[Federal Register Volume 83, Number 34 (Tuesday, February 20, 2018)]
[Notices]
[Pages 7269-7274]
[FR Doc No: 2018-03311]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82702; File No. SR-NASDAQ-2018-008]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Modify the Listing
Requirements Contained in Listing Rule 5635(d) To Change the Definition
of Market Value for Purposes of the Shareholder Approval Rules and
Eliminate the Requirement for Shareholder Approval of Issuances at a
Price Less Than Book Value but Greater Than Market Value

February 13, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 30, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to modify the listing requirements contained
in Listing Rule 5635(d) to change the definition of market value for
purposes of the shareholder approval rules and eliminate the
requirement for shareholder approval of issuances at a price less than
book value but greater than market value.
    The text of the proposed rule change is available on the Exchange's
website at http://nasdaq.cchwallstreet.com, at the principal office of
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq shareholder approval requirements were adopted in 1990.\3\
Among other circumstances, the rule requires shareholder approval for
security issuances for less than the greater of book or market value
(other than in the context of a public offering) if either (a) the
issuance equals 20% of the outstanding stock or voting power or (b) if
a smaller issuance coupled with sales by the officers, directors or
substantial security holders meets the 20% threshold.\4\ This provision
has remained substantively unchanged for the last 28 years. On the
other hand, the capital markets and securities laws, as well as the
nature and type of share issuances, have evolved significantly in that
time.
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    \3\ Securities Exchange Act Release No. 28232 (July 19, 1990),
55 FR 30346 (July 25, 1990) (adopting [sic] the predecessor to
Listing Rule 5635(d)).
    \4\ Id.
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    In 2016, Nasdaq requested comments from, and held discussions with,
market participants regarding whether, given these changes, Nasdaq
could update its shareholder approval rules to enhance the ability for
capital formation without sacrificing investor protections. Based on
the feedback received, in June 2017, Nasdaq launched a formal comment
solicitation on a specific proposal to amend Listing Rule 5635(d) (the
``2017 Solicitation''). Based on Nasdaq's experience and the comments
received, Nasdaq proposes to amend Rule 5635(d) to change the
definition of market value for purposes of the shareholder approval
rules and eliminate the requirement for shareholder approval of
issuances at a price less than book value but greater than market
value.
I. Definition of Market Value
    Listing Rule 5635(d) requires a Nasdaq-listed company to obtain
shareholder approval when issuing common stock or securities
convertible into common stock, which alone or together with sales by
officers, directors or Substantial Shareholders of the Company, equal
to 20% or more of the shares or 20% or more of the voting power
outstanding at a price less than the greater of the book value or
market value of that stock. Listing Rule 5005 defines ``market value''
as the closing bid price.
    Market participants often express to Nasdaq their concern that bid
price may not be transparent to companies and investors and does not
always reflect an actual price at which a security has traded.
Generally speaking, the price of an executed trade is viewed as a more
reliable indicator of value than a bid quotation; and the more shares
executed, the more reliable the price is considered. Further, it was
noted by commenters in the 2017 Solicitation that in structuring
transactions, investors and companies often rely on an average price
over a prescribed period of time for pricing issuances because it can
smooth out unusual fluctuations in price.
    Accordingly, Nasdaq proposes to modify the measure of market value
for purposes of Listing Rule 5635(d) from the closing bid price to the
lower of: (i) The closing price (as reflected on Nasdaq.com); or (ii)
the average closing price of the common stock (as reflected on
Nasdaq.com) for the five trading days immediately preceding the signing
of the binding agreement.
A. Closing Price
    The closing price reported on Nasdaq.com is the Nasdaq Official
Closing Price, which is derived from the closing auction on Nasdaq and
reflects actual sale prices at one of the most liquid times of the day.
The Nasdaq closing auction is designed to gather the maximum liquidity
available for execution at the close of trading, and to maximize the
number of shares executed at a single price at the close of the trading
day. The closing auction promotes accurate closing prices by offering
specialized orders available only during the closing auction and
integrating those orders with regular orders submitted during the
trading day that are still available at the close. The closing auction
is made highly transparent to all investors through the widespread
dissemination of stock-by-stock information about the closing auction,
including the potential price and size of the closing auction. Nasdaq
believes its closing auction has proven to be a valuable pricing tool
for issuers, traders, and investors alike; and Nasdaq continually works
to enhance the experience for those that rely upon it. For these
reasons, Nasdaq believes that the closing price reported on Nasdaq.com
is a better reflection of the market price of a security than the
closing bid price. This proposal is consistent with the approach of
other exchanges.\5\
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    \5\ See Section 312.04(i) of the NYSE Listed Company Manual
(``Market value'' of the issuer's common stock means the official
closing price on the [NYSE] as reported to the Consolidated Tape
immediately preceding the entering into of a binding agreement to
issue the securities.).
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    In addition, because prices are displayed from numerous data
sources on different websites, to provide transparency within the rule
to the appropriate price, and assure that companies and investors use
the Nasdaq Official Closing Price when pricing transactions, Nasdaq
proposes to codify within the rule that Nasdaq.com is the appropriate
source of the closing price information.\6\
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    \6\ The closing price is published on Nasdaq.com with a 15
minute delay and is available without registration or fee and Nasdaq
does not currently intend to charge a fee for access to this data or
otherwise restrict availability and, in the event that Nasdaq
subsequently determines to do so, it will file a proposed rule
change under Section 19(b) of the Act with respect to such change if
necessary to address the impact of compliance with this rule.
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B. Five-Day Average Price
    Several commenters supported the use of a five-day average in their
responses to the 2017 Solicitation. For example, one commenter
suggested that ``[i]nvestors view a 5 day average as a more fair method
of determining `market value' (in a non-technical sense)'' and
continued that ``[u]sing the closing bid on the closing date is more
prone to unanticipated and inequitable results based on market
fluctuations.'' \7\ Another commenter stated that they believe that a
``five-day trailing average of the closing price is more representative
of actual market value than the closing bid price.'' \8\
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    \7\ See Letter from Michael Grundei, Wiggin and Dana LLP, dated
June 16, 2017 (Grundei Letter).
    \8\ Letter from Linda Zwobota, CPA, CFO, Lightbridge
Corporation, dated June 27, 2017 (Lightbridge Letter).
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    While investors and companies sometimes prefer to use an average
when pricing transactions, Nasdaq notes that there are potential
negative consequences to using a five-day average as the sole measure
of whether shareholder approval is required. For example, in a
declining market, the five-day average price will always be above

current market price, thus making it difficult for companies to close
transactions because investors could buy shares in the market at a
price below the five-day average price. Conversely, in a rising market,
the five-day average price will appear to be a discount to the closing
price. In addition, if material news is announced during the five-day
period, the average could be a worse reflection of the market value
than the closing price after the news is disclosed. Nonetheless, Nasdaq
believes that these risks are already accepted in the market, as
evidenced by the use of an average price in transactions that do not
require shareholder approval under Nasdaq's rules, such as where less
than 20% of the outstanding shares are issuable in the transaction,
notwithstanding the risk of price movement during the period to the new
investor, the company and its current shareholders, each of which has
potential risk and benefit depending on how the price ultimately
changes during that period.
    Other commenters in the 2017 Solicitation believed that the five-
day average price may be inappropriate as a measure of market value of
listed securities in certain circumstances and suggested that it
therefore should only be used as an optional alternative to closing
price. In that regard, one commenter, while agreeing that a five-day
trailing average is a useful alternative measure of market price,
pointed out that:

    [T]he Rule 144A convertible bond market and the related call
spread overlay market (whether entered into in connection with a
Rule 144A or registered convertible bond) currently benefit from
certain synergies that arise from the use of the one-day closing
price in light of the complex regulatory, tax and accounting
analysis of these transactions and the related hedging activities of
market participants.\9\
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    \9\ Letter from Greg Rogers, Latham and Watkins LLP, dated July
27, 2017 (Latham Letter).

