[Federal Register Volume 85, Number 239 (Friday, December 11, 2020)]
[Rules and Regulations]
[Pages 79828-79833]
[FR Doc No: 2020-27149]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2018-1077; Project Identifier 2018-NE-40-AD; Amendment
39-21354; AD 2020-25-12]
RIN 2120-AA64

Airworthiness Directives; Superior Air Parts, Inc. Engines and
Lycoming Engines Reciprocating Engines With a Certain SAP Crankshaft
Assembly

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: The FAA is adopting a new airworthiness directive (AD) for all
Superior Air Parts, Inc. (SAP) Model IO-360-series and O-360-series
reciprocating engines and certain Lycoming Engines (Lycoming) Model
AEIO-360-, IO-360-, and O-360-series reciprocating engines with a
certain SAP crankshaft assembly installed. This SAP crankshaft assembly
is installed as original equipment on the affected SAP engines and as a
replacement part under parts manufacturer approval (PMA) on the
affected Lycoming engines. This AD was prompted by three crankshaft
assembly failures that resulted in the loss of engine power and
immediate or emergency landings. This AD requires the removal from
service of all affected crankshaft assemblies. The FAA is issuing this
AD to address the unsafe condition on these products.

DATES: This AD is effective January 15, 2021.

Examining the AD Docket

    You may examine the AD docket at https://www.regulations.gov by
searching for and locating Docket No. FAA-2018-1077; or in person at
Docket Operations between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. The AD docket contains this final rule, any
comments received, and other information. The address for Docket
Operations is U.S. Department of Transportation, Docket Operations, M-
30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue
SE, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Justin Carter, Aviation Safety
Engineer, Fort Worth ACO Branch, FAA, 10101 Hillwood Parkway, Fort
Worth, TX 76177; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; email:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Background

    The FAA issued a notice of proposed rulemaking (NPRM) to amend 14
CFR part 39 by adding an AD that would apply to all SAP Model IO-360-
series and O-360-series reciprocating engines and certain Lycoming
Model AEIO-360-, IO-360-, and O-360-series reciprocating engines with a
certain SAP crankshaft assembly installed. The NPRM published in the
Federal Register on January 29, 2020 (85 FR 5173). The NPRM was
prompted by three crankshaft assembly failures that resulted in the
loss of engine power and immediate or emergency landings. The FAA
determined that the crankshaft assembly failures resulted from the
manufacturing process at SAP's crankshaft vendor during 2012 and 2014
causing excessive residual white layer of iron nitride forming on the
assemblies. This white layer is brittle and can lead to spalling or
fatigue cracking of the crankshaft assembly as a result of the normal
mechanical loads during engine operation. The FAA's analysis concluded
that all three SAP crankshaft assembly failures were the result of this
fatigue cracking. In the NPRM, the FAA proposed to require the removal
from service of all affected crankshaft assemblies. The unsafe
condition, if not addressed, could result in failure of the engine, in-
flight shutdown, and loss of the airplane.

Discussion of Final Airworthiness Directive Comments

    The FAA received comments from seven commenters. The commenters
were SAP, the Aircraft Owners and Pilots Association (AOPA), and five
individual commenters. Three commenters requested that the FAA extend
the comment period. One commenter requested the withdrawal of the AD.
Two commenters asked the FAA to release more information. One commenter
asked for the status of the AD and if the crankshaft assembly is safe
to fly. The following presents the comments received on the NPRM and
the FAA's response to each comment.

Request To Withdraw the NPRM: White Layer Does Not Contribute to
Fracture

    SAP stated that data from an independent laboratory test does not
support the statement in the NPRM that the crankshaft failures were a
result of residual white layer formation, also known as a compound
layer, on certain crankshaft assemblies as a result of improper
manufacturing by a third-party vendor. SAP stated that the fractured
crankshafts were all within specifications. SAP found both the material
and the heat treatment to be within all engineering requirements and
consistent with other crankshafts in general aviation piston aircraft
engines. SAP noted that these requirements were consistent with the
engineering testing conducted by SAP in pursuit of FAA PMA
certification. Additionally, SAP stated the fractures were not
consistent with fatigue fractures due to excessive white layer, and
that no manufacturing or material defect was found in independent
metallurgical laboratory analysis. The FAA infers from this comment
that SAP is requesting that the FAA withdraw the NPRM.
    The FAA disagrees with SAP's analysis. BakerRisk Project No. 01-
05929-003-17, dated August 15, 2017, for SAP crankshaft assembly S/N
SP14-0202, which failed on March 6, 2017, found that there was a
continuous white layer at the surface of the radius, extending up to
the location of the fracture, and that the white layer may have
contributed to early crack initiation. \1\ The continuous white layer
at the origin was 0.0007 inch. BakerRisk Project No. 01-05929-006-17,
Rev. 1, dated May 8, 2018, for SAP crankshaft assembly S/N SP14-0194,
which failed on August 3, 2017, found that the continuous white layer
at the surface of the forward journal radius, extending up to the
location of the fracture, was 0.0006 inch. According to the report,
this indicates that the process being used to remove the white layer
was not removing the entire white layer. Because it found that the
presence of the white layer can lower fatigue resistance and result in
premature fatigue crack initiation, the report included recommendations
to review the material and the processes that define the crankshaft
journals, especially the nitride case hardening and white layer removal
process. \2\
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    \1\ See pp. 2-3 of BakerRisk Project No. 01-05929-003-17.
    \2\ See pp. 4-5 of BakerRisk Project No. 01-05929-006-17, Rev.
1.
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    SAP's comment cited Hurst Metallurgical Research Laboratory, Inc.,
(Hurst) Report No. 73900, dated February 22, 2019, for SAP crankshaft
assembly S/N SP13-0150, which failed on October 31, 2018. This Hurst
report found that the continuous white layer of iron nitride at the
surface of the forward journal radius was 0.0001 inch. The FAA,
however, disagrees with the reported thickness of the white layer. The
report includes two scaled photographs (photographs No. 11 and 12),
magnified 100 times and 500 times, respectively. Using the scaling bar
provided in the photographs, the FAA determined that the white layer is
0.0009 inch. Although SAP stated a white layer of up to 0.001 inch is
allowed, SAP based this figure on an SAE Aerospace Material
specification and not on the original equipment manufacturer's (OEM)
specifications. A white layer of 0.0009 inch exceeds the amount allowed
by the OEM.
    As supported by the reports, the FAA finds that white layer
contributed to the early crack initiation and, on all failed crankshaft
assemblies, exceeded OEM specifications. Based on the foregoing, the
FAA finds no basis to withdraw the NPRM.

Request To Withdraw the NPRM: White Layer Does Not Increase Fatigue
Resistance

    SAP stated that the presence of a white layer does not reduce the
fatigue resistance of material at the surface, but rather increases the
fatigue resistance of that same material. SAP cited a study by Major,
Jakl, and Hub[aacute]lovsk[yacute] for the observation that the
application of plasma carburizing can lead to about a 25% increase in
fatigue resistance.\3\ SAP stated a study by Hiraoka and Ishida \4\
shows a marked increase in fatigue limit in a specimen with a 10 [mu]m
thick white layer as opposed to a specimen without a white layer, with
a slight increase in the fatigue limit in a specimen with a 20 [mu]m
thick white layer as compared to the specimen with a 10 [mu]m thick
white layer. The FAA infers from this comment that SAP is requesting
that the FAA withdraw the NPRM.
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    \3\ [Scaron]tep[aacute]n Major, Vladimir Jakl, &
[Scaron]tep[aacute]n Hub[aacute]lovsk[yacute], Effect of carburizing
on fatigue life of high-strength steel specimen under push-pull
loading, Advances in Engineering Mechanics and Materials, 143
(2014).
    \4\ Yaushi Hiraoka & Akihiro Ishida, Effect of Compound Layer
Thickness Composed of [gamma]'-Fe4N on Rotated-Bending Fatigue
Strength in Gas-Nitrided JIS-SCM435 Steel, 58 MATERIALS TRANSACTIONS
993 (2017).
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    The FAA disagrees with the applicability of these studies to the
unsafe condition identified in this AD. Although the application of
plasma carburizing can lead to an increase in the fatigue resistance,
the affected crankshaft assemblies were not plasma carburized.
Therefore, the Major, Jakl, and Hub[aacute]lovsk[yacute] study is not
relevant here. Although the Hiraoka and Ishida study did reveal an
increase in fatigue limit of gas nitrided steel with a white layer over
one without a white layer, the study's test environment did not
replicate the conditions applicable to an engine crankshaft as
identified in Advisory Circular No. 33.19-1, ``Guidance Material for 14
CFR Sec.  33.19, Durability, for Reciprocating Engine Redesigned
Parts,'' dated September 27,

2004 (AC 33.19-1). A crankshaft is a part whose primary fatigue
mechanism is a forced vibratory response in combination with a resonant
vibratory response that occurs at any engine speed at which the natural
frequency of the part (or assembly that includes the part) coincides
with the frequency of a combustion or inertia harmonic. AC 33.19-1
recommends 300 hours of engine tests, including a vibration test at
peak torsional resonance conditions, to test the fatigue strength of
the crankshaft.
    The white layer is well-established to be problematic in that it is
brittle. The OEM removes the white layer during the manufacturing
process. As a PMA holder, 14 CFR 21.303 requires that SAP produce a
part that is equivalent to the OEM part. Based on the foregoing, the
FAA finds no basis to withdraw the NPRM.

