Trade).
 DATES: This rule is effective July 14, 2022.
 FOR FURTHER INFORMATION CONTACT: Samuel Castilla, Economist, Office of Size Standards, (202) 619-0389 or 
                        *sizestandards@sba.gov.*


SUPPLEMENTARY INFORMATION: Discussion of Size Standards To determine eligibility for Federal small business assistance, SBA establishes small business size definitions (usually referred to as “size standards”) for private sector industries in the United States. SBA uses two primary measures of business size for size standards purposes: average annual receipts and average number of employees. SBA uses financial assets for certain financial industries and refining capacity, in addition to employees, for the petroleum refining industry to measure business size. In addition, SBA's Small Business Investment Company (SBIC), Certified Development Company (CDC/504), and 7(a) Loan Programs use either the industry-based size standards or tangible net worth and net income-based alternative size standards to determine eligibility for those programs. In September 2010, Congress passed the Small Business Jobs Act of 2010 (Pub. L. 111-240, 124 Stat. 2504, September 27, 2010) (“Jobs Act”), requiring SBA to review all size standards every five years and make necessary adjustments to reflect current industry and market conditions. In accordance with the Jobs Act, in early 2016, SBA completed the first five-year review of all size standards—except those for agricultural enterprises for which size standards were previously set by Congress—and made appropriate adjustments to size standards for a number of industries to reflect current industry and Federal market conditions. SBA also adjusts its monetary-based size standards for inflation at least once every five years. An interim final rule on SBA's latest inflation adjustment to size standards, effective August 19, 2019, was published in the 
                    **Federal Register**
                     on July 18, 2019 (84 FR 34261). SBA also updates its size standards every five years to adopt the Office of Management and Budget's (OMB) quinquennial North American Industry Classification System (NAICS) revisions to its table of small business size standards. Effective October 1, 2017, SBA adopted the OMB's 2017 NAICS revisions to its size standards (82 FR 44886 (September 27, 2017)).[1] This final rule is one of a series of final rules that will revise size standards of industries grouped by various NAICS sectors. Rather than revise all size standards at one time, SBA is revising size standards by grouping industries 
                    ( print page 35870)
                    within various NAICS sectors that use the same size measure (
                    *i.e.,*
                     employees or receipts). Although the industries in Sectors 42 and 44-45 have both receipt-based and employee-based industry size standards, SBA is evaluating these sectors together because these size standards share the characteristic that they cannot be used in Federal contracts for supplies. Instead, by rule, these size standards are superseded by a 500-employee size standard for Federal contracts in the Wholesale and Retail Trade sectors. In the prior review, SBA revised size standards mostly on a sector-by-sector basis. As part of the second five-year review of size standards, SBA reviewed all receipt-based and employee-based size standards in NAICS Sectors 42 and 44-45 to determine whether the existing size standards should be retained or revised based on the current industry and program data. After its review, SBA published in the May 25, 2021, issue of the 
                    **Federal Register**
                     (86 FR 28012) a proposed rule to increase the size standards for 14 industries in NAICS Sector 42 (Wholesale Trade) and 35 industries in NAICS Sector 44-45 (Retail Trade). In this final rule, SBA is adopting the proposed size standards from the May 2021 proposed rule without change, except for eight industries in Sector 42 for which SBA is increasing size standards instead of maintaining them as proposed after refining its analysis of the economic characteristics of the comparison industry group. In conjunction with the ongoing second five-year review of size standards under the Jobs Act, SBA developed a revised “Size Standards Methodology” (Methodology) for developing, reviewing, and modifying size standards, when necessary. SBA's revised Methodology provides a detailed description of its analyses of various industry and program factors and data sources, and how the agency uses the results to establish and revise size standards. In the May 2021 proposed rule itself, SBA detailed how it applied its revised Methodology to review and modify where necessary, the existing size standards for industries covered in this final rule. Prior to finalizing the revised Methodology, SBA issued a notification in the April 27, 2018, edition of the 
                    **Federal Register**
                     (83 FR 18468) to solicit comments from the public and notify stakeholders of the proposed changes to the Methodology. SBA considered all public comments in finalizing the revised Methodology. For a summary of comments and SBA's responses, refer to SBA's April 11, 2019, 
                    **Federal Register**
                     notification (84 FR 14587) of the issuance of the final revised Methodology. SBA's Size Standards Methodology is available on its website at 
                    *www.sba.gov/​size.* In evaluating an industry's size standard, SBA normally examines its characteristics (such as average firm size, startup costs and entry barriers, industry competition, and distribution of firms by size) and the level and small business share of Federal contract dollars in that industry. However, since NAICS codes in the Wholesale Trade and Retail Trade sectors cannot be used to classify Federal Government procurement for supplies, and only the applicable manufacturing code can be applied, the Federal contracting factor is not considered in evaluating industry-based size standards for these sectors (13 CFR 121.402(b)). SBA also examines the potential impact a size standard revision might have on its financial assistance programs, and whether a business concern under a proposed or revised size standard would be dominant in its industry. SBA analyzed the characteristics of each industry in NAICS Sectors 42 and 44-45, mostly using a special tabulation obtained from the U.S. Bureau of the Census from its 2012 Economic Census (the latest available when the proposed rule was prepared). The 2012 special tabulation contains information for different levels of NAICS categories on average (simple and weighted average) and median firm size in terms of both receipts and employment, total receipts generated by the four and eight largest firms, the Herfindahl-Hirschman Index (HHI), the Gini coefficient, and size distributions of firms by various receipts and employment size groupings. To evaluate average asset size, SBA combines the sales to total assets ratios by industry, obtained from the Risk Management Association's (RMA) Annual eStatement Studies (
                    *https://www.rmahq.org/​statementstudies/​*) with the simple average receipts size by industry from the 2012 Economic Census tabulation to estimate the average assets size for each industry. Table 5 of the May 2021 proposed rule, Size Standards Supported by Each Factor for Each Industry (Employees) and Table 6, Size Standards Supported by Each Factor for Each Industry (Receipts), show the results of analyses of industry factors for each industry covered by the proposed rule. Of the 137 industries, including 71 in Sector 42 and 66 in Sector 44-45, reviewed in the proposed rule, the results from analyses of the latest available data on the four primary industry factors (
                    *i.e.,*
                     average firm size, average assets size, four-firm ratio, and Gini coefficient) supported increasing size standards for 49 industries (14 in Sector 42 and 35 in Sector 44-45), decreasing size standards for 66 industries (38 in Sector 42 and 28 in Sector 44-45), and maintaining size standards for 22 industries (19 in Sector 42 and 3 in Sector 44-45). Table 1, Summary of Calculated Size Standards, summarizes the analytical results from the proposed rule by NAICS sector. Table 1—Summary of Calculated Size Standards
Sector
Sector name
Number of
                             size standards 
                             reviewed
Number of
                             size standards 
                             increased
Number of
                             size standards 
                             decreased
Number of
                             size standards 
                             maintained42
Wholesale Trade
71
14
38
1944-45
Retail Trade
66
35
28
3Total

