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contains regulatory documents having general

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Rules and Regulations Federal Register

51559 

Vol. 70, No. 168 

Wednesday, August 31, 2005 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

5 CFR Parts 5501 and 5502 

RIN 3209–AA15 

Supplemental Standards of Ethical 

Conduct and Financial Disclosure 

Requirements for Employees of the 

Department of Health and Human 

Services 

AGENCY: Department of Health and 

Human Services (HHS). 

ACTION: Final rule. 

SUMMARY: The Department of Health and 

Human Services, with the concurrence 

of the Office of Government Ethics 

(OGE), is amending the HHS regulation 

that supplements the OGE Standards of 

Ethical Conduct. This final rule adopts, 

with certain revisions, the changes 

made to 5 CFR part 5501 in the interim 

final rule that was published on 

February 3, 2005, at 70 FR 5543. After 

considering comments to that 

rulemaking, this final rule: Clarifies the 

definition of an ‘‘employee of a 

component;’’ Amends the outside 

activity prior approval requirements 

applicable to employees of the Food and 

Drug Administration (FDA) and the 

National Institutes of Health (NIH); 

Revises prior approval information 

collection requirements and the waiver 

provision applicable to the outside 

activities prohibitions; Removes 

professional associations and other 

science and health-related organizations 

from the list of entities with which NIH 

employees are prohibited from engaging 

in outside activities; Adds exceptions to 

the NIH outside activities prohibition 

for delivering a class lecture as part of 

a regularly scheduled university course, 

serving on data and safety monitoring 

boards and grant and scientific review 

committees, and presenting in Grand 

Rounds; Limits the prohibition on 

holding financial interests in 

substantially affected organizations to 

senior NIH employees, their spouses, 

and minor children only, permits 

investments in such organizations that 

do not exceed $15,000, and allows 

holdings capped at $50,000 in sector 

mutual funds that concentrate their 

investments in the securities of 

substantially affected organizations; and 

Revises the outside award limitations 

for senior NIH employees by applying 

an official responsibility test for matters 

potentially involving an award donor. In 

addition, the financial disclosure 

reporting requirements specified in new 

part 5502 that were added by the 

interim final rule of February 3, 2005, at 

70 FR 5543, and amended by an interim 

final rule that was published on June 28, 

2005, at 70 FR 37009, are adopted as 

final, subject to certain amendments. 

The requirement to file a supplemental 

disclosure of financial interests in 

substantially affected organizations is 

refocused to apply to NIH employees 

who file a public or confidential 

financial disclosure report and other 

NIH employees who are designated as 

investigators in an NIH clinical research 

protocol approved by an institutional 

review board. The due date for the 

initial report is also changed. 

DATES: This final rule is effective August 

31, 2005. 

FOR FURTHER INFORMATION CONTACT: 

Edgar M. Swindell, Associate General 

Counsel, Office of the General Counsel, 

Ethics Division, Department of Health 

and Human Services, telephone (202) 

690–7258, fax (202) 205–9752. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Standards of Ethical Conduct for 

Employees of the Executive Branch, 5 

CFR part 2635, establish uniform rules 

of ethical conduct applicable to all 

executive branch personnel. Pursuant to 

5 CFR 2635.105, an agency may, with 

the approval of the Office of 

Government Ethics, supplement those 

standards with additional rules that the 

agency determines are necessary and 

appropriate, in view of its programs and 

operations, to fulfill the purposes of part 

2635. On July 30, 1996, with the 

concurrence and co-signature of the 

OGE Director, HHS published at 61 FR 

39755 a final rule codified at 5 CFR part 

5501 establishing supplemental 

standards of ethical conduct for its 

employees. The 1996 final rule was 

amended by an interim final rule with 

a request for comments that was 

published at 70 FR 5543 on February 3, 

2005. 

The interim final rule focused 

primarily on rules applicable to 

employees of the National Institutes of 

Health related to outside activities, 

financial holdings, and awards. 

Regulatory action was taken to address 

significant concerns about employee 

conduct in those areas which had been 

the subject of media reports and 

Congressional hearings. The resulting 

provisions generated considerable 

comment and prompted press coverage 

of employee objections, possible adverse 

effects on hiring and retention, and 

public reaction across a broad spectrum 

of viewpoints. The comments have been 

carefully considered and will be 

addressed more specifically below. 

In addition, the Executive Branch 

Financial Disclosure Regulation, 5 CFR 

part 2634, specifies uniform rules 

governing the public and confidential 

financial disclosure systems established 

under the Ethics in Government Act. 

Pursuant to 5 CFR 2634.103, an agency 

may, subject to the prior written 

approval of the Office of Government 

Ethics, issue supplemental financial 

disclosure regulations that are necessary 

to address special or unique 

circumstances. The interim final rule 

amended chapter XLV of title 5 by 

adding new part 5502 to provide for an 

annual reporting by all employees of 

financial and other information 

concerning outside activities and a 

supplemental disclosure by all FDA and 

NIH employees with respect to 

prohibited financial interests. The latter 

disclosure requirement for NIH 

employees is being changed to correlate 

with revisions to the prohibited 

holdings rule. 

Although this rulemaking confirms as 

final, with significant revisions, the 

amendments made by the interim final 

rule, the regulation will be reviewed 

within one year to evaluate its 

continued adequacy and effectiveness in 

relation to current agency 

responsibilities. As indicated in the 

preamble to the interim final rule at 70 

FR 5543, those aspects of the rule 

governing outside activities continue to 

be under review for the remainder of the 

year indicated in that discussion. 

51560 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

II. Summary of Comments 

Approximately 1200 of the more than 

1400 comments timely submitted were 

from NIH employees, and about 70 

comments were submitted by spouses 

and other family members of NIH 

employees. The remaining comments 

were submitted by health care 

professionals and scientific investigators 

at various universities and health care 

facilities, and a number of private sector 

entities, such as professional 

associations, other non-profit 

organizations, and corporations. The 

Department of Health and Human 

Services has considered each of the 

comments received. Those determined 

to be significant are discussed in further 

detail below in the context of the 

sections to which they pertain. 

Many commenters submitted their 

views on more than one provision, and 

some provided multiple observations 

about a single provision. About 365 

comments specifically addressed the 

outside activity limitations, and slightly 

more, about 385, focused on the 

prohibited holdings rule. The awards 

provision generated no specific reaction. 

With respect to outside activities, 

some commenters objected to the 

increased paperwork and administrative 

burden that would be generated by the 

expanded prior approval requirement. 

They also expressed a more generalized 

concern that the restrictions would stifle 

the ability of government scientists to 

interact with their private sector 

counterparts, thus depriving them of 

personal and professional development 

opportunities and slowing the 

translation of scientific discoveries into 

tangible benefits for the public. 

Regarding the prohibited holdings 

provision, many commenters 

questioned the relative fairness of the 

regulatory approach and its application 

to all NIH employees as well as their 

spouses and minor children. Some 

commenters who understood the need 

to divest holdings in substantially 

affected organizations urged a longer 

grace period within which to comply. 

A number of intramural NIH 

employees, collectively known as the 

Assembly of Scientists, and others 

recommended as an alternative to the 

interim final rule that conduct 

provisions be established for each of 

several groups or categories of 

employees. The five or other number of 

categories recommended were intended 

to represent large groups of employees 

with relatively similar duties and 

authorities. Applicable rules would be 

tailored to each category in an effort to 

respond to the issues of greatest risk for 

each group. While the Department did 

not wholly accept these proposals, a 

number of revisions are being made in 

recognition of the differences between 

employees as to rank, duties, and their 

level of responsibility for matters 

affecting public health and clinical 

research protocols involving human 

subjects. 

Comments, either of style or 

substance, that were generally 

supportive or generally critical of the 

interim final rule are not discussed in 

detail. The latter category of comments 

far exceeded the former, but a few 

commenters expressed support for the 

rule asserting that the provisions would 

reduce or eliminate financial motives 

that might be perceived as influencing 

scientific and medical research. Those 

submissions that offered no constructive 

comments, but simply inquired about 

the application of the interim final rule 

to the commenter’s own situation, such 

as whether a particular company was a 

significantly affected organization or 

whether an aspect of the rule applied to 

the commenter, are not addressed. 

Those comments that discussed topics 

unrelated to government ethics, pointed 

to implementation issues that have been 

resolved, or were without substantive 

merit are also not discussed. Nor does 

this discourse specifically refer to 

comments that demonstrated a clear 

misunderstanding of the purpose or 

language of the interim final rule or of 

other applicable government ethics laws 

or regulations, except when such 

comments highlighted the need for NIHspecific standards. Among such 

comments were those suggesting that 

the Government must compensate 

employees for the costs of complying 

with regulations intended to prevent 

financial conflicts of interest, statements 

that new laws could not legally change 

the rules for current NIH employees, 

comments suggesting that it would not 

be appropriate for the Department to 

hold NIH employees to any standard 

that exceeds the standards applicable to 

employees of non-governmental entities, 

and comments indicating an 

unawareness of the exceptions to the 

outside activity and awards provisions 

applicable to NIH employees and to the 

financial holdings provision applicable 

to NIH employees and their spouses and 

minor children. Finally, comments 

regarding the administration of the 

ethics program at the NIH that are 

unrelated to substance or procedures in 

the interim final rule are not addressed. 

III. Analysis of the Amendments 

A. Supplemental Standards of Ethical 

Conduct 

Section 5501.101 General 

Paragraph (c) is amended to provide 

that the terms used in part 5501, unless 

otherwise defined, have the same 

meaning as those defined in parts 2635 

and 2640. The paragraph previously 

referred only to part 2635. The change 

reflects the use within § 5501.110 of 

several terms defined in part 2640, such 

as holdings, pension plan, and sector 

mutual fund. 

Section 5501.102 Designation of HHS 

Components as Separate Agencies 

The change to this section clarifies an 

ambiguity in § 5501.102(b)(1). The 

definition of ‘‘employee of a 

component’’ can be interpreted to apply 

the supplemental ethics rules applicable 

to a designated agency component to all 

employees of a division or region of the 

Office of the General Counsel if the 

division or region is principally 

responsible for advising or representing 

that component. This formulation does 

not comport with the current 

assignment of responsibilities within 

OGC. For example, regional offices have 

generalist, rather than componentspecific responsibilities. Some divisions 

have multiple branches, and then only 

one branch within a division can be said 

to focus primarily on a particular 

component. Accordingly, 

§ 5501.102(b)(1) is amended to focus on 

the regularly assigned duties and 

responsibilities of an individual 

employee rather than that person’s 

location within the organization. 

Section 5501.106 Outside Employment 

and Other Outside Activities 

Section 5501.106(c)(3)(ii)(B) originally 

provided for an exception to the FDA 

prohibited outside activities rule to 

allow clerical or similar services (such 

as cashier or janitorial services) for retail 

stores, such as supermarkets, drug 

stores, or department stores, that might 

otherwise be significantly regulated 

organizations due to their sales of FDAregulated products. As drafted, the 

exception applied only where clerical or 

similar services were performed for 

retail stores. An employee who worked 

on the weekends as a plumber could not 

respond to an emergency repair call to 

fix a leaky pipe at a bottling plant or a 

pharmaceutical manufacturing facility. 

Although seemingly innocuous business 

relationships can raise conflicts and 

impartiality concerns, subjecting such 

activities to an absolute prohibition 

with only a narrow exception tied to 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51561 

employment at retail stores does not 

appear to be warranted. 

With respect to the parallel provision 

governing NIH employees at § 5501.109, 

several commenters urged that 

appropriate exceptions be adopted to 

accommodate activities that pose a 

diminished risk for potential conflicts or 

other ethics concerns, such as 

performing plumbing or electrical work, 

providing protective or security 

services, and rendering other types of 

personal services that are unrelated to 

the substantive programmatic functions 

of their employing agency. The 

Department concurs in those comments 

and will apply the changes urged for 

NIH employees to FDA employees as 

well. Accordingly, this final rule revises 

the exception to the FDA prohibited 

outside activity rule at § 5501.106(c)(3) 

to permit employment that primarily 

involves manual or unskilled labor or 

utilizes talents, skills, or interests in 

areas unrelated to the substantive 

programmatic activities of the FDA, 

such as clerical work, retail sales, 

service industry jobs, building trades, 

maintenance, or similar services. For 

example, assuming the activity would 

not otherwise violate a Federal statute 

or regulation or result in recusals that 

would materially impair the employee’s 

ability to do his government job, an FDA 

employee covered by the rule would be 

permitted to work as a cashier at a retail 

drug store and ring up consumer 

purchases of soft drinks and 

prescription drugs, or as a truck driver 

who delivers such products to the 

retailer. However, § 5501.106(c)(3) will 

continue to prohibit a public or 

confidential filer at FDA from serving as 

a salesman for a beverage distributor or 

as a pharmaceutical company 

representative engaged in wholesale 

transactions. 