    Other commenters raised similar concerns.\10\ Nasdaq believes these
concerns are justified and as such, Nasdaq proposes to amend Listing
Rule 5635(d) to define market value as the lower of the closing price
at the time of the transaction or the five-day average of the closing
price as the measure of market value for purposes of the shareholder
approval rules. This means that the issuance would not require an
approval by company's shareholders, so long as it is at a price that is
greater than the lower of those measures.\11\ To improve the
readability of the rule, Nasdaq proposes to define this new concept as
the ``Minimum Price'' and eliminate references to book value and market
value from Listing Rule 5635(d).
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    \10\ Letter from Michael Adelstein, Kelley Drye & Warren LLP,
dated July 28, 2017 (Kelley Drey Letter); Letter from Michael
Nordtvedt, Wilson Sonsini Goodrich & Rosati, P.C., dated July 31,
2017 (Wilson Sonsini Letter); Joseph A. Smith, Ellenoff Grossman &
Schole LLP, dated July 31, 2017 (Ellenoff Grossman Letter).
    \11\ Issuances below Market Value to officers, directors,
employees, or consultants are, and will continue to be, subject to
Listing Rule 5635(c). See Nasdaq's FAQ #275 at https://listingcenter.nasdaq.com/Material_Search.aspx?materials=275&mcd=LQ&criteria=2.
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II. Book Value
    Nasdaq proposes to eliminate the requirement for shareholder
approval of issuances at a price less than book value but greater than
market value. Book value is an accounting measure and its calculation
is based on the historic cost of assets, not their current value. As
such, market participants have indicated, and Nasdaq agrees, that book
value is not an appropriate measure of whether a transaction is
dilutive or should otherwise require shareholder approval. Nasdaq has
also observed that when the market price is below the book value, the
rule becomes a trap for the unwary. In that regard, the existing book
value test can appear arbitrary and have a disproportionate impact on
companies in certain industries and at certain times. For example,
during the financial crisis in 2008 and 2009, many banks and
finance[hyphen]related companies temporarily traded below book value.
Similarly, companies that make large investments in infrastructure may
trade below the accounting carrying value of those assets. In these
situations companies are often frustrated when they learn that they
cannot quickly raise capital on terms that are favorable to the market
price. Based on conversations with investors, Nasdaq also believe that
book value is not considered by shareholders to be a material factor
when they are asked to vote to approve a proposed transaction. Most
commenters in the 2017 Solicitation supported the elimination of the
book value requirement from the shareholder approval rules.\12\ The
only support for retaining the book value limitation, came from one
commenter who appeared to believe that issuances below book value would
result in negative investor perception of the issuer and that book
value was an alternative measure not subject to market
manipulation.\13\ The commenter did not elaborate or provide any
evidence of price manipulation surrounding the pricing of transactions
(which would be investigated by Nasdaq Regulation and FINRA) and Nasdaq
does not believe this hypothetical and unsubstantiated concern
justifies retaining the book value requirement in light of the other
concerns raised about its arbitrary and disproportionate impact on
certain companies and the lack of importance placed on this requirement
by investors.
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    \12\ Comments supporting the change could be summarized through
words of one commenter who suggested that ``investors don't view
book value as the equivalent (or even a reasonable substitute for)
market value.'' Grundei Letter.
    \13\ Letter from Heather Koziara, Chief Risk Officer, Conifer
Holdings Inc., dated June 16, 2017 (Conifer Letter).
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III. Other Changes
    To improve the readability of Listing Rule 5635(d) Nasdaq proposes
to define ``20% Issuance'' as ``a transaction, other than a public
offering as defined in IM-5635-3, involving the sale, issuance or
potential issuance by the Company of common stock (or securities
convertible into or exercisable for common stock), which alone or
together with sales by officers, directors or Substantial Shareholders
of the Company, equals 20% or more of the common stock or 20% or more
of the voting power outstanding before the issuance.'' This definition
combines the situations described in existing Rule 5635(d)(1) and
(d)(2) and makes no substantive change but for the change to the
pricing tests, as described above, such that shareholder approval would
be required under the same circumstances for a 20% Issuance as under
existing Listing Rule 5635(d).
    Nasdaq also proposes to amend the title of Listing Rule 5635(d) and
the preamble to Listing Rule 5635 to replace references to ``private
placements'' to ``transactions other than public offerings'' to conform
the language in the title of Listing Rule 5635(d) and the preamble to
the language in the rule text and that of IM-5635-3, which provides the
definition of a public offering.
    Finally, Nasdaq proposes to amend Listing Rules IM-5635-3 and IM-
5635-4, which describe how Nasdaq applies the shareholder approval
requirements, to conform references to book and market value with the
new definition of Minimum Price, as described above, and to utilize the
newly defined term 20% Issuance.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the

objectives of Section 6(b)(5) of the Act,\15\ in particular, in that it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general to protect
investors and the public interest. Nasdaq believes that the approach
taken in the proposal strikes an appropriate balance between investor
protection and impediments upon issuers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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Definition of Market Value
    The proposed rule change will modify the minimum price at which a
20% Issuance would not need shareholder approval from the closing bid
price to the lower of: (i) The closing price (as reflected on
Nasdaq.com); or (ii) the average closing price of the common stock (as
reflected on Nasdaq.com) for the five trading days immediately
preceding the signing of the binding agreement.
    Nasdaq believes that allowing issuers to price transactions at the
closing price (as reflected on Nasdaq.com) rather than closing
consolidated bid price will perfect the mechanism of a free and open
market and protect investors and the public interest because the
closing price will represent an actual sale, which generally occurs at
the same or greater price than the bid price.\16\ Further, the closing
price displayed on Nasdaq.com is the Nasdaq Official Closing Price,
which is derived from the closing auction on Nasdaq and reflects actual
sale prices at one of the most liquid times of the trading day.
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    \16\ Sales typically take place between the bid and ask prices.
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    Allowing share issuances to be priced at the five-day average of
the closing price will further align Nasdaq's requirements with how
many transactions are structured, such as transactions where Listing
Rule 5635(d) is not implicated because the issuance is for less than
20% of the common stock and the parties rely on the five-day average
for pricing to smooth out unusual fluctuations in price. In so doing,
the proposed rule change will perfect the mechanism of a free and open
market. Further, allowing a five-day average price continues to protect
investors and the public interest because it will allow companies and
investors to price transactions in a manner designed to eliminate
aberrant pricing resulting from unusual transactions on the day of a
transaction. Maintaining the allowable average at just a five-day
period also protects investors by ensuring the period is not too long,
such that it would result in the price being distorted by ordinary past
market movements and other outdated events. In a market that rises each
day of the period, the five-day average will be less than the price at
the end of the period, but would still be higher than the price at the
start of such period. Further, as some commenters indicated, aside from
Nasdaq requirements, when selecting the appropriate price for a
transaction company officers and directors also have to consider their
state law structural safeguards, including fiduciary responsibilities,
intended to protect shareholder interests.\17\
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    \17\ See Wilson Sonsini Letter.
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    In addition, because prices could be displayed from numerous data
sources on different websites, to provide certainty about the
appropriate price, Nasdaq proposes to codify within the rule that
Nasdaq.com is the appropriate source of the closing price information,
which is available with only 15 minute delay and without registration
or fee. Because the closing bid price is not included in many public
data feeds, this requirement will promote just and equitable principles
of trade and remove impediments to and perfect the mechanism of a free
and open market because it will improve the transparency of the rule
and provide additional certainty to all market participants about the
appropriate price to be used in determining if shareholder approval is
required.
    Finally, Nasdaq believes that where two alternative measures of
value exist that both reasonably approximate the value of listed
securities, defining the Minimum Price as the lower of those values
allows issuers the flexibility to use either measure because they can
also sell securities at a price greater than the Minimum Price without
needing shareholder approval. This flexibility, and the certainty that
a transaction can be structured at either value in a manner that will
not require shareholder approval, further perfects the mechanism of a
free and open market without diminishing the existing investor
protections of the Listing Rule 5635(d).
Book Value
    Nasdaq also believes that eliminating the requirement for
shareholder approval of issuances at a price less than book value but
greater than market value does not diminish the existing investor
protections of Listing Rule 5635(d). Book value is primarily an
accounting measure calculated based on historic cost and is generally
perceived as an inappropriate measure of the current value of a stock.
Nasdaq has also observed that the existing book value test can appear
arbitrary and have a disproportionate impact on companies in certain
industries and at certain times. For example, during the financial
crisis in 2008 and 2009, many banks and finance[hyphen]related
companies traded below book value. Similarly, companies that make large
investments in infrastructure may trade below the accounting carrying
value of those assets. Because book value is not an appropriate measure
of the current value of a stock, the elimination of the requirement for
shareholder approval of issuances at a price less than book value but
greater than market value will remove an impediment to, and perfect the
mechanism of, a free and open market, which currently unfairly burdens
companies in certain industries, without meaningfully diminishing
investor protections of Listing Rule 5635(d).
Other Changes
    To improve the readability of Listing Rule 5635(d) Nasdaq proposes
to define ``20% Issuance'' as ``a transaction, other than a public
offering as defined in IM-5635-3, involving the sale, issuance or
potential issuance by the Company of common stock (or securities
convertible into or exercisable for common stock), which alone or
together with sales by officers, directors or Substantial Shareholders
of the Company, equals 20% or more of common stock or 20% or more of
the voting power outstanding before the issuance.'' This definition
combines the situations described in existing Rule 5635(d)(1) and
(d)(2) but makes no substantive change. Under the proposed rule, but
for the separate change to the pricing test, shareholder approval would
be required under the same circumstances for a 20% Issuance as under
existing Listing Rule 5635(d). Nasdaq believes that the improved
readability of the rule will perfect the mechanism of a free and open
market by making the rule easier to understand and apply.
    Nasdaq also believes that amending the title of Listing Rule
5635(d) and the preamble to Listing Rule 5635 to replace references to
``private placements'' to ``transactions other than public offerings''
to conform the language in the title of Listing Rule 5635(d) and the
preamble to the language in the rule text and that of IM-5635-3, which
provides the definition of a public offering, will perfect the
mechanism of a free and open market by making the rule easier to
understand and apply.

