32184 Federal Register / Vol. 78, No. 103 / Wednesday, May 29, 2013 / Proposed Rules 

1To view the proposed rule, risk documents, and 

the comments we received, go to http:// 

www.regulations.gov/#!docketDetail;D=APHIS2012-0002. 

1To view the proposed rule, risk documents, and 

the comments we received, go to http:// 

www.regulations.gov/#!docketDetail;D=APHIS2011-0132. 

in our reading room, which is located in 

room 1141 of the USDA South Building, 

14th Street and Independence Avenue 

SW., Washington, DC. Normal reading 

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

Monday through Friday, except 

holidays. To be sure someone is there to 

help you, please call (202) 799–7039 

before coming. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Meredith C. Jones, Senior Regulatory 

Policy Specialist, Regulatory 

Coordination and Compliance, PPQ, 

APHIS, 4700 River Road Unit 133, 

Riverdale, MD 20737–1231; (301) 851– 

2289. 

SUPPLEMENTARY INFORMATION:

Background 

On January 30, 2013, we published in 

the Federal Register (78 FR 6222–6227, 

Docket No. APHIS–2012–0002), a 

proposal 1 to amend the fruits and 

vegetables regulations to allow the 

importation of avocados from 

continental Spain (excluding the 

Balearic Islands and Canary Islands) 

into the United States subject to a 

systems approach and treatment. 

Comments on the proposed rule were 

required to be received on or before 

April 1, 2013. We are reopening the 

comment period on Docket No. APHIS– 

2012–0002 for an additional 15 days. 

This action will allow interested 

persons additional time to prepare and 

submit comments. We will also accept 

comments received between April 2, 

2013 (the day after the close of the 

original comment period) and the date 

of this notice. 

Authority: 7 U.S.C. 450, 7701–7772, and 

7781–7786; 21 U.S.C. 136 and 136a; 7 CFR 

2.22, 2.80, and 371.3. 

Done in Washington, DC, this 22nd day of 

May 2013. 

Kevin Shea, 

Acting Administrator, Animal and Plant 

Health Inspection Service. 

[FR Doc. 2013–12679 Filed 5–28–13; 8:45 am] 

BILLING CODE 3410–34–P 

DEPARTMENT OF AGRICULTURE 

Animal and Plant Health Inspection 

Service 

7 CFR Part 319 

[Docket No. APHIS–2011–0132] 

RIN 0579–AD62 

Importation of Fresh Apricots From 

Continental Spain 

AGENCY: Animal and Plant Health 

Inspection Service, USDA. 

ACTION: Proposed rule; reopening of 

comment period. 

SUMMARY: We are reopening the 

comment period for our proposed rule 

that would allow the importation into 

the United States of fresh apricots from 

continental Spain. This action will 

allow interested persons additional time 

to prepare and submit comments. 

DATES: The comment period for the 

proposed rule published January 30, 

2013 (78 FR 6227) is reopened. We will 

consider all comments that we receive 

on or before June 13, 2013. 

ADDRESSES: You may submit comments 

by either of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov/ 

#!documentDetail;D=APHIS-2011-0132- 

0001. 

• Postal Mail/Commercial Delivery: 

Send your comment to Docket No. 

APHIS–2011–0132, Regulatory Analysis 

and Development, PPD, APHIS, Station 

3A–03.8, 4700 River Road Unit 118, 

Riverdale, MD 20737–1238. 

Supporting documents and any 

comments we receive on this docket 

may be viewed at http:// 

www.regulations.gov/ 

#!docketDetail;D=APHIS-2011-0132 or 

in our reading room, which is located in 

Room 1141 of the USDA South 

Building, 14th Street and Independence 

Avenue SW., Washington, DC. Normal 

reading room hours are 8 a.m. to 4:30 

p.m., Monday through Friday, except 

holidays. To be sure someone is there to 

help you, please call (202) 799–7039 

before coming. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Meredith C. Jones, Senior Regulatory 

Policy Specialist, Regulatory 

Coordination and Compliance, PPQ, 

APHIS, 4700 River Road Unit 133, 

Riverdale, MD 20737–1231; (301) 851– 

2289. 

SUPPLEMENTARY INFORMATION: On 

January 30, 2013, we published in the 

Federal Register (78 FR 6227–6232, 

Docket No. APHIS–2011–0132) a 

proposal 1 to amend the regulations 

concerning the importation of fruits and 

vegetables to allow the importation of 

fresh apricots from continental Spain 

into the United States subject to a 

systems approach jointly agreed upon in 

a bilateral workplan between APHIS 

and the national plant protection 

organization of Spain. 

Comments on the proposed rule were 

required to be received on or before 

April 1, 2013. We are reopening the 

comment period on Docket No. APHIS– 

2011–0132 for an additional 15 days. 

This action will allow interested 

persons additional time to prepare and 

submit comments. We will also consider 

all comments received between April 2, 

2013 (the day after the close of the 

original comment period) and the date 

of this notice. 

Authority: 7 U.S.C. 450, 7701–7772, and 

7781–7786; 21 U.S.C. 136 and 136a; 7 CFR 

2.22, 2.80, and 371.3. 

Done in Washington, DC, this 22nd day of 

May 2013. 

Kevin Shea, 

Acting Administrator, Animal and Plant 

Health Inspection Service. 

[FR Doc. 2013–12685 Filed 5–28–13; 8:45 am] 

BILLING CODE 3410–34–P 

DEPARTMENT OF AGRICULTURE 

Food Safety and Inspection Service 

9 CFR part 417 

[Docket No. FSIS–2009–0019] 

HACCP Systems Validation 

AGENCY: Food Safety and Inspection 

Service, USDA. 

ACTION: Notice of public meeting and 

request for comments. 

SUMMARY: The Food Safety and 

Inspection Service (FSIS) is announcing 

the availability of updated guidance for 

Hazard Analysis Critical Control Point 

(HACCP) systems validation. In 

addition, FSIS is announcing that it will 

hold a public meeting on June 25, 2013, 

to review changes to the guidance 

announced in this notice and to take 

comments. The public meeting will also 

be available by teleconference. 

Following the public meeting, the 

Agency will accept written comments 

until July 25, 2013. Given the extensive 

opportunity for comment on the 

guidance, however, the Agency believes 


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that very few, if any, issues remain in 

this proceeding. 