Section 5501.106(d)(2)(i) as amended 

by the interim final rule required FDA 

and NIH employees to obtain prior 

approval for any outside employment or 

self-employed business activity. Prior to 

the interim final rule, this requirement 

applied only to the FDA. A number of 

commenters objected to extending the 

requirement to the NIH, citing the 

increased paperwork and administrative 

burden. They claimed that the expanded 

prior approval requirement would 

discourage participation in outside 

activities and lead to a decrease in civic 

engagement in community groups, 

volunteer efforts, and non-profit 

organizations that allegedly pose no 

conflict of interest for NIH employees. 

Other commenters questioned the need 

to approve outside activities with no 

apparent connection to agency 

operations such as lawn mowing, 

teaching music, or selling real estate. 

Prior to the interim final rule, NIH 

employees were required only to obtain 

prior approval to engage in an outside 

activity that involved providing 

professional or consultative services; 

teaching, speaking, writing, or editing 

that related to an employee’s official 

duties under the government-wide 

standard, 5 CFR 2635.807, or that 

resulted from an invitation from a 

prohibited source; or serving as an 

officer, director, or board member. The 

interim final rule widened the scope of 

activities subject to prior approval for 

several reasons. Prior approval at the 

NIH was expanded primarily as a means 

to implement the prohibition in 

§ 5501.109 on outside activities with 

substantially affected organizations 

(SAO), supported research institutions 

(SRI), health care providers or insurers 

(HCPI), or related trade, professional, or 

similar associations (RTPSA). An 

approval process that focused only on 

professional or consultative services, 

teaching, speaking, writing, editing, or 

board service would not screen for 

prohibited activities with SAOs, SRIs, 

HCPIs, or RTPSAs that fell outside those 

enumerated categories. Moreover, 

activities considered less problematic, 

such as clerical work, protective 

services, or building maintenance, even 

when performed for organizations other 

than SAOs, SRIs, HCPIs, or RTPSAs, 

potentially could violate other 

supplemental provisions. For example, 

an NIH employee cannot work as a child 

care provider at a local Head Start 

agency if the employee’s salary is 

funded by an Administration for 

Children and Families (ACF) grant, or 

moonlight as a guard for a protective 

services contractor providing security 

for an FDA facility because 

§ 5501.106(c)(2) bars compensated 

employment in an HHS-funded activity. 

Thus, absent an expanded prior 

approval requirement, an employee 

might engage unintentionally in 

proscribed conduct. Prior approval also 

provided additional opportunities for a 

‘‘teaching point’’ where an individual 

employee could receive guidance about 

conflicts under 18 U.S.C. 208, 

appearance concerns under 5 CFR 

2635.502, and the use of public office 

for private gain addressed in 5 CFR 

2635.702. The restrictions on 

representing outside entities before the 

Government under 18 U.S.C. 203 and 

205 also could be stressed. 

Despite the benefits of requiring prior 

approval for all outside activities, many 

commenters questioned whether 

requiring advance permission to paint 

houses, teach piano, or coach a sports 

team, for example, was warranted. The 

Department concurs that such activities 

generally are unlikely to pose conflicts 

or other ethics concerns. Consideration 

was given to excluding these examples 

and a list of similar activities from the 

prior approval requirement using the 

existing authority in § 5501.106(d)(6), 

now codified as paragraph (d)(7). Upon 

further evaluation, the Department has 

decided to remove entirely the 

requirement that FDA and NIH 

employees must obtain prior approval 

for all outside activities. 

In its place, paragraph (d)(2) has been 

revised to require an FDA or NIH 

employee to obtain prior approval for 

any outside employment, as defined in 

5 CFR 2635.603(a), with, or any selfemployed business activity involving 

the sale or promotion of products or 

services of, any person or organization 

that is a prohibited source of the 

employee’s agency component. The 

term ‘‘prohibited source’’ is defined in 

5 CFR 2635.203(d) as any entity that 

seeks official action from, does business 

or seeks to do business with, or 

conducts activities regulated by the 

employee’s agency; has interests that 

may be substantially affected by the 

performance or nonperformance of the 

employee’s official duties; or is an 

organization the majority of whose 

members are such entities. The 

Department has designated separate 

agency components in § 5501.102 that 

define an ‘‘employee’s agency’’ for 

purposes of outside activity prior 

approval. The FDA and the NIH have 

been so designated. 

As a result of the revised prior 

approval requirement, if an outside 

activity does not involve professional or 

consultative services; teaching, 

speaking, writing, or editing that relates 

to official duties; or board service; an 

FDA or NIH employee no longer needs 

prior approval, unless the activity 

involves employment undertaken at the 

invitation of or performed for a 

prohibited source of the FDA or the NIH 

respectively. 

For FDA or NIH employees who 

previously were subject to a prior 

approval requirement for all outside 

activities, this distinction aligns the 

prior approval requirement more closely 

with those types of external entities that 

are most likely to pose conflicts or raise 

appearance concerns. By tailoring the 

prior approval requirement in this 

manner, however, not all potential 

violations will be detected, as was 

previously discussed. An NIH employee 

who seeks to moonlight as a guard at a 

Head Start grantee agency or for the 

contractor that provides protective 

services for FDA at the Parklawn 

51562 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

Building will not have to file an HHS 

520 prior approval form because the 

grantee and contractor are prohibited 

sources of ACF and FDA respectively, 

rather than NIH. This omission 

necessitates extensive training regarding 

the existing prohibitions in 

§§ 5501.106(c)(1) and (2) which bar 

employees from receiving compensation 

for assisting in the preparation of 

documents to be submitted to HHS or 

working in an HHS-funded activity. 

Nevertheless, this change in the prior 

approval requirement from that 

specified in the interim final rule 

considerably reduces the paperwork and 

administrative burden for FDA and NIH 

employees and their respective 

agencies, without unduly diminishing 

the ability of each agency to ensure 

compliance with applicable ethics laws 

and regulations. A prior approval 

requirement for FDA or NIH employees 

that focused on whether the proposed 

employment is to be conducted with a 

prohibited source of HHS, as opposed to 

the employee’s own component, would 

be unnecessarily broad, given the 

extensive reach of the Department’s 

operations in many sectors of the 

economy. Accordingly, this final rule 

correlates prior approval with those 

activities and sources of outside 

employment that have a more clearly 

demonstrable nexus to the employee’s 

work and that of the employing agency 

and hence the potential for ethics 

concerns. 

The prior approval exceptions for 

activities with political, religious, 

social, fraternal, or recreational 

organizations formerly contained in 

paragraphs (d)(1)(iii) and (d)(2)(ii) are 

now combined, placed in new 

paragraph (d)(3)(i), and made applicable 

to all categories within the general 

approval requirement in paragraph 

(d)(1), as well as to paragraph (d)(2). The 

addition of new paragraph (d)(3) 

necessitated the renumbering of the 

succeeding paragraphs. 

The amended paragraphs (d)(4)(ii)(D) 

through (d)(4)(ii)(O) specify information 

to be supplied by an employee who 

requests prior approval to engage in an 

outside activity. These paragraphs were 

edited without substantive change, with 

the exception of a new paragraph 

(d)(4)(ii)(F), which caused the 

subsequent subparagraphs to be 

redesignated. The new subparagraph (F) 

elicits travel reimbursement information 

separately from compensation because 

travel reimbursement is treated 

differently under various ethics rules 

depending upon the employee’s status 

and other circumstances. Subparagraph 

(I) is amended to focus solely on 

compensation and non-travel related 

cash or in-kind items. 

Paragraph (e) is amended to clarify 

that the designated agency ethics official 

may grant a written waiver of the 

prohibited outside activity rules to 

either an individual or a class of 

similarly situated persons. 

Section 5501.109 Prohibited Outside 

Activities Applicable to Employees of 

the National Institutes of Health 

Under § 5501.109(c)(1) of the interim 

final rule, subject to certain exceptions, 

all NIH employees were prohibited from 

engaging in employment (which 

includes serving as an officer, director, 

or other fiduciary board member, 

serving on a scientific advisory board or 

committee, and consulting or providing 

professional services) and compensated 

teaching, speaking, writing, or editing 

with a substantially affected 

organization (SAO), a supported 

research institution (SRI), a health care 

provider or insurer (HCPI), or a related 

trade, professional, or similar 

association (RTPSA). Employees were 

also prohibited from engaging in any 

self-employed business activity that 

involves the sale or promotion of 

products or services of an SAO or HCPI. 

A ‘‘substantially affected 

organization’’ was defined to include 

those entities, irrespective of corporate 

form, that are engaged in the research, 

development, or manufacture of 

biotechnological, biostatistical, 

pharmaceutical, or medical devices, 

equipment, preparations, treatments, or 

products. The term includes those 

organizations a majority of whose 

members are engaged in such activities, 

such as industry trade associations, and 

any other entity classified by the 

designated agency ethics official as a 

substantially affected organization. 

A ‘‘supported research institution’’

was defined as an educational 

institution or a non-profit independent 

research institute that within the last 

year or currently has applied for, 

proposed, or received an NIH grant, 

cooperative agreement, research and 

development contract, or cooperative 

research and development agreement 

(CRADA). 

A ‘‘health care provider or insurer’’

was defined comprehensively to include 

the types of entities that are eligible to 

receive payments under the Medicare 

program for the provision of health care 

items or services and those risk-bearing 

entities that offer health insurance or 

health benefits coverage. 

A ‘‘related trade, professional, or 

similar association’’ referred to a trade, 

professional, consumer, advocacy, or 

other organization, association, society, 

or similar group that is significantly 

involved in advancing the interests of 

persons or entities engaged in activities 

related to or affected by the health, 

scientific, or health care research 

conducted or funded by the NIH. 

The prohibited outside activities rules 

applicable to all NIH employees were 

intended to focus on those types of 

activities and external entities that may 

pose the most significant risk of 

potential conflicts. The need for 

prophylactic rules barring certain types 

of outside activities derived in part from 

the significant administrative burden 

inherent in case-by-case determinations 

and the difficulties encountered by nonscientific staff at NIH tasked with 

administering the ethics program. In 

order to advise whether an outside 

activity was related to an employee’s 

official duties, the ethics staff often had 

to differentiate scientific work 

performed as an official duty 

assignment from that proposed as an 

outside activity, a technical task for 

which they lacked the requisite 

expertise. See the discussion in the 

preamble to the interim final rule at 70 

FR 5548. 

A number of commenters asserted 

that the translation of NIH discoveries 

into viable and available medical 

advances to improve the public health 

would be hampered by the restriction 

on outside consulting and other 

collaborations with industry. Given that 

the interim final rule contained no 

provisions limiting the ability of NIH 

employees to engage officially in efforts 

to advance NIH discoveries, or to travel 

in their official capacities to present and 

discuss research findings (at the 

expense of others where appropriate 

under NIH policy), and contained a 

specific exception permitting employees 

to engage in outside activities involving 

efforts to commercialize invention rights 

waived to them by the agency, the basis 

for those comments is unclear. No 

changes have been made in response to 

such comments. 

Nevertheless, the Department has 

revised § 5501.109 to accommodate a 

significant number of comments from 

professional associations, constituent 

groups, university observers, employees 

and their families regarding the new 

restriction on employment, including 

consultation and board service, with 

‘‘related trade, professional or similar 

associations.’’ Specifically, the 

comments expressed concern that 

restrictions imposed on the ability of 

NIH employees to participate fully as 

members of the greater scientific 

community would negatively affect the 

public health because NIH scientists 

would become isolated from their 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51563 

counterparts in the private and 

academic sectors and ultimately a 

reduction in recruitment and retention 

at NIH would result. As noted in the 

preamble to the interim final rule at 70 

FR 5549, the Department fully 

appreciates that scientific exchange 

between professionals is a cornerstone 

of the scientific process, and that 

science is a collaborative endeavor that 

necessitates interaction between experts 

in their respective fields. 

Therefore, upon further consideration, 

outside activities with RTPSAs do not 

appear to raise the same concerns that 

underlie the prohibition on outside 

activities with SAOs, SRIs, and HCPIs. 