    Finally, Nasdaq believes that amending Listing Rules IM-5635-3 and
IM-5635-4, which describe how Nasdaq applies the shareholder approval
requirements, to conform references to book and market value with the
new definition of Minimum Price, as described above, and to utilize the
newly defined term 20% Issuance will perfect the mechanism of a free
and open market by eliminating confusion caused by references to a
measure that is no longer applicable and by making the rule easier to
understand and apply.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change would
revise requirements that burden issuers by unnecessarily limiting the
circumstances where they can sell securities without shareholder
approval All listed companies would be affected in the same manner by
these changes. As such, these changes are neither intended to, nor
expected to, impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    In the 2017 Solicitation, Nasdaq solicited comments on a specific
proposal to amend Listing Rule 5635(d) to:
    (1) Change the definition of market value for purposes of the
shareholder approval rules from closing bid price to a five-day
trailing average;
    (2) require that any issuance of 20% or more be approved by the
independent directors where shareholder approval is not required; and
    (3) eliminate the requirement for shareholder approval of issuances
at a price less than book value but greater than market value.
    In an effort to seek the broadest response, Nasdaq widely
distributed the 2017 Solicitation to investors, issuers, legal
professionals and other interested parties. In addition, the proposal
was posted on the Nasdaq Listing CenterTM.\18\ In total, 12
comments were received. A copy of the 2017 Solicitation is attached to
the rule filing as Exhibit 2a. Copies of the comments received are
attached to the rule filing as Exhibit 2b.
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    \18\ https://listingcenter.nasdaq.com/assets/Shareholder%20Approval%20Comment%20Solicitation%20June%2014%202017.pdf.
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    With regard to the proposal to change the definition of market
value for purposes of the shareholder approval rules from closing bid
price to a five-day trailing average, of the 12 commenters, seven
supported the change,\19\ one expressed no opinion,\20\ while the
remaining four suggested the five-day average price should be used as
an alternative to the closing price rather than being an exclusive
measure of value of listed securities.\21\ Nasdaq determined to adopt
this suggestion and now proposes to amend Listing Rule 5635(d) to allow
companies the flexibility [sic] of using either the closing price at
the time of the transaction or the five-day average of the closing
price when pricing 20% Issuances. Transactions could be structured to
use either price knowing that neither the lower price nor the higher
one would result in the transaction needing shareholder approval under
the proposed rule because each will be at or above the new measure of
market value for purposes of the shareholder approval rules, which is
now defined as Minimum Price.
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    \19\ See Letter from Dickerson Wright, Chairman and CEO of NV5,
dated June 15, 2017 (NV5 Letter); Grundei Letter; Letter from
Kenneth A. Bertsch, Executive Director, Council of Institutional
Investors, dated June 26, 2017 (CII Letter); Lightbridge Letter;
Letter from Penny Somer-Greif, et al., Chair, the Committee on
Securities Law of the Business Law Section of the Maryland State Bar
Association, dated July 31, 2017 (Md Bar Letter); Letter from Harvey
Kesner, Sichenzia Ross Ference Kesner LLP, dated July 31, 2017
(Sichenzia Letter); Letter from Anne Sheehan, Director of Corporate
Governance, California State Teachers' Retirement System, dated
August 1, 2017 (CALSTRS letter).
    \20\ See Conifer Letter (addressing only the proposal to
eliminate the requirement for shareholder approval of issuances at a
price less than book value but greater than market value).
    \21\ See Latham Letter, Kelley Drey Letter, Wilson Sonsini
Letter, and Ellenoff Grossman Letter.
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    Two commenters suggested the use of the volume weighted average
price (VWAP) instead of the five-day average price because VWAP
includes a broader array of trades, such as trades outside the Nasdaq
closing auction that forms the closing price, and because VWAP gives
greater weight to the price at which a greater number of shares is
traded.\22\ However, the commenters acknowledged that VWAP methodology
generally requires a paid subscription to providers of financial
information, such as Bloomberg, to obtain the VWAP.\23\ Given the
complexity of the VWAP methodology and the potential resulting lack of
transparency among retail investors who do not have access to financial
data that includes VWAP, at this time, Nasdaq is proposing to change
the definition of market value for purposes of the shareholder approval
[sic], as described above, by incorporating the concept of the five-day
average closing price, rather than VWAP, as the alternative to the
closing price at the time of the transaction.
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    \22\ See Kelley Drye Letter and Ellenoff Grossman Letter.
    \23\ Id.
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    Two commenters suggested that the Nasdaq should amend its rules
such that shareholder approval is required for any issuance a [sic]
price that is below market price and for any 20% Issuance.\24\ Nasdaq
is concerned that under their proposal even de minimis issuances below
market price and 20% Issuances at substantial premium to market price
would require shareholder approval. As such, given the expense and
delay associated with obtaining shareholder approval, Nasdaq does not
propose amending the rule as these commenters requested at this time.
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    \24\ See CALSTERS Letter and CII Letter.
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    In the 2017 Solicitation, Nasdaq noted some potential negative
consequences to using a five-day average as the measure of whether
shareholder approval is required and suggested a potential new
safeguard that would have required that any transaction of more than
20% of the company's shares outstanding also be approved by either a
committee of independent directors (as defined in Listing Rule
5605(a)(2)) or a majority of the independent directors on the board,
unless it is approved by the company's shareholders (the ``Independent
Director Approval Requirement'').
    The Independent Director Approval Requirement was not embraced by
the commenters, many of whom doubted the utility of the Independent
Director Approval Requirement.\25\ Some commenters saw the Independent
Director Approval Requirement as a new burden on listed companies that
largely duplicates the existing state corporate law requirements and
thus outweighs any offsetting benefits to shareholders.\26\ In that
regard,

commenters noted state law protections, such as the fiduciary duties of
care and loyalty imposed on management and directors to act in the best
interest of the company and its shareholders.\27\ Thus, given the cool
reception received from investors, who did not believe the addition of
this listing requirement would meaningfully add to investor
protection,\28\ and the belief of commenters that the Independent
Director Approval Requirement is ``solving the problem that does not
exist,'' \29\ Nasdaq is not proposing to adopt the Independent Director
Approval Requirement at this time.
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    \25\ One commenter supported the proposed Independent Director
Approval Requirement. See Md Bar Letter (``[W]e believe the
[Independent Director Approval Requirement] is reasonable, as it
adds an additional protection for investors without unduly burdening
Nasdaq-listed companies seeking to raise capital.''). Some
commenters supported this proposal without discussing the specific
burdens and benefit of this proposal. See Lightbridge Letter; Latham
Letter. Some commenters did not address this issue. See Kelley Drye
Letter, Sichenzia Letter, and Conifer Letter. The remaining six
commenters opposed this proposal. See Footnotes 26 and 28 below.
    \26\ See Wilson Sonsini Letter (``Rather than ensuring adequate
consideration of shareholder interests, we respectfully submit that
the [Independent Director Approval Requirement] would be duplicative
of, and already more effectively addressed by, the corporate law
requirements of an issuer's jurisdiction of incorporation in the
vast majority of cases.''). See also, Grundei Letter (``. . . there
are already state law requirements regarding such approvals.'').
    \27\ See Wilson Sonsini Letter.
    \28\ See CALSTERS Letter (``[W]e genuinely believe and
appreciate that a majority of independent directors should always
screen and vote on any stock issuances . . .''). Yet, CALSTERS
Letter suggested removal the Independent Director Approval
Requirement for the proposed rule. See also, CII Letter (suggesting
removal the Independent Director Approval Requirement for the
proposed rule and the imposition of shareholder approval
requirements for any issuance a price that is below market price and
any 20% Issuances). See also, Ellenoff Grossman Letter
(``[Independent Director Approval Requirement] may not prove helpful
to outside shareholders, in practice''). See also, NV5 Letter.
    \29\ Grundei Letter.
---------------------------------------------------------------------------

    With regard to the proposal to eliminate the requirement for
shareholder approval of issuances at a price less than book value but
greater than market value, of the 12 commenters, only one specifically
opposed the proposed rule change.\30\ The commenter that opposed the
proposed rule change seemed to have been concerned with potentially
negative market perception of issuances below book value and with
potential stock price manipulations by suggesting that the ``. . .
proposed rule change compromises Nasdaq's commitment to protect
investors . . . by allowing companies the potential power to materially
affect the stock price without prior approval of current
stockholders.'' \31\ The commenter did not elaborate and did not
provide any evidence of price manipulation (which would be investigated
by Nasdaq Regulation and FINRA) and Nasdaq does not believe this single
hypothetical and unsubstantiated concern justifies retaining the book
value requirement in light of the other concerns raised about its
arbitrary and disproportionate impact on certain companies and the lack
of importance placed on this requirement by investors.
---------------------------------------------------------------------------

    \30\ One commenter indicated that he disagreed with the proposed
change, but did not address the issue directly. See NV5 Letter.
    \31\ Conifer Letter.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-NASDAQ-2018-008 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2018-008. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2018-008, and should be submitted
on or before March 13, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03311 Filed 2-16-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 77 (Thursday, April 21, 2016)]
[Rules and Regulations]
[Page 23425]
[FR Doc No: 2016-09276]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 100

[USCG-2016-0264]

Special Local Regulation, Newport to Bermuda Regatta,
Narragansett Bay, Newport, RI

AGENCY: Coast Guard, DHS.

ACTION: Notice of enforcement of regulation.

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SUMMARY: The Coast Guard will enforce the Special Local Regulation for
the biennial Newport to Bermuda Regatta, Narragansett Bay, Rhode
Island, from 12 p.m. to 7:30 p.m. on Friday, June 17, 2016. This action
is necessary to ensure the safety of all participants and spectators
from the inherent dangers associated with these types of races, which
include numerous large, fast sailing vessels and hundreds of spectator
vessels. During the enforcement period, no person or vessel may enter
or remain in the regulated area except for participants in the event,
supporting personnel, vessels registered with the event organizer, and
personnel or vessels authorized by the Coast Guard on-scene patrol
commander.