137
49
66
22
 In the May 2021 proposed rule, SBA discussed the impacts of the COVID-19 pandemic on small businesses and greater society. Recognizing the wide-ranging economic impacts of the pandemic, SBA decided not to lower any size standards for which the analysis suggested lowering them. Instead, SBA proposed to maintain all size standards for industries in which the analytical results supported a decrease or no change to size standards and adopt all size standards for which the analytical results supported an increase to size standards. In this final rule, SBA is adopting the proposed size standards from the May 2021 proposed rule without change, except for eight 
                    ( print page 35871)
                    industries in Sector 42 for which SBA is increasing size standards instead of maintaining them as proposed after refining its analysis of the economic characteristics of the comparison industry group in accordance with its “Size Standards Methodology.” Specifically, SBA is increasing the size standards for the following eight additional NAICS industries from 100 employees to 125 employees: NAICS 423740 (Refrigeration Equipment and Supplies Merchant Wholesalers); NAICS 423820 (Farm and Garden Machinery and Equipment Merchant Wholesalers); NAICS 423840 (Industrial Supplies Merchant Wholesalers); NAICS 423850 (Service Establishment Equipment and Supplies Merchant Wholesalers); NAICS 423930 (Recyclable Material Merchant Wholesalers); NAICS 423940 (Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers); NAICS 424520 (Livestock Merchant Wholesalers); and NAICS 425110 (Business to Business Electronic Markets). To evaluate the impact of the changes to size standards adopted in this final rule on SBA's loan programs, SBA analyzed its internal data on its guaranteed and disaster loan programs for fiscal years 2018-2020. The results of this analysis can be found in the Regulatory Impact Analysis section of this final rule. The impact of these changes is limited to SBA's loan programs because, as discussed above, these size standards do not apply to Federal procurements, such as those in SBA's contracting programs. In the May 2021 proposed rule, SBA sought comments on its proposal to increase size standards for 49 industries and retain the current size standards for the remaining 88 industries in Sectors 42 and 44-45. Specifically, SBA requested comments on whether the proposed revisions are appropriate for the industries covered by the proposed rule; whether the decision not to lower any size standards is justified by the COVID-19 pandemic; whether the equal weighting of individual factors to derive an industry size standard is appropriate; and whether the data sources used were appropriate or sufficient. Discussion of Comments SBA received a total of nine comments to the proposed rule, of which four were not pertinent. Of the remaining five comments that were pertinent to the rule, two comments expressed support for the proposed changes to size standards in general, one comment supported SBA's proposed change for the size standard for convenience store-related industries, one comment raised concern regarding SBA's proposal to retain the 500-employee size standard applicable to nonmanufacturers for purposes of Federal contracting, and one comment opposed the proposed changes. All comments to the proposed rule are available at 
                    *www.regulations.gov*
                     (RIN 3245-AH10) and are summarized and discussed below. Comments Supporting SBA's Proposed Changes to Both Sectors SBA received two comments supporting SBA's proposed changes to size standards in both Wholesale Trade and Retail Trade sectors. One commenter supported the rule because they viewed size limits as an important tool for defining small businesses. The second commenter supported the rule on the grounds that it would result in more assistance to small businesses in the form of increased SBA loans and Federal contracting opportunities. SBA's Response SBA agrees with the comment that size limits are an important tool for defining small businesses for eligibility for Federal small business assistance. SBA's proposed changes will help more businesses qualify as small and ensure that SBA's resources and assistance are directed to their intended beneficiaries. SBA also agrees with the comment expressing support for the rule on the grounds that it would result in more assistance to small businesses in the form of increased financial assistance and Federal contracting opportunities. As shown in Table 6 in the Regulatory Impact Analysis section of the rule, below, SBA estimates that the changes to size standards in this final rule will result in an increase to the number of 7(a) and CDC/504 and Economic Injury Disaster Loan (EIDL) loans to small firms. Moreover, although industries within Sectors 42 and 44-45 cannot be used for purposes of classifying Federal contracting opportunities, SBA believes that all small businesses will benefit from this rule in terms of access to its financial assistance that is available for small businesses. Therefore, SBA is adopting increases to 49 size standards from the proposed rule plus increases to eight additional size standards based on its reevaluation of analytical results, as discussed above. Comment Supporting Proposed Changes to the Convenience Services Industry SBA received one comment from an association representing the U.S. convenience services industry, including owners and operators of vending machines and micro markets, expressing support for SBA's changes to size standards for the industries it represents. The commenter did not specify which 6-digit NAICS industries were the focus of their comment, but based on industry descriptions in the NAICS manual, SBA assumed the comment pertained to NAICS 445120 (Convenience Stores), NAICS 447110 (Gasoline Stations with Convenience Stores), NAICS 454210 (Vending Machine Operators), and NAICS 454390 (Other Direct Selling Establishments). The association supported SBA's proposed changes to size standards in these industries on the grounds that the changes would expand eligibility for SBA's assistance to operators that were previously ineligible to participate in SBA's programs and to those who may have experienced economic hardships related to the COVID-19 pandemic. SBA's Response In the May 2021 proposed rule, SBA proposed to increase the size standards for NAICS 454210 and 454390 from $12 million and $8 million to $18.5 million and $13 million, respectively. For NAICS 445120 and 447110, in response to the unprecedented economic impacts of the ongoing COVID-19 pandemic on small businesses and Federal Government response, in the May 2021 proposed rule, SBA proposed to retain their size standards at $32 million instead of decreasing them to $8.5 million and $21 million, respectively, based on analytical results. SBA agrees with the association that these changes will help more small businesses in these industries qualify for SBA's financial assistance. SBA believes that expanding the reach of its programs to include a greater number of small firms supports all small businesses and the overall economy as the Nation continues to recover from the economic challenges caused by the COVID-19 pandemic and small businesses remain in need of SBA's assistance as they recover from the pandemic. SBA believes that the proposed size standards for these industries are more reflective of the current economic characteristics of businesses in these industries and the latest trends in the economy. Thus, SBA is adopting its proposal to increase the size standards for NAICS 454210 and 454390 from $12 million and $8 million to $18.5 million and $13 million, respectively, and retain the size standards for NAICS 445120 and 447110 at $32.0 million.
                    ( print page 35872) Comment on the 500-Employee Size Standard Applicable to Nonmanufacturers for Purposes of Federal Contracting In response to its proposal to retain the nonmanufacturer size standard at 500 employees, SBA received one comment to the May 2021 proposed rule from the members of the U.S. House of Representatives Subcommittee on Contracting and Infrastructure requesting that SBA evaluate the current 500-employee size standard under its nonmanufacturer rule. Specifically, the comment expressed concern that because the level of revenue is immaterial to the determination of size under the 500-employee nonmanufacturer size standard, the current rule may allow a firm with billions of dollars in revenues to qualify as a small business. They suggested that SBA conduct an assessment of the nonmanufacturing industry based on revenue and/or other factors that may be more appropriate to determine what may be considered small for the size of a business qualifying as a nonmanufacturer. The comment also raised other issues outside the scope of the SBA's proposed rule, such as reporting on SBA's small business procurement scorecard and SBA's process for granting waivers to the nonmanufacturing rule. SBA responded to the comments on those issues in a separate letter and addresses the comment regarding the 500-employee nonmanufacturer size standard below. SBA's Response While the nonmanufacturer rule applies to firms primarily engaged in business activities within Sectors 42 and 44-45, SBA did not review the 500-employee nonmanufacturer size standard in its May 2021 proposed rule. However, in an upcoming proposed rule covering the manufacturing sector and industries with employee-based size standards in other sectors (except Wholesale Trade or Retail Trade), SBA will examine whether the current 500-employee size standard for nonmanufacturers is appropriate and provide a detailed response to the Subcommittee's comment. That rulemaking will be identified under RIN 3245-AH09. Interested parties will have an opportunity to review the SBA's proposed rule and submit comments when the rule is published in the 
                    **Federal Register**