DATES: The public meeting will be held 

on June 25, 2013 from 8:30 a.m. to 12:30 

p.m. On-site registration will begin at 

8:00 a.m. Written comments may be 

submitted until July 25, 2013. 

ADDRESSES: The public meeting will be 

held in the 1st Floor Auditorium of 

Patriots Plaza 3, 355 E Street SW., 

Washington, DC 20024. 

FSIS will finalize the agenda by June 

18, 2013 and post it on the FSIS Web 

page at: http://www.fsis.usda.gov/ 

News_&_Events/meetings_&_events/ 

index.asp. 

Registration: Pre-registration is 

recommended. To pre-register, access 

the FSIS Web site at http:// 

www.fsis.usda.gov/News_&_Events/ 

meetings_&_events/index.asp. Call-in 

information will be provided via email 

to pre-registered participants. If you are 

interested in making a public comment 

during the teleconference, please 

indicate so on the registration form. 

In addition to the public meeting, 

interested persons may submit 

comments using either of the following 

methods: 

• Federal eRulemaking Portal: This 

Web site provides the ability to type 

short comments directly into the 

comment field on this Web page or 

attach a file for lengthier comments. Go 

to http://www.regulations.gov. Follow 

the on-line instructions at that site for 

submitting comments. 

• Mail, including CD–ROMs, etc.: 

Send to Docket Clerk, U.S. Department 

of Agriculture (USDA), FSIS, OPPD, 

RIMS, Patriots Plaza 3, 1400 

Independence Avenue SW., Mail Stop 

3782, Room 8–163A, Washington, DC 

20250–3700. 

• Hand- or Courier-Delivered 

Submittals: Deliver to Patriots Plaza 3, 

355 E Street SW., Room 8–163A, 

Washington, DC 20024. 

Instructions: All items submitted by 

mail or electronic mail must include the 

Agency name and docket number FSIS– 

2009–0019. Comments received in 

response to this docket will be made 

available for public inspection and 

posted without change, including any 

personal information, to http:// 

www.regulations.gov. 

Docket: For access to background 

documents or comments received, go to 

the FSIS Docket Room at the address 

listed above between 8:30 a.m. and 4:30 

p.m., Monday through Friday. 

FOR FURTHER INFORMATION CONTACT: 

William K. Shaw, Jr., Ph.D., Office of 

Policy and Program Development, FSIS, 

USDA, 1400 Independence Avenue 

SW., Patriots Plaza 3, Mailstop 3782, 

Room 8–142, Washington, DC 20250. 

Telephone: (301) 504–0852 Fax: 

(202)245–4792. E-Mail: 

william.shaw@fsis.usda.gov. 

Background 

FSIS administers the Federal Meat 

Inspection Act (FMIA) (21 U.S.C. 601 et 

seq.) and the Poultry Products 

Inspection Act (PPIA) (21 U.S.C. 451 et 

seq.) to protect the health and welfare of 

consumers by preventing the 

distribution in commerce of meat or 

poultry products that are unwholesome, 

adulterated, or misbranded. To reduce 

the risk of foodborne illness from meat 

or poultry products, FSIS issued 

regulations on July 25, 1996, which 

require that federally inspected 

establishments adopt HACCP systems 

(61 FR 38806). These regulations require 

that federally inspected establishments 

adopt measures to prevent or control the 

occurrence of food safety hazards at 

each stage of the production process 

where such hazards are reasonably 

likely to occur. 

In the May 9, 2012 Federal Register 

(77 FR 27135), FSIS issued a notice to 

clarify its requirements for validation by 

an establishment of its HACCP system 

and to announce the availability of the 

draft guidance on validation, which is 

discussed in more detail below. The 

HACCP regulations in 9 CFR part 417 

require that establishments validate the 

HACCP plan’s adequacy to control the 

food safety hazards identified by the 

hazard analysis (9 CFR 417.4(a)). These 

regulations prescribe requirements for 

the initial validation of an 

establishment’s HACCP plan and 

require establishments to ‘‘conduct 

activities designed to determine that the 

HACCP plan is functioning as 

intended.’’ During this initial validation 

period, establishments are to 

‘‘repeatedly test the adequacy of the 

CCPs, critical limits, monitoring and 

recordkeeping procedures, and 

corrective actions’’ prescribed in their 

HACCP plans (9 CFR 417.4(a)(1)). As 

FSIS explained in the May 9, 2012 

Federal Register, validation under 9 

CFR 417.4(a)(1) requires that 

establishments assemble two types of 

data: 1) the scientific or technical 

support for the judgments made in 

designing the HACCP system, and 2) 

evidence derived from the HACCP plan 

in operation to demonstrate that the 

establishment is able to implement the 

critical operational parameters 

necessary to achieve the results 

documented in the scientific or 

technical support. 

The regulations also provide that 

‘‘[v]alidation . . . encompasses reviews 

of the records themselves, routinely 

generated by the HACCP system, in the 

context of other validation activities’’ (9 

CFR 417.4(a)(1)). As FSIS explained in 

the May 9, 2012 Federal Register, if an 

establishment’s supporting 

documentation for its hazard analysis 

includes records associated with a 

prerequisite program that provides for 

an intervention or process designed to 

prevent a hazard from being likely to 

occur, the establishment’s validation 

records would need to include all 

documents associated with the 

prerequisite program. Thus, validation 

of the HACCP system involves 

validation of the critical control points 

in the HACCP plan, as well as of any 

interventions or processes used to 

support decisions in the hazard 

analysis. 

Initial Draft Guidance 

In March 2010, FSIS posted on its 

Web site an initial draft guidance 

document to assist the industry, 

particularly small and very small 

establishments, in complying with the 

requirements for HACCP systems, 

pursuant to 9 CFR 417.4. 

On June 14, 2010, FSIS held a public 

meeting to discuss the initial draft 

HACCP validation guidance and 

received input from stakeholders. The 

transcript of the June 2010 public 

meeting is available on the FSIS Web 

site at: http://www.fsis.usda.gov/PDF/

Transcripts_HACCP_Validation_

061410.pdf. 

FSIS received over 2,000 comments 

on the initial draft guidance, 

particularly with respect to the use of 

microbiological testing to validate the 

effectiveness of HACCP systems in 

controlling biological hazards. The 

Agency considered the issues raised by 

the comments received in response to 

the May 2010 Federal Register notice 

and at the June 2010 public meeting and 

developed updated second draft 

compliance guidance. 