DATES: The regulation in 33 CFR 100.119 will be enforced from 12 p.m.
to 7:30 p.m. on June 17, 2016.

FOR FURTHER INFORMATION CONTACT: If you have questions about this
notice of enforcement, call or email Mr. Edward LeBlanc, Waterways
Management, Sector Southeastern New England,<PHONE_NUMBER>, email
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: The Coast Guard will enforce the special
local regulation for the biennial Newport/Bermuda Regatta, Narragansett
Bay, Newport, RI, from 12 p.m. to 7:30 p.m. on Friday, June 17, 2016. A
portion of the navigable waters the East Passage, Narragansett Bay,
Newport, RI or its approaches will be closed during the effective
period to all vessel traffic, except local, state or Coast Guard patrol
craft. The full text of this regulation is found in 33 CFR 100.119.
This notice of enforcement is issued under authority of 33 CFR 165.119
and 5 U.S.C. 552(a). In addition to this notice of enforcement in the
Federal Register, the Coast Guard plans to provide notification of this
enforcement periods via the Local Notice to Mariners and Broadcast
Notice to Mariners.

    Dated: March 30, 2016.
R.J. Schultz,
Captain, U.S. Coast Guard, Acting Captain of the Port, Southeastern New
England.
[FR Doc. 2016-09276 Filed 4-20-16; 8:45 am]
 BILLING CODE 9110-04-P


[Federal Register Volume 84, Number 248 (Friday, December 27, 2019)]
[Notices]
[Page 71519]
[FR Doc No: 2019-27852]

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SECURITIES AND EXCHANGE COMMISSION

Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736

Extension:
    Rule 18f-1 and Form N-18f-1; SEC File No. 270-187, OMB Control
No. 3235-0211

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 350l-3520), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
existing collection of information to the Office of Management and
Budget for extension and approval.
    Rule 18f-1 (17 CFR 270.18f-1) enables a registered open-end
management investment company (``fund'') that may redeem its securities
in-kind, by making a one-time election, to commit to make cash
redemptions pursuant to certain requirements without violating section
18(f) of the Investment Company Act of 1940 (15 U.S.C. 80a-18(f)). A
fund relying on the rule must file Form N-18F-1 (17 CFR 274.51) to
notify the Commission of this election. The Commission staff estimates
that 22 funds file Form N-18F-1 annually, and that each response takes
one hour. Based on these estimates, the total annual burden hours
associated with the rule is estimated to be 22 hours. The estimated
burden hours associated with rule 18f-1 and Form 18F-1 have decreased
by 16 hours from the current allocation of 38 hours. This decrease is
due to a decrease in the estimated number of investment companies
filing Form N-18F-1 annually. There is no external cost associated with
this collection of information.
    The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act, and is not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules. An agency may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid OMB control number.
    Written comments are invited on: (a) Whether the collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information has practical
utility; (b) the accuracy of the Commission's estimate of the burden of
the collection of information; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques or other
forms of information technology. Consideration will be given to
comments and suggestions submitted in writing within 60 days of this
publication.
    Please direct your written comments to Charles Riddle, Acting
Director/Chief Information Officer, Securities and Exchange Commission,
C/O Cynthia Roscoe, 100 F Street NE, Washington, DC 20549; or send an
email to<EMAIL_ADDRESS>
    Dated: December 19, 2019.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27852 Filed 12-26-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 114 (Tuesday, June 14, 2016)]
[Notices]
[Pages 38700-38701]
[FR Doc No: 2016-13976]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 2474-051]

Erie Boulevard Hydropower, L.P.; Notice of Application for
Amendment of License Modifying Flashboard System and Flow Discharge
Location under Article 405, and Soliciting Comments, Motions To
Intervene and Protests

    Take notice that the following hydroelectric application has been
filed with the Commission and is available for public inspection:
    a. Application Type: Amendment of License.
    b. Project No: 2474-051.
    c. Date Filed: May 18, 2016.
    d. Applicant: Erie Boulevard Hydropower, L.P. (licensee).
    e. Name of Project: Oswego River Project.

    f. Location: The Oswego River Project is located on the Oswego
River near the towns of Fulton, Minetto, and Oswego, in Oswego County,
New York. The project consists of 3 developments, Fulton, Minetto, and
Varick in upstream to downstream order.
    g. Filed Pursuant to: Federal Power Act, 16 U.S.C. 791a-825r.
    h. Applicant Contact: Mr. Danial Daoust, Erie Boulevard, L.P.,
Brookfield Renewable Energy Group, 33 West First St., Fulton, NY 13069,
315-596-6131.
    i. FERC Contact: Mr. Mark Pawlowski<PHONE_NUMBER>,
<EMAIL_ADDRESS>    j. Deadline for filing comments, motions to intervene, and
protests: June 23, 2016.
    All documents may be filed electronically via the Internet. See, 18
CFR 385.2001(a)(1)(iii) and the instructions on the Commission's Web
site at http://www.ferc.gov/docs-filing/efiling.asp. If unable to be
filed electronically, documents may be paper-filed. To paper-file, an
original and seven copies should be mailed to: Secretary, Federal
Energy Regulatory Commission, 888 First Street NE., Washington, DC
20426. Commenters can submit brief comments up to 6,000 characters,
without prior registration, using the eComment system at http://www.ferc.gov/docs-filing/ecomment.asp. You must include your name and
contact information at the end of your comments.
    Please include the project number (P-2474-051) on any comments,
motions, or recommendations filed.
    k. Description of Request: The licensee requests approval to
reverse the direction of the stepped flashboard system at the Oswego
River Project's Varick development and install a trip flashboard
section on the eastern side of the dam adjacent to Leto Island. The
licensee maintains the stepped flashboard system so that the tallest
36-inch flashboard section is located on the eastern side of the dam
adjacent to Leto Island while stepping down in height to the shortest
10-inch flashboard section located on the western side of the dam
adjacent to the existing sluice gate and state head gates. The licensee
proposes to reverse the direction of the stepped flashboard by moving
the tallest flashboard section to the western side of the dam adjacent
to the existing sluice gate and state head gates and stepping down in
height in an easterly direction toward Leto Island.
    Under article 405, the licensee is required to maintain seasonal
bypassed reach minimum flows ranging from 200 cubic feet per second
(cfs) between June 1 and September 15 to 800 cfs during the springtime
walleye spawning season. The remainder of the year the licensee is
required to maintain a 400 cfs minimum flow. The proposed trip
flashboard would be installed on the dam adjacent to Leto Island and be
designed to discharge a minimum flow of 200 cfs at the lowest allowable
impoundment elevation at the Varick development. The first 200 cfs of
the minimum flow requirements of article 405 would continue to be
discharged through the existing sluice gate.
    l. Locations of the Application: A copy of the application is
available for inspection and reproduction at the Commission's Public
Reference Room, located at 888 First Street NE., Room 2A, Washington,
DC 20426, or by calling<PHONE_NUMBER>. This filing may also be viewed on
the Commission's Web site at http://www.ferc.gov using the ``eLibrary''
link. Enter the docket number excluding the last three digits in the
docket number field to access the document. You may also register
online at http://www.ferc.gov/docs-filing/esubscription.asp to be
notified via email of new filings and issuances related to this or
other pending projects. For assistance, call<PHONE_NUMBER> or email
<EMAIL_ADDRESS>for TTY, call<PHONE_NUMBER>. A copy is also
available for inspection and reproduction at the address in item (h)
above.
    m. Individuals desiring to be included on the Commission's mailing
list should so indicate by writing to the Secretary of the Commission.
    n. Comments, Protests, or Motions to Intervene: Anyone may submit
comments, a protest, or a motion to intervene in accordance with the
requirements of Rules of Practice and Procedure, 18 CFR 385.210, .211,
.214. In determining the appropriate action to take, the Commission
will consider all protests or other comments filed, but only those who
file a motion to intervene in accordance with the Commission's Rules
may become a party to the proceeding. Any comments, protests, or
motions to intervene must be received on or before the specified
comment date for the particular application.
    o. Filing and Service of Responsive Documents: Any filing must (1)
bear in all capital letters the title ``COMMENTS''; ``PROTESTS'', or
``MOTION TO INTERVENE'' as applicable; (2) set forth in the heading the
name of the applicant and the project number of the application to
which the filing responds; (3) furnish the name, address, and telephone
number of the person protesting or intervening; and (4) otherwise
comply with the requirements of 18 CFR 385.2001 through 385.2005. All
comments, motions to intervene, or protests must set forth their
evidentiary basis and otherwise comply with the requirements of 18 CFR
4.34(b). Agencies may obtain copies of the application directly from
the applicant. A copy of any protest or motion to intervene must be
served upon each representative of the applicant specified in the
particular application. If an intervener files comments or documents
with the Commission relating to the merits of an issue that may affect
the responsibilities of a particular resource agency, they must also
serve a copy of the document on that resource agency. A copy of all
other filings in reference to this application must be accompanied by
proof of service on all persons listed in the service list prepared by
the Commission in this proceeding, in accordance with 18 CFR 4.34(b)
and 385.2010.