                    . Thus, in this final rule, SBA is not evaluating the size standard for nonmanufacturers. Comment Opposed to SBA's Proposed Changes SBA received one comment opposed to its proposed changes on the grounds that SBA's size standards are generally too large and allow larger corporations to obtain small business status and to dominate the market. The commenter also recommended that SBA abolish the Davis-Bacon Act and other regulations that may place burdens on small businesses. The commenter also urged SBA to broadly define small businesses as those with less than 100 employees. SBA's Response SBA believes that establishing a common industry size standard of less than 100 employees for all wholesale and retail trade firms would be contrary to the Small Business Act. Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's Administrator is responsible for establishing small business size definitions and ensuring that such definitions vary from industry to industry to reflect differences among various industries. The Jobs Act requires SBA to review every five years all size standards and make necessary adjustments to reflect current industry and Federal market conditions. The size standards adopted in this final rule are part of SBA's efforts to meet its statutory responsibility. Moreover, SBA conducted its review of size standards according to its Size Standards Methodology which was adopted through a notice and comment process. SBA considered all public comments in finalizing the revised Methodology, which included a detailed explanation of how these sectors would be analyzed. SBA also does not agree with the comment urging SBA to abolish the Davis-Bacon Act and other regulations that may place burdens on small businesses. The Davis-Bacon Act requires contractors and subcontractors to pay laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area (Pub. L. 107-217, Sec. 1, 6(b), Aug. 21, 2002, 116 Stat. 1062, 1304). While the commenter did not specify which regulations would be included under the “other” category, SBA notes that it generally does not have the authority to repeal or override the regulations of other agencies or of Acts passed by Congress. For the reasons above, in this final rule, SBA is adopting the proposed size standards from the May 2021 proposed rule without change, except for eight industries in Sector 42 for which SBA is increasing size standards instead of maintaining them in the proposed rule. Summary of Adopted Revisions to Size Standards Based on the evaluation of public comments it received on the May 2021 proposed rule and on its analyses of industry factors using the latest available relevant industry and program data when the proposed rule was prepared, SBA is increasing 57 size standards, including 22 employee-based size standards in NAICS Sector 42 and 35 receipts-based size standards in NAICS Sector 44-45. A summary of SBA's size standards revisions in this rule can be found below in Table 2, Summary of Size Standards Revisions (Employees) and Table 3, Summary of Size Standards Revisions (Receipts). Table 2—Summary of Size Standards Revisions
[Employees]
NAICS
                             code
NAICS U.S. industry title
Current
                             size standard 
                             (employees)
Calculated
                             size standard 
                             (employees)
Adopted
                             size standard 
                             (employees)423110
Automobile and Other Motor Vehicle Merchant Wholesalers
250
225
250423120
Motor Vehicle Supplies and New Parts Merchant Wholesalers
200
150
200423130
Tire and Tube Merchant Wholesalers
200
175
200423140
Motor Vehicle Parts (Used) Merchant Wholesalers
100
125
125423210
Furniture Merchant Wholesalers
100
50
100423220
Home Furnishing Merchant Wholesalers
100
75
100423310
Lumber, Plywood, Millwork, and Wood Panel Merchant Wholesalers
150
75
150423320
Brick, Stone, and Related Construction Material Merchant Wholesalers
150
100
150423330
Roofing, Siding, and Insulation Material Merchant Wholesalers
200
225
225423390
Other Construction Material Merchant Wholesalers
100
75
100423410
Photographic Equipment and Supplies Merchant Wholesalers
200
150
200( print page 35873)423420
Office Equipment Merchant Wholesalers
200
200
200423430
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
250
225
250423440
Other Commercial Equipment Merchant Wholesalers
100
50
100423450
Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers
200
200
200423460
Ophthalmic Goods Merchant Wholesalers
150
175
175423490
Other Professional Equipment and Supplies Merchant Wholesalers
150
125
150423510
Metal Service Centers and Other Metal Merchant Wholesalers
200
150
200423520
Coal and Other Mineral and Ore Merchant Wholesalers
100
200
200423610
Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers
200
125
200423620
Household Appliances, Electric Housewares, and Consumer Electronics Merchant Wholesalers
200
225
225423690
Other Electronic Parts and Equipment Merchant Wholesalers
250
225
250423710
Hardware Merchant Wholesalers
150
75
150423720
Plumbing and Heating Equipment and Supplies (Hydronics) Merchant Wholesalers
200
150
200423730
Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers
150
175
175423740
Refrigeration Equipment and Supplies Merchant Wholesalers
100
100
125423810
Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers
250
200
250423820
Farm and Garden Machinery and Equipment Merchant Wholesalers
100
100
125423830
Industrial Machinery and Equipment Merchant Wholesalers
100
75
100423840
Industrial Supplies Merchant Wholesalers
100
100
125423850
Service Establishment Equipment and Supplies Merchant Wholesalers
100
100
125423860
Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers
150
175
175423910
Sporting and Recreational Goods and Supplies Merchant Wholesalers
100
50
100423920
Toy and Hobby Goods and Supplies Merchant Wholesalers
150
175
175423930
Recyclable Material Merchant Wholesalers
100
100
125423940
Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers
100
100
125423990
Other Miscellaneous Durable Goods Merchant Wholesalers
100
50
100424110
Printing and Writing Paper Merchant Wholesalers
200
225
225424120
Stationery and Office Supplies Merchant Wholesalers
150
150
150424130
Industrial and Personal Service Paper Merchant Wholesalers
150
125
150424210
Drugs and Druggists' Sundries Merchant Wholesalers
250
250
250424310
Piece Goods, Notions, and Other Dry Goods Merchant Wholesalers
100
50
100424320
Men's and Boys' Clothing and Furnishings Merchant Wholesalers
150
125
150424330
Women's, Children's, and Infants' Clothing and Accessories Merchant Wholesalers
100
75
100424340
Footwear Merchant Wholesalers
200
200
200424410
General Line Grocery Merchant Wholesalers
250
250
250424420
Packaged Frozen Food Merchant Wholesalers
200
150
200424430
Dairy Product (except Dried or Canned) Merchant Wholesalers
200
200
200424440
Poultry and Poultry Product Merchant Wholesalers
150
125
150424450
Confectionery Merchant Wholesalers
200
225
225424460
Fish and Seafood Merchant Wholesalers
100
50
100424470
Meat and Meat Product Merchant Wholesalers
150
100
150424480
Fresh Fruit and Vegetable Merchant Wholesalers
100
75
100424490
Other Grocery and Related Products Merchant Wholesalers
250
200
250424510
Grain and Field Bean Merchant Wholesalers
200
175
200424520
Livestock Merchant Wholesalers
100
100
125424590
Other Farm Product Raw Material Merchant Wholesalers
100
175
175424610
Plastics Materials and Basic Forms and Shapes Merchant Wholesalers
150
125
150424690
Other Chemical and Allied Products Merchant Wholesalers
150
175
175424710
Petroleum Bulk Stations and Terminals
200
225
225424720
Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)
200
200
200424810
Beer and Ale Merchant Wholesalers
200
125
200424820
Wine and Distilled Alcoholic Beverage Merchant Wholesalers
250
225
250424910
Farm Supplies Merchant Wholesalers
200
175
200424920
Book, Periodical, and Newspaper Merchant Wholesalers
200
200
200424930
Flower, Nursery Stock, and Florists' Supplies Merchant Wholesalers
100
50
100424940
Tobacco and Tobacco Product Merchant Wholesalers
250
250
250424950
Paint, Varnish, and Supplies Merchant Wholesalers
150
150
150424990
Other Miscellaneous Nondurable Goods Merchant Wholesalers
100
50
100425110
Business to Business Electronic Markets
100
100
125425120
Wholesale Trade Agents and Brokers
100
125
125( print page 35874)441110
New Car Dealers
200
150
200454310
Fuel Dealers
100
75
100
 Table 3—Summary of Size Standards Revisions
[Receipts]
NAICS
                             code
NAICS U.S. industry title
Current
                             size standard 
                             ($ million)
Calculated
                             size standard 
                             ($ million)
Adopted
                             size standard 
                             ($ million)441120
Used Car Dealers
$27.0
$17.0
$27.0441210
Recreational Vehicle Dealers
35.0
19.0
35.0441222
Boat Dealers
35.0
11.5
35.0441228
Motorcycle, ATV, and All Other Motor Vehicle Dealers
35.0
10.0
35.0441310
Automotive Parts and Accessories Stores
16.5
25.0
25.0441320
Tire Dealers
16.5
22.5
22.5442110
Furniture Stores
22.0
19.0
22.0442210
Floor Covering Stores
8.0
7.5
8.0442291
Window Treatment Stores
8.0
10.0
10.0442299
All Other Home Furnishings Stores
22.0
29.5
29.5443141
Household Appliance Stores
12.0
19.5
19.5443142
Electronics Stores
35.0
31.5
35.0444110
Home Centers
41.5
41.5
41.5444120
Paint and Wallpaper Stores
30.0
21.0
30.0444130
Hardware Stores
8.0
14.5
14.5444190
Other Building Material Dealers
22.0
14.0
22.0444210
Outdoor Power Equipment Stores
8.0
8.5
8.5444220
Nursery, Garden Center, and Farm Supply Stores
12.0
19.0
19.0445110
Supermarkets and Other Grocery (except Convenience) Stores
35.0
32.0
35.0445120
Convenience Stores
32.0
8.5
32.0445210
Meat Markets
8.0
7.0
8.0445220
Fish and Seafood Markets
8.0
7.0
8.0445230
Fruit and Vegetable Markets
8.0
7.5
8.0445291
Baked Goods Stores
8.0
14.0
14.0445292
Confectionery and Nut Stores
8.0
17.0
17.0445299
All Other Specialty Food Stores
8.0
9.0
9.0445310
Beer, Wine, and Liquor Stores
8.0
9.0
9.0446110
Pharmacies and Drug Stores
30.0
33.0
33.0446120
Cosmetics, Beauty Supplies, and Perfume Stores
30.0
28.0
30.0446130
Optical Goods Stores
22.0
26.0
26.0446191
Food (Health) Supplement Stores
16.5
20.0
20.0446199
All Other Health and Personal Care Stores
8.0
8.5
8.5447110
Gasoline Stations with Convenience Stores
32.0
21.0
32.0447190
Other Gasoline Stations
16.5
29.5
29.5448110
Men's Clothing Stores
12.0
22.5
22.5448120
Women's Clothing Stores
30.0
25.0
30.0448130
Children's and Infants' Clothing Stores
35.0
32.5
35.0448140
Family Clothing Stores
41.5
39.5
41.5448150
Clothing Accessories Stores
16.5
29.5
29.5448190
Other Clothing Stores
22.0
27.5
27.5448210
Shoe Stores
30.0
29.0
30.0448310
Jewelry Stores
16.5
18.0
18.0448320
Luggage and Leather Goods Stores
30.0
33.5
33.5451110
Sporting Goods Stores
16.5
23.5
23.5451120
Hobby, Toy, and Game Stores
30.0
31.0
31.0451130
Sewing, Needlework, and Piece Goods Stores
30.0
19.5
30.0451140
Musical Instrument and Supplies Stores
12.0
20.0
20.0451211
Book Stores
30.0
31.5
31.5451212
News Dealers and Newsstands
8.0
20.0
20.0452210
Department Stores
35.0
32.5
35.0452311
Warehouse Clubs and Supercenters
32.0
41.5
41.5452319
All Other General Merchandise Stores
35.0
35.0
35.0453110
Florists
8.0
6.5
8.0453210
Office Supplies and Stationery Stores
35.0
32.0
35.0453220
Gift, Novelty, and Souvenir Stores
8.0
12.0
12.0453310
Used Merchandise Stores
8.0
12.5
12.5453910
Pet and Pet Supplies Stores
22.0
28.0
28.0453920
Art Dealers
8.0
14.5
14.5( print page 35875)453930
Manufactured (Mobile) Home Dealers
16.5
16.5
16.5453991
Tobacco Stores
8.0
7.5
8.0453998
All Other Miscellaneous Store Retailers (except Tobacco Stores)
8.0
10.0
10.0454110
Electronic Shopping and Mail-Order Houses
41.5
33.0
41.5454210
Vending Machine Operators
12.0
18.5
18.5454390
Other Direct Selling Establishments
8.0
13.0
13.0
 Table 4, Summary of Adopted Size Standards Revisions by Sector, summarizes the adopted changes to size standards by NAICS sector. Table 4—Summary of Adopted Size Standards Revisions by Sector
Sector
Sector name
Number of
                             size standards reviewed
Number of
                             size standards increased
Number of
                             Size standards decreased
Number of
                             size standards maintained42
Wholesale Trade
71
22
0
4944-45
Retail Trade
66
35
0
31Total

