At the proposed rule stage, the affected parties have an opportunity to petition the
Commission to be treated as small entities. If no such requests are received, the Chairman makes
the negative certification in the final rule. If requests are received, the originating Bureau/Office,
in conjunction with the Bureau of Trade Analysis (“BTA”), must determine if the petitioning
entities should be treated as small businesses. If the originating Bureau/Office and BTA
determine that these entities should, in fact, be treated as small businesses, the analysis set forth
in step 5 will be conducted.

5. If small businesses are affected, is there a significant impact on a substantial
number?

If a proposed rule is expected to have an effect on one or more small entities, a threshold
analysis will be initiated by BTA with the assistance of the originating Bureau/Office. The
threshold analysis is conducted to determine the extent of the impact and the number of small
entities that would be affected by the proposed rule. It has been determined by the Commission
that collection and maintenance of current financial data on every entity regulated by the FMC
would cause undue cost and burden on the entities. Therefore, the threshold analysis is based on
extrapolation of data and information from current economic trends and statistics, and the
Commission’s industry expertise. The results or findings of each threshold analysis are evaluated
on a case-by-case basis to determine whether the proposed rule will have a significant impact on
a substantial number of small businesses. In addition, any comments received on the proposed
rule once it has been published in the Federal Register would be taken into consideration.

If it is determined that the proposed rule will not have a significant impact on a
substantial number of small entities, a negative certification by the Commission’s Chairman may

be made. The certification should be published and explained in the supplementary information


unlikely that any of its rules will duplicate, overlap, or conflict with the rules of
other agencies. Should the situation arise, however, the Commission would need
to include information for regulated entities on other rules governing the same
activities. In some instances, the existence of relevant rules of other agencies will
be known to the originating Bureau/Office. When legal research is required, it
will be done by the Bureau of Enforcement (“BOE”).

4. The FMC then must produce an FRFA with the final rule. This analysis, prepared by

the originating Bureau/Office and BTA, must contain the comments, if any, of SBA. It also must

contain:

a. A succinct statement of the need for and objectives of the rule;

b. A summary of significant issues raised by public comments in response to the
initial regulatory flexibility analysis, and a summary of the originating
Bureau/Office’s assessment of such comments;

Cc. The Commission’s written response to any written comments submitted by SBA,
unless the Chairman certifies that the public interest is not served thereby.

d. A description and an estimate of the number of small entities to which the rule
will apply or an explanation of why no such estimate is available;

ie A description of the projected reporting, record keeping, and other compliance
requirements of the rule, including an estimate of the classes of small entities that
will be subject to the requirements and the type of professional skills necessary for
the preparation of the report record; and,

f. A description of the steps the FMC has taken to minimize the significant

economic impacts on small entities consistent with the stated objectives of


revenues) of less than $21.5 million are small businesses. The Commission will use SBA’s
determinations in its review of the impact of its regulatory undertakings on small businesses.
35 What types of small entities, if any, are subject to the rule’s requirements?

VOCCs, PVOs, and MTOs generally are very large companies with far in excess of 500
employees, in the case of VOCCs and PVOs, and $21.5 million in gross revenues, in the case of
MTOs. These companies, as well as conferences or associations of such companies, generally
are represented by retained counsel. They frequently raise informal, complex issues, and the
Commission exerts considerable time and effort responding to them. Such entities are not the
intended small business beneficiaries of SBREFA. OTIs, on the other hand, will be considered
small businesses by the Commission.

Therefore, the Commission makes a refutable presumption that VOCCs, PVOs and
MTOs are not small businesses encompassed within the programs and policies mandated by
SBREFA. Nevertheless, a VOCC, PVO, or MTO that falls under SBA guidelines and seeks to
be treated as a small business for Commission regulatory purposes may submit a request for such
treatment to the Commission, along with payroll or gross annual revenue evidence, as applicable,
to substantiate its claim and rebut the presumption.

4, What if no small entities are affected by the rule?

If a proposed rule does not affect any small entity (based on the definition of small entity
provided above) RFA authorizes the Commission’s Chairman to make a negative certification
with respect to the rulemaking. This will be published in the Federal Register and be
accompanied by the factual basis for certification as prepared by the originating Bureau/Office.