Request To Withdraw the NPRM: Operation Outside of Normal Conditions

    SAP stated the fractures of the crankshaft assemblies cited in the
NPRM were due to misuse, abuse, or lack of lubrication. In support, SAP
cited Hurst Report No. 73614, Rev. 1, dated December 7, 2018, for SAP
crankshaft assembly S/N SP14-0202 and Hurst Report No. 73617, Rev. 1,
dated December 7, 2018, for SAP crankshaft assembly S/N SP14-0194,
which indicate that the fractures were likely initiated by abnormal
service conditions, such as a propeller strike and a start-up of the
engine in a low-temperature (below optimal performing temperature)
environment. SAP also cited Hurst Report No. 73900 for SAP crankshaft
assembly S/N SP13-0150, which indicates that likely contributors of the
failure include rod sliding bearing failure due to insufficient
lubrication, misalignment of the crankshaft, and improper engine
performance from inadequate operation procedure resulting in high
bending moment at the radius locations from excessive force from the
piston assembly. SAP stated that all three of these crankshafts were
operated in a flight school environment. The FAA infers from this
comment that SAP is requesting that the FAA withdraw the NPRM.
    The FAA disagrees that the fracture was initiated by the operation
of the engines outside of ``normal'' conditions or parameters. With
respect to Hurst Report No. 73614 for SAP crankshaft assembly S/N SP14-
0202 and Hurst Report No. 73617 for SAP crankshaft assembly S/N SP14-
0194, none of the engines exhibited evidence of propeller strikes, and
none were started below optimal performance temperature. According to
Lycoming,\5\ cold weather requiring the use of pre-heat to avoid a cold
engine start-up is 10 degrees Fahrenheit or below. Two of the incidents
occurred in August (Canada) and October (Florida), making cold engine
start-up unlikely. The third incident occurred in March
(Massachusetts), which had a low of 16 degrees Fahrenheit at 6 a.m. and
proceeded to a high of 41 degrees Fahrenheit in the afternoon.
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    \5\ Lycoming Service Instruction No. 1505, dated July 1, 2002:
``The use of pre-heat will facilitate starting during cold weather,
and is required when the engine has been allowed to drop to
temperatures below +10 [deg]F/-12 [deg]C.''
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    With respect to Hurst Report No. 73900 for SAP crankshaft assembly
S/N SP13-0150, the pilot and mechanic separately reported the engine
had good oil pressure, indicating that the engine did not suffer from a
lack of proper lubrication at the time of the crankshaft assembly
failure. The report identifies possible contributors of single origin
fatigue failure, including the misalignment of the crankshaft assembly
or improper engine performance from inadequate operation procedure
resulting in high bending moment at the radius locations from excessive
force from the piston assembly. However, the report does not provide
evidence to support these contributors. Based on the foregoing, the FAA
declines to withdraw the NPRM.

Request To Review National Transportation Safety Board (NTSB) Reports

    An individual commenter requested to review the NTSB reports on the
accidents mentioned in the NPRM. The commenter was unable to locate
anything in the NTSB database concerning engine stoppage in aircraft
powered by Lycoming or SAP O-360 or IO-360 engines.
    The NTSB did not generate reports for the three incidents that
resulted from the crankshaft failures discussed in the NPRM. Therefore,
the FAA did not rely on NTSB reports and is not in possession of any
report generated as a result of the three incidents.

Request To Add Metallurgical Analyses to the Docket

    An individual commenter requested that the FAA add its
metallurgical analyses to the docket. The commenter stated that it was
his understanding from discussions with the FAA that the FAA has shared
its metallurgical analyses with SAP.
    The FAA agrees and has uploaded the BakerRisk and Hurst
metallurgical reports provided by SAP to the AD docket, as SAP has
agreed to release these reports to the public. The FAA, however, did
not perform its own metallurgical testing. The FAA instead relied on
metallurgical testing performed by BakerRisk and Hurst for SAP.

Request To Release Pertinent Information

    An individual commenter requested that the FAA release information
it has on this issue, including the circumstances of the crankshaft
assembly failures, the cost of crankshaft assembly replacement, and the
scope of the proposed action.
    The FAA agrees to provide additional information about the
circumstances of the failures. In each incident, the crankshaft
assembly broke into two pieces. The March 6, 2017, incident resulted in
the crankshaft separating at journal #2 while the August 3, 2017, and
October 31, 2018, incidents both resulted in a separation of the
crankshaft at journal #4. All of the incidents involved flight-training
aircraft. Additionally, as discussed previously, the FAA has uploaded
the metallurgical reports to the AD docket.
    Both the NPRM and this final rule adequately explain the scope of
the AD and contain a detailed estimate of the costs of compliance
within this AD, including the cost of the crankshaft assembly
replacement, labor cost, and total estimated cost to U.S. operators.
This final rule also discusses the net benefit of this AD.

Request To Consider Costs of Implementing This AD

    An individual commenter requested that the FAA consider the
financial costs and unintended consequences of this AD, such as
decreased aircraft value. The commenter estimates that the value of his
aircraft has been reduced by at least $15,000 since the publication of
the NPRM.
    The FAA disagrees. The cost analysis in AD rulemaking actions
typically includes only the costs associated with complying with the AD
and does not include indirect costs such as loss of aircraft value. The
FAA acknowledges that the general obligation of the operator to
maintain its aircraft in an airworthy condition is sometimes expensive.
However, and as discussed in more detail in the Benefits section, the
FAA estimates that the benefits of this AD greatly exceed its cost.

Request To Clarify Applicability

    An individual commenter asked if SAP crankshaft assemblies earlier
than 2012 are affected by this AD.
    The first affected SAP crankshaft assembly was shipped on July 31,
2012. SAP crankshaft assemblies assembled before July 31, 2012, are not
affected by this AD.

Request To Extend Comment Period

    SAP and AOPA requested that the FAA extend the comment period by 60
days to enable SAP to gather more information. SAP asked for more time
to research, gather, and respond appropriately to the NPRM. AOPA
similarly requested an extension to review the costs and overall scope,
and to gather information to respond to the NPRM. SAP, AOPA, and an
individual commenter requested the FAA extend the comment period
because of delays due to the COVID-19 pandemic, such as the closure of
laboratories for further testing and the reduction in aircraft
operations.
    The FAA disagrees. At SAP's request, the FAA met with SAP and AOPA
in April 2020 to discuss the NPRM. During that meeting, the
participants discussed certain aspects of the NPRM, including the white
layer and metallurgical reports, the three failed crankshaft
assemblies, and SAP's request for a 60-day extension to the comment
period. A summary of the meeting is available in the AD docket. None of
the information provided by SAP or AOPA justifies an extension of the
comment period. If investigations by SAP or others reveal information
that changes the FAA's determination regarding the unsafe condition,
the FAA will consider future rulemaking.

Request for a Status Update

    An individual commenter requested information regarding the FAA's
progress on issuing this AD. The commenter stated that based on
feedback from SAP, the crankshaft assembly is safe and that a
metallurgy company inspected one of the affected crankshaft assemblies
and did not find any issues.
    The FAA disagrees with the assessment from SAP. The FAA reviewed
the metallurgical reports from the incidents of failed crankshaft
assemblies and determined that an unsafe condition exists in other
crankshaft assemblies of the same type design. In each incident, the
crankshaft assembly broke into two pieces, leading to loss of engine
power. The crankshaft assemblies involved in the three incidents were
found to have excessive white layer. As a result, this AD requires
removing all affected crankshaft assemblies from service within 25
engine operating hours after the effective date of this AD.

Conclusion

    The FAA reviewed the relevant data, considered the comments
received, and determined that air safety requires adopting the AD as
proposed. Accordingly, the FAA is issuing this AD to address the unsafe
condition on these products.

Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354, codified as
amended at 5 U.S.C. 601-612) (RFA) establishes ``as a principle of
regulatory issuance that agencies shall endeavor, consistent with the
objectives of the rule and of applicable statutes, to fit regulatory
and informational requirements to the scale of the businesses,
organizations, and governmental jurisdictions subject to regulation. To
achieve this principle, agencies are required to solicit and consider
flexible regulatory proposals and to explain the rationale for their
actions to assure that such proposals are given serious
consideration.'' Public Law 96-354, 2(b), September 19, 1980. The RFA
covers a wide-range of small entities, including small businesses, not-
for-profit organizations, and small governmental jurisdictions.
Agencies must perform a review to determine whether a rule will have a
significant economic impact on a substantial number of small entities.
If the agency determines that it will, the agency must prepare a
regulatory flexibility analysis as described in the RFA.
    The FAA published an Initial Regulatory Flexibility Analysis (IRFA)
in the proposed rule to aid the public in commenting on the potential
impacts to small entities. The FAA considered the public comments in
developing the final rule and this Final Regulatory Flexibility
Analysis (FRFA).