137
57
0
80
 Evaluation of Dominance in Field of Operation SBA determined that for the industries evaluated under this final rule, no individual firm at or below the adopted size standards would be large enough to dominate its field of operation. At the size standard levels adopted in this final rule, the small business share of total industry receipts among those industries would be, on average, 0.4%, varying from 0.005% to 4.8%. These market shares effectively preclude a firm at or below the adopted size standards from exerting control on any of the industries. Alternatives Considered In response to the unprecedented economic impacts of the ongoing COVID-19 pandemic on small businesses and Federal Government response, SBA is adopting increases to size standards where the data suggests increases are warranted, and retaining all current size standards where the data suggested lowering of size standards is appropriate. SBA is also retaining all current size standards where the data suggested no changes to the current size standards. Nonetheless, SBA considered two other alternatives. Alternative Option One was to adopt changes to size standards exactly as suggested by the analytical results. In other words, Alternative Option One would entail increasing size standards for 57 industries, decreasing them for 66 industries, and retaining them at their current levels for 14 industries. Alternative Option Two was to retain all current size standards, including those for which the analytical results support increases. SBA did not adopt Alternative Option One because it would cause a substantial number of currently small businesses to lose their small business status and hence to lose their access to Federal small business assistance, especially SBA's financial assistance. Lowering size standards in the current environment would also run counter to various measures the Federal Government has implemented to help small businesses and the overall economy recover from the ongoing COVID-19 pandemic. Considering the impacts of the Great Recession and Federal Government actions that followed to support small businesses and the overall economy, SBA also adopted a policy of not decreasing size standards during the first five-year review of size standards, even though the data supported decreases. Under Alternative Option Two, given the current COVID-19 pandemic, SBA considered retaining the current level of all size standards even though the analytical results suggested changing them. Under this option, as the current situation develops, SBA will be able to assess new data available on economic indicators and SBA loans before adopting changes to size standards. However, SBA is not adopting Alternative Option Two because the results discussed in the Regulatory Impact Analysis section, below, show that retaining all size standards at their current levels would cause otherwise qualified small businesses to forgo various small business benefits becoming available to them under the option of increasing 57 and retaining 80 size standards. Such benefits would include access to capital through SBA's business loan, EIDL loan, and SBIC programs, and exemptions from paperwork and other compliance requirements. Compliance With Executive Order 12866, the Congressional Review Act (5 U.S.C. 801-808), the Regulatory Flexibility Act (5 U.S.C. 601-612), Executive Orders 13563, 12988, and 13132, and the Paperwork Reduction Act (44 U.S.C. Ch. 35) Executive Order 12866 The Office of Management and Budget (OMB) has determined that this final rule is a significant regulatory action for purposes of Executive Order 12866. Accordingly, in the next section SBA provides a Regulatory Impact Analysis of this final rule, including: (1) A statement of the need for the regulatory action, (2) An examination of alternative approaches, and (3) An evaluation of the benefits and costs—both quantitative and qualitative—of the regulatory action and the alternatives considered.
                    ( print page 35876) Regulatory Impact Analysis 1. What is the need for this regulatory action? SBA's mission is to aid and assist small businesses through a variety of financial, procurement, business development and counseling, and disaster assistance programs. To determine the actual intended beneficiaries of these programs, SBA establishes numerical size standards by industry to identify businesses that are deemed small. Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's Administrator is responsible for establishing small business size definitions (or “size standards”) and ensuring that such definitions vary from industry to industry to reflect differences among various industries. The Jobs Act requires SBA to review every five years all size standards and make necessary adjustments to reflect current industry and Federal market conditions. This final rule is part of the second five-year review of size standards in accordance with the Jobs Act. The first five-year review of size standards was completed in early 2016. Such periodic reviews of size standards provide SBA with an opportunity to incorporate ongoing changes to industry structure and Federal market environment into size standards and to evaluate the impacts of prior revisions to size standards on small businesses. This also provides SBA with an opportunity to seek and incorporate public input to the size standards review and analysis. SBA believes that the size standards revisions adopted for industries being reviewed in this final rule will make size standards more reflective of the current economic characteristics of businesses in those industries and the latest trends in the Federal marketplace. The revisions to the existing size standards for 57 industries in NAICS Sectors 42 and 44-45 are consistent with SBA's statutory mandate to help small businesses grow and create jobs and to review and adjust size standards every five years. This regulatory action promotes the Administration's goals and objectives and ensures that SBA complies with statutory requirements. One of SBA's goals in support of promoting the Administration's objectives is to help small businesses succeed through fair and equitable access to capital and credit, Federal Government contracts and purchases, and management and technical assistance. Reviewing and modifying size standards, when appropriate, ensures that intended beneficiaries can access Federal small business programs that are designed to assist them to become competitive and create jobs. 2. What are the potential benefits and costs of this regulatory action? OMB directs agencies to establish an appropriate baseline to evaluate any benefits, costs, or transfer impacts of regulatory actions and alternative approaches considered. The baseline should represent the agency's best assessment of what the world would look like absent the regulatory action. For a new regulatory action promulgating modifications to an existing regulation (such as modifying the existing size standards), a baseline assuming no change to the regulation (
                    *i.e.,*
                     making no changes to current size standards) generally provides an appropriate benchmark for evaluating benefits, costs, or transfer impacts of regulatory changes and their alternatives. Changes to Size Standards Based on the results from the analyses of the latest industry data, evaluation of the public comments on the proposed rule, as well as consideration of the impact of size standards changes on small businesses and significant adverse impacts of the COVID-19 pandemic on small firms and the overall economy, of the total of 137 industries in Sectors 42 and 44-45 evaluated in the proposed rule, SBA is adopting increases to size standards for 57 industries and maintaining current size standards for the remaining 80 industries. The Baseline For purposes of this regulatory action, the baseline represents maintaining the “status quo,” 
                    *i.e.,*
                     making no changes to the current size standards. Using the number of small businesses and levels of small business benefits (such as SBA's business loans, disaster assistance, etc.) they receive under the current size standards as a baseline, one can examine the potential benefits, costs, and transfer impacts of changes to size standards on small businesses and on the overall economy. Based on the 2012 Economic Census (the latest available when this proposed rule was prepared), of a total of about 975,569 businesses in industries in Sectors 42 and 44-45, 97.4% are considered small under the current size standards. That percentage varies from 96.6% in Sector 42 to 97.9% in Sector 44-45. Based on SBA's internal data on its loan programs for fiscal years 2018-2020, small businesses in those industries received, on an annual basis, a total of 9,871 7(a) and CDC/504 loans in that period, totaling about $5.4 billion, of which 82.6% was issued through the 7(a) program and 17.4% was issued through the CDC/504 program. During fiscal years 2018-2020, small businesses in those industries also received 561 loans through SBA's Economic Injury Disaster Loan (EIDL) program, totaling about $28.3 million on an annual basis.
                    2
                     Table 5, Baseline for All Industries, provides these baseline results by sector. The results of regulatory impact analyses SBA provided in the May 2021 proposed rule were based on SBA loan data for fiscal years (FYs) 2016-2018. In this final rule, SBA is updating the impact analysis results by using SBA loan data for fiscal years 2018-2020. Accordingly, there can be some differences between the proposed rule and this final rule with respect to impacts of size standards changes on SBA loans. Table 5—Baseline for All Industries
Sector 42
Sector 44-45
TotalBaseline all industries (current size standards)
71
66
137Total firms (2012 Economic Census)
319,716
655,853
975,569Total small firms under current size standards (2012 Economic Census)
308,710
641,995
950,705( print page 35877)Small firms as % of total firms
96.6%
97.9%
97.5%No. of 7(a) and CDC/504 loans (FY 2018-2020)
2,665
7,206
9,871Amount of 7(a) and CDC/504 loans ($ million) (FY 2018-2020)
$1,706
$3,732
$5,438No. of EIDL loans (FY 2018-2020) *
123
438
561Amount of EIDL loans ($million) (FY 2018-2020) *
$7.4
$20.9
$28.3* Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.
 Increases to Size Standards As stated above, of the 73-employee-based and 64 receipts-based size standards reviewed in NAICS Sectors 42 and 44-45, based on the results from analyses of latest industry data, impacts of size standards changes on small businesses, considerations of the impacts of the COVID-19 pandemic, and public comments to the proposed rule, SBA is adopting increases to size standards for 57 industries and maintaining size standards for the remaining 80 industries. Below are descriptions of the benefits, costs, and transfer impacts of the increases to size standards adopted in this final rule. Benefits of Increasing Size Standards The most significant benefit to businesses from increases to size standards is gaining eligibility for Federal small business assistance programs or retaining that eligibility for such programs for a longer period. These include SBA's business loan programs, such as the 7(a) and CDC/504 programs, and the EIDL loan program. SBA's regulations provide that NAICS codes for the Wholesale and Retail Trade industries shall not be used to classify Federal Government acquisition for supplies (13 CFR 121.402(b)). As such, for purposes of Federal contracts set aside for small businesses, the size standard for all industries in the Wholesale Trade and Retail Trade sectors is 500 employees under the SBA's nonmanufacturer rule (see 13 CFR 121.406(b)). SBA is not evaluating the 500-employee the nonmanufacturer size standard in this final rule. Thus, the increases to size standards in this final rule will not impact the Federal market for contracts set aside for small businesses. Besides the access to SBA's financial assistance programs discussed above, because of increases to size standards, small businesses also benefit through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through the Federal Government programs. However, SBA has no data to estimate the number of small businesses receiving such benefits. Based on the 2012 Economic Census (the latest available when the proposed rule was prepared), SBA estimates that in 57 industries in NAICS Sectors 42 and 44-45 for which this final rule is increasing size standards, about 2,000 firms not small under the current size standards will become small under the adopted size standards increases and therefore become eligible for SBA's financial and other Federal non-procurement programs. That represents about 0.5% of all firms classified as small under the current size standards in industries for which SBA is adopting increases to size standards. Table 6, Impacts of Increasing Size Standards, provides impacts of increasing 57 and maintaining 80 size standards by NAICS sector. Table 6—Impacts of Increasing Size Standards
Sector 42
Sector 44-45
TotalNo. of industries with increases to size standards
22
35
57Total current small businesses in industries with increases to size standards (2012 Economic Census)
93,426
286,758
380,184Additional firms qualifying as small under standards (2012 Economic Census)
308
1,694
2,002% of additional firms qualifying as small relative to current small businesses in industries with increases to size standards
0.3%
0.6%
0.5%Total no. of 7(a) and 504 loans to small business in industries with increases to size standards (FY 2018-2020)
536
3,692
4,228Total 7(a) and 504 loan amounts to small businesses in industries with increases to size standards ($ million) (FY 2018-2020)
$341
$1,641
$1,982Estimated no. of 7(a) and 504 loans to newly-qualified small firms
2
23
25Estimated 7(a) and 504 loan amounts to newly-qualified small firms ($ million)
$1.3
$10.3
$11.6% increase to 7(a) and 504 loan amount relative to the total amount of 7(a) and 504 loans in industries with increases to size standards
0.4%
0.6%
0.6%Total no. of EIDL loans to small businesses in industries with increases to size standards (FY 2018-2020) *
26
248
274Total amount of EIDL loans to small businesses in industries with increases to size standards ($ million) (FY 2018-2020) *
$1.5
$11.7
$13.3Estimated no. of EIDL loans to newly-qualified small firms *
1
2
3Estimated EIDL loan amount to newly-qualified small firms ($ million) *
$0.06
$0.09
$0.2% increase to EIDL loan amount relative to the total amount of disaster loans in industries with increases to size standards *
3.8%
0.8%
1.5%* Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.
 