On September 22–23, 2011, FSIS 

shared a second draft of the HACCP 

validation guidance with the National 

Advisory Committee on Meat and 

Poultry Inspection (NACMPI). The 

Committee reviewed the draft and 

provided comments and suggestions to 

FSIS on how to improve the guidance. 

The NACMPI report is available on the 

FSIS Web site at: http://

www.fsis.usda.gov/PDF/Validation_

Issue_Paper_Final.pdf. The Agency 

made additional revisions to the draft 

guidance in response to the input from 

NACMPI. 

In a May 9, 2012 Federal Register 

notice, FSIS announced the availability 

of, and requested comments on, the 

revised draft guidance document 


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(http://www.fsis.usda.gov/OPPDE/rdad/ 

FRPubs/2009-0019.htm). In the May 

2012 Federal Register notice, the 

Agency also clarified its requirements 

for HACCP system validation and 

responded to the comments that it had 

received on the initial draft guidance. 

The May 2012 Federal Register notice 

explained that the Agency was soliciting 

comments on the revised draft, and that 

it would hold another public meeting 

before issuing final guidance for HACCP 

systems validation (77 FR 27135). 

Comments on the Guidance 

FSIS received fifty-one (51) comments 

on its May 2012 revised draft guidance 

on HACCP validation from small and 

very small meat or poultry processors, 

trade associations representing animal 

producers, small business owners, 

corporations, State Departments of 

Agriculture, and consumer advocacy 

organizations. FSIS has carefully 

considered the comments and has 

revised its draft guidance in light of 

these comments. The following is a brief 

summary and discussion of the major 

issues raised in the comments to the 

draft guidance document. 

1. Concerns About Validation, Its 

Applicability, and Cost 

Comment: Several commenters asked 

why the validation guidance or new 

FSIS enforcement of validation 

requirements is necessary, especially 

given the amount of time the HACCP 

regulations have been in place. These 

commenters stated that establishments 

should not have to ‘‘revalidate’’ their 

systems. 

Response: The validation guidance is 

necessary because the Agency found 

that establishments have not adequately 

validated their systems. During the 

process of developing the draft 

guidance, FSIS added an appendix to 

the document that explains the need for 

validation and FSIS’s experiences that 

led it to create the guidance document 

(e.g., FSIS’s findings following a 2011 

Lebanon bologna outbreak that the 

establishment’s scientific support on file 

did not match the process the 

establishment was using to make the 

bologna; non-O157 positives in 2012 

that FSIS concluded likely occurred 

because of improperly designed 

interventions; and the chicken pot pie 

outbreaks in 2007 that FSIS concluded 

may have occurred because of 

improperly validated cooking 

instructions). 

Based on findings from FSIS’s data 

analyses and outbreak investigations, 

the Agency recommends that 

establishments use the guidance 

document to ensure that their HACCP 

systems are properly validated. On an 

annual basis, and whenever changes 

occur that affect the hazard analysis of 

the HACCP plan, the establishment 

should conduct a reassessment as 

required in 9 CFR 417.4(a)(3) (i.e., 

review records generated over the 

course of the previous year, or during 

the period the change occurred, that 

reflect how the HACCP system is 

performing as a whole and analyze them 

to determine whether food safety goals 

are being met). 

If the reassessment shows that the 

HACCP system is effective and 

functioning as intended, the 

establishment can consider continuing 

on with the same system and the same 

monitoring and verification procedures 

and frequencies. If reassessment shows 

that either their HACCP system was not 

set up correctly, is not being 

implemented consistently, or is no 

longer effective, the establishment 

would make changes to its HACCP 

system (e.g., add another intervention) 

and then would, in most cases, be 

required to validate any changes to its 

HACCP system. 

While most establishments have 

assembled the scientific or technical 

documentation needed to support their 

HACCP systems, many establishments 

have not gathered the necessary in-plant 

validation data demonstrating that their 

HACCP systems are functioning as 

intended, which is why the guidance 

document is necessary. As is explained 

below, in approximately six months 

from the time that FSIS issues the final 

validation guidance, FSIS intends to 

begin verifying that establishments 

comply with all validation 

requirements. 

Comment: Several commenters 

expressed concern about the cost of 

validation, particularly for small 

establishments that have many different 

HACCP plans. One comment stated that 

if a very small establishment cannot 

afford to comply with validation 

requirements, it should have the option 

to return to ‘‘conventional’’ inspection 

instead of HACCP. Commenters were 

also concerned about the costs of 

obtaining in-plant microbial data and 

other costs associated with validation. 

Response: HACCP was implemented 

in 1996 and has resulted in great 

improvements in food safety. The 

Agency is not going back to a command 

and control inspection approach 

because it would not provide 

establishments with the flexibility to 

design innovative systems that ensure 

food safety. 

In the guidance, FSIS states that 

microbiological testing is needed for inplant data in only limited circumstances 

and has provided low cost ways in 

which establishments can validate their 

systems in place of microbiological 

testing, such as ensuring that they are 

meeting the critical operating 

parameters of the interventions as 

defined in the scientific support. 

Therefore, FSIS estimates that costs 

associated with meeting validation 

requirements will be minimal. 

Comment: Several commenters stated 

that establishments should not have to 

validate their prerequisite programs 

because 9 CFR 417.4(a)(1) does not 

apply to prerequisite programs. One 

commenter recommended that, in the 

absence of a CCP, prerequisite programs 

referenced in the flow chart should be 

validated, but that otherwise, 

establishments should not be required 

to validate their prerequisite programs. 

The same commenter also requested 

that FSIS begin only reviewing 

validation for CCPs and then, at a later 

date, begin reviewing validation for 

prerequisite programs referenced in the 

flow chart. One commenter stated that 

only prerequisite programs that contain 

scientifically supported critical 

operating parameters (e.g., foreign 

material control, Good Manufacturing 

Practices, employee hygiene) should 

have to be validated. Several 

commenters stated that they needed 

guidance concerning how to validate 

pest control, employee hygiene, 

sanitation practices, and other 

processes. 

Response: Validation is the process of 

demonstrating that the HACCP system, 

as designed, can adequately control 

identified hazards to produce a safe, 

unadulterated product. Prerequisite 

programs designed to support a decision 

in the hazard analysis are part of the 

HACCP system. When an establishment 

determines that a hazard is not 

reasonably likely to occur because the 

prerequisite program prevents the 

hazard, that prerequisite program 

becomes part of the HACCP system. 