Benefits

    The FAA found that SAP, the manufacturer of the crankshaft
assemblies, sold 192 SAP crankshaft assemblies to date: 115 of these
crankshaft assemblies are estimated to be installed on type
certificated airplanes and the remaining 77 crankshaft assemblies are
estimated to be installed on experimental aircraft. The FAA's risk
analysis indicates that 100 percent of crankshaft assembly failures
will destroy the engine. Using the historical incident data (2000-
2014), the FAA assumes that 24.4 percent of crankshaft assembly
failures will result in aircraft hull loss while 22 percent of
crankshaft assembly failures will result in fatalities. There would be
an average of 2.1 fatalities per each crankshaft assembly accident.
Applying these probabilities to the estimated 115 crankshaft assemblies
installed on type certificated airplanes, the FAA estimates that if
these crankshaft assemblies are not replaced and continue to be used in
these airplanes, this will result in 53 fatalities (2.1 fatalities per
crankshaft accident x 22 percent probability of a crankshaft assembly
failure resulting in fatalities x 115 crankshaft assemblies) and 28
aircraft losses (24.4 percent probability of a crankshaft assembly
failure destroying the airplane). This AD will prevent all 53
fatalities and 28 aircraft losses.
    Using an average price of $50,000 for a small single engine
airplane, an average price of $30,000 for a 360-series engine and the
Department of Transportation's $9.6 million estimate for the Value of
Statistical Life (VSL) from the ``Revised Departmental Guidance on
Valuation of a Statistical Life in Economic Analysis,'' \6\ the FAA
estimated this AD final rule will result in monetized benefits of
$512.8 million. \7\
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    \6\ https://www.transportation.gov/office-policy/transportation-policy/revised-departmental-guidance-on-valuation-of-a-statistical-life-in-economic-analysis.
    \7\ 53 preventable fatalities will amount to $508.8 million in
benefits of this rule. (53 x $9.6 million). The value of 28 airplane
losses is $1.4 million (28 x $50,000). The remaining 75.6 percent of
crankshaft failures (100 percent-24.4 percent crankshaft failure
destroying the airplane) will result in $2.6 million in engine
damages. (115 x 0.756 probability of crankshaft failure damaging an
airplane engine x $30,000 value of 360 engine). Therefore, the total
estimated benefits are $512.8 million ($508.8 million preventable
fatalities + $1.4 million avoidable airplane loss + $2.6 million
preventable engine damages).
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Costs of Compliance

    The costs of compliance with this AD consist of the cost to remove
and replace a crankshaft assembly. The FAA estimates that this AD will
affect 115 crankshaft assemblies installed on airplanes of U.S.
registry. This cost estimate does not include 77 SAP crankshaft
assemblies installed on experimental engines since this AD does not
apply to these engines. The estimated compliance cost per crankshaft
assembly is identified below.
    Labor cost = 61 hours per crankshaft assembly replacement x $85
Hourly Wage = $5,185.
    Equipment costs per crankshaft assembly replacement = $9,636
(Source: Average of the two vendors).
    $5,185 labor per crankshaft assembly + $9,636 equipment costs per
crankshaft

assembly replacement = $14,821 compliance cost per engine.
    The total costs to U.S. operators is $1,704,415 ($14,821 x 115), or
$119,309 in annualized costs in perpetuity using a 7 percent discount
rate. There are no additional costs after removing and replacing the
crankshaft assembly.
    Therefore, the FAA estimates that the net benefit of this final
rule will be $511.1 million ($512.8 million benefits -$1.7 million
costs), or $35.77 million in annualized net benefits using a 7 percent
discount rate in perpetuity.

Final Regulatory Flexibility Analysis

    Under Sec.  604(a) of the RFA, the final analysis must contain the
following:
    (1) A statement of the need for, and objectives of, the rule;
    (2) A statement of the significant issues raised by the public
comments in response to the IRFA, a statement of the assessment of the
agency of such issues, and a statement of any changes made in the
proposed rule as a result of such comments;
    (3) The response of the agency to any comments filed by the Chief
Counsel for Advocacy of the Small Business Administration (SBA) in
response to the proposed rule, and a detailed statement of any change
made to the proposed rule in the final rule as a result of the
comments;
    (4) A description of and an estimate of the number of small
entities to which the rule will apply or an explanation of why no such
estimate is available;
    (5) A description of the projected reporting, record-keeping, and
other compliance requirements of the proposed rule, including an
estimate of the classes of small entities which will be subject to the
requirement and the type of professional skills necessary for the
preparation of the report or record;
    (6) A description of the steps the agency has taken to minimize the
significant economic impact on small entities consistent with the
stated objectives of applicable statutes, including a statement of the
factual, policy, and legal reasons for selecting the alternative
adopted in the final rule and why each of the other significant
alternatives to the rule considered by the agency which affect the
impact on small entities was rejected.

1. Need for and Objectives of the Rule

    This final rule AD was prompted by three crankshaft assembly
failures that resulted in the loss of engine power and immediate or
emergency landings. The FAA is issuing this AD to prevent failure of
the crankshaft assembly by requiring the removal of all affected
crankshaft assemblies from service. Failure of a crankshaft assembly,
if not addressed, could result in failure of the engine, in-flight
shutdown, and loss of the airplane.

2. Significant Issues Raised in Public Comments

    An individual commenter noted that some owners of affected aircraft
may not be in a position to absorb the $15,000 cost of the crankshaft
assembly replacement. The commenter proposed that the financial costs
of this AD would exceed the FAA estimates in some cases and, therefore,
the unintended consequences of this AD would destroy value out of
proportion to the preservation of the safety of the national airspace
system and the general public.
    The FAA estimates the cost of replacing a single crankshaft
assembly at $14,821. The risk of not replacing the crankshaft is not
insignificant, and the crankshaft failure could cause engine loss,
airplane loss, or fatality valued at $30,000, $50,000, and $9.6
million, respectively. When these potentially substantial losses and
risks of fatality to each airplane owner and operator are considered,
the $14,821 compliance cost per airplane is minimal. Further, the FAA
estimates the benefits of this AD to be $512.8 million, which greatly
exceeds its cost of $1.7 million, justifying this final rule.
    Based on the risk and benefits analysis above, the FAA determined
that no changes are necessary to the final rule as a result of this
individual comment.

3. Response to SBA Comments

    The Chief Counsel for Advocacy of the SBA did not file any comments
in response to the proposed rule.

4. Small Entities to Which the Rule Will Apply

    This AD applies to all SAP Model IO-360-series and O-360-series
reciprocating engines and certain Lycoming Model AEIO-360-, IO-360-,
and O-360-series reciprocating engines with a certain SAP crankshaft
assembly installed. This SAP crankshaft assembly is installed as
original equipment on the affected SAP engines and as a replacement
part under PMA on the affected Lycoming engines. These engines are
installed on airplanes performing various activities including, but not
limited to, flight training, charter flights, and agriculture.
    Under the RFA, the FAA must determine whether a final rule
significantly affects a substantial number of small entities. The FAA
uses the SBA criteria for determining whether an affected entity is
small. For aircraft and engine manufacturers, aviation operators, and
any business using an aircraft, the SBA criterion is 1,500 or fewer
employees. The FAA estimates that this AD affects 115 crankshaft
assemblies installed on airplanes of U.S. registry. The FAA does not
have any information or data on whether these entities are small
businesses according to the definition established by the SBA. Although
in the NPRM the FAA requested comments and data that would allow the
agency to more accurately assess the number of employees and sales
revenues of the affected entities, no such comments or data was
received. Accordingly, the FAA assumes for purposes of this final rule
that some of the affected entities are small businesses.\8\ The FAA
determines that the estimated $14,821 compliance cost per aircraft due
to this rule will have a significant impact on a substantial number of
small entities.
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    \8\ The FAA recognizes that many of these affected airplanes are
recreational. The 2016 GAMA Databook shows that of 141,141 active
General Aviation piston aircraft, 104,669 are used for personal or
recreational purposes (74 percent), Using this distribution, only 30
of the 115 crankshaft assemblies would be installed in airplanes
operated for business use.
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5. Projected Reporting, Record-Keeping, and Other Compliance
Requirements

    There are no record-keeping costs or other compliance costs
associated with this final rule.

6. Significant Alternatives Considered

    As part of the FRFA, the FAA is required to consider regulatory
alternatives that may be less burdensome. The FAA considered the
following alternatives:
    Do nothing: This option is not acceptable because the risk of
additional failures of these crankshaft assemblies constitutes a known
unsafe condition. The FAA estimates that this AD will prevent 53
fatalities and 28 aircraft losses, and monetized benefits of $512.8
million.
    Periodic inspections: This option is not possible as the crankshaft
assembly cannot be inspected without destroying it.
    There is no direct safety alternative to the replacement of the
crankshaft assembly. The replacement addresses a safety issue aimed at
preventing the failure of the crankshaft assembly.
    Therefore, the FAA rejected these two regulatory alternatives and
determined that this rulemaking may have a significant economic impact
on a substantial number of small entities.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the agency's authority.
    The FAA is issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701: General requirements.
Under that section, Congress charges the FAA with promoting safe flight
of civil aircraft in air commerce by prescribing regulations for
practices, methods, and procedures the Administrator finds necessary
for safety in air commerce. This regulation is within the scope of that
authority because it addresses an unsafe condition that is likely to
exist or develop on products identified in this rulemaking action.

Regulatory Findings

    This AD will not have federalism implications under Executive Order
13132. This AD will not have a substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government.
    For the reasons discussed above, I certify that this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866, and
    (2) Will not affect intrastate aviation in Alaska.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

The Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13   [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new airworthiness
directive:

2020-25-12 Superior Air Parts, Inc.: Amendment 39-21354; Docket No.
FAA-2018-1077; Project Identifier 2018-NE-40-AD.

(a) Effective Date

    This airworthiness directive (AD) is effective January 15, 2021.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to the reciprocating engine models identified in
paragraphs (c)(1) and (2) of this AD with a Superior Air Parts, Inc.
(SAP) crankshaft assembly, part number (P/N) SL36500-A20 or P/N
SL36500-A31, with serial numbers 82976-01; 82976-02; SP12-0003
through SP12-0089, inclusive; SP13-0034 through SP13-0150,
inclusive; or SP14-0151 through SP14-0202, inclusive; installed.
    (1) With SAP crankshaft assembly, P/N SL36500-A20, installed:
    (i) SAP Model IO-360-series and O-360-series reciprocating
engines.
    (ii) Lycoming Engines (Lycoming) Model IO-360-B2F, IO-360-L2A,
O-360, O-360-A2A, O-360-A2D, O-360-A2E, O-360-A2F, O-360-A2G, O-360-
B2A, O-360-C2A, O-360-C2C, O-360-C2D, O-360-C2E, O-360-D2A, and O-
360-D2B reciprocating engines.
    (2) With SAP crankshaft assembly, P/N SL36500-A31, installed:
    (i) SAP Model IO-360-series and O-360-series reciprocating
engines.
    (ii) Lycoming Model AEIO-360-H1A, IO-360-B1A, IO-360-B1B, IO-
360-B1D, IO-360-B1E, IO-360-B1F, IO-360-M1A, O-360, O-360-A1A, O-
360-A1C, O-360-A1D, O-360-A2A, O-360-C1A, O-360-C1G, O-360-C1C, O-
360-C1E, and O-360-C1F reciprocating engines.
    Note 1 to paragraph (c): This SAP crankshaft assembly may be
installed as a replacement part under parts manufacturer approval on
the affected Lycoming engines.