Although activities with health-related 

trade associations, such as those that 

represent health care providers or 

insurers, may present potential 

conflicts, the trade associations most 

directly interested in NIH research 

activities are those that represent the 

pharmaceutical, biotechnology, and 

medical device industries. Such trade 

associations are already covered by the 

prohibition on outside activities with 

SAOs due to the composition of their 

membership. In addition, serving as an 

officer or board member of, or 

consulting for, a professional 

association, an advocacy group, or a 

consumer organization, although not 

devoid of potential conflicts, presents 

financial interests and covered 

relationship issues distinct from those 

presented by employment or consulting 

with SAOs, SRIs, and HCPIs, the 

commercial interests of which are more 

directly affected by NIH research and 

funding activities. Consequently, in 

order to tailor more narrowly the scope 

of the outside activity prohibition, 

RTPSAs are deleted. Outside activities 

with RTPSAs that involve professional 

or consultative services, teaching, 

speaking, writing, editing, or board 

service or that are performed for a 

prohibited source of the employee’s 

agency nevertheless require prior 

approval and are subject to the 

substantive provisions governing 

outside activities under prior existing 

law. 

Section 5501.109(c)(3) of the interim 

final rule contained several exceptions 

designed to facilitate professional 

obligations and certain academic 

endeavors. These exceptions partially 

lifted the absolute bar on outside 

activities with the list of organizations 

described in § 5501.109(c)(1), but they 

did not affirmatively permit an activity 

that would otherwise violate Federal 

law or regulations, including 5 CFR 

parts 2635, 2636, and 5501. Specifically, 

exceptions were provided to allow, 

subject to the prior approval standard 

and the substantive provisions 

governing outside activities under prior 

existing law, participation in pursuits 

that are critical to maintaining technical 

proficiency, professional licenses, and 

academic credentials and disseminating 

scientific information, such as teaching 

involving multiple presentations at 

academic institutions, providing 

individual patient care, moderating or 

presenting at continuing professional 

education programs, and writing or 

editing scientific articles, textbooks, and 

treatises that are subjected to scientific 

peer review or a substantially equivalent 

editorial review process. The rule also 

contained exceptions for employment 

with, providing professional or 

consultative services to, or teaching, 

speaking, writing, or editing for, a 

political, religious, social, fraternal, or 

recreational organization. The rule also 

recognized that individuals may be 

employed in less problematic roles with 

outside entities such as providing 

clerical assistance, janitorial services, or 

unskilled labor. 

The exception to the outside activity 

prohibition in § 5501.109(c)(3)(iii) for 

clerical or similar services is amended 

to correspond with the changes to the 

FDA counterpart to this provision at 

§ 5501.106(c)(3)(ii)(B). 

This final rule identifies four 

additional activities as exceptions to the 

outside activity prohibition in order to 

promote important educational 

objectives and advance public health 

and safety. As with the existing 

exceptions, any outside activity 

excepted from the prohibition in 

§ 5501.109(c)(1) may be prohibited 

nonetheless if the activity would 

otherwise violate Federal law or 

regulations, including 5 CFR parts 2635, 

2636, and 5501. With this caveat 

understood, two changes refine the 

existing exceptions for teaching and 

continuing professional education. Two 

other changes permit employees to 

serve, under certain circumstances, on 

data and safety monitoring boards 

associated with clinical research 

protocols and to lend their expertise on 

grant and scientific review committees 

for external funding institutions. 

First, new § 5501.109(c)(3)(i)(B) 

permits compensation for a single class 

lecture delivered by the employee as 

part of a regularly scheduled course 

taught by an individual other than the 

employee at an accredited academic 

institution. Unlike the exception in 

paragraph (c)(3)(i)(A) for teaching a 

course involving multiple presentations, 

a compensated guest lecture delivered 

on a single occasion within the context 

of a college course is subject to the 

prohibition in 5 CFR 2635.807(a)(2)(i)(B) 

on accepting compensated teaching and 

speaking invitations extended primarily 

because of official position and the 

subject matter restrictions of 5 CFR 

2635.807(a)(2)(i)(E). The latter provision 

refers to activities the subject matter of 

which deals in significant part with the 

employee’s current or recent (within the 

last year) work assignments or any 

ongoing or announced policy, program, 

or operation of the agency. Similarly, 

the new exception for single lectures 

will not permit compensation for 

activity related to the employee’s 

official duties within the meaning of 

any other provisions in 5 CFR 

2635.807(a)(2)(i). Class lectures that 

would be prohibited as outside 

activities for these reasons may, in 

appropriate circumstances, be given as 

part of an employee’s official duties 

with supervisory approval. Class 

lectures permissible as compensated 

outside activities would be those that 

result from invitations extended 

primarily because of the employee’s 

expertise, that occur at universities 

lacking interests affected substantially 

by the employee’s discharge of official 

duties, and that convey broad 

knowledge about a particular scientific 

or clinical area, and not those that focus 

on the employee’s own work or other 

cutting-edge research conducted at the 

NIH. 

Second, the current continuing 

professional education exception 

addresses only one aspect of the 

instructional continuum in the medical 

profession, i.e., those seminars that are 

open to practicing physicians. 

Presentations geared to an audience 

composed of medical students and 

resident physicians-in-training, 

commonly known as Grand Rounds, are 

not covered, yet the educational 

interaction of NIH employees with this 

population is as critically important as 

participation in continuing medical 

education (CME) instruction, 

particularly given the potential to 

recruit attendees to work at the NIH. 

Accordingly, new paragraph (c)(3)(vii) 

incorporates a Grand Rounds exception 

with appropriate limitations to preclude 

participation in such activities if an 

SAO or speakers’ bureau affiliated with 

an SAO sponsors the program or the 

employee’s presentation other than 

through an unrestricted educational 

grant. 

As with other exceptions in paragraph 

(c)(3), the exception for compensated 

Grand Rounds presentations is subject 

to the limitations in 5 CFR 2635.807. 

Accordingly, the invitation to deliver a 

Grand Rounds presentation cannot have 

been tendered to the employee 

primarily because of the employee’s 

51564 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

official position or extended by an 

entity that has interests that may be 

substantially affected by the 

performance or nonperformance of the 

employee’s official duties. The subject 

matter of the Grand Rounds 

presentation must not deal in significant 

part with the employee’s recent (within 

the last year) or current assignments or 

any ongoing or announced policy, 

program, or operation of the NIH. The 

information conveyed may not draw 

substantially on ideas or official data 

that are nonpublic information. 

Third, NIH employees often have 

played a critical role in serving on data 

and safety monitoring boards (DSMB) 

for clinical trials conducted at 

universities and medical research 

institutes. These boards monitor 

incoming statistical and other data on 

patient outcomes and adverse events 

that may be associated with a drug, 

biologic, or an intervention under 

review in a clinical trial. The DSMB 

members are experts in relevant 

disciplines, such as trial design, 

biostatistics, and bioethics, who are not 

directly involved in conducting the 

study. Although the DSMB members 

generally are considered a group 

separate from the sponsor (entity that 

funds the trial), the organizer (entity 

that selects the members), or the 

investigators (lead scientific staff that 

conducts the clinical research), DSMBs 

follow various models with respect to 

the degree of independence from the 

sponsor. See Arthur S. Slutsky et al., 

Data Safety and Monitoring Boards, 350 

N. Eng. J. Med. 1143 (2004); Food and 

Drug Administration, Guidance for 

Clinical Trial Sponsors on the 

Establishment and Operation of Clinical 

Trial Data Monitoring Committees 

(2001), draft guidance available at 

http://www.fda.gov/cber/gdlns/ 

clindatmon.pdf; National Institutes of 

Health, Further Guidance on Data and 

Safety Monitoring for Phase I and Phase 

II Trials (2000), available at http:// 

grants.nih.gov/grants/guide/notice-files/ 

NOT-OD-00-038.html; and National 

Institutes of Health, NIH Policy for Data 

and Safety Monitoring (1998), available 

at http://grants.nih.gov/grants/guide/ 

notice-files/not98-084.html. 

The exception is intended to facilitate 

DSMB service, while maintaining the 

restrictions if a substantially affected 

organization selects the members of the 

DSMB or pays for their service, or if the 

protocol is funded by the NIH. The 

exception is also unavailable if the 

activity would violate the HHS-wide 

prohibitions in 5 CFR 5501.106(c)(1) 

and (2) relating to the compensated 

preparation of documents intended for 

submission to HHS and working for pay 

on an HHS-funded activity. 

Fourth, NIH employees also have 

served on grant and scientific review 

committees for private foundations and 

other grant-making entities to assist 

those institutions in awarding their own 

funds to qualified applicants. NIH 

employees lend their considerable 

expertise in judging scientific merit, 

project feasibility, and other factors. As 

a result of the interim final rule, private 

foundations that funded scientific 

research activities would have been 

considered an RTPSA inasmuch as they 

are organizations that are ‘‘significantly 

involved in advancing the interests of 

persons or entities engaged in activities 

related to or affected by the health, 

scientific, or health care research 

conducted or funded by the NIH.’’ 70 FR 

5560. Serving on grant and scientific 

review committees for private 

foundations and other grant-making 

entities is in the public interest, even 

where done in a personal capacity. 

Accordingly, the rule is amended to 

provide an appropriate exception. 

For the most part, permitting this 

activity has been accomplished by 

removing RTPSAs from the list of 

organizations described in 

§ 5501.109(c)(1); however, because an 

SRI or an HCPI can also make grant 

awards, an exception in new paragraph 

(c)(3)(viii) is added. For example, a 

private foundation that makes research 

grants might itself receive a training or 

conference grant from the NIH and thus 

may be considered an SRI. Absent the 

exception, an employee might be 

precluded from serving on a body that 

assists the private foundation in 

awarding research grants. Similarly, a 

university or hospital within the SRI 

and HCPI categories might receive a 

donation or bequest intended for the 

purpose of making research grants. 

Those entities also may convene groups 

to advise on the selection of grantees. 

The exception does not permit an 

employee to serve on a grant or 

scientific review committee for a grant 

award or program funded by the NIH. In 

addition, if the employee is paid to 

serve on a grant or scientific review 

committee, such service cannot involve 

the preparation of documents intended 

for submission to HHS within the 

meaning of § 5501.106(c)(1), and the 

grant award or program about which the 

committee provides input cannot be an 

HHS-funded activity as described in 

§ 5501.106(c)(2). A further caveat is that 

a substantially affected organization 

cannot select the members of the grant 

or scientific review committee or pay 

them for their service. Provided that the 

funding institution retains control of 

member selection and payment, this 

caveat is not intended to preclude such 

service if a substantially affected 

organization provides an unrestricted 

grant to the funding institution. 

Paragraphs (c)(4) and (c)(5), which 

provided a transitional grace period 

with an opportunity for an extension of 

time for terminating outside activities 

prohibited by paragraph (c)(1), are 

removed. The time periods calculated 

from the date of publication of the 

interim final rule, February 3, 2005, 

have passed, and such activities should 

now have ceased. 

Section 5501.110 Prohibited Financial 

Interests Applicable to Employees of the 

National Institutes of Health 

Section 5501.110 of the interim final 

rule prohibited employees of the NIH 

who file either a public or confidential 

financial disclosure report, and their 

spouses and minor children, from 

owning stock and having other financial 

interests in substantially affected 

organizations, subject to certain 

exceptions. All other NIH employees (as 

well as those confidential filers 

excluded from coverage by the rule) 

were subject to a $15,000 limit on the 

holding or acquisition of such interests 

and certain other restrictions. All NIH 

employees were permitted to invest 

freely in widely diversified, publicly 

traded mutual funds, even if those funds 

owned shares in substantially affected 

organizations. The rule also allowed 

spouses, and employees who came from 

industry, to retain financial interests 

derived from industry employment, 

such as stock options distributed as 

compensation, provided any resulting 

conflicts were managed appropriately. 

Although these provisions were no 

more onerous than existing financial 

holdings restrictions that have applied 

to FDA employees since 1972, the 

commenters urged the Department to 

treat NIH employees differently than 

their counterparts at FDA because the 

NIH is not primarily a regulatory 

agency. They also criticized the 

application of the prohibited holdings 

rule to all NIH employees regardless of 

their relative seniority within the 

organization or the nature of their 

official duties. Some commented on the 

focus on substantially affected 

organizations for all employees rather 

than on office supplies, computer 

equipment, and travel-related 

businesses with which certain 

employees may have conflicts under 

pre-existing government-wide rules. A 

number of commenters asked why the 

rules applied to spouses and minor 

children who have no impact on the 

pharmaceutical and biotechnology 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51565 

industries, and questioned more 

generally the exclusion of an entire 

economic sector from family investment 

and retirement portfolios. 

Many comments demonstrated that 

the existing law governing conflicts of 

interest is not well understood. In 

arguing for elimination of the prohibited 

holdings rule, a number of commenters 

assumed incorrectly that a return to the 

status quo existing prior to the interim 

final rule invariably would preserve 

their ability to hold financial interests in 

substantially affected organizations, 

without realizing that each employee’s 

situation would still be subject to a caseby-case analysis that could result in a 

directed divestiture. Others believed 

incorrectly that potential conflicts can 

be managed with full disclosure or that 

no violation can occur as long as the 

employee’s actions do not actually move 

stock prices. Apparently unaware that 

those who give advice, conduct 

research, or recommend action in a 

government matter can be fully 

culpable, others saw no need to limit 

stock holding because they believed 

erroneously that only decision makers 

would have financial conflicts. Other 

commenters criticized a mechanistic or 

legalistic approach to conflicts without 

fully comprehending that Federal law 

prescribes very specific standards. 