Therefore, prerequisite programs 

designed to support decisions in the 

hazard analysis (e.g. Sanitation 

Standard Operating Procedures 

(Sanitation SOPs), purchase 

specifications, antimicrobial 

interventions) need to be validated to 

ensure that the overall system can 

operate effectively. Even though 9 CFR 

417.4(a)(1) does not refer to Sanitation 

SOPs or other prerequisite programs, 

establishments’ initial validation 

activities need to include employee 

hygiene and other similar prerequisite 

programs if they are used to support 

decisions in the hazard analysis. As 

explained in the guidance, in order to 

validate such programs, establishments 


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need to provide scientific 

documentation that supports that they 

will work as intended and to collect inplant data to support that the programs 

can be implemented as designed. 

Comment: Some commenters stated 

that establishments should not be 

required to validate cooking instructions 

because the cooking is performed by the 

consumer. One comment stated that 

discussion of validating the time and 

temperature combinations for cooking 

instructions should be removed from 

the guidance. Another commenter 

requested more guidance on how 

establishments should validate cooking 

instructions. Another commenter asked 

for confirmation that validated cooking 

instructions are not considered a CCP. 

Response: An establishment must 

validate all measures that it relies upon 

to prevent or control the hazards that it 

has identified in its HACCP system, 

whether the measures are part of the 

HACCP plan itself or part of a program 

that includes measures that affect the 

hazard analysis. Thus, if an 

establishment’s HACCP system includes 

cooking instructions as a measure to 

address a potential food safety hazard 

after entry into the establishment, the 

establishment must properly validate 

the instructions. 

As we saw in the 2007 salmonellosis 

outbreak associated with chicken pot 

pies, providing cooking instructions on 

a package that cannot be repeated by the 

consumer represents an increased risk 

to the consumer. Had the establishment 

validated the cooking instructions on 

the pot pies to ensure they would 

achieve the desired endpoint 

temperature under actual consumer 

cooking conditions, these illnesses may 

have been prevented (http://

www.cdc.gov/mmwr/preview/

mmwrhtml/mm5747a3.htm). 

If an establishment’s HACCP system 

includes placing cooking instructions 

on the product’s label, the instructions 

must be validated to ensure that 

consumers who follow the instructions 

will achieve the endpoint time/ 

temperature needed to ensure that the 

product is cooked and safe to consume. 

While validated cooking instructions 

may be used as a control to address 

hazards that may occur after the product 

has left the establishment, the 

establishment is still required to address 

food safety hazards that are reasonably 

likely to occur in the production process 

and identify the measures the 

establishment can apply to control those 

hazards (9 CFR 417.2(a)(1). http://

www.cdc.gov/mmwr/preview/

mmwrhtml/mm5747a3.htm). 

FSIS is in the process of developing 

a guidance document on validating 

cooking instructions for mechanically 

tenderized beef product. FSIS has 

previously recommended validated 

cooking instructions for product that 

appears to be ready-to-eat, but its meat 

or poultry components have not 

received a sufficient lethality step or 

some other component has not received 

a lethality step. http://

www.fsis.usda.gov/OPPDE/rdad/FSIS

Directives/10240.4/Resource_1.pdf 

Resource 1 for NRTE products that 

appear to be RTE (e.g., entrees, dinners, 

casseroles etc) http://www.fsis.usda.gov/ 

PDF/Info_on_Validation_of_Labeled_

Cooking_Instructions_Raw_or_Partially_

Cooked_Poultry.pdf (validated cooking 

instructions) http://www.fsis.usda.gov/

PDF/Labeling_Policy_Guidance_

Uncooked_Breaded_Boneless_Poultry_

Products.pdf (this link includes the 

background information and Q&As) 

Comment: Several comments stated 

that establishments should not be 

required to collect in-plant data for 

more than one product in a HACCP 

process category. These commenters 

also requested guidance on how to 

select a product from within each 

HACCP category. Commenters noted 

that such in-plant data would include 

execution data for all CCPs, 

interventions, and prerequisite 

programs used to support decisions in 

the hazard analysis. One commenter 

questioned whether the establishment 

would need to validate the food safety 

system for each product if the only 

difference among products is a 

seasoning. Another commenter stated 

that it is possible to have in-plant data 

for product of one species within a 

HACCP category serve as in-plant data 

to validate the process for product from 

another species if there are no 

additional food safety concerns. 

Another commenter stated that FSIS’s 

guidance should follow the NACMPI 

recommendations to group typical 

products into categories and select 

‘‘worst case products’’ within the group. 

Response: In the revised guidance, 

FSIS has clarified that establishments 

are not required to collect in-plant data 

for more than one product within a 

HACCP process category. The guidance 

now provides information concerning 

how establishments should select a 

product from within a HACCP category. 

The guidance also provides information 

on how establishments can develop a 

decision-making document concerning 

product choices for collecting in-plant 

data. The guidance provides examples 

of how to collect in-plant data to aid 

industry, but establishments will have 

the flexibility to develop their own 

criteria. 

Comment: A few commenters 

requested confirmation that 

establishments would not have to 

conduct ‘‘initial’’ validation for all 

changes that result from reassessment. 

Several commenters asked whether the 

whole system would need to be 

validated or just a change following 

reassessment. One commenter stated 

that improved implementation of a 

HACCP system would not necessarily 

result in changes to the design of the 

system. 

Response: Establishments do not need 

to conduct validation of the whole 

system for all changes that result from 

reassessment. Depending on the change, 

the establishment will likely only need 

to validate that the change is 

functioning as intended. For example, 

an establishment may change the 

thickness of a raw patty product and 

determine that it only needs to validate 

that the cooking instructions still 

achieve the desired endpoint 

temperature at the new product 

thickness. In this example, the 

establishment would not need to 

validate the entire HACCP system. 

Comment: Several commenters stated 

that very small establishments that 

produce products infrequently cannot 

obtain 13 production days worth of 

records within 90 calendar days. One 

commenter suggested extending the 

validation period beyond 90 calendar 

days in order to obtain 13 days worth 

of records. Another commenter 

requested that the guidance document 

clarify that large establishments have 

the flexibility to determine whether 

there are a sufficient number of 

production days within the 90 calendarday period to gather appropriate data. 

Response: The guidance explains that 

for large establishments, 90 calendar 

days equates to approximately 60 

production days. FSIS recognizes that 

many small and very small 

establishments do not operate daily. 