(d) Subject

    Joint Aircraft System Component (JASC) Code 8520, Reciprocating
Engine Power Section.

(e) Unsafe Condition

    This AD was prompted by three crankshaft assembly failures that
resulted in the loss of engine power and immediate or emergency
landings. The FAA is issuing this AD to prevent failure of the
crankshaft assembly. The unsafe condition, if not addressed, could
result in failure of the engine, in-flight shutdown, and loss of the
airplane.

(f) Compliance

    Comply with this AD within the compliance times specified,
unless already done.

(g) Required Action

    Within 25 engine operating hours after the effective date of
this AD, remove the crankshaft assembly from service.

(h) Special Flight Permit

    A one-time special flight permit may be issued to fly the
aircraft to a maintenance facility to perform the actions of this AD
with the following limitations: No passengers, visual flight rules
(VFR) day conditions only, and avoid areas of known turbulence.

(i) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Fort Worth ACO Branch, FAA, has the authority
to approve AMOCs for this AD, if requested using the procedures
found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your
request to your principal inspector or local Flight Standards
District Office, as appropriate. If sending information directly to
the manager of the certification office, send it to the attention of
the person identified in Related Information.
    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.

(j) Related Information

    For more information about this AD, contact Justin Carter,
Aviation Safety Engineer, Fort Worth ACO Branch, FAA, 10101 Hillwood
Parkway, Fort Worth, TX 76177; phone:<PHONE_NUMBER>; fax: (817)
222-5245; email<EMAIL_ADDRESS>
(k) Material Incorporated by Reference

    None.

    Issued on December 3, 2020.
Lance T. Gant,
Director, Compliance & Airworthiness Division, Aircraft Certification
Service.
[FR Doc. 2020-27149 Filed 12-10-20; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 84, Number 236 (Monday, December 9, 2019)]
[Notices]
[Pages 67318-67324]
[FR Doc No: 2019-26407]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33709; 813-00394]

Lazard Asset Management LLC and Lazard ESC Funds LLC

December 3, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of application for an order under sections 6(b) and 6(e) of
the Investment Company Act of 1940 (the ``Act'') granting an exemption
from all provisions of the Act and the rules and regulations
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act,
and the rules and regulations thereunder (the ``Rules and
Regulations''). With respect to sections 17(a), (d), (e), (f), (g) and
(j) and 30(a), (b), (e), and (h) of the Act, and the Rules and
Regulations, and rule 38a-1 under the Act, the exemption is limited as
set forth in the application.

Summary of Application: Applicants request an order to exempt certain
limited partnerships, limited liability companies, corporations,
business or statutory trusts or other entities formed for the benefit
of eligible employees of Lazard Asset Management LLC and its affiliates
from certain provisions of the Act. Each series of a Fund will be an
``employees' securities company'' within the meaning of section
2(a)(13) of the Act.

Applicants: Lazard Asset Management LLC, a Delaware limited liability
company (``LAM'') and Lazard ESC Funds LLC, a Delaware limited
liability company.

Filing Dates: The application was filed on January 18, 2019 and was
amended on June 20, 2019 and September 24, 2019.

Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on December 30, 2019, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE, Washington, DC 20549-1090; Applicants: 30 Rockefeller Plaza,
New York, NY 10112.

FOR FURTHER INFORMATION CONTACT: Kyle R. Ahlgren, Senior Counsel, at
(202) 551-6857, or Holly L. Hunter-Ceci, Assistant Chief Counsel, at
(202) 551-6825 (Division of Investment Management, Chief Counsel's
Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's website by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. LAM and its ``affiliates'' within the meaning of rule 12b-2
under the Securities Exchange Act of 1934 (the ``Exchange Act'')
(collectively, ``Lazard''), have organized Lazard ESC Funds LLC, and
may in the future organize limited partnerships, limited liability
companies, business or statutory trusts or other entities or series of
any of the foregoing as ``employees'

securities companies'' (each, a ``Fund'' and together with series of
Lazard ESC Funds LLC, the ``Funds''). The Funds are intended to provide
investment opportunities that are competitive with those at other
investment management and financial services firms and to facilitate
the recruitment and retention of high caliber professionals.
    2. Lazard ESC Funds LLC was formed on January 23, 2019 as a
Delaware limited liability company. LAM is the manager of Lazard ESC
Funds LLC. The investment objectives and policies of each Fund and
whether it will operate as a diversified or non-diversified vehicle may
vary from Fund to Fund, and will be set forth in the informational
memorandum and the governing documents relating to the specific Fund.
Potential investments for the Funds may include a wide variety of U.S.
and non-U.S. assets, including but not limited to, public and private
debt and equity securities, real estate, equity, credit, and other
financial assets. The Funds may invest either directly or indirectly
through investments in limited partnerships and other investment pools
(including pools that are exempt from registration in reliance on
section 3(c)(1) or 3(c)(7) of the Act) and investments in registered
investment companies. Investments may be made side by side with Lazard
and Lazard-related investors and through investment pools (including
Aggregation Vehicles) \1\ sponsored or managed by Lazard or an
unaffiliated entity.
---------------------------------------------------------------------------

    \1\ An ``Aggregation Vehicle'' is an investment pool sponsored
or managed by Lazard or an unaffiliated entity that is formed solely
for the purpose of permitting a Fund and Lazard and Lazard-related
investors or Third Party Funds to collectively invest in other
entities. A ``Third Party Fund'' is an investment fund organized
primarily for the benefit of investors who are not affiliated with
Lazard over which Lazard or an unaffiliated subadviser exercises
investment discretion.
---------------------------------------------------------------------------

    3. A Fund may be structured as a limited partnership, limited
liability company, corporation, business or statutory trust or other
entity, or series of any of the foregoing. A Fund may be organized
inside the United States (under the laws of Delaware, or another state)
or in a jurisdiction outside the United States. A Fund may be organized
under the laws of a non-U.S. jurisdiction to address any tax, legal,
accounting and/or regulatory considerations applicable to certain
Eligible Employees (defined below) in other jurisdictions or the nature
of the investment program. The investment objectives and policies of
the Funds may vary from Fund to Fund. Each Fund will operate either as
a closed-end or open-end management investment company, and a
particular Fund may operate as a ``diversified'' or ``non-diversified''
vehicle, within the meaning of the Act. A Fund may be a partnership or
corporation for U.S. federal income tax purposes, and a Fund that is a
corporation for U.S. federal income tax purposes may elect to be
treated as a regulated investment company. A Fund may serve as the
master fund of one or more other Funds (such entities, ``Master
Funds''). Interests in a Fund (``Interests'') may be issued in one or
more series, each of which corresponds to particular Fund investments.
In such event, each series will be an ``employees' securities company''
within the meaning of section 2(a)(13) of the Act.
    4. Lazard will control each Fund within the meaning of section
2(a)(9) of the Act. Each Fund will have a general partner, managing
member or other such similar entity (a ``General Partner'') that
manages, operates and controls such Fund and will be responsible for
the overall management of the Fund. The General Partner or another
Lazard entity will serve as investment adviser (``Investment Adviser'')
to each Fund.
    5. Each General Partner and Investment Adviser in managing a Fund
is an ``investment adviser'' within the meaning of sections 9 and 36 of
the Act, and is subject to those sections. The Investment Adviser may
be paid a management fee for its services to a Fund. A General Partner
or Investment Adviser may receive a performance-based fee or allocation
(``Carried Interest'') based on the net gains of the Fund's investments
or increase in the value of Interests, in addition to any amount
allocable to the General Partner's or Investment Adviser's
Interests.\2\
---------------------------------------------------------------------------

    \2\ All or a portion of the Carried Interest may be paid to
individuals who are officers, employees or stockholders of the
General Partner or Investment Adviser or their ``affiliated
persons,'' as defined in section 2(a)(3) of the Act.
---------------------------------------------------------------------------

    6. If a General Partner determines that a Fund should enter into
any side-by-side investment with an unaffiliated entity, the General
Partner will be permitted to engage as sub-investment adviser the
unaffiliated entity (an ``Unaffiliated Subadviser''), which will be
responsible for the management of such side-by-side investment.
    7. With the exception of Plan Interest Holders (as defined below),
all potential investors in a Fund (the ``Investors'') will be informed,
among other things, that Interests in a Fund will be offered in a
transaction exempt from registration under section 4(a)(2) of the
Securities Act of 1933, as amended (the ``1933 Act''), or Regulation D
or Regulation S promulgated thereunder, and will be sold only to
Qualified Participants, which term refers to: (i) Eligible Employees
(as defined below); (ii) at the request of Eligible Employees and the
discretion of the General Partner, to Qualified Participants (as
defined below) of such Eligible Employees; or (iii) Lazard.\3\ Prior to
offering Interests to an Eligible Employee or an Eligible Family Member
(as defined below), a General Partner must reasonably believe that the
Eligible Employee or Eligible Family Member will be capable of
understanding and evaluating the merits and risks of participation in a
Fund and that each such individual is able to bear the economic risk of
such participation and afford a complete loss of his or her investment
in a Fund.
---------------------------------------------------------------------------