In implementing those standards, the 

interim final rule imposed a 

significantly changed environment for 

handling potential conflicts of interest 

arising from financial interests in 

substantially affected organizations. 

Congressional oversight and media 

reports included references to situations 

in which the connection to industry 

derived from financial holdings, and not 

solely from outside consulting. The new 

rule replaced a case-by-case evaluation 

of an employee’s duties and financial 

interests with a bright-line rule designed 

to eliminate financial conflicts 

altogether. The rule encompassed the 

holdings of a spouse and minor children 

because their interests are imputed to 

the employee under the criminal 

conflict of interest statute, 18 U.S.C. 

208. The changes wrought by the 

interim final rule were intended to 

protect both the employee and the 

agency more effectively. 

Regulations governing the conduct of 

the employees of any agency must 

reflect the agency’s effect on its 

constituents and stakeholders. The 

pharmaceutical, biotechnology, and 

health care industries have changed 

substantially over the past two decades, 

and continue to evolve at a rapid pace. 

The NIH does not exist or work in a 

vacuum. Every day, the NIH announces 

findings or results, scientific priorities, 

or strategic relationships or plans that 

impact companies in those fields. Any 

agency that has this power must hold 

itself and its employees to an 

appropriate standard. Given the 

complexity of the financial interests in 

those industries, monitoring and 

identifying conflict of interest situations 

on a case-by-case basis was no longer 

considered feasible for the NIH. 

The interim final rule recognized no 

difference between ‘‘regulatory’’ and 

‘‘non-regulatory’’ agencies because the 

legal standards applicable to employee 

conduct do not make such distinctions. 

Government agencies, without regard to 

how their functions may be 

characterized, exercise significant 

influence over the activities of nonFederal entities. A core mission of the 

NIH is to provide the basic science that 

forms the foundation upon which nonFederal research and development may 

proceed. Moreover, the potential to 

affect the financial interests of 

pharmaceutical and biotechnology 

companies through clinical trials can be 

significant. Most importantly, the rule 

was intended to assure the public in 

general, and human subjects enrolled in 

NIH trials in particular, that public 

health decisions would be made 

without even the appearance of 

influence from extraneous financial 

interests. 

Prohibited holdings regulations 

similar to those applicable to the NIH 

have been considered an appropriate 

means to manage potential conflicts and 

address appearance concerns at various 

government agencies or agency 

subcomponents. The prohibitions at 

those agencies also apply to the 

financial interests of the employee, 

spouse, and minor children, and are 

enforced without regard to the nature of 

the individual employee’s duties. For 

example, the Department of Housing 

and Urban Development (HUD) 

prohibits employee ownership of 

financial interests in housing and other 

real estate projects that HUD subsidizes 

and bars investments in Fannie Mae 

stock or the securities of other 

companies that are collateralized by 

Fannie Mae securities. 5 CFR 7501.104. 

At the Department of the Treasury, the 

Office of the Comptroller of the 

Currency bans investments in the 

banking industry. 5 CFR 3101.108. 

Various components of the 

Environmental Protection Agency (EPA) 

preclude investments in the automotive, 

pesticide, and mining industries, and 

EPA information resources management 

employees cannot own stock in data 

management, computer, or information 

processing firms. 5 CFR 6401.102. At 

the Department of Transportation, 

Federal Railroad Administration 

employees cannot invest in railroads, 

and Federal Aviation Administration 

employees are barred from owning stock 

in an airline or aircraft manufacturing 

company, or in their suppliers of 

components or parts. 5 CFR 6001.104. 

Against this background, retaining a 

prohibited holdings regulation at the 

NIH is amply justified, and comments 

urging the elimination of the provision 

have not been adopted. Some 

commenters recommended retargeting 

the prohibition toward various subsets 

of the employee population. These 

suggestions have received serious 

consideration, although a number of 

concerns remain. Retargeting the 

financial holdings prohibition will 

require most employees to acquire a 

more detailed understanding of the law 

and assume a greater degree of personal 

responsibility for their actions. 

Under the criminal conflict of interest 

statute, 18 U.S.C. 208, and OGE 

regulations in 5 CFR parts 2635 and 

2640, employees, as well as their 

spouses and minor children, generally 

are not able to own stock valued above 

certain limits if the employees’ official 

duties require them to be involved in 

particular matters that either involve a 

company in which they, their spouse, or 

minor children own stock or that would 

affect the financial interests of such a 

company or industry. Absent a waiver 

under § 208(b), conflicting assets worth 

more than these limits can be retained 

only if the employee, without materially 

impairing his ability to perform the 

duties of his position, can recuse from 

working on a matter that would affect 

the company, and provided that the 

arrangement does not adversely affect 

the agency’s ability to accomplish its 

mission. 

The task of monitoring investments 

and recusing appropriately is 

particularly challenging in an era where 

mergers, acquisitions, joint ventures, 

licensing agreements, and corporate 

name changes are common in the 

biomedical industry. One of the goals of 

the prohibited holdings rule was to 

avoid putting employees into a position 

where, in a fast paced work 

environment, they might participate in 

a government matter at their peril. 

Further, it had become increasingly 

difficult to sort through, on a case-bycase basis, these individual 

circumstances and police such 

situations to the degree required to 

maintain public confidence. These 

concerns remain, but there are other 

means to attain the desired objective, 

including increased staffing and 

resources to address the problem, a 

massive and continuous effort at 

51566 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

training employees, and holding 

employees personally accountable for 

knowing their holdings and recognizing 

the financial consequences of agency 

actions in which they may participate. 

The majority of commenters encouraged 

the agency to retarget the prohibited 

holdings rule. Many expressed their 

belief that stricter enforcement of prior 

rules would have avoided the problems. 

They observed that the public 

perception of the NIH is dependent 

largely upon the actions of its 

leadership and of those who are most 

directly involved in making key 

decisions that affect human subjects 

enrolled in clinical trials. A regulatory 

scheme that insulated senior employees 

from financial ties to industry was urged 

as a more measured response to the 

ethics concerns at the NIH. 

The NIH has committed additional 

staff and resources to ethics program 

administration. Detailed training 

development is underway, and a 

renewed commitment to enforce the 

rules and to pursue appropriate 

corrective actions is evident. In this 

context, the Department has decided to 

adopt the recommendation that the 

prohibited holdings rule be limited to 

senior employees. 

For this purpose, ‘‘senior employee’’

will include the NIH Director and the 

NIH Deputy Director; members of the 

senior staff within the Office of the 

Director who report directly to the NIH 

Director; the Directors, the Deputy 

Directors, Scientific Directors, and 

Clinical Directors of each NIH institute 

and center (IC); extramural program 

officials who report directly to an IC 

Director; and any employee of 

equivalent levels of decision-making 

responsibility who is designated as a 

senior employee by the designated 

agency ethics official or the NIH 

Director, in consultation with the 

designated agency ethics official. 

Senior employees, their spouses, and 

minor children will be barred from 

having financial interests in 

substantially affected organizations, 

subject to the exceptions for pensions 

and other employee benefits, diversified 

mutual funds, and exceptional 

circumstances that existed under the 

interim final rule. In addition, because 

the OGE regulatory exemptions in 5 CFR 

2640.201 and 2640.202 allow an 

employee to participate in certain types 

of matters depending upon the value of 

sector mutual fund interests and 

publicly traded securities within the 

investment portfolio of the employee, 

spouse, and minor children, § 5501.110 

has been amended to allow senior 

employees to take advantage of the OGE 

exemptions. Under current de minimis 

thresholds, and subject to certain 

limitations, senior employees, their 

spouses, and minor children will be 

permitted to retain investments in SAOs 

capped at $15,000 in any one company. 

Although they may own multiple 

$15,000 holdings in SAOs, provided 

their cumulative interests in SAOs and 

SAO sector funds are less than 50 

percent of their total investments, senior 

employees will be required, through 

broker instructions or otherwise, to 

monitor capital appreciation and divest 

any portion that exceeds $15,000. 

Similarly, total investments in sector 

funds that state in a prospectus the 

objective or practice of concentrating 

their investments in the securities of 

substantially affected organizations will 

be capped at $50,000. In calculating the 

fair market value of any holdings, 

including stock options, that are subject 

to these exemption limits, guidance 

issued by OGE for reporting asset values 

for financial disclosure purposes will 

apply. Other generally accepted 

valuation principles, not inconsistent 

with OGE guidance, also may be 

utilized. 

The $15,000 cap will adjust 

automatically to any change in the 

exemption limit for matters involving 

parties at 5 CFR 2640.202(a), and the 

$50,000 cap will change in tandem with 

the sector fund monetary limit at 5 CFR 

2640.201(b). As was the case in the 

interim final rule, although the dollar 

amounts are linked, an NIH exception 

and an OGE exemption may not be 

identical. For example, not all financial 

interests valued at $15,000 or less will 

be covered by the OGE regulatory 

exemption. Although the NIH exception 

permits a senior employee to hold a 

financial interest in a non-publicly 

traded company (assuming all the other 

criteria in the section are also satisfied), 

the OGE regulatory exemption only 

applies to securities in publicly traded 

companies or long-term Federal 

Government or municipal securities. 

Similarly, the NIH exception would 

permit ownership of stock options 

valued at $15,000 or less, but the OGE 

regulatory exemption for interests in 

securities would not apply. 

Accordingly, senior employees are 

reminded that even though § 5501.110 

may allow retention of certain assets 

that would otherwise be prohibited, the 

financial interest may nevertheless be 

problematic under 18 U.S.C. 208. 

Absent a regulatory exemption that 

specifically addresses the financial 

interest, a recusal, a divestiture, or an 

individual waiver may be required. 

The exceptional circumstances 

exception to the prohibited holdings 

rule, formerly found in paragraph (d)(3) 

of the interim final rule and now 

codified in the final rule as paragraph 

(d)(4), is amended to clarify that an 

exception may be granted to a class of 

individuals. Although the prohibition in 

§ 5501.110(c) has been significantly 

narrowed in its application only to 

senior employees, their spouses and 

minor children, class exceptions may be 

appropriate where the identified class 

shares a common factual pattern and the 

requisite reasons for an exception are 

similarly evident. An example might be 

an exception for financial interests held 

by minor children of new entrant senior 

employees where the minors are within 

a certain number of months of attaining 

the age of majority, and the conflict 

arising from the retention of the 

financial interests can be managed 

through appropriate recusals for a timelimited period. Another example might 

address the inheritance by a senior 

employee of a prohibited financial 

interest a few months before retirement. 

Section 5501.111 Awards Tendered to 

Employees of the National Institutes of 

Health 

Section 5501.111, as added by the 

interim final rule, mandated that a 

senior NIH employee would not be 

permitted to accept a gift with an 

aggregate market value of more than 

$200, or cash or an investment interest, 

that constituted an award or incident to 

an award given because of the 

employee’s official position or from a 

prohibited source. (Although often 

referred to as an award, an honor or 

other recognition that entailed only the 

receipt of a plaque or other item of little 

intrinsic value presented at a gathering 

of interested persons could be accepted 

if the presentation item satisfied the 

criteria for exclusion from the gift 

definition in 5 CFR 2635.203(b), and the 

free attendance, including food, 

refreshments, and entertainment, at the 

event met the exception requirements 

for widely attended gatherings and other 

events in 5 CFR 2635.204(g)). 

Section 5501.111 prohibited nonsenior employees from accepting awards 

from a person, organization, or other 

donor that: is seeking official action 

from the employee, any subordinate of 

the employee, or any agency component 

or subcomponent under the employee’s 

official responsibility; does business or 

seeks to do business with any agency 

component or subcomponent under the 

employee’s official responsibility; 

conducts activities substantially affected 

by any agency component or 

subcomponent under the employee’s 

official responsibility; or is an 

organization a majority of whose 

members fall into one of the above 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51567 

categories. In other words, such NIH 

employees could not accept a cash 

award or one valued at more than $200 

that was tendered by a donor that had 

matters pending under the employee’s 

official responsibility, either 

individually or before subordinates in 

the employee’s chain of command, 

irrespective of whether the matter 

would ever reach the employee for 

advice or decision. 

Upon further consideration, given that 

the official position and prohibited 

source criteria for precluding awards to 

senior employees added little to the 

official responsibility test applicable to 

every other employee, section 5501.111 

is amended to apply one uniform rule 

for all employees based on whether the 

award donor has matters pending under 

the employee’s official responsibility. 