 
 Growing small businesses that are close to exceeding the current size standards will be able to retain their small business status for a longer period under the higher size standards, thereby enabling them to continue to benefit from the Federal small business assistance outside of the contracting programs. Based on its internal loan data for fiscal years 2018-2020, SBA estimates that up to about 25 SBA 7(a) and CDC/504 loans totaling about $11.6 million could be made to these newly-qualified small businesses in those industries under the adopted increases to size standards. That represents a 0.4% increase to the 7(a) and CDC/504 loan amount compared to the baseline (see Table 6). Newly-qualified small businesses will also benefit from the SBA's EIDL program. Since the benefits provided through this program are contingent on the occurrence and severity of a disaster in the future, SBA cannot make a meaningful estimate of this impact. However, based on the historical trends of the disaster loan program data, SBA estimates that, on an annual basis, the newly-defined small businesses under the increases to 57 size standards could receive three disaster loans (except physical disaster loans, which are unaffected by the changes in this rule), totaling about $0.2 million (see Table 6). Additionally, the newly-defined small businesses would also benefit through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through the Federal Government, but SBA has no data to quantify this impact. Costs of Increasing Size Standards To the extent that newly-qualified small businesses could seek assistance from SBA's financial assistance programs, the adopted increases to size standards may entail some additional administrative costs to the Government for the verification of their small business status. However, small business lenders have an option of using the tangible net worth and net income-based alternative size standard instead of using the industry-based size standards to establish eligibility for SBA's loans which many small businesses already qualify under. Moreover, this rule does not establish new size standards for the very first time; rather it intends to modify the existing size standards in accordance with a statutory requirement and the latest data and other relevant factors. For these reasons, SBA believes that these added administrative costs will be minor because necessary mechanisms are already in place to handle the additional requirements. Transfer Impacts of Increasing Size Standards The increases to size standards adopted in this final rule may result in some redistribution of SBA loans between the newly-qualified small businesses and small businesses under the current size standards. However, SBA estimates this impact to be de minimis because the vast majority of the SBA loans go to small businesses that are much smaller than the current or adopted size standards. Moreover, this rule would not have any impact on Federal contract dollars awarded to small businesses since SBA's regulations specify that NAICS codes for the Wholesale and Retail Trade industries shall not be used to classify Government procurement for supplies. 3. What alternatives have been considered? Under OMB Circular A-4, SBA is required to consider regulatory alternatives to the adopted changes in this final rule. In this section, SBA describes and analyzes two such alternatives. Alternative Option One to the final rule, a more stringent alternative to the adopted change, would propose adopting size standards based solely on the analytical results. In other words, the size standards of 57 industries for which the analytical results suggest raising them would be raised. However, the size standards of 66 industries for which the analytical results suggest lowering them, as shown in Table 4 of the May 2021 proposed rule, would be lowered. For the 14 remaining industries for which analysis suggested no changes, size standards would be maintained at their current levels. Alternative Option Two would propose retaining size standards for all industries, given the uncertainty generated by the ongoing COVID-19 pandemic. Below, SBA discusses benefits, costs, and the net impacts of each option. Alternative Option One: Adopting All Calculated Size Standards As discussed previously in the Alternatives Considered section of this final rule, Alternative Option One would cause a substantial number of currently small businesses to lose their small business status and hence to lose their access to Federal small business assistance, especially SBA's financial assistance. These consequences could be mitigated. For example, in response to the 2008 Financial Crisis and the economic conditions that followed, SBA adopted a general policy in the first five-year comprehensive size standards review to not lower any size standard (except to exclude dominant firms) even when the analytical results suggested the size standard should be lowered. Currently, because of the economic challenges presented by the COVID-19 pandemic and the measures taken to protect public health, SBA has decided to adopt the same general policy of not lowering size standards in the ongoing second five-year comprehensive size standards review as well. The primary benefits of adopting Alternative Option One would include: (1) SBA's management, technical, and financial assistance would be targeted to the most appropriate beneficiaries of such programs according to the analytical results; (2) Adopting the size standards based on the analytical results would also promote consistency and predictability in SBA's implementation of its authority to set or adjust size standards; and (3) Firms who would remain small would face less competition from larger small firms for the remaining Federal opportunities. Specifically, SBA sought public comment on the impact of adopting the size standards based on the analytical results. As explained in the “Size Standards Methodology” white paper, in addition to adopting all results of the analysis of the primary factors, SBA evaluates other relevant factors as needed, such as the impact of the reductions or increases of size standards on the distribution of SBA resources intended for small businesses and may adopt different results with the intention of mitigating potential negative impacts. We have already discussed the benefits, costs, and transfer impacts of increasing 57 and retaining 80 size standards. Below we discuss the benefits, costs, and transfer impacts of decreasing 66, increasing 57, and maintaining 14 size standards based on the analytical results. Benefits of Decreasing Size Standards Under Alternative Option One The most significant benefit to businesses from decreases to size standards when SBA's analysis suggests such decreases is to ensure that size standards are more reflective of latest industry structure and current market trends and that Federal small business assistance is more effectively targeted to its intended beneficiaries. These include SBA's business loan and EIDL programs. Decreasing size standards may reduce the administrative costs to the Federal Government, because the risk of providing SBA's loans to firms that do 
                    ( print page 35879)
                    not need them the most may diminish when the size standards reflect better the structure of the market. This may provide a better chance for smaller small firms to grow and benefit from the opportunities and resources available through SBA. Costs of Decreasing Size Standards Under Alternative Option One Table 7, Impacts of Decreasing Size Standards Under Alternative Option One, below, shows the various impacts of lowering size standards in 66 industries based solely on the analytical results. Based on the 2012 Economic Census, more than 5,500 (1.0%) firms would lose their small business status under Alternative Option One. As shown in Table 7, decreasing size standards would have a relatively minor impact on small businesses applying for SBA's 7(a) and CDC/504 loans because a vast majority of such loans are issued to businesses that are far below the reduced size standards. For example, based on the loan data for fiscal years 2018-2020, SBA estimates that 67 of SBA's 7(a) and CDC/504 loans, totaling $32.5 million, could not be made to those small businesses that would lose eligibility under the reduced size standards. That represents a 1.1% decrease of the loan amounts compared to the baseline. However, the actual impact could be much less as businesses losing small business eligibility under the decreases to industry-based size standards could still qualify for SBA's 7(a) and CDC/504 loans under the tangible net worth and net income-based alternative size standard. Table 7—Impacts of Decreasing Size Standards Under Alternative Option One
Sector 42
Sector 44-45
TotalNo. of industries for which SBA considered decreasing size standards (2012 Economic Census)
38
28
66Total current small businesses in industries for which SBA considered decreasing size standards (2012 Economic Census)
184,837
343,639
528,476Estimated no. of firms losing small status for which SBA considered decreasing size standards (2012 Economic Census)
2,735
2,774
5,509% of Firms losing small status relative to current small businesses in industries for which SBA considered decreasing size standards
1.5%
0.8%
1.0%Total no. of 7(a) and 504 loans to small businesses in industries for which SBA considered decreasing size standards (FY 2018-2020)
1,829
3,464
5,293Total amount of 7(a) and 504 loans to small businesses in industries for which SBA considered decreasing size standards ($ million) (FY 2018-2020)
$1,176
$1,856
$3,032Estimated no. of 7(a) and 504 loans not available to firms that would have lost small business status
28
23
51Estimated 7(a) and 504 loan amounts not available to firms that would have small status ($ million)
$18.0
$14.5
$32.5% decrease to 7(a)and 504 loan amounts relative to the total amount of 7(a) and 504 loans in industries for which SBA considered decreasing size standards
1.5%
0.8%
1.1%Total no. of EIDL loans to small businesses in industries for which SBA considered decreasing size standards (FY 2018-2020) *
79
187
266Total amount of EIDL loans to small businesses in industries for which SBA considered decreasing size standards ($ million) (FY 2018-2020) *
$4.8
$9.0
$13.8Estimated no. of EIDL loans not available to firms that would have lost small business status *
2
3
5Estimated EIDL loan amount not available to firms that would have lost small business status ($ million) *
$0.1
$0.1
$0.2% decrease to EIDL loan amount relative to the baseline *
2.5%
1.5%
1.8%* Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.