    \3\ In order to qualify as a ``Qualified Participant,'' an
individual or entity must (i) be an Eligible Family Member or
Eligible Investment Vehicle of an Eligible Employee or Plan Interest
Holder and (ii) if purchasing an Interest from a Fund, except as
discussed below, come within the standards of an ``accredited
investor'' under rule 501(a) of Regulation D.
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    8. In order to qualify as an ``Eligible Employee,'' (a) an
individual must (i) be a current or former employee, officer or
director or current Consultant \4\ of Lazard and (ii) except for
certain individuals who meet the definition of ``knowledgeable
employee'' in rule 3c-5(a)(4) under the Act as if the Funds were
``Covered Companies'' within the meaning of the rule and a limited

number of other employees of Lazard \5\ (collectively, ``Non-Accredited
Investors''), meet the standards of an ``accredited investor'' under
rule 501(a)(5) or (a)(6) of Regulation D, or (b) an entity must (i) be
a current Consultant of Lazard and (ii) meet the standards of an
``accredited investor'' under rule 501(a) of Regulation D. No Fund will
sell its Interests to more than 35 Non-Accredited Investors under
Regulation D.
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    \4\ The term ``Consultant'' is defined as a person or entity who
Lazard has engaged to provide services and professional expertise on
an ongoing basis as regular consultants or business or legal
advisors to Lazard. In order to participate in the Funds,
Consultants must be currently engaged by Lazard and will be required
to be sophisticated investors who qualify as accredited investors
under rule 501(a) of Regulation D. If a Consultant is an entity
(such as, for example, a law firm or consulting firm), and the
Consultant proposes to invest in the Fund through a partnership,
corporation or other entity that is controlled by the Consultant,
the individual participants in such partnership, corporation or
other entity will be limited to senior level employees, members or
partners of the Consultant who are responsible for the activities of
the Consultant or the activities of the Consultant in relation to
Lazard and will be required to qualify as ``accredited investors''
under rule 501(a) of Regulation D. In addition, such entities will
be limited to businesses controlled by individuals who have levels
of expertise and sophistication in the area of investments in
securities that are comparable to other Eligible Employees who are
employees, officers or directors of Lazard and who have an interest
in maintaining an ongoing relationship with Lazard. The individuals
participating through such entities will belong to that class of
persons who will have access to the directors and officers of the
General Partner or the directors and officers of Lazard, as
applicable, responsible for making investments for the Funds similar
to the access afforded Eligible Employees who are employees,
officers or directors of Lazard.
    \5\ Such employees must meet the sophistication requirements set
forth in rule 506(b)(2)(ii) of Regulation D under the 1933 Act and
may be permitted to invest his or her own funds in the Fund if, at
the time of the employee's investment in a Fund, he or she (a) has a
graduate degree in business, law or accounting, (b) has a minimum of
five years of consulting, investment banking or similar business
experience, and (c) has had reportable income from all sources of at
least $100,000 in each of the two most recent years and a reasonable
expectation of income from all sources of at least $140,000 in each
year in which such person will be committed to make investments in a
Fund. In addition, such an employee will not be permitted to invest
in any year more than 10% of his or her income from all sources for
the immediately preceding year in the aggregate in such Fund and in
all other Funds in which he or she has previously invested.
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    9. An ``Eligible Family Member'' is a spouse, parent, child, spouse
of child, brother, sister or grandchild of an Eligible Employee or Plan
Interest Holder, including step and adoptive relationships. An
``Eligible Investment Vehicle'' is (a) a trust of which the trustee,
grantor and/or beneficiary is an Eligible Employee or Plan Interest
Holder, (b) a partnership, corporation or other entity controlled by an
Eligible Employee or Plan Interest Holder, or (c) a trust or other
entity established solely for the benefit of an Eligible Employee or
Plan Interest Holder and/or one or more Eligible Family Members of an
Eligible Employee or Plan Interest Holder.
    10. Certain employees of Lazard may also receive Interests as part
of an employee benefit plan without payment in order to reward and
retain these employees (each, a ``Plan Interest Holder''). The Funds
will not register Interests awarded to Plan Interest Holders under the
1933 Act in reliance on an opinion of counsel that the awards of
Interests are not sales within the meaning of section 2(a)(3) of the
1933 Act. No relief from the provisions of the 1933 Act is requested by
the Applicants with respect to the award of Interests to Plan Interest
Holders. Plan Interest Holders will not be required to meet the
sophistication and salary requirements to which Eligible Employees are
subject.
    11. An Eligible Employee or Eligible Family Member may purchase
Interests through an Eligible Investment Vehicle only if either (i) the
investment vehicle is an ``accredited investor'' as defined in rule
501(a) of Regulation D, or (ii) the applicable Eligible Employee or
Eligible Family Member is a settlor \6\ and principal investment
decision-maker with respect to the investment vehicle. Eligible
Investment Vehicles that are not accredited investors will be counted
in accordance with Regulation D toward the 35 Non-Accredited Investor
limit discussed above.
---------------------------------------------------------------------------

    \6\ If such investment vehicle is an entity other than a trust,
the term ``settlor'' will be read to mean a person who created such
vehicle, alone or together with other Eligible Employees and/or
Eligible Family Members, and contributed funds to such vehicle.
---------------------------------------------------------------------------

    12. The terms of each Fund will be fully disclosed to each Eligible
Employee and, if a Qualified Participant of such Eligible Employee is
required to make an investment decision with respect to whether or not
to participate in a Fund, to such Qualified Participant, at the time
such Eligible Employee or Qualified Participant is invited to
participate in the Fund, or to a Plan Interest Holder at the time he or
she receives an Interest. A Fund will send its investors an annual
financial statement within 120 days after the end of each fiscal year
end of the Fund, or as soon as practicable after the end of the Fund's
fiscal year. The annual financial statement will be audited \7\ by an
independent certified public accountant. In addition, as soon as
practicable after the end of each fiscal year of a Fund, a report will
be sent to each investor setting forth the information with respect
such investor's share of income, gains, losses, credits, and other
items for U.S. federal and state income tax purposes resulting from the
operation of the Fund during that year.
---------------------------------------------------------------------------

    \7\ ``Audit'' has the meaning defined in rule 1-02(d) of
Regulation S-X.
---------------------------------------------------------------------------

    13. Interests in a Fund will be non-transferable except with the
prior written consent of the General Partner, and, in any event, no
person or entity will be admitted into the Fund as an investor unless
such person is (i) an Eligible Employee, (ii) a Plan Interest Holder,
(iii) a Qualified Participant, or (iv) Lazard. No sales load or similar
fee of any kind will be charged in connection with the sale of
Interests.
    14. A General Partner may have the right, but not the obligation,
to repurchase, cancel, or transfer to another Qualified Participant the
Interests of (i) an Eligible Employee who ceases to be an employee,
officer, director or Consultant of Lazard for any reason or (ii) any
Qualified Participant of any person described in clause (i). The
governing documents for each Fund will describe, if applicable, the
amount that an investor would receive upon repurchase, cancellation or
transfer of its Interests.
    15. Among other assets, the Funds may invest either directly or
indirectly through investments in limited partnerships and other
investment pools (including pools that are exempt from registration in
reliance on section 3(c)(1) or 3(c)(7) of the Act) and investments in
registered investment companies. Investments may be made side by side
with Lazard and Lazard-related investors and through investment pools
(including Aggregation Vehicles) sponsored or managed by Lazard or an
unaffiliated entity.
    16. A Fund may co-invest in a portfolio company with one or more of
Lazard and/or a separate account for the benefit of clients, or an
investment fund organized primarily for the benefit of investors, in
either case, who are not affiliated with Lazard over which Lazard or an
Unaffiliated Subadviser exercises investment discretion (``Third Party
Funds''). Side-by-side investments held by a Third Party Fund, or by
Lazard in a transaction in which Lazard's investment was made pursuant
to a contractual obligation to a Third Party Fund, will not be subject
to the restrictions contained in Condition 3. All other side-by-side
investments held by Lazard will be subject to the restrictions
contained in Condition 3.
    17. If Lazard makes loans to a Fund, the lender will be entitled to
receive interest, provided that the interest rate will be no less
favorable to the borrower than the rate obtainable on an arm's length
basis. The possibility of any such borrowings, as well as the terms
thereof, would be disclosed to investors prior to their investment in a
Fund. Any indebtedness of the Fund will be the debt of the Fund and
without recourse to the investors. A Fund will not borrow from any
person if the borrowing would cause any person not named in section
2(a)(13) of the Act to own securities of the Fund (other than short-
term paper). A Fund will not lend any funds to Lazard.
    18. A Fund will not purchase or otherwise acquire any security
issued by a registered investment company if, immediately after such
purchase or acquisition, the Fund would own more than 3% of the
outstanding voting stock of the registered investment company unless
such purchase or acquisition is permitted under the applicable rules
and regulations or any applicable exemption.