The section incorporates the definition 

of ‘‘official responsibility’’ contained in 

18 U.S.C. 202(b): ‘‘the direct 

administrative or operating authority, 

whether intermediate or final, and 

either exercisable alone or with others, 

and either personally or through 

subordinates, to approve, disapprove, or 

otherwise direct Government action.’’

B. Supplemental Financial Disclosure 

Regulations 

5502.105 Agency Procedures 

The provision governing reporting 

procedures is amended to codify the 

authority of the designated agency 

ethics official or separate agency 

components, with the concurrence of 

the designated agency ethics official, to 

prescribe standard forms for the 

collection of information deemed 

necessary or appropriate to implement 

part 5502. 

5502.106 Supplemental Disclosure of 

Prohibited Financial Interests 

Applicable to Employees of the Food 

and Drug Administration 

Section 5502.106, as added by the 

interim final rule, required FDA and 

NIH employees to report prohibited 

financial interests, including those 

interests that are covered by an 

applicable exception, within 30 days of 

joining the agency, being reassigned 

from another part of HHS, or acquiring 

such interests, for example, through 

marriage, gift, or inheritance. This final 

rule specifies that the value of such 

interests must be reported. It also 

removes from § 5502.106 those 

provisions applicable to NIH employees 

and places them in a new § 5502.107 in 

order to correlate with the changes 

made to the NIH prohibited holdings 

regulation. 

5502.107 Supplemental Disclosure of 

Financial Interests in Substantially 

Affected Organizations Applicable to 

Employees of the National Institutes of 

Health 

New § 5502.107 carries forward the 

same reporting obligations previously 

contained in § 5502.106, and clarifies 

that the value of the reported interests 

must be disclosed, but revises the class 

of NIH employees subject to the 

reporting requirement. With the changes 

made to 5 CFR 5501.110, subjecting 

every employee to an extensive and 

burdensome disclosure obligation is no 

longer required. Although only senior 

NIH employees are now subject to a 

prohibited holdings rule, § 5502.107 

will require disclosure of financial 

interests in substantially affected 

organizations by filers of public and 

confidential financial disclosure reports 

and those employees who are not filers 

but who serve as clinical investigators 

designated in an NIH clinical research 

protocol approved by an institutional 

review board. The term ‘‘clinical 

investigator’’ means the principal 

investigator, accountable investigator, 

lead associate investigator, medical 

advisory investigator, associate 

investigators, and other subinvestigators 

who make direct and significant 

contributions to the NIH clinical study, 

and may include registered nurses and 

allied health professionals so 

designated. Those employees who file 

public or confidential financial 

disclosure reports or who serve as 

clinical investigators possess budgetary, 

grant-making, or research authority, 

exercise discretion at higher levels 

within the agency, or are in positions 

with the potential to affect significantly 

the life and safety of human subjects. 

Because holdings in substantially 

affected organizations may continue to 

pose conflicts for this cohort of 

employees, and divestiture on a case-bycase basis may be required, disclosure 

continues to play a critical role in ethics 

program administration. Accordingly, 

depending on the number of clinical 

research protocols approved each year, 

approximately one-third to one-half of 

the NIH employee population will 

remain subject to the disclosure 

requirement specified in § 5502.107. 

New § 5502.107 also restarts the 

initial reporting date for on-duty 

employees subject to the revised 

disclosure rule. Public filers, 

confidential filers, and clinical 

investigators on duty at the NIH on the 

effective date of this final rule must 

report in writing on or before October 

31, 2005, their holdings in substantially 

affected organizations held on the date 

the report is filed. Under the prior 

regulation, the initial report presented a 

snapshot of an employee’s holdings as 

of the effective date of the rule. As a 

result of filing extensions, a 

considerable gap in time could make the 

information on the filed report out-ofdate. Accordingly, under new 

§ 5502.107, the initial disclosure report 

must be current as of the date of filing. 

IV. Matters of Regulatory Procedure 

Regulatory Flexibility Act 

The Department of Health and Human 

Services has determined under the 

Regulatory Flexibility Act, 5 U.S.C. 

chapter 6, that this rule will not have a 

significant economic impact on a 

substantial number of small entities 

because the rule prescribes personnel 

provisions that primarily affect HHS 

employees. 

Paperwork Reduction Act 

The Paperwork Reduction Act, 44 

U.S.C. chapter 35, does not apply to 

these final rule amendments because 

they do not contain information 

collection requirements that are subject 

to approval by the Office of 

Management and Budget. 

Congressional Review Act 

The Department of Health and Human 

Services has determined that this 

rulemaking is not a rule as defined in 5 

U.S.C. 804, and, thus, does not require 

review by Congress. 

Executive Orders 12866 and 12988 

Because this rule relates to HHS 

personnel, it is exempt from the 

provisions of Executive Orders 12866 

and 12988. 

List of Subjects 

5 CFR Part 5501 

Conflict of interests, Ethics, Executive 

branch standards of conduct, Financial 

interests, Government employees, 

Outside activities. 

5 CFR Part 5502 

Conflict of interests, Ethics, 

Government employees, Outside 

activities, Reporting and recordkeeping 

requirements. 

51568 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

Dated: August 25, 2005. 

Edgar M. Swindell, 

Designated Agency Ethics Official, 

Department of Health and Human Services. 

Dated: August 25, 2005. 

Michael O. Leavitt, 

Secretary, Department of Health and Human 

Services. 

Approved: August 26, 2005. 

Marilyn L. Glynn, 

General Counsel, Office of Government 

Ethics. 

■ For the reasons discussed in the 

preamble, the Department of Health and 

Human Services, with the concurrence 

of the Office of Government Ethics, 

adopts as a final rule the interim final 

rule that amended 5 CFR part 5501 and 

added 5 CFR part 5502, which was 

published at 70 FR 5543 on February 3, 

2005, and which was amended by the 

interim final rule published at 70 FR 

37009 on June 28, 2005, with the 

following changes: 

Title 5—[Amended] 

Chapter XLV—Department of Health and 

Human Services 

PART 5501—SUPPLEMENTAL 

STANDARDS OF ETHICAL CONDUCT 

FOR EMPLOYEES OF THE 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

■ 1. The authority citation for part 5501 

continues to read as follows: 

Authority: 5 U.S.C. 301, 7301, 7353; 5 

U.S.C. App. (Ethics in Government Act of 

1978); 25 U.S.C. 450i(f); 42 U.S.C. 216; E.O. 

12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 

215, as modified by E.O. 12731, 55 FR 42547, 

3 CFR, 1990 Comp., p. 306; 5 CFR 2635.105, 

2635.203, 2635.403, 2635.802, 2635.803. 

■ 2. Amend § 5501.101 by revising the 

first sentence of the introductory text in 

paragraph (c) to read as follows: 

§ 5501.101 General. 

* * * * * 

(c) Definitions. Unless a term is 

otherwise defined in this part, the 

definitions set forth in 5 CFR parts 2635 

and 2640 apply to terms in this part. 

* * * 

* * * * * 

■ 3. Amend § 5501.102 by revising 

paragraph (b)(1) to read as follows: 

§ 5501.102 Designation of HHS 

components as separate agencies. 

* * * * * 

(b) Definitions—(1) Employee of a 

component includes, in addition to 

employees actually within a component, 

an employee of the Office of the General 

Counsel whose regularly assigned duties 

and responsibilities principally involve 

the provision of legal services to the 

relevant component with respect to 

substantive programmatic issues. 

* * * * * 

■ 4. Amend § 5501.106 as follows: 

■ a. Revise paragraph (c)(3)(ii)(B) to read 

as set forth below; 

■ b. Revise paragraphs (d)(1) and (d)(2) 

to read as set forth below; 

■ c. Redesignate paragraphs (d)(3) 

through (d)(6) as (d)(4) through (d)(7); 

■ d. Add new paragraph (d)(3) to read 

as set forth below; 

■ e. Revise redesignated paragraphs 

(d)(4)(ii)(D) and (d)(4)(ii)(E) to read as 

set forth below; 

■ f. Redesignate paragraphs (d)(4)(ii)(F) 

through (d)(4)(ii)(N) as (d)(4)(ii)(G) 

through (d)(4)(ii)(O); 

■ g. Revise redesignated paragraphs 

(d)(4)(ii)(I) through (d)(4)(ii)(K) to read 

as set forth below; 

■ h. Add new paragraph (d)(4)(ii)(F) to 

read as set forth below; 

■ i. Remove the words ‘‘paragraph 

(d)(3)’’ in the second sentence of 

redesignated paragraph (d)(6) and add, 

in their place, the words ‘‘paragraph 

(d)(4)’’; 

■ j. Revise paragraph (e) to read as set 

forth below. 

The additions and revisions read as 

follows: 

§ 5501.106 Outside employment and other 

outside activities. 

* * * * * 

(c) * * * 

(3) * * * 

(ii) * * * 

(B) The employment primarily 

involves manual or unskilled labor or 

utilizes talents, skills, or interests in 

areas unrelated to the substantive 

programmatic activities of the FDA, 

such as clerical work, retail sales, 

service industry jobs, building trades, 

maintenance, or similar services. 

* * * * * 

(d) Prior approval for outside 

employment and other outside 

activities-(1) General approval 

requirement. Except as provided in 

paragraph (d)(3) of this section, an 

employee shall obtain written approval 

prior to engaging, with or without 

compensation, in outside employment, 

including self-employed business 

activities, or other outside activities in 

which the employee seeks to: 

(i) Provide consultative or 

professional services, including service 

as an expert witness; 

(ii) Engage in teaching, speaking, 

writing, or editing that: 

(A) Relates to the employee’s official 

duties within the meaning of 5 CFR 

2635.807(a)(2)(i)(B) through (E); or 

(B) Would be undertaken as a result 

of an invitation to engage in the activity 

that was extended to the employee by a 

person or organization that is a 

prohibited source within the meaning of 

5 CFR 2635.203(d), as modified by the 

separate HHS component agency 

designations in § 5501.102; or 

(iii) Provide services to a non-Federal 

entity as an officer, director, or board 

member, or as a member of a group, 

such as a planning commission, 

advisory council, editorial board, or 

scientific or technical advisory board or 

panel, which requires the provision of 

advice, counsel, or consultation. 

(2) Additional approval requirement 

for employees of the Food and Drug 

Administration and the National 

Institutes of Health. In addition to the 

general approval requirements set forth 

in paragraph (d)(1) of this section, an 

employee of the Food and Drug 

Administration or the National 

Institutes of Health shall obtain written 

approval prior to engaging, with or 

without compensation, in any outside 

employment, as defined in 5 CFR 

2635.603(a), with, or any self-employed 

business activity involving the sale or 

promotion of products or services of, 

any person or organization that is a 

prohibited source of the employee’s 

component agency. 

(3) Exceptions to prior approval 

requirements. (i) Notwithstanding the 

requirements of paragraphs (d)(1) and 

(d)(2) of this section, prior approval is 

not required for participation in the 

activities of a political, religious, social, 

fraternal, or recreational organization 

unless: 

(A) The activity or the position held 

in the organization requires the 

provision of professional services 

within the meaning of paragraph (b)(3) 

of this section; or 

(B) The activity is performed for 

compensation other than the 

reimbursement of expenses. 

(ii) Notwithstanding the requirements 

of paragraphs (d)(1) and (d)(2) of this 

section, prior approval is not required 

for participation in an employment or 

other outside activity that has been 

exempted under paragraph (d)(7) of this 

section. 