Therefore, the guidance also states that 

a minimum level of records from 13 

production days within those initial 90 

calendar days should be used to initially 

validate a small or very small 

establishment’s HACCP system. The 

establishment should consider focusing 

validation activities on the product 

produced most frequently within each 

HACCP category. 

In the guidance, FSIS recognizes that 

there are some establishments that 

produce products so infrequently that 

they would not be able to gather records 

from 13 production days within those 

90 initial calendar days. If the 

establishment infrequently produces 

several products that are each part of a 

separate HACCP category, there is 


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inherent risk with the processes if the 

establishment does not have experience 

in producing them. Therefore, to 

determine whether the system is 

properly designed and executed, even 

though the regulations provide 90 days 

for a conditional grant of inspection (9 

CFR 304.3(b)), an establishment needing 

more than 90 days can ask the District 

Office, in writing, for additional time to 

collect at least 13 production days of 

records. The guidance explains that 

establishments may also consider 

evaluating data collected for products 

across multiple HACCP categories that 

share some common steps, ingredients, 

or equipment, to determine whether the 

data together can support its ability to 

meet critical operational parameters. 

Scientific Support 

Comment: Appendix A of the final 

rule, ‘‘Performance Standards for the 

Production of Certain Meat and Poultry 

Products’’ (64 FR 746–748) is specific to 

Salmonella but is often used to support 

lethality of other pathogens, such as E. 

coli O157:H7 and Lm. Therefore, several 

commenters asked whether 

establishments could use Appendix A 

as scientific support for process controls 

for pathogens other than Salmonella. 

Response: FSIS has revised the 

validation guidance to clarify that 

during slaughter, in order to be most 

effective, it is very important that 

interventions have been studied for the 

pathogen and product pair of interest. In 

addition, FSIS has clarified that for 

thermal processing treatments, 

Salmonella can be used as an indicator 

for other pathogens of concern. 

Therefore, Appendix A can be used as 

scientific justification for the process 

without further support that the results 

apply to other pathogens such as E. coli 

O157:H7 or Lm. 

Comment: Some commenters 

questioned whether their scientific 

support must be peer-reviewed. One 

commenter asked whether a processing 

authority could be an establishment 

owner with knowledge of the process. 

The commenter also asked if it could 

use documents that only provide a 

critical limit as scientific support (for 

example, a University publication or a 

textbook with growth limits of bacteria). 

Response: FSIS has revised the 

guidance to clarify that the Agency 

recommends peer-reviewed scientific 

data to support the process used, but 

does not require peer-reviewed data. An 

establishment may use peer-reviewed 

scientific data or information in 

addition to a scientific article from a 

peer-reviewed journal as scientific 

support for its processes. Such 

information would include data from a 

textbook on the growth limits of certain 

pathogens, based on a food product’s 

water activity and pH. This information 

could be used as scientific support 

because information in scientific 

textbooks has generally been peerreviewed. Peer-reviewed scientific data 

goes through a process of evaluation 

involving qualified individuals within 

the relevant field that ensures the 

integrity of the data. 

Scientific data that is not peerreviewed is less reliable than peerreviewed data, because there could be 

flaws in the science that a peer review 

would have revealed. If an 

establishment uses scientific data that is 

not peer-reviewed, the establishment 

may be subject to additional scrutiny by 

Agency personnel performing 

verification activities. 

An establishment may rely on a 

process authority to provide necessary 

scientific support for the 

establishment’s process. As stated 

above, to meet validation requirements, 

the establishment is required to ensure 

that the scientific data and 

documentation provided by the 

processing authority supports that the 

process addresses the identified 

hazards, and meets the expectations for 

validation requirements. 

Comment: Several commenters stated 

that the guidance document is still too 

vague in terms of how close the 

scientific support needs to match an 

actual process. For example, 

commenters asked whether the 

manufacturer of a grinder would have to 

be the same as the grinder used in a 

supporting study. Commenters also 

asked how significant casing size 

differences among the process used and 

support studies would need to be before 

the support document would no longer 

apply. Commenters stated that 

parameters are often more controlled 

during research than in-plant, and that 

it is costly for establishments to measure 

temperature and pounds per square 

inch. 

Response: In the guidance, FSIS has 

clarified how scientific support should 

match an actual process. Generally, 

establishments should use the same 

critical operational parameters as those 

in the support documents. In some 

circumstances, establishments may be 

able to support using critical operational 

parameters that are different from those 

in the support documents (e.g., higher 

concentrations of antimicrobials or 

higher thermal processing 

temperatures). In these cases, 

establishments should provide 

justification supporting that the levels 

chosen are at least as effective as those 

in the support documents. This 

justification is needed because higher 

levels of a critical operational parameter 

may not always be equally effective. For 

example, antimicrobial agents may only 

be effective within a range of 

concentration after which point efficacy 

may decrease. Similarly, higher 

processing temperatures may result in 

the surface of the product drying out 

before adequate lethality is achieved. 

Establishments also need to ensure the 

levels are safe and suitable (http:// 

www.fsis.usda.gov/OPPDE/rdad/ 

FSISDirectives/7120.1.pdf and 9 CFR 

424.21(c)). 

Comment: Several commenters stated 

that FSIS Notice 36–12 (http:// 

www.fsis.usda.gov/oppde/rdad/ 

FSISNotices/36-12.pdf) suggested that 

the challenge study establishments used 

in the case of the Lebanon bologna 

would not be adequate support because 

the critical operational parameters in 

the study did not match those used in 

the establishment. 

Response: The FSIS notice on 

Lebanon bologna explained that the 

actual process that the establishment 

used did not match the scientific 

support. As a result, the establishment’s 

process did not achieve adequate 

lethality. Establishments producing 

Lebanon bologna can use the guidance 

as scientific support; however, they 

need to ensure that their process meets 

the critical operating parameters used in 

the study. 

FSIS recognizes that scientific support 

performed in a laboratory may not 

always match an establishment’s exact 

parameters. However, significant 

differences, such as the permeability of 

the casing used or the diameter of the 

product, are key factors that affect 

lethality and therefore cannot be 

overlooked. For instance, if an 

establishment wants to use a permeable 

casing, the establishment cannot assume 

that its process will achieve the same 

reduction in pathogens as achieved in a 

study using an impermeable casing. 