Applicants' Legal Analysis

    1. Section 6(b) of the Act provides that the Commission shall
exempt employees' securities companies from the provisions of the Act
if and to the extent that such exemption is consistent with the
protection of investors. Section 6(b) provides that the Commission will
consider, in determining the provisions of the Act from which the
company should be exempt, the company's form of organization and
capital structure, the persons owning and controlling its securities,
the price of the company's securities and the amount of any sales load,
how the company's funds are invested, and the relationship between the
company and the issuers of the securities in which it invests. Section
2(a)(13) defines an employees' securities company, in relevant part, as
any investment company all of whose securities (other than short-term
paper) are beneficially owned (a) by current or former employees, or
persons on retainer, of one or more affiliated employers, (b) by
immediate family members of such persons, or (c) by such employer or
employers together with any of the persons in (a) or (b).
    2. Section 7 of the Act generally prohibits investment companies
that are not registered under section 8 of the Act from selling or
redeeming their securities. Section 6(e) of the Act provides that in
connection with any order exempting an investment company from any
provision of section 7, certain specified provisions of the Act shall
be applicable to such company, and to other persons in their
transactions and relations with such company, as though such company
were registered under the Act, if the Commission deems it necessary and
appropriate in the public interest or for the protection of investors.
Applicants submit that it would be appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policies and provisions of the Act for the Commission
to issue an order under sections 6(b) and 6(e) of the Act exempting the
Funds from all provisions of the Act and the rules and regulations
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act,
and the Rules and Regulations. With respect to sections 17(a), (d),
(e), (f), (g) and (j) and 30(a), (b), (e), and (h) of the Act, and the
Rules and Regulations, and rule 38a-1 under the Act, Applicants request
a limited exemption as set forth in the application.
    3. Section 17(a) of the Act generally prohibits any affiliated
person of a registered investment company, or any affiliated person of
such a person, acting as principal, from knowingly selling or
purchasing any security or other property to or from the investment
company. Applicants request an exemption from section 17(a) to the
extent necessary to (a) permit Lazard or a Third Party Fund (or any
``affiliated person,'' as defined in the Act, of Lazard or a Third
Party Fund), acting as a principal, to purchase or sell securities or
other property to or from any Fund or any company controlled by such
Fund; and (b) permit a Fund to invest in or engage in any transaction
with Lazard, acting as principal, (i) in which such Fund, any company
controlled by such Fund or Lazard or any Third Party Fund has invested
or will invest, or (ii) with which such Fund, any company controlled by
such Fund or Lazard or any Third Party Fund is or will become otherwise
affiliated. The transactions to which any Fund is a party will be
effected only after a determination by the General Partner that the
requirements of Conditions 1, 2 and 6 below have been satisfied.
Lazard, on behalf of the Funds, represents that any transactions
otherwise subject to section 17(a) of the Act, for which exemptive
relief has not been requested, would require approval of the
Commission.
    4. Applicants submit that an exemption from section 17(a) is
consistent with the policy of each Fund and the protection of
investors. Applicants state that the investors in each Fund will have
been fully informed of the possible extent of such Fund's dealings with
Lazard and of the potential conflicts of interest that may exist.
Applicants also state that, as professionals employed in the investment
management and securities businesses, or in administrative, financial,
accounting, legal, sales, marketing, risk management or operational
activities related thereto, the investors will be able to understand
and evaluate the risks associated with those dealings. Applicants
assert that the community of interest among the investors in each Fund
and Lazard will serve to reduce the risk of abuse in transactions
involving Lazard. Applicants acknowledge that the requested relief will
not extend to any transactions between a Fund and an Unaffiliated
Subadviser or an affiliated person of an Unaffiliated Subadviser, or
between a Fund and any person who is not an employee, officer or
director of Lazard or is an entity outside of Lazard and is an
affiliated person of the Fund as defined in section 2(a)(3)(E) of the
Act (an ``Advisory Person'') or any affiliated person of such person.
    5. Section 17(d) of the Act and rule 17d-1 thereunder prohibit any
affiliated person or principal underwriter of a registered investment
company, or any affiliated person of such a person or principal
underwriter, acting as principal, from participating in any joint
arrangement with the company unless authorized by the Commission.
Applicants request an exemption from section 17(d) and rule 17d-1 to
the extent necessary to permit affiliated persons of each Fund, or
affiliated persons of any of such persons, to participate in, or effect
any transaction in connection with, any joint enterprise or other joint
arrangement or profit-sharing plan in which such Fund or a company
controlled by such Fund is a participant. The exemption would permit,
among other things, co-investments by the Funds, Third Party Funds and
individual members or employees, officers, directors or Consultants of
Lazard making their own individual investment decisions apart from
Lazard. Applicants acknowledge that the requested relief will not
extend to any transaction in which an Unaffiliated Subadviser or an
Advisory Person or an affiliated person of either such person has an
interest, except in connection with a Third Party Fund sponsored by an
Unaffiliated Subadviser.
    6. The Applicants submit that investments will be made by a Fund
because of its affiliation with Lazard. The Applicants also submit that
the types of investment opportunities often considered by a Fund
require each participant in the transaction to make funds available in
an amount that may be substantially greater than what a Fund (including
its Eligible Employees, Plan Interest Holders and Qualified
Participants) may be able to make available on its own. The Applicants
contend that, as a result, the only way in which a Fund (and thus its
Eligible Employees, Plan Interest Holders and Qualified Participants)
may be able to participate in these opportunities is to co-invest with
Lazard. The Applicants note that each Fund will be primarily organized
for the benefit of Eligible Employees as an incentive for them to
remain with Lazard and for the generation and maintenance of goodwill.
The Applicants believe that, if co-investments with Lazard are
prohibited, the appeal of the Funds would be significantly diminished.
The Applicants assert that Eligible Employees wish to participate in
such co-investment opportunities because they believe that (i) the
resources of Lazard enable it to analyze investment

opportunities to an extent that Eligible Employees would not be able to
duplicate, (ii) investments recommended by Lazard will not be generally
available to investors even of the financial status of the Eligible
Employees, and (iii) Eligible Employees will be able to pool their
investment resources, thus achieving greater diversification of their
individual investment portfolios.
    7. Applicants assert that the flexibility to structure co-
investments and joint investments will not involve abuses of the type
section 17(d) and rule 17d-1 were designed to prevent. In addition,
Applicants represent that any transactions otherwise subject to section
17(d) of the Act and rule 17d-1 thereunder, for which exemptive relief
has not been requested, would require approval by the Commission.
    8. Co-investments with Third Party Funds, or by Lazard pursuant to
a contractual obligation to a Third Party Fund, will not be subject to
Condition 3 below. The Applicants note that it is common for a Third
Party Fund to require that Lazard invest its own capital in Third Party
Fund investments and that Lazard's investments be subject to
substantially the same terms as those applicable to the Third Party
Fund. The Applicants believe that it is important that the interests of
the Third Party Fund take priority over the interests of the Funds and
that the Third Party Fund not be burdened or otherwise affected by
activities of the Funds. In addition, the Applicants assert that the
relationship of a Fund to a Third Party Fund is fundamentally different
from a Fund's relationship to Lazard. The Applicants contend that the
focus of, and the rationale for, the protections contained in the
requested relief are to protect the Funds from any overreaching by
Lazard in the employer/employee context, whereas the same concerns are
not present with respect to the Funds vis-[agrave]-vis a Third Party
Fund.
    9. Section 17(e) of the Act and rule 17e-1 thereunder limit the
compensation an affiliated person may receive when acting as agent or
broker for a registered investment company. Applicants request an
exemption from section 17(e) to permit Lazard (including the General
Partner) that acts as an agent or broker to receive placement fees,
advisory fees, brokerage fees or other compensation from a Fund in
connection with the purchase or sale by the Fund of securities,
provided that the fees or other compensation are deemed ``usual and
customary.'' Applicants state that for purposes of the application,
fees or other compensation that are charged or received by Lazard will
be deemed ``usual and customary'' only if (i) the Fund is purchasing or
selling securities with other unaffiliated third parties, including
Third Party Funds, (ii) the fees or other compensation being charged to
the Fund (directly or indirectly) are also being charged to the
unaffiliated third parties, including Third Party Funds, and (iii) the
amount of securities being purchased or sold by the Fund (directly or
indirectly) does not exceed 50% of the total amount of securities being
purchased or sold by the Fund (directly or indirectly) and the
unaffiliated third parties, including Third Party Funds. Applicants
state that compliance with section 17(e) would prevent a Fund from
participating in transactions in where the Fund is being charged lower
fees than unaffiliated third parties also participating in the
transaction. Applicants assert that the concerns of overreaching and
abuse that section 17(e) and rule 17e-1 were designed to prevent are
alleviated by the conditions that ensure that the fees or other
compensation paid by a Fund to Lazard are those negotiated at arm's
length with unaffiliated third parties.
    10. Rule 17e-1(b) under the Act requires that a majority of
directors who are not ``interested persons'' (as defined in section
2(a)(19) of the Act) take actions and make approvals regarding
commissions, fees, or other remuneration. Rule 17e-1(c) under the Act
requires each Fund to comply with the fund governance standards defined
in rule 0-1(a)(7) under the Act. Applicants request an exemption from
rule 17e-1(b) to the extent necessary to permit each Fund to comply
with rule 17e-1(b) without having a majority of the directors of the
General Partner who are not ``interested persons'' take actions and
make determinations as set forth in paragraph (b) of the rule and
without having to satisfy the standards set forth in paragraph (c) of
the rule. Applicants state that because all the directors or other
governing body of a General Partner will be affiliated persons, without
the relief requested, a Fund could not comply with rule 17e-1.
Applicants represent that each Fund will comply with rule 17e-1(b) by
having a majority of the directors (or members of a comparable body) of
the Fund or its General Partner take such actions and make such
approvals as are set forth in the rule. Applicants state that each Fund
will otherwise comply with rule 17e-1.
    11. Section 17(f) of the Act provides that the securities and
similar investments of a registered management investment company must
be placed in the custody of a bank, a member of a national securities
exchange or the company itself in accordance with Commission rules.
Rule 17f-1 under the Act specifies the requirements that must be
satisfied for a registered management investment company to maintain
custody of its securities and similar investments with a company that
is a member of a national securities exchange. The Applicants request
relief from section 17(f) of the Act and subsections (a), (b) (to the
extent such subsection refers to contractual requirements), (c) and (d)
of rule 17f-1 under the Act to the extent necessary to permit Lazard to
act as custodian for a Fund without a written contract. Applicants
contend that since there is a close association between a Fund and
Lazard, requiring a detailed written contract would expose the Fund to
unnecessary burden and expense. The Applicants also request relief from
the requirement in paragraph (b)(4) of the rule that an independent
accountant periodically verify the Fund's assets held by the custodian.
The Applicants believe that, because of the community of interest
between Lazard and the Funds and the existing requirement for an
independent audit, compliance with this requirement would be
unnecessary. Except as set forth above, a Fund relying on rule 17f-1
will otherwise comply with the provisions of the rule.
    12. Rule 17f-2 under the Act specifies the requirements that must
be satisfied for a registered management investment company to act as a
custodian of its own investments. Applicants request relief from
section 17(f) and rule 17f-2 to permit the following exceptions from
the requirements of rule 17f-2: (i) A Fund's investments may be kept in
the locked files of Lazard or the General Partner or the Investment
Adviser; (ii) for purposes of paragraph (d) of the rule, (a) employees
of the General Partner (or Lazard) will be deemed to be employees of
the Funds, (b) officers or managers of the General Partner (or Lazard)
will be deemed to be officers of the Fund, and (c) the General Partner
or its board of directors will be deemed to be the board of directors
of the Fund; and (iii) in place of the verification procedure under
paragraph (f) of the rule, verification will be effected quarterly by
two employees, each of whom will have sufficient knowledge,
sophistication and experience in business matters to perform such
examination. With respect to certain Funds, some of their investments
may be evidenced only by partnership agreements, participation
agreements or similar documents, rather than by negotiable certificates
that could be misappropriated. The Applicants