(4) * * * 

(ii) * * * 

(D) A description of how the 

employee’s official duties will affect the 

interests of the person for whom or 

organization with which the proposed 

activity will be performed; 

(E) The name and address of the 

person for whom or organization with 

which the work or activity will be done, 

including the location where the 

services will be performed; 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51569 

(F) A statement as to whether travel 

is involved and, if so, whether the 

transportation, lodging, meals, or per 

diem will be at the employee’s expense 

or provided by the person for whom or 

organization with which the work or 

activity will be done, and a description 

of the arrangements and an estimate of 

the costs of items to be furnished or 

reimbursed by the outside entity; 

(G) The estimated total time that will 

be devoted to the activity. If the 

proposed outside activity is to be 

performed on a continuing basis, a 

statement of the estimated number of 

hours per year; for other employment, a 

statement of the anticipated beginning 

and ending date; 

(H) A statement as to whether the 

work can be performed entirely outside 

of the employee’s regular duty hours 

and, if not, the estimated number of 

hours and type of leave that will be 

required; 

(I) The method or basis of any 

compensation to be received (e.g., fee, 

honorarium, retainer, salary, advance, 

royalty, stock, stock options, non-travel 

related expenses, or other form of 

remuneration tendered in cash or inkind in connection with the proposed 

activity) from the person for whom or 

organization with which the work or 

activity will be done; 

(J) The amount of any compensation 

to be received from the person for whom 

or organization with which the work or 

activity will be done; 

(K) The amount and date of any 

compensation received, or due for 

services performed, within the current 

and previous six calendar years 

immediately preceding the submission 

of the request for approval from the 

person for whom or organization with 

which the work or activity will be done 

(including any amount received or due 

from an agent, affiliate, parent, 

subsidiary, or predecessor of the 

proposed payor); 

(L) A statement as to whether the 

compensation is derived from an HHS 

grant, contract, cooperative agreement, 

or other source of HHS funding or 

attributed to services related to an 

activity funded by HHS, regardless of 

the specific source of the compensation; 

(M) For activities involving the 

provision of consultative or professional 

services, a statement indicating whether 

the client, employer, or other person on 

whose behalf the services are performed 

is receiving, or intends to seek, an HHS 

grant, contract, cooperative agreement, 

or other funding relationship; 

(N) For activities involving teaching, 

speaking, or writing, a syllabus, outline, 

summary, synopsis, draft or similar 

description of the content and subject 

matter involved in the course, speech, 

or written product (including, if 

available, a copy of the text of any 

speech) and the proposed text of any 

disclaimer required by 5 CFR 

2635.807(b)(2) or by the instructions or 

manual issuances authorized under 

paragraph (d)(7) of this section; and 

(O) Such other relevant information 

that the designated agency ethics official 

or, with the concurrence of the 

designated agency ethics official, each 

of the separate agency components of 

HHS listed in § 5501.102(a) determines 

is necessary or appropriate in order to 

evaluate whether a proposed activity is 

likely to involve conduct prohibited by 

statute or Federal regulations, including 

5 CFR part 2635 and this part. 

* * * * * 

(6) Duration of approval. Approval 

shall be effective for a period not to 

exceed one year from the date of 

approval. Upon a significant change in 

the nature of the outside activity or in 

the employee’s official position or 

duties, the employee shall submit a 

revised request for approval using the 

procedure in paragraph (d)(4) of this 

section. * * * 

* * * * * 

(e) Waivers. The designated agency 

ethics official may grant a written 

waiver, for an individual or class of 

similarly situated individuals, from any 

prohibited outside activity provision in 

this section or in § 5501.109 based on a 

determination that the waiver is not 

inconsistent with part 2635 of this title 

or otherwise prohibited by law and that, 

under the particular circumstances, 

application of the prohibition is not 

necessary to avoid the appearance of 

misuse of position or loss of impartiality 

or otherwise to ensure confidence in the 

impartiality and objectivity with which 

agency programs are administered. An 

individual or class waiver under this 

paragraph may impose appropriate 

conditions, such as requiring execution 

of a written disqualification. 

■ 5. Amend § 5501.109 as follows: 

■ a. Remove paragraph (b)(6); 

■ b. Redesignate paragraphs (b)(7) 

through (b)(11) as (b)(9) through (b)(13); 

■ c. Redesignate paragraph (b)(5) as 

(b)(8); 

■ d. Add new paragraphs (b)(6) and 

(b)(7) to read as set forth below; 

■ e. Redesignate paragraphs (b)(3) and 

(b)(4) as (b)(4) and (b)(5); 

■ f. Add new paragraph (b)(3) to read as 

set forth below; 

■ g. Revise redesignated paragraphs 

(b)(4), (b)(8), (b)(10), (b)(11), and (b)(13) 

introductory text to read as set forth 

below; 

■ h. Revise paragraph (c)(1) to read as 

set forth below; 

■ i. Revise paragraphs (c)(3)(i), (c)(3)(iii) 

and (c)(3)(v) to read as set forth below; 

■ j. Add new paragraphs (c)(3)(vi) 

through (c)(3)(viii) to read as set forth 

below; 

■ k. Remove paragraphs (c)(4) and (c)(5). 

The additions and revisions read as 

follows: 

§ 5501.109 Prohibited outside activities 

applicable to employees of the National 

Institutes of Health. 

* * * * * 

(b) * * * 

(3) Data and safety monitoring board 

(DSMB) means a board, committee, or 

panel constituted in connection with an 

ongoing clinical study and comprised of 

individuals, other than the study 

sponsors, organizers, and investigators, 

who possess expertise in relevant 

specialties and disciplines, such as trial 

design, biostatistics, and bioethics, and 

who review accumulating safety and 

outcome data in order to ensure the 

continuing safety of the participating 

human subjects and of those yet to be 

recruited, and to assess the continuing 

validity and scientific merit of the 

investigation. 

(4) Educational activity provider 

means a supported research institution 

or a health care provider or insurer that 

presents Grand Rounds or offers 

accredited continuing professional 

education (or, in the case of a profession 

or academic discipline whose members 

are not subject to licensure and which 

does not have program accreditation 

requirements, an education program 

determined by the designated agency 

ethics official or his designee or, in 

consultation with the designated agency 

ethics official or his designee, the NIH 

Director or the NIH Director’s designee 

to be substantially equivalent to an 

accredited continuing professional 

education program), but does not 

include a substantially affected 

organization. 

(5) Employment has the meaning 

specified in 5 CFR 2635.603(a). 

(6) Grand Rounds means a regularly 

scheduled, interactive presentation or 

series of educational seminars that focus 

on clinical cases, recent biomedical or 

behavioral research results, or a review 

of scientific research methods and 

findings in a specific field, with 

supporting basic and clinical science 

information, that are conducted in an 

accredited medical school or an 

affiliated teaching hospital setting that 

provides practicing physicians, faculty, 

fellows, resident physician trainees, 

medical students, graduate students, 

and post-doctoral fellows, as well as 

allied and associated health 

professionals, and other staff, an 

51570 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

opportunity to evaluate outcomes of 

patient treatment decisions, a forum to 

discuss clinical decision making, and a 

means to impart updates in diagnosis, 

treatment, therapy, and research as 

indicated by the context of the cases 

presented. 

(7) Grant or scientific review 

committee means a board, committee, or 

panel of qualified experts assembled by 

an external grant-making entity or other 

funding institution for the purpose of 

making a funding decision, the members 

of which review, evaluate, rate, rank, or 

otherwise assess a proposed or ongoing 

project or program for which grant 

support is sought on the basis of various 

factors, such as scientific merit, 

feasibility, significance, approach, and 

originality (and scientific progress in 

any previous period of funding), and 

gauge the ability of the applicant(s), 

principal and associate investigators, 

and scientific team members to 

complete successfully the project or 

program, and then recommend to the 

grantor whether to fund or continue to 

fund a particular proposal or ongoing 

program. 

(8) Health care provider or insurer 

means a hospital, clinic, skilled nursing 

facility, rehabilitation facility, durable 

medical equipment supplier, home 

health agency, hospice program, health 

maintenance organization, managed 

care organization, or other provider of 

health care items and services as 

defined in sections 1877(h)(6) or 

1903(w)(7) of the Social Security Act (42 

U.S.C. 1395nn(h)(6) or 1396b(w)(7)) and 

any entity organized and licensed as a 

risk-bearing entity eligible to offer 

health insurance or health benefits 

coverage. 

(9) Scientific peer review is the 

evaluation of scientific research findings 

for competence, significance, and 

originality by qualified experts who 

research and submit work for 

publication in the same field and which 

provides systematized accountability for 

adherence to ethical guidelines 

commonly accepted within the relevant 

research community for disseminating 

scientific information. 

(10) Substantially affected 

organization means: 

(i) A biotechnology or pharmaceutical 

company; a medical device 

manufacturer; or a corporation, 

partnership, or other enterprise or entity 

significantly involved, directly or 

through subsidiaries, in the research, 

development, or manufacture of 

biotechnological, biostatistical, 

pharmaceutical, or medical devices, 

equipment, preparations, treatments, or 

products; 

(ii) Any organization a majority of 

whose members are described in 

paragraph (b)(10)(i) of this section; and 

(iii) Any other organization 

determined by the designated agency 

ethics official or, in consultation with 

the designated agency ethics official, by 

the NIH Director or the NIH Director’s 

designee that is substantially affected by 

the programs, policies, or operations of 

the NIH. 

(11) Supported research institution 

means any educational institution or 

non-profit independent research 

institute that: 

(i) Is, or within the last year has been, 

an applicant for or recipient of an NIH 

grant, cooperative agreement, or 

research and development contract; 

(ii) Is, or within the last year has been, 

a proposer of or party to a cooperative 

research and development agreement 

(CRADA) with the NIH; or 

(iii) Any organization a majority of 

whose members are described in 

paragraphs (b)(11)(i) or (ii) of this 

section. 

(12) Unrestricted educational grant 

means funds received by or available to 

an educational activity provider from 

another source that are granted without 

stipulated conditions for their use other 

than the limitation that the funds shall 

be used to advance an educational 

program of the grant recipient. For 

purposes of this section, an educational 

grant shall not be considered 

unrestricted if the funding source for a 

Grand Rounds or a continuing 

professional education program directly 

or indirectly: 

(i) Selects or recommends the 

moderators, speakers, or presenters at 

the sponsored event; 

(ii) Independently provides additional 

funding to the moderators, speakers, or 

presenters in connection with the 

educational activity; 

(iii) Determines or recommends the 

audience composition; 

(iv) Specifies or recommends the 

topics to be addressed, or 

(v) Controls or recommends the 

planning, content, or implementation of 

the program in a manner inconsistent 

with guidelines established by a 

relevant professional association or 

accrediting organization that are 

designed to ensure that such activities 

are accurate, balanced, educational, free 

from commercial bias, nonpromotional, 

and independent of the influence of the 

funding source. 

(13) Unrestricted financial 

contribution means funds received by or 

available to a publisher, academic press, 

editorial board, or other entity affiliated 

with or operated by a supported 

research institution or a health care 

provider or insurer from another source 

that are provided without stipulated 

conditions for their use other than the 

limitation that the funds shall be used 

to advance peer-reviewed writing or 

editing by the funds recipient. For 

purposes of this section, a financial 

contribution shall not be considered 

unrestricted if the funding source for 

peer-reviewed writing or editing 

directly or indirectly: * * * 

* * * * * 

(c) Prohibitions—(1) Prohibited 

outside activities with substantially 

affected organizations, supported 

research institutions, and health care 

providers or insurers. Except as 

permitted by paragraph (c)(3) of this 

section, an employee of the NIH shall 

not: 

(i) Engage in employment with a 

substantially affected organization, a 

supported research institution, or a 

health care provider or insurer; 

(ii) Teach, speak, write, or edit for 

compensation for any substantially 

affected organization, supported 

research institution, or health care 

provider or insurer; or 

(iii) Engage in any employment or 

self-employed business activity that 

involves the sale or promotion of 

products or services of a substantially 

affected organization or a health care 

provider or insurer, except for the 

purpose of commercializing invention 

rights obtained by the employee 

pursuant to Executive Order 10096, 15 

U.S.C. 3710d, or implementing 

regulations. 

* * * * * 

(3) * * * 

(i) Teaching. An employee may 

engage in and accept compensation for: 

(A) Teaching a course requiring 

multiple presentations as permitted 

under 5 CFR 2635.807(a)(3); or 

(B) Delivering a class lecture that is 

unrelated to the employee’s official 

duties within the meaning of 5 CFR 

2635.807 if the activity is performed as 

part of a regularly scheduled course 

offered under the established 

curriculum of an institution of higher 

education as defined at 20 U.S.C. 1001. 

* * * * * 

(iii) Clerical, retail, service industry, 

building trades, maintenance, or similar 

services. An employee may engage in 

and accept compensation for any 

outside employment or self-employed 

business activity that primarily involves 

manual or unskilled labor or utilizes 

talents, skills, or interests in areas 

unrelated to the health and scientific 

research activities of the NIH, such as 

clerical work, retail sales, service 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51571 

industry jobs, building trades, 

maintenance, or similar services. 

* * * * * 

(v) Authorship of writings subjected to 

scientific peer review or a substantially 

equivalent editorial review process. An 

employee may engage in and accept 

compensation for a writing or editing 

activity that is unrelated to the 

employee’s official duties within the 

meaning of 5 CFR 2635.807 if the 

resulting article, chapter, essay, report, 

text, or other writing is submitted to a 

publisher, academic press, editorial 

board, or other entity affiliated with or 

operated by a supported research 

institution or a health care provider or 

insurer for publication in a scientific 

journal, textbook, or similar publication 

that subjects manuscripts to scientific 

peer review or a substantially equivalent 

editorial review process. If a 

substantially affected organization funds 

the publishing activities of a supported 

research institution or a health care 

provider or insurer, this exception is 

inapplicable unless the substantially 

affected organization is involved only as 

an unrestricted financial contributor 

and exercises no editorial control. 