This certification is subject to judicial review.


section of the proposed and final rules and supported in the rulemaking record as appropriate.

The originating Office/Bureau, working with BTA as necessary, prepares a memorandum

containing its analyses and explaining the negative certification. No further analysis is required

to support the certification, unless the agency receives comments on the proposed rule’s

certification that raise issues about the basis of its analysis.

6. What if the rule would have a significant impact on a substantial number of small
entities?

The primary purpose of the Initial and Final Regulatory Flexibility Analyses
(“IRFA/FRFA”) is to identify and consider regulatory alternatives “which minimize any
significant economic impact of the proposed [or final] rule on small entities.” (Sections 603 and
604 of RFA, emphasis added.) Therefore, if the threshold analysis shows that a proposed rule
would have a significant impact on a substantial number of small businesses, the FMC must take
the following steps:

1. Assure that small entities have been given an opportunity to participate in the
rulemaking through various possible techniques. The originating Bureau/Office will implement
one of the following, or possible additional, measures:

a. State in an advance notice prior to issuance of the proposed rulemaking that the
rule may have a significant economic effect on a substantial number of small
entities;

b. Publish a general notice of the proposed rulemaking in publications that small
entities are likely to receive;

C. Directly notify small entities about the rule; or

d. Hold “open conference or public hearings” about the rule.


applicable statutes, including a statement of the factual, policy, and legal reasons
for selecting the alternative adopted in the final rule, and the reasons for rejecting
each of the other viable alternatives.

Small Entity Compliance Guide

Ifa final regulatory flexibility analysis is necessary, a compliance guide also must be
created. Each rule promulgated by the Commission that significantly affects a substantial
number of small businesses will include a “compliance guide” that facilitates their compliance
with applicable requirements. This guide will be drafted by the originating Bureau/Office.
Periodic Review

SBREFA requires that any promulgated rules that have or will have a significant
economic impact on a substantial number of small entities be reviewed periodically. There
currently is one Commission rule which falls under this category. The agency conducted an
IRFA and FRFA for Docket No. 98-28, Licensing, Financial Responsibility Requirements, and
General Duties for Ocean Transportation Intermediaries. The Commission is revising Form
FMC-18, which is used in the licensing process to collect information about OTI applicants,
and also is planning for an electronically-submitted version.?. The Commission will review the

impact of the involved rule in conjunction with that effort.

*Form FMC-18 currently is assigned OMB control number 3072-0018, through August
2005.


FMC POLICY AND PROCEDURES REGARDING
PROPER CONSIDERATION OF SMALL ENTITIES IN RULEMAKINGS

February 7, 2003
Overview

The purpose of this guidance is to assist drafters of Federal Maritime Commission
(“FMC” or “Commission”) rules in appropriately implementing the requirements of the
Regulatory Flexibility Act (“RFA”), as amended by the Small Business Regulatory Enforcement
Fairness Act (“SBREFA”). In general, SBREFA amended the RFA to establish certain formal
procedural and analytical requirements (described below) for rules the agency may develop
which have the potential to impose a significant economic impact on a substantial number of
small entities. If a rule will impose significant economic impact on a substantial number of small
entities, a more formal analysis of the potential adverse economic impacts on small entities must
be prepared. Additionally, Executive Order 13272 of August 13, 2002 (“EO 13272"), requires
agencies to issue and publish written procedures and policies for use in considering the potential
impact of draft rules on small entities.

This guidance is not a binding Commission procedural rule. In determining and
mitigating impacts on small entities, the FMC anticipates that there may be some situations in
which agency staff and management must exercise considerable judgment. Nevertheless, we
intend this guidance to provide an analytic and sequential structure that should be sufficient for
most rulemakings. This guidance will be published on the Commission’s Internet website
(http://www.fme.gov) for informational purposes.

The purpose of RFA/SBREFA is “to fit regulatory and informational requirements to the
scale of the businesses, organizations and governmental jurisdictions subject to the regulation.”
To achieve this objective, agencies are required to “‘solicit and consider flexible regulatory

proposals and to explain the rationale for their actions to assure that such proposals are given


2. Prior to publishing the proposed rule, the Commission will notify SBA (and the Office
of Information and Regulatory Affairs at the Office of Management and Budget (“OMB”) as
required by EO 12866).