assert that, for such a Fund, these instruments are most suitably kept
in the files of Lazard, the General Partner or the Investment Adviser,
where they can be referred to as necessary. The Applicants state that
they will comply with all other provisions of rule 17f-2.
    13. Section 17(g) of the Act and rule 17g-1 thereunder generally
require the bonding of officers and employees of a registered
investment company who have access to its securities or funds. Rule
17g-1 requires that a majority of directors who are not ``interested
persons'' of a registered investment company take certain actions and
give certain approvals relating to fidelity bonding. Among other
things, the rule also requires that the board of directors of an
investment company relying on the rule satisfy the fund governance
standards defined in rule 0-1(a)(7). Applicants request an exemption
from rule 17g-1 to the extent necessary to permit the General Partner's
board of directors or other governing body, who may be deemed
interested persons, to take actions and make determinations as set
forth in the rule. The Applicants also request an exemption from the
requirements of: (i) Paragraph (g) of rule 17g-1 relating to the filing
of copies of fidelity bonds and related information with the Commission
and the provision of notices to the board of directors; (ii) paragraph
(h) of the rule relating to the appointment of a person to make the
filings and provide the notices required by paragraph (g); and (iii)
paragraph (j)(3) of the rule relating to compliance with the fund
governance standards set forth in rule 0-1(a)(7) under the Act.
Applicants state that because all directors or other governing body of
the General Partner will be affiliated persons, a Fund could not comply
with rule 17g-1 without the requested relief. Applicants contend that
the filing requirements are burdensome and unnecessary as applied to
the Funds and represent that the applicable General Partner will
maintain the materials otherwise required to be filed with the
Commission by paragraph (g) of rule 17g-1 and agree that all such
materials will be subject to examination by the Commission and its
staff. Applicants submit that no purpose would be served in complying
with the requirements of the rule related to filing information with
the Commission. Applicants represent that the Funds will comply with
all other requirements of rule 17g-1.
    14. Section 17(j) of the Act and rule 17j-1 require that every
registered investment company adopt a written code of ethics that
contains provisions reasonably necessary to prevent ``access persons''
from violating the anti-fraud provisions of the rule. Under rule 17j-1,
the investment company's access persons must report to the investment
company with respect to transactions in any security in which the
access person has, or by reason of the transaction acquires, any direct
or indirect beneficial ownership in such security. Applicants request
an exemption from section 17(j) and the provisions of rule 17j-1,
except for the antifraud provisions of paragraph (b), because they
assert that these requirements are unnecessarily burdensome as applied
to the Funds. The relief requested will extend only to Lazard and is
not requested with respect to any Unaffiliated Subadviser or Advisory
Person.
    15. Sections 30(a), (b) and (e) of the Act and the rules thereunder
generally require that registered investment companies prepare and file
with the Commission and mail to their shareholders certain periodic
reports and financial statements. Applicants contend that the forms
prescribed by the Commission for periodic reports have little relevance
to the Funds and would entail administrative and legal costs that
outweigh any benefit to the investors. Applicants request relief under
sections 30(a), (b) and (e) to the extent necessary to permit each Fund
to report annually to its investors in the manner described in the
application. Section 30(h) of the Act requires that every officer,
director, member of an advisory board, investment adviser or affiliated
person of an investment adviser of a closed-end investment company be
subject to the same duties and liabilities as those imposed upon
similar classes of persons under section 16(a) of the Exchange Act.
Applicants request an exemption from section 30(h) of the Act to the
extent necessary to exempt the General Partner of each Fund, members of
the General Partner, any board of managers or directors or committee of
Lazard's employees to whom the General Partner may delegate its
functions, and any other persons who may be deemed to be members of an
advisory board of a Fund, or any other persons otherwise subject to
section 30(h), from filing Forms 3, 4, and 5 under section 16(a) of the
Exchange Act with respect to their ownership interests in the Fund.
Applicants assert that, because there will be no trading market and the
transfers of Interests are severely restricted, these filings are
unnecessary for the protection of investors and burdensome to those
required to make them.
    16. Rule 38a-1 requires registered investment companies to adopt,
implement and periodically review written policies reasonably designed
to prevent violation of the federal securities laws and to appoint a
chief compliance officer. Applicants represent that each Fund will
comply with rule 38a-1(a), (c) and (d), except that (i) since the Fund
does not have a board of directors, the board of directors or other
governing body of the General Partner will fulfill the responsibilities
assigned to the Fund's board of directors under the rule, and (ii)
since the board of directors or other governing body of the General
Partner does not have any disinterested members, (a) approval by a
majority of the disinterested board members required by rule 38a-1 will
not be obtained, and (b) the Funds will comply with the requirement in
rule 38a-1(a)(4)(iv) that the chief compliance officer meet with the
independent directors by having the chief compliance officer meet with
the board of directors or other governing body of the General Partner
as constituted Applicants represent that each Fund will adopt written
policies and procedures reasonably designed to prevent violations of
the terms and conditions of the application, will appoint a chief
compliance officer and will comply with the terms and conditions of the
application.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will
be subject to the following conditions:
    1. Each proposed transaction involving a Fund otherwise prohibited
by section 17(a) or section 17(d) of the Act and rule 17d-1 under the
Act to which a Fund is a party (the ``Section 17 Transactions'') will
be effected only if the applicable General Partner determines that (i)
the terms of the Section 17 Transaction, including the consideration to
be paid or received, are fair and reasonable to the Investors of the
Fund and do not involve overreaching of the Fund or its investors on
the part of any person concerned, and (ii) the Section 17 Transaction
is consistent with the interests of the Investors, the Fund's
organizational documents and the Fund's reports to its Investors.\8\ In
addition, the applicable General Partner will record and preserve a
description of all Section 17 Transactions, the General Partner's
findings, the information or materials upon which the findings are
based and

the basis for the findings. All such records will be maintained for the
life of the Fund and at least six years thereafter and will be subject
to examination by the Commission and its staff.\9\
---------------------------------------------------------------------------

    \8\ If a Fund invests through an Aggregation Vehicle and such
investment is a Section 17 Transaction, this condition will apply
with respect to both the investment in the Aggregation Vehicle and
any investment by the Aggregation Vehicle of Fund assets.
    \9\ Each Fund will preserve the accounts, books and other
documents required to be maintained in an easily accessible place
for the first two years.
---------------------------------------------------------------------------

    2. The General Partner of each Fund will adopt, and periodically
review and update, procedures designed to ensure that reasonable
inquiry is made, prior to the consummation of any Section 17
Transaction, with respect to the possible involvement in the
transaction of any affiliated person or promoter of or principal
underwriter for the Fund or any affiliated person of such person,
promoter or principal underwriter.
    3. The General Partner of each Fund will not invest the funds of
the Fund in any investment in which an Affiliated Co-Investor (as
defined below) has acquired or proposes to acquire the same class of
securities of the same issuer and where the investment transaction
involves a joint enterprise or other joint arrangement within the
meaning of rule 17d-1 in which the Fund and an Affiliated Co-Investor
are participants (each such investment, a ``Rule 17d-1 Investment''),
unless any such Affiliated Co-Investor, prior to disposing of all or
part of its investment, (i) gives the General Partner sufficient, but
not less than one day's, notice of its intent to dispose of its
investment, and (ii) refrains from disposing of its investment unless
the Fund has the opportunity to dispose of the Fund's investment prior
to or concurrently with, on the same terms as and pro rata with, the
Affiliated Co-Investor.\10\ The term ``Affiliated Co-Investor'' with
respect to any Fund means any person who is (i) an ``affiliated
person'' (as such term is defined in section 2(a)(3) of the Act) of the
Fund (other than a Third Party Fund), (ii) Lazard, (iii) an officer or
director of Lazard, (iv) an Eligible Employee, or (v) an entity (other
than a Third Party Fund) in which Lazard acts as a general partner or
has a similar capacity to control the sale or other disposition of the
entity's securities. The restrictions contained in this condition,
however, shall not be deemed to limit or prevent the disposition of an
investment by an Affiliated Co-Investor (i) to its direct or indirect
wholly owned subsidiary, to any company (a ``Parent'') of which the
Affiliated Co-Investor is a direct or indirect wholly owned subsidiary
or to a direct or indirect wholly owned subsidiary of its Parent, (ii)
to immediate family members of the Affiliated Co-Investor or a trust or
other investment vehicle established for any Affiliated Co-Investor or
any such immediate family member, or (iii) when the investment is
comprised of securities that are (a) listed on a national securities
exchange registered under section 6 of the Exchange Act, (b) NMS stocks
pursuant to section 11A(a)(2) of the Exchange Act and rule 600(a) of
Regulation NMS thereunder, (c) government securities as defined in
section 2(a)(16) of the Act or other securities that meet the
definition of ``Eligible Security'' in rule 2a-7 under the Act, or (d)
listed or traded on any foreign securities exchange or board of trade
that satisfies regulatory requirements under the law of the
jurisdiction in which such foreign securities exchange or board of
trade is organized similar to those that apply to a national securities
exchange or a national market system for securities.
---------------------------------------------------------------------------