Comment: Some comments stated that 

discussion of critical operational 

parameters in the guidance will lead 

some to conclude that all parameters are 

critical. Several commenters requested 

that FSIS create a third party or 

consortium to help establishments 

identify scientific support and critical 

operational parameters. Another 

commenter requested that FSIS’s 

guidance address validation and 

scientific support for additional 

hazards, such as viruses and protozoa. 

Several commenters stated that 

establishments do not have the expertise 

to scientifically support or identify 

critical operational parameters. One 

commenter stated that establishments 


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do not know how to test parameters of 

the different processes. 

Response: Critical operational 

parameters are the specific conditions 

that the intervention must operate under 

in order for it to be effective. The 

guidance document explains in detail 

how an establishment can identify the 

critical operational parameters in its 

scientific support. Specifically, 

Appendix 3, provides step-by-step 

guidance to establishments. 

FSIS will continue to post commonly 

cited journal articles on its Web site in 

which critical operational parameters 

have been identified and will offer 

support through askFSIS to 

establishments trying to identify critical 

operational parameters. 

Comment: One commenter requested 

that reference to Purac’s modeling 

program be made within the guidance, 

and that the guidance address the use of 

pathogen modeling programs as 

scientific supporting documentation. 

The commenter also requested an 

additional example in the guidance to 

show how an establishment could 

validate the effectiveness of an 

antimicrobial agent through pathogen 

modeling. 

Response: FSIS has added a reference 

to pathogen modeling as a type of 

scientific support. In addition, FSIS has 

added an example in Appendix 3 to 

show how an establishment can validate 

its stabilization process through 

pathogen modeling. FSIS does not 

advocate certain programs and therefore 

did not cite Purac in the guidance. 

Comment: One commenter requested 

a listing of surrogate or indicator 

organisms that can be used for 

validation. Another commenter 

requested clarification on when 

establishments can use scientific 

support based on indicator organisms. 

Response: As explained in the 

guidance document, establishments 

should not rely on scientific support 

containing data from indicator or 

surrogate organisms unless available 

data establishes a relationship between 

the presence or level of a pathogen or 

toxin and the indicator organism. Such 

data can be collected from in-laboratory 

studies using indicator organisms that 

parallel the data in a challenge study 

performed with the inoculated 

pathogen. This data could be collected 

in the same way in which the pathogen 

is being tested or in another study 

performed under similar conditions. If 

similar and consistent reduction or 

control can be established, then control 

of the indicator organisms can be 

reliably used to indicate expected 

pathogen control in actual application 

in-plant. 

2. Validation Worksheet Examples 

Comment: One commenter stated that 

FSIS should include an explanation of 

how the validation worksheet examples 

can be used. Another commenter 

recommended that the guidance state 

that establishments have flexibility to 

utilize approaches other than those in 

the worksheet examples. Two 

commenters recommended that FSIS 

recognize in the guidance that not all 

critical operational parameters 

identified in the Appendix will apply to 

all processes. 

Another commenter requested more 

detail be provided in the worksheet 

examples in terms of formatting and the 

types of data that establishments should 

collect. 

One comment stated that 

establishments’ environmental 

monitoring verifies that the Sanitation 

SOPs are working as intended, but does 

not validate them. 

Response: In the guidance document, 

FSIS has added numerous validation 

worksheet examples to illustrate how an 

establishment may want to display its 

own in-plant validation data. As FSIS 

explains in the guidance, the validation 

worksheet examples are for illustration 

purposes only and are included to help 

establishments to understand the types 

of scientific support and in-plant 

documentation that are needed to 

comply with the validation 

requirements. 

With regard to the comment on the 

Sanitation SOP monitoring, FSIS 

included this data in the guidance as an 

example of data collected during the 

initial 90 days of the set-up of a new 

program. Scientific support is needed to 

support the frequency of testing (which 

would address the factors used to 

determine the frequency). In-plant 

validation data is needed to support that 

the testing is adequate. 

3. Microbiological Testing 

Comment: One comment asked for 

clarification as to whether samples need 

to be collected for each and every 

process, product, or species, and 

whether establishments would need to 

collect 13 samples for every product 

produced, as in the regulations that 

require establishments to conduct 

testing for generic E. coli (9 CFR 310.25 

and 381.94) 

Response: If an establishment’s 

scientific support contains 

microbiological data showing the 

efficacy of the intervention against the 

identified food safety hazard, then the 

in-plant data does not need to include 

sampling. In that case, the in-plant data 

should support that the establishment 

follows the critical operational 

parameters from the study. 

Agency Training and Implementation 

Comment: Commenters stated that 

FSIS should ensure that inspection 

program personnel consistently verify 

and enforce validation requirements. 

One commenter stated that FSIS should 

share training for FSIS personnel with 

industry. 

A commenter also recommended that 

FSIS hold regional sessions to 

communicate the policy to 

establishments, and that the Agency 

engage cooperative extension programs 

in its communication strategy. One 

commenter recommended that the 

Agency create a tutorial on 

understanding scientific articles and on 

identifying critical operational 

parameters. Commenters also requested 

that FSIS issue a notice or directive 

explaining how inspectors should use 

the validation guideline. 

A few commenters requested that 

FSIS phase-in verification of validation 

requirements based on risk or product 

categories, rather than establishment 

size. One commenter requested an 

additional six months to gather 

validation documents before FSIS 

begins new verification activities related 

to validation. 

Response: The guidance is meant for 

establishments. FSIS will ensure 

inspection program personnel 

understand validation requirements and 

will issue necessary instructions to field 

personnel so that they are aware of the 

final guidance and share it with 

establishments. FSIS will also issue 

necessary instructions to field personnel 

for them to verify that establishments 

meet all validation requirements. 

FSIS will implement its new 

verification activities by phasing them 

in based on establishment size. For large 

establishments, the agency plans to wait 

approximately six months from the date 

that the final guidance is issued to start 

verifying and enforcing the second 

element of validation (initial in-plant 

validation). Thus, large establishments 

will have six months from the date that 

the final guidance is issued to gather all 

necessary in-plant demonstration 

documents. 

FSIS intends to begin verifying that 

small and very small establishments 

meet all validation requirements nine 

months from the date the final guidance 

is issued. Therefore, these 

establishments will have approximately 

nine months from the date the final 

guidance is issued to gather all 

necessary in-plant demonstration 

documents before FSIS will verify and 


tkelley on DSK3SPTVN1PROD with PROPOSALS
32190 Federal Register / Vol. 78, No. 103 / Wednesday, May 29, 2013 / Proposed Rules 

enforce the second element of 

validation. 