(vi) Data and safety monitoring 

boards. An employee may serve as a 

member of a data and safety monitoring 

board for a clinical study conducted by 

a supported research institution or 

health care provider or insurer, 

provided that: 

(A) The members of the DSMB are not 

selected or paid for their service by a 

substantially affected organization; 

(B) The clinical study is not funded 

under a grant, cooperative agreement, or 

research and development contract 

from, or conducted pursuant to a 

cooperative research and development 

agreement (CRADA) with, or aided 

under another funding mechanism by, 

the NIH; and 

(C) If the service is performed for 

compensation, the service does not 

entail prohibited assistance in the 

preparation of documents intended for 

submission to HHS within the meaning 

of § 5501.106(c)(1), and the clinical 

study is not an HHS-funded activity 

described in § 5501.106(c)(2). 

(vii) Grand Rounds. An employee 

may engage in and accept compensation 

for a teaching, speaking, writing, or 

editing activity that is unrelated to the 

employee’s official duties within the 

meaning of 5 CFR 2635.807 if the 

activity is performed as part of a Grand 

Rounds program conducted by an 

accredited educational institution 

offering instruction in the life sciences, 

such as a medical school or school of 

public health, or by an affiliated 

teaching hospital, provided that: 

(A) The employee’s presentation 

includes an interactive component, such 

as visiting patients or discussing 

individual clinical cases, or interacting 

for educational purposes with 

undergraduates, graduates, or postgraduate students and fellows, in 

addition to any lecture; 

(B) The audience is composed 

primarily of faculty and students or 

trainees registered in a biomedical or 

health-related program of studies; and 

(C) A substantially affected 

organization or a speakers’ bureau 

affiliated with a substantially affected 

organization does not sponsor or 

underwrite the costs of the Grand 

Rounds program or the employee’s 

presentation, except pursuant to an 

unrestricted educational grant. 

(viii) Grant or scientific review 

committee. An employee may serve on 

a grant or scientific review committee 

for a supported research institution or a 

health care provider or insurer, 

provided that: 

(A) The members of the grant or 

scientific review committee are not 

selected or paid for their service by a 

substantially affected organization; 

(B) The grant award or program in 

relation to which the recommendation 

of the grant or scientific review 

committee is sought is not funded under 

a grant, cooperative agreement, or 

research and development contract 

from, conducted pursuant to a 

cooperative research and development 

agreement (CRADA) with, or aided 

under another funding mechanism by, 

the NIH; and 

(C) If the service is performed for 

compensation, the service does not 

entail prohibited assistance in the 

preparation of documents intended for 

submission to HHS within the meaning 

of § 5501.106(c)(1), and the grant award 

or program in relation to which the 

recommendation of the grant or 

scientific review committee is sought is 

not an HHS-funded activity described in 

§ 5501.106(c)(2). 

■ 6. Amend § 5501.110 as follows: 

■ a. Revise the section heading to read 

as set forth below; 

■ b. Remove paragraphs (b)(1), (b)(2), 

and (b)(4); 

■ c. Redesignate paragraph (b)(3) as 

(b)(2); 

■ d. Revise redesignated paragraph 

(b)(2) to read as set forth below; 

■ e. Add new paragraph (b)(1) to read as 

set forth below; 

■ f. Remove paragraphs (c), (d), (e), and 

(f) and the notes to paragraphs (e)(1) and 

(e); 

■ g. Redesignate paragraph (g) as (e) and 

revise redesignated paragraph (e) to read 

as set forth below; 

■ h. Add new paragraphs (c) and (d) and 

notes to paragraphs (d)(1) and (d) to 

read as set forth below. 

The additions and revisions read as 

follows: 

§ 5501.110 Prohibited financial interests 

applicable to senior employees of the 

National Institutes of Health. 

* * * * * 

(b) * * * 

(1) Senior employee means the 

Director and the Deputy Director of the 

National Institutes of Health; members 

of the senior staff within the Office of 

the Director who report directly to the 

NIH Director; the Directors, the Deputy 

Directors, Scientific Directors, and 

Clinical Directors of each Institute and 

Center within NIH; Extramural Program 

Officials who report directly to an 

Institute or Center Director; and any 

employee of equivalent levels of 

decision-making responsibility who is 

designated as a senior employee by the 

designated agency ethics official or the 

NIH Director, in consultation with the 

designated agency ethics official. 

(2) Substantially affected organization 

has the meaning set forth in 

§ 5501.109(b)(10). 

(c) Prohibition applicable to senior 

employees. Except as permitted by 

paragraph (d) of this section, a senior 

employee or the spouse or minor child 

of such senior employee shall not have 

a financial interest in a substantially 

affected organization. 

(d) Exceptions for certain financial 

interests. Notwithstanding the 

prohibition in paragraph (c) of this 

section: 

(1) Pension or other employee benefit. 

A senior employee or spouse or minor 

child of a senior employee may have a 

financial interest, such as a pension or 

other employee benefit, arising from 

employment with a substantially 

affected organization. 

Note to Paragraph (d)(1): NIH employees, 

as opposed to spouses and minor children of 

employees, are generally prohibited under 

§ 5501.109 from engaging in current 

employment with a substantially affected 

organization. 

(2) De minimis holdings. A senior 

employee or spouse or minor child of a 

senior employee may have a financial 

interest in a substantially affected 

organization if: 

(i) The aggregate market value of the 

combined interests of the senior 

employee and the senior employee’s 

spouse and minor children in any one 

substantially affected organization is 

equal to or less than the de minimis 

exemption limit for matters involving 

parties established by 5 CFR 2640.202(a) 

or $15,000, whichever is greater; 

51572 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

(ii) The holding, if it represents an 

equity interest, constitutes less than 1 

percent of the total outstanding equity 

of the organization; and 

(iii) The total holdings in 

substantially affected organizations and 

sector mutual funds that, in the 

literature they distribute to prospective 

and current investors or participants, 

state the objective or practice of 

concentrating their investments in the 

securities of substantially affected 

organizations account for less than 50 

percent of the total value of the 

combined investment portfolios of the 

senior employee and the senior 

employee’s spouse and minor children. 

(3) Diversified mutual funds. A senior 

employee or spouse or minor child of a 

senior employee may have an interest in 

a substantially affected organization that 

constitutes any interest in a publicly 

traded or publicly available investment 

fund (e.g., a mutual fund), or a widely 

held pension or similar fund, which, in 

the literature it distributes to 

prospective and current investors or 

participants, does not indicate the 

objective or practice of concentrating its 

investments in substantially affected 

organizations, if the employee neither 

exercises control nor has the ability to 

exercise control over the financial 

interests held in the fund. 

(4) Exceptional circumstances. In 

cases involving exceptional 

circumstances, the NIH Director or the 

NIH Director’s designee, with the 

approval of the designated agency ethics 

official or his designee, may grant a 

written exception to permit a senior 

employee, or the spouse or minor child 

of a senior employee, or a class of such 

individuals, to hold a financial interest 

in a substantially affected organization 

based upon a determination that the 

application of the prohibition in 

paragraph (c) of this section is not 

necessary to ensure public confidence 

in the impartiality or objectivity with 

which HHS programs are administered 

or to avoid a violation of part 2635 of 

this title. 

(5) Technology transfer. A senior 

employee may have a financial interest 

in connection with the development 

and commercialization of invention 

rights obtained by the employee 

pursuant to Executive Order 10096, 15 

U.S.C. 3710d, or implementing 

regulations. 

(6) Sector mutual funds. (i) A senior 

employee or spouse or minor child of a 

senior employee may have an interest in 

a substantially affected organization that 

constitutes any interest in a sector 

mutual fund that, in the literature it 

distributes to prospective and current 

investors or participants, does not 

indicate the objective or practice of 

concentrating its investments in the 

biomedical science, pharmaceutical, 

medical device, biotechnology, or health 

industry sectors. 

(ii) A senior employee or spouse or 

minor child of a senior employee may 

have an interest in a substantially 

affected organization that constitutes 

any interest in a sector mutual fund 

that, in the literature it distributes to 

prospective and current investors or 

participants, states the objective or 

practice of concentrating its investments 

in the securities of substantially affected 

organizations provided that: 

(A) The aggregate market value of the 

combined ownership interests of the 

senior employee and the senior 

employee’s spouse and minor children 

in such sector funds is equal to or less 

than the de minimis exemption limit for 

sector mutual funds established by 5 

CFR 2640.201(b)(2)(i) or $50,000, 

whichever is greater; and 

(B) The total holdings in substantially 

affected organizations and in sector 

mutual funds that, in the literature they 

distribute to prospective and current 

investors or participants, state the 

objective or practice of concentrating 

their investments in the securities of 

substantially affected organizations 

account for less than 50 percent of the 

total value of the combined investment 

portfolios of the senior employee and 

the senior employee’s spouse and minor 

children. 

Note to Paragraph (d): With respect to any 

excepted financial interest, employees are 

reminded of their obligations under 5 CFR 

part 2635, and specifically their obligation 

under subpart D to disqualify themselves 

from participating in any particular matter in 

which they, their spouses or minor children 

have a financial interest arising from publicly 

traded securities that exceeds the de minimis 

thresholds specified in the regulatory 

exemption at 5 CFR 2640.202 or from nonpublicly traded securities that are not 

covered by the regulatory exemption. 

Furthermore, the agency may prohibit or 

restrict an individual employee from 

acquiring or holding any financial interest or 

a class of financial interests based on the 

agency’s determination that the interest 

creates a substantial conflict with the 

employee’s duties, within the meaning of 5 

CFR 2635.403. 

(e) Reporting and divestiture. For 

purposes of determining the divestiture 

period specified in 5 CFR 2635.403(d), 

as applied to financial interests 

prohibited under paragraph (c) of this 

section, the ‘‘date divestiture is first 

directed’’ means the date on which the 

new entrant public or confidential 

financial disclosure report required by 

part 2634 of this title or any report 

required by § 5502.107(c) of this chapter 

is due. 

■ 7. Amend § 5501.111 as follows: 

■ a. Redesignate paragraphs (b), (c), and 

(d) as (c), (d) and (e); 

■ b. Redesignate the note to paragraph 

(b) as the note to paragraph (c); 

■ c. Add new paragraph (b) to read as 

set forth below; 

■ d. Remove redesignated paragraph 

(c)(1) and redesignate paragraphs (c)(2) 

and (c)(3) as (c)(1) and (c)(2); 

■ e. In the introductory text of 

redesignated paragraph (c)(1), remove 

the phrase ‘‘other than a senior 

employee’’; 

■ f. Revise redesignated paragraph 

(c)(1)(iv) to read as set forth below; 

■ g. Revise the introductory text of 

redesignated paragraph (d) to read as set 

forth below; 

■ h. Revise redesignated paragraphs 

(d)(2) and (d)(3) to read as set forth 

below; 

■ i. Revise redesignated paragraph (e)(1) 

and the introductory text of 

redesignated paragraph (e)(2) to read as 

set forth below. 

The additions and revisions read as 

follows: 

§ 5501.111 Awards tendered to employees 

of the National Institutes of Health. 

* * * * * 

(b) Definitions. For purposes of this 

section, official responsibility has the 

meaning set forth in 18 U.S.C. 202(b). 

(c) Additional limitations on awards 

to employees of the National Institutes 

of Health. The following limitations 

shall apply to the acceptance by an 

employee of an award pursuant to 5 

CFR 2635.204(d): 

(1) Limitations applicable to 

employees with official responsibility for 

matters affecting an award donor. An 

employee shall not accept a gift with an 

aggregate market value of more than 

$200, or that is cash or an investment 

interest, that is an award or incident to 

an award from a person, organization, or 

other donor that: 

* * * * * 

(iv) Is an organization a majority of 

whose members are described in 

paragraphs (c)(1)(i) through (iii) of this 

section. 

(2) Prior approval of awards. (i) No 

employee shall accept an award under 

5 CFR 2635.204(d) or this section unless 

the receipt thereof has been approved in 

writing in advance in accordance with 

procedures specified by the designated 

agency ethics official, or with the 

concurrence of the designated agency 

ethics official, the NIH Director or the 

NIH Director’s designee. 

(ii) Approval shall be granted only 

upon a determination that acceptance of 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51573 

the award is not prohibited by statute or 

Federal regulation, including 5 CFR part 

2635 and this part. 

Note to Paragraph (c): In some 

circumstances cash and other things of value 

provided in connection with the provision of 

personal services, including speaking or 

writing, may be compensation, not a gift. 