 Businesses losing small business status would also be impacted in terms of access to loans through the SBA's EIDL program. However, SBA expects such impact to be minimal as only a small number of businesses in those industries received such loans during fiscal years 2018-2020. Additionally, most of those businesses were below the reduced size standards. Since this program is contingent on the occurrence and severity of a disaster in the future, SBA cannot make a precise estimate of this impact. However, based on the disaster loan data for fiscal years 2018-2020, SBA estimates that, under Alternative Option One, on an annual basis, five EIDL loans, totaling about $0.2 million, would be unavailable to firms that no longer qualify as small under the decreases to size standards. Table 7 shows these results by sector. Small businesses becoming other than small if size standards were decreased might lose the benefits of reduced fees, and paperwork and compliance requirements that are available to small businesses through the Federal Government programs, but SBA has no data to quantify this impact. However, if agencies determine that SBA's size standards do not adequately serve the needs of their programs, they can establish a different size standard, with an approval from SBA, if they are required to use SBA's size standards for such programs. SBA may adopt mitigating measures to reduce the negative impact under the Alternative Option One. SBA could adopt one or more of the following three actions: (1) Accept decreases in size standards as suggested by the analytical results; (2) Decrease size standards by a smaller amount than the calculated values; and (3) Retain the size standards at their current levels. For example, in response to the 2008 Financial Crisis, SBA adopted a general policy in the first five-year comprehensive size standards review to not lower any size standard (except to exclude dominant firms) even when the analytical results suggested the size standard should be lowered. Currently, because of the economic challenges presented by the COVID-19 pandemic and the measures taken to protect public health, in this final rule, SBA has decided to adopt the same general policy of not lowering size standards in the ongoing second five-
                    ( print page 35880)
                    year comprehensive size standards review as well. Nevertheless, the impact on the overall loan activity is likely to be de minimis because SBA estimates that the majority of firms currently eligible for its loan programs would continue to remain eligible under the reduced size standards. SBA's regulations specify that NAICS codes for the Wholesale Trade and Retail Trade industries shall not be used to classify Federal Government acquisition for supplies (13 CFR 121.402(b)). As such, for purposes of Federal contracting, the size standard for all industries in the Wholesale Trade and Retail Trade sectors is 500 employees under SBA's nonmanufacturer rule (13 CFR 121.406(b)). Thus, SBA estimates that any decreases to size standards as part of this rulemaking will not impact the market for Federal contracts. Transfer Impacts of Decreasing Size Standards Under Alternative Option One If the size standards were decreased under Alternative Option One, it may result in a redistribution of loans between the newly-qualified small businesses and small businesses under the current size standards. However, SBA estimates this impact to be de minimis as participants in SBA's financial assistance programs are on average much smaller than their industry size standards and SBA's loans are not disbursed based on a competitive process. Moreover, this rule would not have an impact on Federal contract dollars awarded to small businesses since SBA's regulations specify that NAICS codes for the Wholesale and Retail Trade industries shall not be used to classify Government acquisition for supplies. While SBA cannot estimate with certainty the actual outcome of the gains and losses among different groups of businesses from this redistribution, it can identify several probable impacts. With a smaller pool of small businesses under the decreases to size standards, some SBA's resources to be otherwise awarded to small businesses may be diverted to other uses or programs. However, since the total benefit provided through this program is contingent on the availability of funds and the occurrence and severity of a disaster in the future, SBA cannot make a meaningful estimate of this impact. Net Impact of Alternative Option One To estimate the net impacts of adopting Alternative Option One, SBA followed the same methodology used to evaluate the impacts of the increasing size standards (see Table 6). However, under Alternative Option One, SBA used the calculated size standards instead of the adopted increases to determine the impacts of changes to current thresholds. The impacts of the increases of size standards were already shown in Table 6. Similarly, the impacts of the decreases of size standards were also already presented in Table 7. Table 8, Net Impacts of Size Standards Changes under Alternative Option One, presents the net impacts of adopting the calculated size standards under Alternative Option One. Table 8—Net Impacts of Size Standards Changes Under Alternative Option One
Sector 42
Sector 44-45
TotalNo. of industries with changes to size standards
60
63
123Total no. of small business under the current size standards (2012 Economic Census)
278,263
630,397
908,660Additional firms qualifying as small under size standards (2012 Economic Census)
−2,427
−1,080
−3,507% of additional firms qualifying as small relative to total current small businesses
−0.9%
−0.2%
−0.4%Total no. of 7(a) and 504 loans to small businesses (FY 2018-2020)
2,665
7,206
9,871Total amount of 7(a) and 504 loans to small businesses (FY 2018-2020)
$1,706
$3,732
$5,438Estimated no. of additional 7(a) and 504 loans to newly- qualified small firms
−26
0
−26Estimated additional 7(a) and 504 loan amount to newly- qualified small firms ($ million)
−$16.7
−$4.2
−$20.9% increase to 7(a)and 504 loan amount relative to the total amount of 7(a) and 504 loans to small businesses
−1.0%
−0.1%
−0.4%Total no. of EIDL loans to small businesses (FY 2018-2020) *
123
438
561Total amount of EIDL loans to small businesses (FY 2018-2020) *
$7.4
$20.9
$28.3Estimated no. of additional EIDL loans to newly-qualified small firms *
−1
−1
−2Estimated additional EIDL loan amount to newly-qualified small firms ($ million) *
−$0.04
−$0.01
−$0.01% increase to EIDL loan amount relative to the total amount of EIDL loans to small businesses *
−0.5%
0.0%
0.01%* Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.
 As shown in Table 8, based on the 2012 Economic Census, SBA estimates that in 123 industries in NAICS Sectors 42 and 44-45 for which the analytical results suggested to change size standards, about 3,500 firms would lose their small business size status under Alternative Option One. That represents about 0.4% of all firms classified as small under the current size standards in those industries. Based on SBA's loan data for fiscal years 2018-2020, the total number of 7(a) and CDC/504 loans will decrease by 26 loans, while the total loan amount will decrease by about $21 million. This is a 0.4% decrease of the 7(a) and CDC/504 loan amounts relative to the baseline. Firms' participation under SBA's EIDL loan program will be affected as well. Since the benefit provided through this program is contingent on the occurrence and severity of a disaster in the future, SBA cannot make a precise estimate of this impact. However, based on the EIDL loan program data for fiscal years 2018-2020, SBA estimates that the number of EIDL loans will decrease by two loans, while the total loan amount will decrease by about $0.01 million. This is a 0.01% decrease of the EIDL loan amounts relative to the baseline. Table 8 provides these results by NAICS sector. Alternative Option Two: Retaining All Current Size Standards Under this option, given the current COVID-19 pandemic, as discussed elsewhere, SBA considered retaining the current levels of all size standards even though the analytical results suggested changing them. Under this option, as the current situation develops, SBA will be able to assess new data available on economic indicators and SBA loans as well. When compared to the baseline, there is a net impact of zero (
                    *i.e.,*
                     zero 
                    ( print page 35881)
                    benefit and zero cost) for retaining all size standards. However, this option would cause otherwise qualified small businesses to forgo various small business benefits (
                    *e.g.,*
                     access to capital and other benefits) that become available to them under the option of increasing 57 and retaining 80 size standards adopted in this final rule. Moreover, retaining all size standards under this option would also be contrary to the SBA's statutory mandate to review and adjust, every five years, all size standards to reflect current industry and market conditions. Retaining all size standards without required periodic adjustments would increasingly exclude otherwise eligible small firms from small business benefits. Congressional Review Act Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. SBA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the CRA cannot take effect until 60 days after it is published in the 
                    **Federal Register**