    Dated: June 8, 2016.
Kimberly D. Bose,
Secretary.
[FR Doc. 2016-13976 Filed 6-13-16; 8:45 am]
 BILLING CODE 6717-01-P


[Federal Register Volume 85, Number 150 (Tuesday, August 4, 2020)]
[Notices]
[Pages 47225-47228]
[FR Doc No: 2020-16856]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2020-N-1693]

Outsourcing Facility Fee Rates for Fiscal Year 2021

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is announcing the
fiscal year (FY) 2021 rates for the establishment and re-inspection
fees related to entities that compound human drugs and elect to
register as outsourcing facilities under the Federal Food, Drug, and
Cosmetic Act (FD&C Act). The FD&C Act authorizes FDA to assess and
collect an annual establishment fee from outsourcing facilities, as
well as a re-inspection fee for each re-inspection of an outsourcing
facility. This document establishes the FY 2021 rates for the small
business establishment fee ($5,695), the non-small business
establishment fee ($18,837), and the re-inspection fee ($17,085) for
outsourcing facilities; provides information on how the fees for FY
2021 were determined; and describes the payment procedures outsourcing
facilities should follow. These fee rates are effective October 1,
2020, and will remain in effect through September 30, 2021.

FOR FURTHER INFORMATION CONTACT:
    For more information on human drug compounding and outsourcing
facility fees: Visit FDA's website at: https://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/default.htm.
    For questions relating to this notice: Lola Olajide, Office of
Financial Management, Food and Drug Administration, 4041 Powder Mill
Rd., Rm. 61077B, Beltsville, MD 20705-4304,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    The Drug Quality and Security Act contains important provisions
relating to the oversight of compounding human drugs. Title I of this
law, the Compounding Quality Act, created a new section 503B in the
FD&C Act (21 U.S.C. 353b). Under section 503B of the FD&C Act, a human
drug compounder can become an ``outsourcing facility.''
    Outsourcing facilities, as defined in section 503B(d)(4) of the
FD&C Act, are facilities that meet all of the conditions described in
section 503B(a), including registering with FDA as an outsourcing
facility and paying an annual establishment fee. If the conditions of
section 503B are met, a drug compounded by or under the direct
supervision of a licensed pharmacist in an outsourcing facility is
exempt from three sections of the FD&C Act: (1) Section 502(f)(1) (21
U.S.C. 352(f)(1)) concerning the labeling of drugs with adequate
directions for use; (2) section 505 (21 U.S.C. 355) concerning the
approval of human drug products under new drug applications (NDAs) or
abbreviated new drug applications (ANDAs); and (3) section 582 (21
U.S.C. 360eee-1) concerning drug supply chain security requirements.
Drugs compounded in outsourcing facilities are not exempt from the
requirements of section 501(a)(2)(B) of the FD&C Act (21 U.S.C.
351(a)(2)(B)) concerning current good manufacturing practice
requirements for drugs.
    Section 744K of the FD&C Act (21 U.S.C. 379j-62) authorizes FDA to
assess and collect the following fees associated with outsourcing
facilities: (1) An annual establishment fee from each outsourcing
facility and (2) a re-inspection fee from each outsourcing facility
subject to a re-inspection (see section 744K(a)(1) of the FD&C Act).
Under statutorily defined conditions, a qualified applicant may pay a
reduced small business establishment fee (see section 744K(c)(4) of the
FD&C Act).
    FDA announced in the Federal Register of November 24, 2014 (79 FR
69856), the availability of a final guidance for industry entitled
``Fees for Human Drug Compounding Outsourcing Facilities Under Sections
503B and 744K of the FD&C Act.'' The guidance provides additional
information on the annual fees for outsourcing facilities and
adjustments required by law, re-inspection fees, how to submit payment,
the effect of failure to pay fees, and how to qualify as a small
business to obtain a reduction of the annual establishment fee. This
guidance can be accessed on FDA's website at: https://www.fda.gov/media/136683/download.

II. Fees for FY 2021

A. Methodology for Calculating FY 2021 Adjustment Factors

1. Inflation Adjustment Factor
    Section 744K(c)(2) of the FD&C Act specifies the annual inflation
adjustment for outsourcing facility fees. The inflation adjustment has
two components: One based on FDA's payroll costs and one based on FDA's
non-payroll costs for the first 3 of the 4 previous fiscal years. The
payroll component of the annual inflation adjustment is calculated by
taking the average change in FDA's per-full time equivalent (FTE)
personnel compensation and benefits (PC&B) in the first 3 of the 4
previous fiscal years (see section 744K(c)(2)(A)(ii) of the FD&C Act).
FDA's total annual spending on PC&B is divided by the total number of
FTEs per fiscal year to determine the average PC&B per FTE.
    Table 1 summarizes the actual cost and FTE data for the specified
fiscal years, and provides the percent change from the previous fiscal
year and the average percent change over the first 3 of the 4 fiscal
years preceding FY 2021. The 3-year average is 1.2644 percent.

                                 Table 1--FDA PC&Bs Each Year and Percent Change
----------------------------------------------------------------------------------------------------------------
               Fiscal year                      2017              2018              2019         3-Year average
----------------------------------------------------------------------------------------------------------------
Total PC&B..............................    $2,581,551,000    $2,690,678,000    $2,620,052,000  ................
Total FTE...............................            17,022            17,023            17,144  ................
PC&B per FTE............................          $151,660          $158,061          $152,826  ................
Percent change from previous year.......           2.8845%           4.2206%          -3.3120%           1.2644%
----------------------------------------------------------------------------------------------------------------

    Section 744K(c)(2)(A)(ii) of the FD&C Act specifies that this
1.2644 percent should be multiplied by the proportion of PC&B to total
costs of an average FDA FTE for the same 3 fiscal years.

                      Table 2--FDA PC&Bs as a Percent of FDA Total Costs of an Average FTE
----------------------------------------------------------------------------------------------------------------
               Fiscal year                      2017              2018              2019         3-Year average
----------------------------------------------------------------------------------------------------------------
Total PC&B..............................    $2,581,551,000    $2,690,678,000    $2,620,052,000  ................
Total Costs.............................    $5,104,580,000    $5,370,935,000    $5,663,389,000  ................
PC&B Percent............................          50.5732%          50.0970%          46.2630%          48.9777%
----------------------------------------------------------------------------------------------------------------

    The payroll adjustment is 1.2644 percent multiplied by 48.9777
percent, or 0.6193 percent.
    Section 744K(c)(2)(A)(iii) of the FD&C Act specifies that the
portion of the inflation adjustment for non-payroll costs for FY 2021
is equal to the average annual percent change in the Consumer Price
Index (CPI) for urban consumers (U.S. City Average; Not Seasonally
Adjusted; All items; Annual Index) for the first 3 years of the
preceding 4 years of available data, multiplied by the proportion of
all non-PC&B costs to total costs of an average FDA FTE for the same
period.
    Table 2 provides the summary data for the percent change in the
specified CPI for U.S. cities. These data are published by the Bureau
of Labor Statistics and can be found on its website: https://data.bls.gov/cgi-bin/surveymost?cu. The data can be viewed by checking
the box marked ``U.S. city average, All items--CUUR0000SA0'' and then
selecting ``Retrieve Data.''

                   Table 3--Annual and 3-Year Average Percent Change in U.S. City Average CPI
----------------------------------------------------------------------------------------------------------------
                  Year                          2017              2018              2019         3-Year average
----------------------------------------------------------------------------------------------------------------
Annual CPI..............................           245.120           251.107           255.657  ................
Annual Percent Change...................           2.1304%           2.4425%           1.8120%           2.1283%
----------------------------------------------------------------------------------------------------------------

    Section 744K(c)(2)(A)(iii) of the FD&C Act specifies that this
2.1283 percent should be multiplied by the proportion of all non-PC&B
costs to total costs of an average FTE for the same 3 fiscal years. The
proportion of all non-PC&B costs to total costs of an average FDA FTE
for FYs 2017 to 2019 is 51.0223 percent (100 percent -48.9777 percent =
51.0223 percent). Therefore, the non-pay adjustment is 2.1283 percent
times 51.0233 percent, or 1.0859 percent.
    The PC&B component (0.6193 percent) is added to the non-PC&B
component (1.0859 percent), for a total inflation adjustment of 1.7052
percent (rounded). Section 744K(c)(2)(A)(i) of the FD&C Act specifies
that one is added to that figure, making the inflation adjustment
1.017052.
    Section 744K(c)(2)(B) of the FD&C Act provides for this inflation
adjustment to be compounded after FY 2015. This factor for FY 2021
(1.7052 percent) is compounded by adding one to it, and then
multiplying it by one plus the inflation adjustment factor for FY 2020
(11.9895 percent), as published in the Federal Register on July 31,
2019 (84 FR 37311 at 37312). The result of this multiplication of the
inflation factors for the 6 years since FY 2015 (1.017052 x 1.119895)
becomes the inflation adjustment for FY 2021. For FY 2021, the
inflation adjustment is 13.8991 percent (rounded). We then add one,
making the FY 2021 inflation adjustment factor 1.138991.
2. Small Business Adjustment Factor
    Section 744K(c)(3) of the FD&C Act specifies that in addition to
the inflation adjustment factor, the establishment fee for non-small
businesses is to be further adjusted for a small business adjustment
factor. Section 744K(c)(3)(B) of the FD&C Act provides that the small
business adjustment factor is the adjustment to the establishment fee
for non-small businesses that is necessary to achieve total fees
equaling the