Other ethics rules governing outside 

activities may restrict receipt of such 

compensation. See, for example, 5 CFR 

2635.807. 

(d) Exception. Notwithstanding the 

prohibition in paragraph (c)(1) of this 

section, the NIH Director (or the 

Secretary, with respect to awards 

tendered to the NIH Director), with the 

approval of the designated agency ethics 

official, may grant a written exception to 

permit an employee to accept an award 

otherwise prohibited by this section 

under the following conditions: 

* * * * * 

(2) Absent the prohibition in 

paragraph (c)(1) of this section, the gift 

would be permitted under part 2635 of 

this title; and 

(3) The designated agency ethics 

official shall have determined that the 

application of the prohibition in 

paragraph (c)(1) of this section is not 

necessary to ensure public confidence 

in the impartiality or objectivity with 

which NIH programs are administered 

or to avoid a violation of part 2635 of 

this title. 

(e) Disposition of improperly accepted 

awards.—(1) Failure to obtain prior 

approval. If an employee accepts an 

award for which approval is required 

under paragraph (c)(2) of this section 

without obtaining such approval, the 

employee may be required, in addition 

to any penalty provided by law and 

applicable regulations, to forfeit the 

award by returning it to the donor. 

(2) Receipt of prohibited award. If an 

employee accepts an award prohibited 

by paragraph (c)(1) of this section, the 

employee shall be required, in addition 

to any penalty provided by law and 

applicable regulations, to: 

* * * * * 

PART 5502—SUPPLEMENTAL 

FINANCIAL DISCLOSURE 

REQUIREMENTS FOR EMPLOYEES OF 

THE DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

■ 8. The authority citation for part 5502 

continues to read as follows: 

Authority: 5 U.S.C. 301, 7301; 5 U.S.C. 

App. (Ethics in Government Act of 1978); 

E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., 

p. 215, as modified by E.O. 12731, 55 FR 

42547, 3 CFR, 1990 Comp., p. 306; 5 CFR 

2634.103. 

§ 5502.102 [Amended] 

■ 9. Amend § 5502.102 by removing 

from the second sentence the citation to 

‘‘§ 5501.106(d)(4)’’ and add in its place 

the citation ‘‘§ 5501.106(d)(5)’’. 

■ 10. Amend § 5502.105 by revising 

paragraph (a) to read as follows: 

§ 5502.105 Agency procedures. 

(a) The designated agency ethics 

official or, with the concurrence of the 

designated agency ethics official, each 

of the separate agency components of 

HHS listed in § 5501.102(a) of this 

chapter may prescribe forms for the 

collection of information under this part 

and establish procedures for the 

submission and review of each report 

filed. These procedures may provide for 

filing extensions, for good cause shown, 

totaling not more than 90 days. 

* * * * * 

■ 11. Amend § 5502.106 by revising the 

section heading and paragraphs (b)(2) 

and (c) to read as follows: 

§ 5502.106 Supplemental disclosure of 

prohibited financial interests applicable to 

employees of the Food and Drug 

Administration. 

* * * * * 

(b) * * * 

(2) Prohibited financial interest means 

a financial interest prohibited by 

§ 5501.104(a), including those financial 

interests that are excepted under 

§ 5501.104(b) of this chapter. 

* * * * * 

(c) Report of prohibited financial 

interests.—(1) New entrant employees. 

A new entrant employee, other than a 

public filer or a confidential filer, shall 

report in writing within 30 days after 

entering on duty with the FDA any 

prohibited financial interest and the 

value thereof held upon commencement 

of employment with the agency. 

(2) Reassigned employees. An 

employee of a separate agency 

component other than the FDA or of the 

remainder of HHS who is reassigned to 

a position at the FDA shall report in 

writing within 30 days of entering on 

duty with the FDA any prohibited 

financial interest and the value thereof 

held on the effective date of the 

reassignment to the agency. 

(3) Incumbent employees. An 

incumbent employee of the FDA who 

acquires any prohibited financial 

interest shall report such interest and 

the value thereof in writing within 30 

days after acquiring the financial 

interest. 

■ 12. Add new § 5502.107 to read as 

follows: 

§ 5502.107 Supplemental disclosure of 

financial interests in substantially affected 

organizations applicable to employees of 

the National Institutes of Health. 

(a) Applicability. This section does 

not apply to special Government 

employees. 

(b) Definitions. For purposes of this 

section: 

(1) Clinical investigator means an 

employee identified as a principal 

investigator, accountable investigator, 

lead associate investigator, medical 

advisory investigator, associate 

investigator, or other subinvestigator in 

an NIH clinical study involving human 

subjects under a clinical research 

protocol approved by an institutional 

review board. 

(2) Clinical research has the meaning 

set forth in 42 U.S.C. 284d(b). 

(3) Institutional review board (IRB) 

means any board, committee, or other 

group formally designated by an 

institution to review a clinical research 

protocol and approve the initiation of 

biomedical research involving human 

subjects and to assess periodically the 

progress of the investigation to protect 

the rights and welfare of the trial 

participants. 

(4) Confidential filer means an 

employee who meets the criteria in 5 

CFR 2634.904 and who has not been 

excluded from the requirement of filing 

a confidential financial disclosure 

report under the procedures in 5 CFR 

2634.905. 

(5) Public filer means an employee 

who meets the criteria in 5 CFR 

2634.202 and who has not been 

excluded from the requirement of filing 

a public financial disclosure report 

under the procedures in 5 CFR 

2634.203. 

(6) Remainder of HHS has the 

meaning set forth in § 5501.102(b)(2) of 

this chapter. 

(7) Separate agency component has 

the meaning set forth in § 5501.102(a) of 

this chapter. 

(8) Substantially affected organization 

has the meaning set forth in 

§ 5501.109(b)(10) of this chapter. 

(c) Report of financial interests in 

substantially affected organizations.—

(1) New entrant employees. A new 

entrant employee, other than a public 

filer or a confidential filer, who is 

designated to serve as a clinical 

investigator shall report in writing 

within 30 days after entering on duty 

with the NIH any financial interest in a 

substantially affected organization and 

the value thereof held upon 

commencement of employment with the 

agency. 

(2) Reassigned employees. An 

employee of a separate agency 

51574 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

component, other than the NIH, or of 

the remainder of HHS who is either a 

public filer, a confidential filer, or a 

clinical investigator who is reassigned 

to a position at the NIH shall report in 

writing within 30 days of entering on 

duty with the NIH any financial interest 

in a substantially affected organization 

and the value thereof held on the 

effective date of the reassignment to the 

agency. 

(3) Incumbent employees. An 

incumbent employee of the NIH who is 

either a public filer, a confidential filer, 

or a clinical investigator who acquires 

any financial interest in a substantially 

affected organization shall report such 

interest and the value thereof in writing 

within 30 days after acquiring the 

financial interest. Any incumbent 

employee, irrespective of financial 

disclosure filing status, who is 

designated a clinical investigator shall 

report in writing within 30 days of the 

approval of the clinical research 

protocol by the relevant institutional 

review board any financial interest in a 

substantially affected organization and 

the value thereof held on the date of the 

IRB approval. 

(4) Initial report by on duty 

employees. An employee on duty at the 

NIH on August 31, 2005, who is either 

a public filer, a confidential filer, or a 

clinical investigator shall report in 

writing on or before October 31, 2005, 

any financial interest in a substantially 

affected organization and the value 

thereof held on the date the report is 

filed. 

[FR Doc. 05–17352 Filed 8–26–05; 4:12 pm] 

BILLING CODE 4150–03–P 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 906 

[Docket No. FV05–906–1 IFR] 

Oranges and Grapefruit Grown in 

Lower Rio Grande Valley in Texas; 

Changes to Container and Pack 

Requirements 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Interim final rule with request 

for comments. 

SUMMARY: This rule revises the container 

and pack requirements currently 

prescribed under the marketing order 

(order) covering oranges and grapefruit 

grown in the Lower Rio Grande Valley 

in Texas. The order regulates the 

handling of such fruit and is 

administered locally by the Texas 

Valley Citrus Committee (Committee). 

This rule revises the orange and 

grapefruit rules and regulations and 

container requirements by adding eight 

new containers to the list of authorized 

containers for use by Texas citrus 

handlers, removing one obsolete 

container, and by combining all the 

requirements on authorized bags into 

one grouping for easier reference. Other 

changes would revise incorrect 

references to the U.S. grade standards 

for oranges and grapefruit grown in 

Texas. These changes are expected to 

help handlers compete more effectively 

in the marketplace, better meet the 

needs of buyers, and to improve 

producer returns. 

DATES: Effective September 1, 2005; 

comments received by October 31, 2005 

will be considered prior to issuance of 

a final rule. 

ADDRESSES: Interested persons are 

invited to submit written comments 

concerning this rule. Comments must be 

sent to the Docket Clerk, Marketing 

Order Administration Branch, Fruit and 

Vegetable Programs, AMS, USDA, 1400 

Independence Avenue SW., STOP 0237, 

Washington, DC 20250–0237; Fax: (202) 

720–8938; E-mail: 

moab.docketclerk@usda.gov; or Internet: 

http://www.regulations.gov. All 

comments should reference the docket 

number and the date and page number 

of this issue of the Federal Register and 

will be made available for public 

inspection in the Office of the Docket 

Clerk during regular business hours, or 

can be viewed at: http:// 

www.ams.usda.gov/fv/moab.html. 

FOR FURTHER INFORMATION CONTACT: 

Belinda G. Garza, Regional Manager, 

Texas Marketing Field Office, Marketing 

Order Administration Branch, Fruit and 

Vegetable Programs, AMS, USDA; 

Telephone: (956) 682–2833, Fax: (956) 

682–5942; or George Kelhart, Technical 

Advisor, Marketing Order 

Administration Branch, Fruit and 

Vegetable Programs, AMS, USDA, 1400 

Independence Avenue SW., STOP 0237, 

Washington, DC 20250–0237; 

Telephone: (202) 720–2491, Fax: (202) 

720–8938. 

Small businesses may request 

information on complying with this 

regulation by contacting Jay Guerber, 

Marketing Order Administration 

Branch, Fruit and Vegetable Programs, 

AMS, USDA, 1400 Independence 

Avenue SW., STOP 0237, Washington, 

DC 20250–0237; Telephone: (202) 720–

2491, Fax: (202) 720–8938, or E-mail: 

Jay.Guerber@usda.gov. 

SUPPLEMENTARY INFORMATION: This rule 

is issued under Marketing Agreement 

and Order No. 906, as amended (7 CFR 

part 906), regulating the handling of 

oranges and grapefruit grown in the 

Lower Rio Grande Valley in Texas, 

hereinafter referred to as the ‘‘order.’’

The marketing agreement and order are 

effective under the Agricultural 

Marketing Agreement Act of 1937, as 

amended (7 U.S.C. 601–674), hereinafter 

referred to as the ‘‘Act.’’

The Department of Agriculture 

(USDA) is issuing this rule in 

conformance with Executive Order 

12866. 

This rule has been reviewed under 

Executive Order 12988, Civil Justice 

Reform. This rule is not intended to 

have retroactive effect. This rule will 

not preempt any State or local laws, 

regulations, or policies, unless they 

present an irreconcilable conflict with 

this rule. 

The Act provides that administrative 

proceedings must be exhausted before 

parties may file suit in court. Under 

section 608c(15)(A) of the Act, any 

handler subject to an order may file 

with USDA a petition stating that the 

order, any provision of the order, or any 

obligation imposed in connection with 

the order is not in accordance with law 

and request a modification of the order 

or to be exempted therefrom. A handler 

is afforded the opportunity for a hearing 

on the petition. After the hearing USDA 

would rule on the petition. The Act 

provides that the district court of the 

United States in any district in which 

the handler is an inhabitant, or has his 

or her principal place of business, has 

jurisdiction to review USDA’s ruling on 

the petition, provided an action is filed 

not later than 20 days after the date of 

the entry of the ruling. 

This rule revises container and pack 

requirements currently prescribed under 

the Texas orange and grapefruit order 

and makes several conforming and 

formatting changes. The rule revises the 

rules and regulations and container 

requirements by adding eight new 

containers to the list of authorized 

containers for use by Texas citrus 

handlers, removing one obsolete 

container, combining all of the 

requirements on authorized bags into 

one grouping for easier reference. Other 

changes include revising incorrect 

references to the U.S. grade standards 

for oranges and grapefruit grown in 

Texas and States other than Florida, 

California, and Arizona (7 CFR 51.680 

through 51.714 for oranges, and 7 CFR 

51.620 through 51.653 for grapefruit). 

See 68 FR 46433, August 6, 2003; and 

66 FR 48785, September 24, 2001, for 

information on changes in the grade 

standards that necessitate changes to the 

Texas citrus handling regulations.