                    . OMB's Office of Information and Regulatory Affairs has determined that this rule is not a “major rule” as defined by 5 U.S.C. 804(2). Final Regulatory Flexibility Analysis According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, when an agency issues a rulemaking, it must prepare a regulatory flexibility analysis to address the impact of the rule on small entities. This final rule may have a significant impact on a substantial number of small businesses in the industries covered by this final rule. As described above, this final rule may affect small businesses seeking loans under SBA's 7(a), CDC/504, and EIDL loan programs, and assistance under other Federal small business programs. Immediately below, SBA sets forth a final regulatory flexibility analysis (FRFA) of this final rule addressing the following questions: (1) What is the need for, and objectives of the rule?; (2) What are significant issues raised by the public comments in response to the initial regulatory flexibility analysis, assessment of the agency of such issues, and any changes made in the proposed rule as a result of such comments?; (3) What's the agency's response to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration in response to the proposed rule and description of any change made to the proposed rule in the final rule as a result of the comments?; (4) What is SBA's description and estimate of the number of small businesses to which the rule will apply?; (5) What are the projected reporting, record keeping, and other compliance requirements of the rule?; (6) What are the relevant Federal rules that may duplicate, overlap, or conflict with the rule?; (7) What alternatives will allow SBA to accomplish its regulatory objectives while minimizing the economic impact on small businesses? *1. What is the need for, and objectives, of the rule?* Changes in industry structure, technological changes, productivity growth, mergers and acquisitions, and updated industry definitions have changed the structure of many the industries covered by this final rule. Such changes can be enough to support revisions to current size standards for some industries. Based on the analysis of the latest data available, SBA believes that the size standards adopted in this final rule more appropriately reflect the size of businesses that need Federal assistance. The 2010 Jobs Act also requires SBA to review every five years all size standards and make necessary adjustments to reflect market conditions. *2. What are the significant issues raised by the public comments in response to the initial regulatory flexibility analysis, assessment of the agency of such issues, and any changes made in the proposed rule as a result of such comments?* SBA did not receive any public comments to the initial regulatory flexibility analysis it provided in the proposed rule. *3. What is the agency's response to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration in response to the proposed rule and description of any change made to the proposed rule in the final rule as a result of the comments*
                    ? SBA did not receive any comments from the Chief Counsel for Advocacy of the Small Business Administration in response to the proposed rule. *4. What is SBA's description and estimate of the number of small businesses to which the rule will apply, or an explanation of why no such estimate is available?* Based on data from the 2012 Economic Census, SBA estimates that there are about 380,184 small firms covered by this rulemaking under industries with adopted changes to size standards. Under this final rule, SBA estimates that an additional 2,000 businesses will be defined as small. *5. What are the projected reporting, record keeping and other compliance requirements of the rule?* The size standard changes in this final rule impose no additional reporting or record keeping requirements on small businesses. However, qualifying for Federal procurement and a number of other programs requires that businesses register in the System for Award Management (SAM) and self-certify that they are small at least once annually (48 CFR 52.204-13 (the Federal Acquisition Regulation (FAR)). For existing contracts, small business contractors are required to update their SAM registration as necessary to ensure that they reflect the contractor's current status (FAR 52.219-28). Businesses are also required to verify that their SAM registration is current, accurate, and complete with the submission of an offer for every new contract (FAR 52.204-7 and 52.204-8). Therefore, businesses opting to participate in those programs must comply with SAM requirements. Changes in small business size standards do not result in additional costs associated with SAM initial registration or annual recertification. Changing size standards alters the access to SBA's programs that assist small businesses but does not impose a regulatory burden because they neither regulate nor control business behavior. *6. What are the relevant Federal rules that may duplicate, overlap, or conflict with the rule?* Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 632(a)(2)(c), Federal agencies must use SBA's size standards to define a small business, unless specifically authorized by statute to do otherwise. In 1995, SBA published in the 
                    **Federal Register**
                     a list of statutory and regulatory size standards that identified the application of SBA's size standards as well as other size standards used by Federal agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any Federal rule that would duplicate or conflict with establishing size standards. However, the Small Business Act and SBA's regulations allow Federal agencies to develop different size standards if they believe that SBA's size standards are not appropriate for their 
                    ( print page 35882)
                    programs, with the approval of SBA's Administrator (13 CFR 121.903). The Regulatory Flexibility Act authorizes an agency to establish an alternative small business definition, after consultation with the Office of Advocacy of the U.S. Small Business Administration (5 U.S.C. 601(3)). *7. What alternatives will allow SBA to accomplish its regulatory objectives while minimizing the impact on small entities?* By law, SBA is required to develop numerical size standards for establishing eligibility for Federal small business assistance programs. Other than varying size standards by industry and changing the size measures, no practical alternative exists to the systems of numerical size standards. However, SBA considered two alternatives to increasing 57 and maintaining 80 size standards at their current levels. The first alternative SBA considered was adopting size standards revisions based solely on the analytical results. In other words, the size standards of 57 industries for which the analytical results suggest raising size standards would be raised. However, the size standards of 66 industries for which the analytical results suggest lowering them would be lowered. This would cause a significant number of small businesses to lose their small business status in both Sectors 42 and 44-45 (see Table 7). Under the second alternative, in view of the COVID-19 pandemic, SBA considered retaining all size standards at the current levels, even though the analytical results suggested increasing 57 and decreasing 66 size standards. SBA believes retaining all size standards at their current levels would be more onerous for small businesses than the option of increasing 57 and retaining 80 size standards. Postponing the adoption of the higher calculated size standards in 57 industries would be detrimental for otherwise small businesses in terms of access to various small business benefits, including access to SBA's financial assistance programs and exemptions from paperwork and other compliance requirements. Executive Order 13563 Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. A description of the need for this regulatory action and benefits and costs associated with this action, including possible distributional impacts that relate to Executive Order 13563, is included above in the Regulatory Impact Analysis under Executive Order 12866. Additionally, Executive Order 13563, section 6, calls for retrospective analyses of existing rules. The review of size standards in the industries covered by this final rule is consistent with section 6 of Executive Order 13563 and the 2010 Jobs Act, which requires SBA to review all size standards and make necessary adjustments to reflect market conditions. Specifically, the 2010 Jobs Act requires SBA to review at least one-third of all size standards during every 18-month period from the date of its enactment (September 27, 2010) and to review all size standards not less frequently than once every five years, thereafter. SBA had already launched a comprehensive review of size standards in 2007. In accordance with the Jobs Act, in early 2016, SBA completed the first five-year review of all small business size standards, except those for agricultural enterprises previously set by Congress, and made appropriate adjustments to size standards for a number of industries to reflect current Federal and industry market conditions. Prior to 2007, the last time SBA conducted a comprehensive review of all size standards was during the late 1970s and early 1980s. SBA issued a white paper entitled “Size Standards Methodology” and published a notification in the April 11, 2019, edition of the 
                    **Federal Register**
                     (84 FR 14587) to advise the public that the document is available for public review. The “Size Standards Methodology” white paper explains how SBA establishes, reviews, and modifies its receipts-based and employee-based small business size standards. The methodology also provides descriptions of methodologies SBA employs to adjust monetary-based size standards for inflation and to update size standards to adopt the OMB's quinquennial NAICS revisions. SBA considered all input, suggestions, recommendations, and relevant information obtained from industry groups, individual businesses, and Federal agencies in developing size standards for those industries covered by this final rule. SBA received a total of nine comments to the proposed rule. In the Discussion of Comments section of this final rule, SBA summarizes comments received on the proposed rule and provides its responses. Executive Order 12988 This action meets applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect. Executive Order 13132 For purposes of Executive Order 13132, SBA has determined that this final rule will not have substantial, direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, SBA has determined that this final rule has no federalism implications warranting preparation of a federalism assessment. Paperwork Reduction Act For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this final rule will not impose any new reporting or record keeping requirements. List of Subjects in 13 CFR Part 121 Administrative practice and procedure
Government procurement
Government property
Grant programs—business
Individuals with disabilities
Loan programs—business
Reporting and recordkeeping requirements
Small businesses
 For the reasons set forth in the preamble, SBA amends 13 CFR part 121 as follows: PART 121—SMALL BUSINESS SIZE REGULATIONS
 1.The authority citation for part 121 is revised to read as follows: Authority:
                        15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and 694a(9); 15 U.S.C. 9012. 2.In § 121.201, amend the table “Small Business Size Standards by NAICS Industry” by revising entries “423140,” ”423330,” “423460,” “423520,” “423620,” “423730,” “423740,” “423820,” “423840,” “423850,” “423860,” “423920,” “423930,” “423940,” “424110,” “424450,” “424520,” “424590,” “424690,” “424710,” “425110,” “425120,” “441310,” “441320,” “442291,” “442299,” “443141,” “444130,” “444210,” “444220,” “445291,” “445292,” “445299,” “445310,” “446110,” “446130,” “446191,” “446199,” “447190,” “448110,” “448150,” “448190,” “448310,” “448320,” “451110,” “451120,” “451140,” “451211,” “451212,” “452311,” “453220,” “453310,” “453910,” “453920,” “453998,” “454210,” and “454390” to read as follows: § 121.201
  