amount that FDA would have collected if no entity qualified for the
small business exception in section 744K(c)(4) of the FD&C Act.
Additionally, section 744K(c)(5)(A) states that in establishing the
small business adjustment factor for a fiscal year, FDA shall provide
for the crediting of fees from the previous year to the next year if
FDA overestimated the amount of the small business adjustment factor
for such previous fiscal year.
    Therefore, to calculate the small business adjustment to the
establishment fee for non-small businesses for FY 2021, FDA must
estimate: (1) The number of outsourcing facilities that will pay the
reduced fee for small businesses for FY 2021 and (2) the total fee
revenue it would have collected if no entity had qualified for the
small business exception (i.e., if each entity that registers as an
outsourcing facility for FY 2021 were to pay the inflation-adjusted fee
amount of $17,085).
    With respect to (1), FDA estimates that 15 entities will qualify
for small business exceptions and will pay the reduced fee for FY 2021.
With respect to (2), to estimate the total number of entities that will
register as outsourcing facilities for FY 2021, FDA used data submitted
by outsourcing facilities through the voluntary registration process,
which began in December 2013. Accordingly, FDA estimates that 85
outsourcing facilities, including 15 small businesses, will be
registered with FDA in FY 2021.
    If the projected 85 outsourcing facilities paid the full inflation-
adjusted fee of $17,085, this would result in total revenue of
$1,452,225 in FY 2021 ($17,085 x 85). However, 15 of the entities that
are expected to register as outsourcing facilities for FY 2021 are
projected to qualify for the small business exception and to pay one-
third of the full fee ($5,695 x 15), totaling $85,425 instead of paying
the full fee ($17,085 x 15), which would total $256,275. This would
leave a potential shortfall of $170,850 ($256,275 - $85,425).
    Additionally, section 744K(c)(5)(A) of the FD&C Act states that in
establishing the small business adjustment factor for a fiscal year,
FDA shall provide for the crediting of fees from the previous year to
the next year if FDA overestimated the amount of the small business
adjustment factor for such previous fiscal year. FDA has determined
that it is appropriate to credit excess fees collected from the last
completed fiscal year, due to the inability to conclusively determine
the amount of excess fees from the fiscal year that is in progress at
the time this calculation is made. This crediting is done by comparing
the small business adjustment factor for the last completed fiscal
year, FY 2019 ($2,248), to what would have been the small business
adjustment factor for FY 2019 ($1,560) if FDA had estimated perfectly.
    The calculation for what the small business adjustment would have
been if FDA had estimated perfectly begins by determining the total
target collections (15,000 x [inflation adjustment factor] x [number of
registrants]). For the most recent complete fiscal year, FY 2019, this
was $1,310,560 ($16,382 x 80). The actual FY 2019 revenue from the 80
total registrants (i.e., 70 registrants paying FY 2019 non-small
business establishment fee and 10 small business registrants) paying
establishment fees is $1,201,350. $1,201,350 is calculated as follows:
(FY 2019 Non-Small Business Establishment Fee adjusted for inflation
only) x (total number of registrants in FY 2019 paying Non-Small
Business Establishment Fee) + (FY 2019 Small Business Establishment
Fee) x (total number of small business registrants in FY 2019 paying
Small Business Establishment Fee). $16,382 x 70 + $5,461 x 10 =
$1,201,350. This left a shortfall of $109,210 from the estimated total
target collection amount ($1,310,560-$1,201,350). $109,210 divided by
the total number of registrants in FY 2019 paying Standard
Establishment Fee (70) equals $1,560.
    The difference between the small business adjustment factor used in
FY 2019 and the small business adjustment factor that would have been
used had FDA estimated perfectly is $688 ($2,248-$1,560). The $688
(rounded to the nearest dollar) is then multiplied by the number of
actual registrants who paid the standard fee for FY 2019 (70), which
provides us a total excess collection of $48,181 in FY 2019.
    Therefore, to calculate the small business adjustment factor for FY
2021, FDA subtracts $48,181 from the projected shortfall of $170,850
for FY 2021 to arrive at the numerator for the small business
adjustment amount, which equals $122,669. This number divided by 70
(the number of expected non-small businesses for FY 2021) is the small
business adjustment amount for FY 2021, which is $1,752 (rounded to the
nearest dollar).

B. FY 2021 Rates for Small Business Establishment Fee, Non-Small
Business Establishment Fee, and Re-Inspection Fee

1. Establishment Fee for Qualified Small Businesses \1\
---------------------------------------------------------------------------

    \1\ To qualify for a small business reduction of the FY 2021
establishment fee, entities had to submit their exception requests
by April 30, 2020. See section 744K(c)(4)(B) of the FD&C Act. The
time for requesting a small business exception for FY 2021 has now
passed. An entity that wishes to request a small business exception
for FY 2022 should consult section 744K(c)(4) of the FD&C Act and
section III.D of FDA's guidance for industry entitled ``Fees for
Human Drug Compounding Outsourcing Facilities Under Sections 503B
and 744K of the FD&C Act,'' which can be accessed on FDA's website
at https://www.fda.gov/media/136683/download.
---------------------------------------------------------------------------

    The amount of the establishment fee for a qualified small business
is equal to $15,000 multiplied by the inflation adjustment factor for
that fiscal year, divided by three (see section 744K(c)(4)(A) and
(c)(1)(A) of the FD&C Act). The inflation adjustment factor for FY 2021
is 1.138991. See section II.A.1 for the methodology used to calculate
the FY 2021 inflation adjustment factor. Therefore, the establishment
fee for a qualified small business for FY 2021 is one third of $17,085,
which equals $5,695 (rounded to the nearest dollar).
2. Establishment Fee for Non-Small Businesses
    Under section 744K(c) of the FD&C Act, the amount of the
establishment fee for a non-small business is equal to $15,000
multiplied by the inflation adjustment factor for that fiscal year,
plus the small business adjustment factor for that fiscal year, and
plus or minus an adjustment factor to account for over- or under-
collections due to the small business adjustment factor in the prior
year. The inflation adjustment factor for FY 2021 is 1.138991. The
small business adjustment amount for FY 2021 is $1,752. See section
II.A.2 for the methodology used to calculate the small business
adjustment factor for FY 2021. Therefore, the establishment fee for a
non-small business for FY 2021 is $15,000 multiplied by 1.138991 plus
$1,752, which equals $18,837 (rounded to the nearest dollar).
3. Re-Inspection Fee
    Section 744K(c)(1)(B) of the FD&C Act provides that the amount of
the FY 2021 re-inspection fee is equal to $15,000, multiplied by the
inflation adjustment factor for that fiscal year. The inflation
adjustment factor for FY 2021 is 1.138991. Therefore, the re-inspection
fee for FY 2021 is $15,000 multiplied by 1.138991, which equals $17,085
(rounded to the nearest dollar). There is

no reduction in this fee for small businesses.

C. Summary of FY 2021 Fee Rates

                   Table 4--Outsourcing Facility Fees
------------------------------------------------------------------------

------------------------------------------------------------------------
Qualified Small Business Establishment Fee.....................   $5,695
Non-Small Business Establishment Fee...........................   18,837
Re-inspection Fee..............................................   17,085
------------------------------------------------------------------------

III. Fee Payment Options and Procedures

A. Establishment Fee

    Once an entity submits registration information and FDA has
determined that the information is complete, the entity will incur the
annual establishment fee. FDA will send an invoice to the entity, via
email to the email address indicated in the registration file, or via
regular mail if email is not an option. The invoice will contain
information regarding the obligation incurred, the amount owed, and
payment procedures. A facility will not be registered as an outsourcing
facility until it has paid the annual establishment fee under section
744K of the FD&C Act. Accordingly, it is important that facilities
seeking to operate as outsourcing facilities pay all fees immediately
upon receiving an invoice. If an entity does not pay the full invoiced
amount within 15 calendar days after FDA issues the invoice, FDA will
consider the submission of registration information to have been
withdrawn and adjust the invoice to reflect that no fee is due.
    Outsourcing facilities that registered in FY 2020 and wish to
maintain their status as an outsourcing facility in FY 2021 must
register during the annual registration period that lasts from October
1, 2020, to December 31, 2020. Failure to register and complete payment
by December 31, 2020, will result in a loss of status as an outsourcing
facility on January 1, 2021. Entities should submit their registration
information no later than December 10, 2021, to allow enough time for
review of the registration information, invoicing, and payment of fees
before the end of the registration period.

B. Re-Inspection Fee

    FDA will issue invoices for each re-inspection after the conclusion
of the re-inspection, via email to the email address indicated in the
registration file or via regular mail if email is not an option.
Invoices must be paid within 30 days.