Other Changes to Validation Guidance 

Examples: The guidance contains 

additional examples of food safety 

problems linked to inadequate 

validation and recommendations to aid 

establishments in meeting initial 

validation requirements. These 

examples demonstrate the need for 

validation and provide support for 

recommendations made within the 

guidance. 

Scientific Support Documents. FSIS 

has added a section to the guidance that 

explains to establishments how to 

determine whether scientific support 

documents are sufficiently related to the 

process, product, and hazard identified 

in the hazard analysis to constitute 

appropriate validation. The guidance 

explains that the supporting 

documentation should identify the 

hazard (biological, physical, and 

chemical), the expected level of hazard 

reduction or prevention to be achieved, 

all critical operational parameters or 

conditions necessary to address the 

hazard, the processing steps that will 

achieve the specified reduction or 

prevention, and how these processing 

steps can be monitored. FSIS has also 

included information on how 

establishments can identify supporting 

documentation that adequately 

addresses the expected level of hazard 

or reduction or prevention to be 

achieved. FSIS provided examples for 

biological, physical, and chemical 

hazards that should aid establishments 

in ensuring that the scientific support 

closely matches the hazard being 

controlled. FSIS has also clarified when 

establishments may use scientific 

support containing data from indicator 

or surrogate organisms. 

Critical Operational Parameters. The 

guidance continues to state that critical 

operational parameters are those 

necessary for interventions to be 

effective and explains how an 

establishment can identify the critical 

operational parameters in its scientific 

support. As discussed above in response 

to comments, establishments generally 

should use the same critical operational 

parameters as those in the support 

documents. However, in some 

circumstances, establishments may be 

able to support using critical operational 

parameters that are different from those 

in the support documents (e.g., higher 

concentrations of antimicrobials or 

higher thermal processing 

temperatures). In these cases, 

establishments should provide 

justification supporting that the levels 

chosen are at least as effective as those 

in the support documents. 

FSIS has added an additional 

Appendix (Appendix 2) to provide an 

example of a decision-making document 

an establishment could develop when it 

uses different levels of a critical 

operational parameter than the 

parameters in the support document. An 

establishment may use the decisionmaking document to explain the 

scientific rationale for why it is using 

critical operational parameters that are 

different from those in the support 

documents. 

In-plant data. The guidance 

recommends that establishments collect 

in-plant validation data for a wide 

variety of products and worst case 

scenarios. Appendix 4 of the guidance 

contains validation worksheet examples 

that establishments may reference to 

help them understand the types of 

scientific support and in-plant 

documentation that are needed to 

comply with the validation 

requirements. 

Initial validation vs. on-going 

verification. The guidance explains the 

differences between initial validation 

and on-going verification and the 

relationship between the activities 

performed to provide initial validation 

as opposed to on-going verification. The 

revised guidance also clarifies when 

changes that result from reassessment 

would not require validation. For 

example, an establishment may need to 

reassess its HACCP system following a 

change in supplier of a raw material, but 

the change would not require validation 

if the establishment determines that the 

composition of the raw material and 

microbiological profile are not 

significantly different from the material 

provided by the previous supplier. In 

other cases, changes that result from the 

reassessment would not require 

additional scientific support but would 

require additional in-plant 

demonstration data. For example, an 

establishment may find through 

reassessment that the design of an 

intervention was adequate, but that its 

employees are not implementing the 

intervention correctly. In that case, the 

establishment would only need to 

collect in-plant data to demonstrate that 

the intervention could be implemented 

appropriately. Depending on the 

change, the establishment would likely 

only need to validate that the change is 

functioning as intended and not the 

entire HACCP system. The current draft 

of the compliance guide is available for 

public viewing in the FSIS docket room 

and on the FSIS Web site at http:// 

www.fsis.usda.gov/ 

Significant_Guidance/index.asp. 

Public Meeting 

On June 25, 2013, the Agency will 

hold a public meeting to review the 

information presented in this document 

and accept comments. 

Next Steps 

Following the public meeting, the 

Agency will accept public comment for 

30 days. Given the extensive 

opportunity for public comment on the 

compliance guide, it is likely that there 

are very few, if any, remaining issues. 

Therefore, FSIS does not foresee 

granting an extension to this final 30 

day comment period. As soon as 

possible after the comment period ends, 

the Agency will issue a Federal Register 

notice announcing the final guidance 

and will post the final guidance to its 

Web page. FSIS will implement its new 

verification activities phased in by 

establishment size. As stated above, for 

large establishments, the Agency plans 

to delay verification of the second 

element of validation as part of its 

inspection activities for approximately 

six months from the date the final 

guidance is posted. For small and very 

small establishments, the Agency plans 

to delay implementation for 

approximately nine months from the 

date the final guidance is posted. 

Until FSIS begins enforcing all 

validation requirements, FSIS 

inspection personnel will continue to 

issue noncompliance records (NRs) if an 

establishment lacks the required 

scientific or technical support for its 

HACCP system, or if the scientific or 

technical support is inadequate. FSIS 

will continue to issue a Notice of 

Intended Enforcement if, taken together 

with other relevant findings, an 

establishment’s scientific or technical 

support is inadequate, and the Agency 

can support a determination that the 

establishment’s HACCP system is 

inadequate for any of the reasons 

provided in 9 CFR 417.6. 

Moreover, if, in conducting a Food 

Safety Assessment (FSA), an 

Enforcement, Investigations, and 

Analysis Officer (EIAO) finds that an 

establishment has not collected in-plant 

data to demonstrate that its HACCP 

process works as intended, the EIAO 

will note this finding in the FSA and 

inform the establishment. Until FSIS 

begins enforcing the in-plant data 

requirements, FSIS will not issue NRs or 

take enforcement actions based solely 

on a finding that an establishment lacks 

in-plant validation data. 

Additional Public Notification 

FSIS will announce this notice online 

through the FSIS Web page located at 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 103 / Wednesday, May 29, 2013 / Proposed Rules 32191 

1A derivative is an instrument whose price is 

dependent on or derived from one or more 

underlying assets. A derivatives transaction 

involves a contract between two parties, called 

counterparties, that exchange value based on the 

fluctuation of the underlying asset or index. A 

counterparty is the other party to the derivatives 

transaction and can include swap dealers and major 

swap participants, which are terms to identify 

entities that operate primarily in the derivatives 

market. These transactions may involve collateral 

and a collateral custodian, which is an entity that 

holds the collateral for the two contracting parties. 