 Small Business Size Standards by NAICS Industry
NAICS codes
NAICS U.S. industry title
Size
                                     standards in 
                                     millions of 
                                     dollars
Size
                                     standards in 
                                     number of 
                                     employees*         *         *         *         *         *         ***Sector 42—Wholesale Trade***         *         *         *         *         *         ***Subsector 423—Merchant Wholesalers, Durable Goods***         *         *         *         *         *         *423140
Motor Vehicle Parts (Used) Merchant Wholesalers

125*         *         *         *         *         *         *423330
Roofing, Siding, and Insulation Material Merchant Wholesalers

225*         *         *         *         *         *         *423460
Ophthalmic Goods Merchant Wholesalers

175*         *         *         *         *         *         *423520
Coal and Other Mineral and Ore Merchant Wholesalers

200*         *         *         *         *         *         *423620
Household Appliances, Electric Housewares, and Consumer Electronics Merchant Wholesalers

225*         *         *         *         *         *         *423730
Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers

175423740
Refrigeration Equipment and Supplies Merchant Wholesalers

125*         *         *         *         *         *         *423820
Farm and Garden Machinery and Equipment Merchant Wholesalers

125*         *         *         *         *         *         *423840
Industrial Supplies Merchant Wholesalers

125423850
Service Establishment Equipment and Supplies Merchant Wholesalers

125423860
Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers

175*         *         *         *         *         *         *423920
Toy and Hobby Goods and Supplies Merchant Wholesalers

175423930
Recyclable Material Merchant Wholesalers

125423940
Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers

125*         *         *         *         *         *         ***Subsector 424—Merchant Wholesalers, Nondurable Goods**424110
Printing and Writing Paper Merchant Wholesalers

225*         *         *         *         *         *         *424450
Confectionery Merchant Wholesalers

225*         *         *         *         *         *         *424520
Livestock Merchant Wholesalers

125424590
Other Farm Product Raw Material Merchant Wholesalers

175*         *         *         *         *         *         *424690
Other Chemical and Allied Products Merchant Wholesalers

175424710
Petroleum Bulk Stations and Terminals

225( print page 35884)*         *         *         *         *         *         ***Subsector 425—Wholesale Electronic Markets and Agents and Brokers**425110
Business to Business Electronic Markets

125425120
Wholesale Trade Agents and Brokers

125**Sector 44-45—Retail Trade***         *         *         *         *         *         ***Subsector 441—Motor Vehicle and Parts Dealers***         *         *         *         *         *         *441310
Automotive Parts and Accessories Stores
$25.0441320
Tire Dealers
22.5**Subsector 442—Furniture and Home Furnishings Stores***         *         *         *         *         *         *442291
Window Treatment Stores
10.0442299
All Other Home Furnishings Stores
29.5**Subsector 443—Electronics and Appliance Stores**443141
Household Appliance Stores
19.5*         *         *         *         *         *         ***Subsector 444—Building Material and Garden Equipment and Supplies Dealers***         *         *         *         *         *         *444130
Hardware Stores
14.5*         *         *         *         *         *         *444210
Outdoor Power Equipment Stores
8.5444220
Nursery, Garden Center, and Farm Supply Stores
19.0**Subsector 445—Food and Beverage Stores***         *         *         *         *         *         *445291
Baked Goods Stores
14.0445292
Confectionery and Nut Stores
17.0445299
All Other Specialty Food Stores
9.0445310
Beer, Wine, and Liquor Stores
9.0**Subsector 446—Health and Personal Care Stores**446110
Pharmacies and Drug Stores
33.0*         *         *         *         *         *         *446130
Optical Goods Stores
26.0446191
Food (Health) Supplement Stores
20.0446199
All Other Health and Personal Care Stores
8.5**Subsector 447—Gasoline Stations***         *         *         *         *         *         *447190
Other Gasoline Stations
29.5**Subsector 448—Clothing and Clothing Accessories Stores**448110
Men's Clothing Stores
22.5( print page 35885)*         *         *         *         *         *         *448150
Clothing Accessories Stores
29.5448190
Other Clothing Stores
27.5*         *         *         *         *         *         *448310
Jewelry Stores
18.0448320
Luggage and Leather Goods Stores
33.5**Subsector 451—Sporting Good, Hobby, Book and Music Stores**451110
Sporting Goods Stores
23.5451120
Hobby, Toy, and Game Stores
31.0*         *         *         *         *         *         *451140
Musical Instrument and Supplies Stores
20.0451211
Book Stores
31.5451212
News Dealers and Newsstands
20.0**Subsector 452—General Merchandise Stores***         *         *         *         *         *         *452311
Warehouse Clubs and Supercenters
41.5*         *         *         *         *         *         ***Subsector 453—Miscellaneous Store Retailers***         *         *         *         *         *         *453220
Gift, Novelty, and Souvenir Stores
12.0453310
Used Merchandise Stores
12.5453910
Pet and Pet Supplies Stores
28.0453920
Art Dealers
14.5*         *         *         *         *         *         *453998
All Other Miscellaneous Store Retailers (except Tobacco Stores)
10.0**Subsector 454—Nonstore Retailers***         *         *         *         *         *         *454210
Vending Machine Operators
18.5*         *         *         *         *         *         *454390
Other Direct Selling Establishments
13.0*         *         *         *         *         *         *
 Isabella Casillas Guzman, Administrator.


# Footnotes

1.
    
                         On December 21, 2021, the U.S. Office of Management and Budget (OMB) published its “Notice of NAICS 2022 Final Decisions . . .” (86 FR 72277), accepting the Economic Classification Policy Committee (ECPC) recommendations, as outlined in the July 2, 2021, 
                        **Federal Register**
                         notice (86 FR 35350), for the 2022 revisions to the North American Industry Classification System (NAICS), . . . .” In the near future, SBA will issue a proposed rule to adopt the OMB's NAICS 2022 revisions for its table of size standards. SBA anticipates updating its size standards with the NAICS 2022 revisions, effective October 1, 2022. Back to Citation
 2.
    
                         The analysis of the disaster loan data excludes physical disaster loans that are available to anyone regardless of size, disaster loans issued to nonprofit entities, and EIDLs issued under the COVID-19 relief program. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances. Thus, the disaster loan analysis presented here pertains to the regular EIDL loans only. SBA estimates impacts of size standards changes on EIDL loans by calculating the ratio of businesses getting EIDL loans to total small businesses (based on the Economic Census data) and multiplying it by the number of impacted small firms. Due to data limitations, for FY 2019-20, some loans with both physical and EIDL loan components could not be broken into the physical and EIDL loan amounts. In such cases, SBA applied the ratio of EIDL amount to total (physical loan + EIDL) amount using FY 2016-18 data to the FY 2019-20 data to obtain the amount attributable to the EIDL loans. Back to Citation


[FR Doc. 2022-12512 Filed 6-13-22; 8:45 am] BILLING CODE 8026-03-P