C. Fee Payment Procedures

    1. The preferred payment method is online using electronic check
(Automated Clearing House (ACH) also known as eCheck) or credit card
(Discover, VISA, MasterCard, American Express). Secure electronic
payments can be submitted using the User Fees Payment Portal at https://userfees.fda.gov/pay. (Note: Only full payments are accepted. No
partial payments can be made online.) Once you search for your invoice,
click ``Pay Now'' to be redirected to Pay.gov. Electronic payment
options are based on the balance due. Payment by credit card is
available for balances less than $25,000. If the balance exceeds this
amount, only the ACH option is available. Payments must be made using
U.S bank accounts as well as U.S. credit cards.
    2. If paying with a paper check: Checks must be in U.S. currency
from a U.S. bank and made payable to the Food and Drug Administration.
Payments can be mailed to: Food and Drug Administration, P.O. Box
979033, St. Louis, MO 63197-9000. Include invoice number on check. If a
check is sent by a courier that requests a street address, the courier
can deliver the check to: U.S. Bank, Attn: Government Lockbox 979033,
1005 Convention Plaza, St. Louis, MO 63101. (Note: This U.S. Bank
address is for courier delivery only. If you have any questions
concerning courier delivery, contact the U.S. Bank at<PHONE_NUMBER>).
    3. When paying by wire transfer, the invoice number must be
included. Without the invoice number the payment may not be applied.
Regarding re-inspection fees, if the payment amount is not applied, the
invoice amount will be referred to collections. The originating
financial institution may charge a wire transfer fee. If the financial
institution charges a wire transfer fee, it is required that the
outsourcing facility add that amount to the payment to ensure that the
invoice is paid in full. Use the following account information when
sending a wire transfer: U.S. Dept of the Treasury, TREAS NYC, 33
Liberty St., New York, NY 10045, Acct. No. 75060099, Routing No.
021030004, SWIFT: FRNYUS33. If needed, FDA's tax identification number
is 53-0196965.

    Dated: July 29, 2020.
Lauren K. Roth,
Associate Commissioner for Policy.
[FR Doc. 2020-16856 Filed 7-30-20; 11:15 am]
BILLING CODE 4164-01-P


[Federal Register Volume 77, Number 146 (Monday, July 30, 2012)]
[Notices]
[Pages 44636-44639]
[FR Doc No: 2012-18442]

-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2012-D-0049]

Agency Information Collection Activities; Submission for Office
of Management and Budget Review; Comment Request; Reporting Harmful and
Potentially Harmful Constituents in Tobacco Products and Tobacco Smoke
Under the Federal Food, Drug, and Cosmetic Act

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA) is announcing that a
proposed collection of information has been submitted to the Office of
Management and Budget (OMB) for review and clearance under Paperwork
Reduction Act of 1995.

DATES: Fax written comments on the collection of information by August
29, 2012.

ADDRESSES: To ensure that comments on the information collection are
received, OMB recommends that written comments be faxed to the Office
of Information and Regulatory Affairs, OMB, Attn: FDA Desk Officer,
FAX:<PHONE_NUMBER>, or emailed to<EMAIL_ADDRESS>All
comments should be identified with the OMB control number 0910-NEW and
title ``Reporting Harmful and Potentially Harmful Constituents in
Tobacco Products and Tobacco Smoke Under the Federal Food, Drug, and
Cosmetic Act.'' Also include the FDA docket number found in brackets in
the heading of this document.

FOR FURTHER INFORMATION CONTACT: Daniel Gittleson, Office of
Information Management, Food and Drug Administration, 1350 Piccard Dr.,
PI50-400B, Rockville, MD 20850,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: In compliance with 44 U.S.C. 3507, FDA has
submitted the following proposed collection of information to OMB for
review and clearance.

Reporting Harmful and Potentially Harmful Constituents in Tobacco
Products and Tobacco Smoke Under the Federal Food, Drug, and Cosmetic
Act--(OMB Control Number 0910-NEW)

    On June 22, 2009, the President signed the Family Smoking
Prevention and Tobacco Control Act (Public Law 111-31) into law. This
law amends the Federal Food, Drug, and Cosmetic Act (FD&C Act) and
grants FDA authority to

regulate the manufacture, marketing, and distribution of tobacco
products to protect public health generally and to reduce tobacco use
by minors. Section 904(a)(3) of the FD&C Act (21 U.S.C. 387d(a)(3))
requires each tobacco product manufacturer or importer, or an agent, to
begin reporting to FDA no later than June 22, 2012, ``all constituents,
including smoke constituents, identified by [FDA] as harmful or
potentially harmful to health in each tobacco product, and as
applicable in the smoke of each tobacco product.'' Reports must be by
the brand and by quantity in each brand and subbrand. Section 904(c)(1)
of the FD&C Act states that manufacturers of tobacco products not on
the market as of June 22, 2009, must also provide information
reportable under section 904(a)(3) at least 90 days prior to
introducing the product into interstate commerce.
    FDA has taken several steps to identify harmful and potentially
harmful constituents (HPHCs) to be reported under sections 904(a)(3)
and (c)(1) of the FD&C Act, including issuing a final guidance
discussing FDA's current thinking on the meaning of ``harmful and
potentially harmful constituent'' in the context of implementing the
HPHC list requirement (76 FR 5387, January 31, 2011). The guidance is
available on the Internet at http://www.fda.gov/TobaccoProducts/GuidanceComplianceRegulatoryInformation/ucm241339.htm. In addition, in
the Federal Register of April 3, 2012 (77 FR 20034), FDA published a
notice (the HPHC list notice) announcing the established list of HPHCs
as required by section 904(e) of the FD&C Act and describing the
criteria we used in identifying the HPHCs for the established list.
Previously, FDA sought comment on both the criteria that would be used
to identify HPHCs for the established list and a list of chemicals and
chemical compounds that met the proposed criteria.
    In the Federal Register of April 3, 2012 (77 FR 20030), FDA
announced the availability of a draft guidance entitled ``Guidance for
Industry: Reporting Harmful and Potentially Harmful Constituents in
Tobacco Products and Tobacco Smoke Under Section 904(a)(3) of the
Federal Food, Drug, and Cosmetic Act'' (904(a)(3) draft guidance)
discussing the information to be reported on HPHCs in tobacco products
and tobacco smoke under sections 904(a)(3) and (c)(1) of the FD&C Act.
The 904(a)(3) draft guidance discusses, among other things: The
statutory requirement for testing and reporting quantities of HPHCs,
who tests and reports quantities of HPHCs to FDA, what HPHCs will be
the focus of FDA enforcement at this time, when reports are submitted
to FDA, what information is reported to FDA, and how the reports should
be submitted to FDA. The 904(a)(3) draft guidance notifies
manufacturers and importers that, at this time, while industry is
developing laboratory capacity to comply with section 904(a)(3) of the
FD&C Act, FDA does not intend to enforce the statutory requirement to
submit quantities of all constituents identified by FDA as HPHCs by
June 22, 2012, where manufacturers or importers complete testing and
reporting for an abbreviated list of HPHCs as set forth in the
904(a)(3) draft guidance. In particular, at this time, for products
that were first marketed before June 22, 2012, FDA does not intend to
enforce the section 904(a)(3) requirement to test and report quantities
of all HPHCs on FDA's established list where: (1) A manufacturer or
importer (or agents thereof), other than a small tobacco product
manufacturer, submits quantities of the HPHCs on an abbreviated list
described in the guidance for all of its products, by brand and
subbrand, no later than September 22, 2012 or (2) a small tobacco
product manufacturer (or agents thereof) submits quantities of HPHCS on
the abbreviated list for all of its products, by brand and subbrand, by
December 22, 2012. In addition, for products first marketed on or after
June 22, 2012, the 904(a)(3) draft guidance explains that FDA does not
intend, at this time, to enforce the requirement in section 904(c)(1)
of the FD&C Act to test and report quantities of all HPHCs on FDA's
established list for products not previously on the market if a
manufacturer or importer reports quantities for the abbreviated list of
HPHCs at least 90 days prior to marketing the product in the United
States. The 904(a)(3) draft guidance explains that, at this time, FDA
intends to enforce the HPHC reporting requirements with respect to
manufacturers of finished tobacco products for consumer use--
cigarettes, smokeless tobacco, and roll-your-own tobacco--and not with
respect to manufacturers and importers of other products, such as
components sold to manufacturers or consumers for incorporation into
finished products.
    The purpose of the proposed information collection is for FDA to
collect statutorily mandated information regarding HPHCs in tobacco
products and tobacco smoke, by quantity in each brand and subbrand. The
904(a)(3) draft guidance provides an abbreviated list of HPHCs on which
FDA intends to focus enforcement at this time for each of the
following: Cigarette smoke, smokeless tobacco products, and roll-your-
own tobacco and cigarette filler.
    To facilitate the submission of HPHC information, FDA has developed
Form 3787 in both paper and electronic formats. Manufacturers or
importers, or an agent, may submit information either electronically or
in paper format. The FDA eSubmitter tool provides electronic forms to
streamline the data entry and submission process for reporting HPHCs.
Users of eSubmitter may also populate an Excel file and import data
into eSubmitter. FDA also provides paper forms for the submission of
section 904(a)(3) reports. FDA placed draft copies of the paper forms
and screen shots of the electronic form and spreadsheet in this docket.
Whether respondents decide to submit reports electronically or on
paper, each form provides instructions for filling out and submitting
HPHC information to FDA. The forms contain fields for company
information, product information, and HPHC information (including the
specific HPHCs identified in the 904(a)(3) draft guidance).
    The Federal Register notice announcing the availability of the
904(a)(3) draft guidance included a 60-day notice requesting public
comment on the proposed collection of information. FDA received 16
comments that were PRA-related, including but not limited to the
following issues:
     Suggestions to enhance the quality, utility, and clarity
of the information to be collected (i.e., comments specific to FDA's
eSubmitter tool and paper forms);
     Cost associated with the collection of information to
comply with section 904(a)(3) of the FD&C Act, particularly for small
tobacco product manufacturers; and
     Use of the proposed information collection, especially
because specific test methods are not prescribed to determine HPHC
quantities.
    Section 904(a)(3) of the FD&C Act requires HPHC testing and
reporting. We have stated that we intend to exercise enforcement
discretion for manufacturers who test for 20 rather than 93 HPHCs at
this time. In addition, we have recognized that small tobacco product
manufacturers are likely to rely on contract testing laboratories and
intend to exercise enforcement discretion for those who submit
quantities of HPHCs 6 months after the statutory deadline (i.e.,
December 22, 2012), and 3 months after submissions by other tobacco
product manufacturers. Our abbreviated list of HPHCs, along with the
timeframes described in the

draft guidance, represent a reasonable approach to implementing section
904(a)(3) of the FD&C Act.
    Based on comments received, FDA has revised the instructions for
FDA Form 3787 to explain that if the HPHC quantity is below the limit
of detection or limit of quantitation, zero should be entered in the
space identified for form. We have also made minor cosmetic changes to
clarify instructions and to allow accurate data entry. FDA has not
revised the burden estimate for this collection of information.
    FDA estimates the burden of this collection of information as
follows:

                                 Table 1--Estimated Annual Reporting Burden \1\
----------------------------------------------------------------------------------------------------------------
                                                     Number of
      Information collected          Number of     responses per   Total annual   Average burden    Total hours
                                    respondents     respondent       responses     per response
----------------------------------------------------------------------------------------------------------------
            Part 1--Section 904(a)(3) of the FD&C Act (Annualized estimate of one-time reporting) \2\
----------------------------------------------------------------------------------------------------------------
1. Reporting of Manufacturer/
 Importer Company and Product
 Information by Completing
 Submission Forms
    Cigarette...................             120           10.10           1,212            2              2,424
    Roll-Your-Own...............              46            3.22             148            2                296
    Smokeless...................             200            1.44             288            2                576
                                 -------------------------------------------------------------------------------
        Total...................  ..............  ..............  ..............  ..............           3,296
----------------------------------------------------------------------------------------------------------------
2. Testing of HPHC Quantities in Products
----------------------------------------------------------------------------------------------------------------
    Cigarette Filler............             120           10.1            1,212            9.42          11,417
    Roll-Your-Own...............              46            3.22             148            9.42           1,394
    Smokeless...................             200            1.44             288           12.06           3,473
                                 -------------------------------------------------------------------------------
        Total...................  ..............  ..............  ..............  ..............          16,284
----------------------------------------------------------------------------------------------------------------
3. Testing of HPHC Quantities in Mainstream Smoke
----------------------------------------------------------------------------------------------------------------
    Cigarette: International                 120           10.1            1,212           23.64          28,652
     Organization for
     Standardization (ISO)
     Regimen....................
    Cigarette: Health Canada                 120           10.1            1,212           23.64          28,652
     Regimen....................
                                 -------------------------------------------------------------------------------
        Total...................  ..............  ..............  ..............  ..............          57,304
                                 -------------------------------------------------------------------------------
            Total Section         ..............  ..............  ..............  ..............          76,884
             904(a)(3)
             Annualized One-Time
             Burden.............
----------------------------------------------------------------------------------------------------------------
             Part 2--Reporting of Section 904(c)(1) New Products (15% of One-Time Burden Totals) \3\
----------------------------------------------------------------------------------------------------------------
1. Reporting of Manufacturer/Importer Company and Product Information by Completing Submission Forms
----------------------------------------------------------------------------------------------------------------
    Cigarette...................              18           10.10             182            2                364
    Roll-Your-Own...............               7            3.22              23            2                 46
    Smokeless...................              30            1.44              43            2                 86
                                 -------------------------------------------------------------------------------
        Total...................  ..............  ..............  ..............  ..............             496
----------------------------------------------------------------------------------------------------------------
2. Reporting of HPHC Quantities in Products
----------------------------------------------------------------------------------------------------------------
    Cigarette Filler............              18           10.1              182            9.42           1,714
    Roll-Your-Own...............               7            3.22              23            9.42             217
    Smokeless...................              30            1.44              43           12.06             519
                                 -------------------------------------------------------------------------------
        Total...................  ..............  ..............  ..............  ..............           2,450
----------------------------------------------------------------------------------------------------------------
3. Reporting of HPHC Quantities in Mainstream Smoke
----------------------------------------------------------------------------------------------------------------
    Cigarette: ISO Regimen......              18           10.1              182           23.64           4,302
    Cigarette: Health Canada                  18           10.1              182           23.64           4,302
     Regimen....................
                                 -------------------------------------------------------------------------------
        Total...................  ..............  ..............  ..............  ..............           8,604
                                 -------------------------------------------------------------------------------
            Total Section         ..............  ..............  ..............  ..............          11,550
             904(c)(1) Burden...
                                 -------------------------------------------------------------------------------
                Total Reporting   ..............  ..............  ..............  ..............          88,434
                 Burden Hours...
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of
  information.
\2\ One-time actual first year burden hours have been annualized over the 3-year OMB period of approval to avoid
  over counting the burden each year.
\3\ Annual new product reporting under section 904(c)(1) of the FD&C Act is estimated to be 15 percent of the
  annualized one-time burden.

    FDA estimates the one-time reporting burden for this guidance would
be 230,652 hours during the first year for section 904(a)(3) of the
FD&C Act reporting plus ongoing annual burden of 11,550 hours for
section 904(c)(1) reporting. The burden estimate for this collection of
information includes the time it will take to read the guidance
document, test the products, and prepare the HPHC report.
    To avoid overcounting the one-time reporting burden, FDA has
annualized the one-time burden over the 3-year expected OMB period of
approval. The annualized one-time burden of 76,884 hours is located in
part one of table 1 of this document, and includes burden for
collections of information gathered under section 904(a)(3) of the FD&C
Act. The total annual burden for this collection of information is
estimated to be 88,434 hours, which is the annualized one-time burden
estimate for section 904(a)(3) of the FD&C Act associated with the
submission of HPHC reports and the annual burden estimate for section
904(c)(1). Table 1 of this document estimates 366 respondents will
submit HPHC reports on a one-time basis. Table 1 of this document
addresses the time required for manufacturers and importers to report
their company information. We estimate that the burden is no more than
2 hours per response to report company and product information,
regardless of whether the paper or electronic form (Form FDA 3787) is
used. This estimate is not dependent on product type, so the estimated
burden is the same for cigarettes, roll-your-own tobacco, and smokeless
tobacco products. We also estimate that 3,636 cigarette subbrands, 445
roll-your-own tobacco subbrands, and 861 smokeless tobacco subbrands
(4,942 total subbrands) must comply with section 904(a)(3) of the FD&C
Act. Therefore, the total annualized burden for reporting company and
product information is 3,296 hours.
    Table 1 of this document also addresses the time required for
manufacturers and importers to report quantities of HPHCs in their
products. The burden hour estimates include the time needed to test the
tobacco products, draft testing reports, draft the report for FDA, and
submit the report to FDA. For cigarette filler, smokeless, and roll-
your-own products, we estimate the burden to test the product, draft
testing reports, draft the report for FDA, and submit the report to FDA
to be 16,284 annualized burden hours. The burden for each product type
reflects our estimate of the burden to test the tobacco products (i.e.,
carry out laboratory work).
    In addition to addressing the time required to report quantities of
HPHCs in tobacco products, table 1 of this document addresses the time
required for manufacturers and importers to report quantities for HPHCs
in cigarette smoke. The burden estimates include testing the tobacco
products, drafting testing reports, drafting the report for FDA, and
submitting the report to FDA. We estimate the annualized burden for
this section to be 57,304 hours. The annualized burden reflects our
estimate of the burden to test the tobacco products (i.e., carry out
laboratory work). The burden estimate assumes that manufacturers and
importers report HPHC quantities in cigarette mainstream smoke
according to the two recommended smoking regimens. The total annualized
burden for part one of table 1 (section 904(a)(3) reporting) is 76,884
hours.
    Table 1 of this document also contains estimates for new product
information received annually under section 904(c)(1) of the FD&C Act.
Manufacturers and importers must report HPHC information under section
904(c)(1) of the FD&C Act at least 90 days prior to delivery for
introduction into interstate commerce. We estimate that approximately
15 percent of FDA currently regulated tobacco products in any given
year will require submission of this information. The estimated total
annual burden for section 904(c)(1) of the FD&C Act is 11,550 hours,
which includes reporting manufacturer/importer company and product
information, reporting HPHC quantities in products, and reporting HPHC
quantities in mainstream smoke.
    The estimated total annual burden for the reporting of HPHC under
section 904(a)(3) and (c)(1) of the FD&C Act is 88,434 hours, which
includes the section 904(a)(3) annualized reporting burden plus the
section 904(c)(1) annual reporting burden.
    We have not estimated any capital costs because we do not believe
there are any capital costs associated with this collection. However,
you may comment on any specific capital costs that you have identified.

    Dated: July 24, 2012.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2012-18442 Filed 7-27-12; 8:45 am]
BILLING CODE 4160-01-P