2 12 U.S.C. 1757(7) and (15). 

3 12 CFR 703.16. 

4 Id. at 703.16(a). Section 703.16(a), however, 

provides three exceptions to the general prohibition 

on derivatives. First, an FCU may purchase or sell 

any derivatives permitted under § 703.14(g) or 

under § 701.21(i) of NCUA’s lending regulations. 

Second, an FCU may purchase or sell an embedded 

option not required under generally accepted 

accounting principles (GAAP) to be accounted for 

separately from the host contract. Third, an FCU 

may enter into interest rate lock commitments or 

Continued 

http://www.fsis.usda.gov/ 

regulations_&_policies/ 

Federal_Register_Notices/index.asp. 

FSIS will also make copies of this 

Federal Register publication available 

through the FSIS Constituent Update, 

which is used to provide information 

regarding FSIS policies, procedures, 

regulations, Federal Register notices, 

FSIS public meetings, and other types of 

information that could affect or would 

be of interest to constituents and 

stakeholders. The Update is 

communicated via Listserv, a free 

electronic mail subscription service for 

industry, trade groups, consumer 

interest groups, health professionals, 

and other individuals who have asked 

to be included. The Update is also 

available on the FSIS Web page. In 

addition, FSIS offers an electronic mail 

subscription service which provides 

automatic and customized access to 

selected food safety news and 

information. This service is available at 

http://www.fsis.usda.gov/ 

News_&_Events/Email_Subscription/. 

Options range from recalls to export 

information to regulations, directives 

and notices. Customers can add or 

delete subscriptions themselves, and 

have the option to password protect 

their accounts. 

USDA Nondiscrimination Statement 

USDA prohibits discrimination in all 

its programs and activities on the basis 

of race, color, national origin, gender, 

religion, age, disability, political beliefs, 

sexual orientation, and marital or family 

status. (Not all prohibited bases apply to 

all programs.) Persons with disabilities 

who require alternative means for 

communication of program information 

(Braille, large print, or audiotape.) 

should contact USDA’s Target Center at 

(202) 720–2600 (voice and TTY). 

To file a written complaint of 

discrimination, write USDA, Office of 

the Assistant Secretary for Civil Rights, 

1400 Independence Avenue SW., 

Washington, DC 20250–9410 or call 

(202) 720–5964 (voice and TTY). USDA 

is an equal opportunity provider and 

employer. 

Done at Washington, DC on May 23, 2013. 

Alfred V. Almanza, 

Administrator. 

[FR Doc. 2013–12763 Filed 5–24–13; 8:45 am] 

BILLING CODE 3410–DM–P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Parts 703, 715, and 741 

RIN 3133–AD90 

Derivatives 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Proposed Rule. 

SUMMARY: This proposed rule permits 

credit unions to engage in limited 

derivatives activities for the purpose of 

mitigating interest rate risk. This 

proposed rule applies to federal credit 

unions and any federally insured, statechartered credit unions that are 

permitted under applicable state law to 

engage in derivatives transactions. It 

requires any credit union seeking 

derivatives authority to submit an 

application for one of two levels of 

authority. Level I and Level II authority 

differ on the permissible levels of 

transactions as well as the application, 

expertise, and systems requirements 

associated with operating a derivatives 

program. 

DATES: Comments must be received on 

or before July 29, 2013. 

ADDRESSES: You may submit comments 

by any of the following methods (Please 

send comments by one method only): 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• NCUA Web Site: http:// 

www.ncua.gov/ 

RegulationsOpinionsLaws/ 

proposed_regs/proposed_regs.html. 

Follow the instructions for submitting 

comments. 

• E-Mail: Address to 

regcomments@ncua.gov. Include ‘‘[Your 

name]—Comments on Proposed Rule— 

Derivatives’’ in the email subject line. 

• Fax: (703) 518–6319. Use the 

subject line described above for email. 

• Mail: Address to Mary Rupp, 

Secretary of the Board, National Credit 

Union Administration, 1775 Duke 

Street, Alexandria, Virginia 22314– 

3428. 

• Hand Delivery/Courier: Same as 

mail address. 

FOR FURTHER INFORMATION CONTACT: 

Justin M. Anderson or Lisa Henderson, 

Staff Attorneys, Office of General 

Counsel, at the above address or 

telephone (703) 518–6540; J. Owen Cole, 

Director, Division of Capital and Credit 

Markets, or Rick Mayfield, Senior 

Capital Markets Specialist, Office of 

Examination and Insurance, at the above 

address or telephone (703) 518–6360; or 

Dr. John Worth, Chief Economist, Office 

of the Chief Economist, at the above 

address or telephone (703) 518–6660. 

SUPPLEMENTARY INFORMATION:

I. Background 

A. Introduction 

The NCUA Board (Board) is proposing 

to allow credit unions to engage in 

limited derivatives transactions 1 for the 

purpose of mitigating interest rate risk 

(IRR). This proposed authority does not, 

however, allow credit unions to offer 

derivatives. This proposed rule applies 

to all federal credit unions (FCUs) and 

all federally insured state- chartered 

credit unions (FISCUs) that are 

expressly permitted by applicable state 

law to engage in derivatives 

transactions. The Board believes this 

proposed rule allows eligible credit 

unions to utilize an additional tool to 

mitigate IRR, while also reducing risk to 

the National Credit Union Share 

Insurance Fund (NCUSIF). 

The rule requires eligible credit 

unions to apply to NCUA or, in the case 

of a FISCU, NCUA and the applicable 

state supervisory authority (SSA), for 

either Level I or Level II derivatives 

authority. As discussed in greater detail 

below, Level I and Level II authority 

differ on the permissible levels of 

transactions as well as the application, 

expertise, and systems requirements. 

B. The Act and NCUA’s Regulations 

The Federal Credit Union Act (Act) 

provides FCUs with the authority to 

invest in certain securities, obligations, 

and accounts.2 For safety and soundness 

reasons, however, NCUA has adopted 

regulatory restrictions on certain 

investments and activities permitted by 

the Act.3 Currently, derivatives are 

among the investments specifically 

prohibited by NCUA.4


tkelley on DSK3SPTVN1PROD with PROPOSALS