3. Complete an IRFA, and publish it with the proposed rule. The IRFA, prepared by the
originating Bureau/Office and BTA, must contain:

a. Reasons why the Commission is considering the action — this currently is in the

preamble to all proposed regulations.

b. The objectives and legal basis for the proposed rule — this currently is included in
a proposed rule.

oH The kind and number of small entities to which the rule will apply — to the extent
possible, the originating Bureau/Office describes the industry and economic sector
in total and its small and large entity segments, and explains any existing
dynamics, such as trends in employment.

d. The projected recording, record keeping, and other compliance requirements of
the proposed rule — this description should include an estimate of the classes of
small entities that will be subject to the requirements and the type of professional
skills necessary for the preparation of the report or record. A cost analysis should
describe each item and estimate the costs, comparing large and small entities. It
should distinguish the initial costs from recurring or operating costs. This
information may be available from the paperwork burden analysis prepared under
the requirements of the Paperwork Reduction Act.

e. Identify all federal rules that may duplicate, overlap, or conflict with the proposed

rule — given the Commission’s specific regulatory responsibility, it is extremely


serious consideration.” RFA/SBREFA does not require an agency necessarily to minimize a
rule’s impact on small entities if there are legal, policy, factual or other reasons for not doing so.
RFA/SBREFA requires only that an agency determine, to the extent feasible, the rule’s economic
impact on small entities, explore regulatory options for reducing any significant economic impact
on a substantial number of such entities, and explain its ultimate choice of regulatory approach.

Since its enactment, RFA has required every federal agency to prepare a regulatory
flexibility analysis for any rule for which the agency is required to issue a notice of proposed
rulemaking under the Administrative Procedure Act (“APA”) or any other statute, unless the
agency certifies that the rule “will not, if promulgated, have a significant economic impact on a
substantial number of small entities.” When SBREFA became law in 1996, the FMC developed
procedures and guidelines to implement the applicable statutory requirements. The guidelines
are being updated below to ensure continuing compliance with RFA/SBREFA requirements, as
well as EO 13272.

In general, RFA/SBREFA requirements will apply to the FMC’s rules subject to the
notice-and-comment rulemaking requirements under the APA or any other statute. Exempt from
the RFA requirement regarding a regulatory flexibility analysis or certification are Commission
actions that are not rules (e.g., orders or adjudications), and rules that the Commission is not
required by statute to propose before promulgating.

RFA/SBREFA Preliminary Analysis: Assessing the Impact on Small Entities

This part describes the procedures to follow for determining whether a regulatory
flexibility analysis or certification of no significant economic impact on a substantial number of

entities should be prepared for a proposed or final rule. It is a six-step process.


i Is the rule subject to notice-and-comment rulemaking requirements?

As mentioned earlier, most, if not all, FMC proposed and final rules will be subject to
notice-and-comment and therefore subject to RFA/SBREFA.

2. What types of entities will be subject to the rule’s requirement?

The Commission has adopted small business standards pursuant to the North American
Industrial Classification System (“NAICS”) published by the Executive Office of the President,
Office of Management and Budget.' The staff has identified the following NAICS categories and
codes defined by the Small Business Administration (“SBA”) that fall within the Commission’s
regulatory jurisdiction:

483111 Deep Sea Foreign Transport of Freight - Vessel Operating Common Carriers

(“VOCCs”)

483112 Deep Sea Transportation of Passengers - Passenger Vessel Operators (“PVOs”)

488320 Marine Cargo Handling - Marine Terminal Operators (“MTOs”)

488510 Arrangement of Transportation of Freight and Cargo - Ocean Transportation

Intermediaries (“OTIs”)

Categories 483111 and 483112 are evaluated by the SBA according to their number of
employees. The SBA has determined that if such a business establishment has less than 500
employees, it qualifies as a small business for SBA purposes. Business establishments in
categories 488320 and 488510 are evaluated by their annual receipts in millions of dollars. In

these categories, SBA determines that business establishments with annual receipts (gross annual

'The code was changed in February 2002 from the Standard Industrial Classification
System to NAICS. The FMC will follow the guidelines set forth by the NAICS. For an
explanation of NAICS, see http:/Avww.sba.gov/size/Table-of-Small-Business-Size-Standards-
from-final-rule.html.