    \10\ If a Fund invests in a Rule 17d-1 Investment through an
Aggregation Vehicle, the requirements of clauses (i) and (ii) of
this sentence shall apply to both the Affiliated Co-Investor's
disposition of such Rule 17d-1 Investment and, if the Affiliated Co-
Investor also holds a Rule 17d-1 Investment through such Aggregation
Vehicle, its disposition of all or part of its investment in the
Aggregation Vehicle.
---------------------------------------------------------------------------

    4. Each Fund and its General Partner will maintain and preserve,
for the life of each Fund and at least six years thereafter, such
accounts, books and other documents constituting the record forming the
basis for the audited financial statements that are to be provided to
the investors in the Fund, and each annual report of the Fund required
to be sent to the investors, and agree that all such records will be
subject to examination by the Commission and its staff.\11\
---------------------------------------------------------------------------

    \11\ Each fund will preserve the accounts, books, and other
documents required to be maintained in an easily accessible place
for the first two years.
---------------------------------------------------------------------------

    5. Within 120 days after the end of each fiscal year of each Fund,
or as soon as practicable thereafter, the General Partner of each Fund
will send to each Investor having an Interest in the Fund at any time
during the fiscal year then ended Fund financial statements audited by
the Fund's independent accountants. At the end of each fiscal year, the
General Partner will make or cause to be made a valuation of all of the
assets of the Fund as of such fiscal year end in a manner consistent
with customary practice with respect to the valuation of assets of the
kind held by the Fund. In addition, within 120 days after the end of
each fiscal year of each Fund (or as soon as practicable thereafter)
the General Partner will send a report to each person who was an
Investor at any time during the fiscal year then ended, setting forth
such tax information as shall be necessary for the preparation by the
Investor of that person's federal and state income tax returns and a
report of the investment activities of the Fund during that fiscal
year.
    6. If a Fund makes purchases or sales from or to an entity
affiliated with the Fund by reason of an officer, director or employee
of Lazard (i) serving as an officer, director, general partner, manager
or investment adviser of the entity (other than an entity that is an
Aggregation Vehicle), or (ii) having a 5% or more investment in the
entity, such individual will not participate in the Fund's
determination of whether or not to effect the purchase or sale.

     For the Commission, by the Division of Investment Management,
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-26407 Filed 12-6-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: June 14, 2010 (Volume 75, Number 113)]
[Notices]
[Page 33661-33662]
[DOCID:fr14jn10-92]

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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2008-0078]

Commercial Driver's License (CDL) Standards; Rotel North American
Tours, LLC; Application for Renewal of Exemption; Request for Comments

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice of application for renewal; request for comments.

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

SUMMARY: FMCSA announces that Rotel North American Tours, LLC (Rotel),
has applied for renewal of its current exemption permitting 22 named
drivers, employed by Rotel and possessing German CDLs, to operate
commercial motor vehicles (CMVs) in the United States without a CDL
issued by one of the States. Rotel asks that the current exemption, due
to expire on July 30, 2010, be renewed subject to the terms and
conditions of the current exemption for an additional period of 2
years.

DATES: Comments must be received on or before July 14, 2010.

ADDRESSES: You may submit comments identified by Federal Docket
Management System Number FMCSA-2008-0078 by any of the following
methods:
    Web site: Federal eRulemaking Portal: http://www.regulations.gov.
Follow the online instructions for submitting comments.
    Fax: 1-202-493-2251.
    Mail: Docket Management Facility, U.S. Department of
Transportation, Room W12-140, 1200 New Jersey Avenue, SE., Washington,
DC 20590-0001.
    Hand Delivery or Courier: West Building, Ground Floor, Room W12-
140, 1200 New Jersey Avenue, SE., Washington, DC between 9 a.m. and 5
p.m. e.t., Monday through Friday, except Federal holidays.
    Instructions: All submissions must include the Agency name and
docket number 2008-0078. For detailed instructions on submitting
comments and additional information on the exemption process, see the
Public Participation heading below. Note that all comments received
will be posted without change to http://www.regulations.gov, including
any personal information provided. Please see the Privacy Act heading
below.
    Docket: For access to the docket to read background documents or
comments received, go to the street address listed above, or go to
http://www.regulations.gov, and follow the online instructions for
accessing the dockets.
    Privacy Act: Anyone is able to search the electronic form of all
comments received into any of the dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act Statement in the Federal Register published on
April 11, 2000 (65 FR 19476) or you may visit http://
DocketInfo.dot.gov.
    Public Participation: The Federal eRulemaking Portal is available
24 hours each day, 365 days each year. You can obtain electronic
submission and retrieval help and guidelines under the ``help'' section
of the Federal eRulemaking Portal Web site. If you want us to notify
you that we received your comments, please include a self-addressed,
stamped envelope or postcard, or print the acknowledgement page that
appears after submitting comments online. Comments received after the
comment closing date will be included in the docket and considered to
the extent practicable.

FOR FURTHER INFORMATION CONTACT: Robert Schultz, Jr., FMCSA Driver and
Carrier Operations Division, Office of Bus and Truck Standards and
Operations, Telephone:<PHONE_NUMBER>. E-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Background

    Section 4007 of the Transportation Equity Act for the 21st Century
(Pub. L. 105-178, 112 Stat. 107, June 9, 1998) amended 49 U.S.C. 31315
and 31136(e) to provide authority to grant exemptions from motor
carrier safety regulations. Under its regulations, FMCSA must publish a
notice of each exemption application in the Federal Register (49 CFR
381.315(a)). The Agency must provide the public an opportunity to
inspect the information relevant to the application, including any
safety analyses that have been conducted. The Agency must also provide
an opportunity for public comment on the application.
    The Agency reviews the safety analyses and the public comments, and
determines whether granting the exemption would likely achieve a level
of safety equivalent to, or greater than, the level that would be
achieved by complying with the current regulation (49 CFR 381.305). The
decision of the Agency must be published in the Federal Register (49
CFR 381.315(b)) with the reason for denying or, in the alternative, the
specific person or class of persons receiving the exemption, and the
regulatory provision or provisions from which the exemption is granted.
The notice must also specify the effective period of the exemption (up
to 2 years), and explain the terms and conditions of the exemption. The
exemption may be renewed (49 CFR 381.300(b)).
    Rotel provides motorcoach tours in the U.S., Mexico and Canada for
German and Austrian tourists. Rotel bus drivers operate the CMV during
the day. They also prepare dinner and breakfast for the customers each
day during the trip; Rotel CMVs incorporate cooking and sleeping
facilities.
    Rotel states that none of the States of the U.S. will issue CDLs to
Rotel's drivers because they are not State residents; until recent
years, most States would issue non-resident CDLs to Rotel's drivers.
Rotel asserts that without the exemption from the requirement that its
drivers have a CDL issued by a State, it would have to terminate these
tour operations. Complete details of Rotel's operations, including its
original application for exemption dated August 27, 2007, can be found
in the docket of this notice.
    On July 30, 2008, after notice and comment, FMCSA granted Rotel's
request to allow 22 drivers, each holding a German CDL, to operate
Rotel motor coaches in the U.S. without a CDL issued by one of the
States as required by 49 CFR 383.23. FMCSA found that these drivers,
operating specialty tour buses in the U.S., would ``likely achieve a
level of safety that is equivalent to, or greater than, the level that
would be achieved absent such exemption,'' in accordance with 49 CFR
381.305. The two-year exemption expires on July 30, 2010.

Rotel's Request for Renewal

    By letter dated December 21, 2009, Rotel applied for renewal of its
current exemption from the requirement that operators of CMVs obtain a
CDL from one of the States. The letter is available in the docket for
this notice. Rotel asks that the 22 individuals who are currently
exempt continue to be exempt from the CDL licensing requirement of 49
CFR 383.23 for an additional 2 years. Each of these individuals is a
non-resident of the U.S., a holder of a valid German CDL, and an
experienced CMV operator. The drivers are, as follows:

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

------------------------------------------------------------------------
Josef Dangl                     Rudolf Ramsl
Reinfried Dangl                 Paul Schl[ouml]gl
Herbert Erber                   Walter Schreiner
Helmut Erbersdobler             Josef Stockinger
Wilhelm Fuchs                   Josef Vogl

Peter Hess                      Klaus Weber
Michael Huber                   Markus W[ouml]lfl
Gerhard Kinateder               Norbert Zechmesiter
Hermann Lichtenauer             Klaus Endres
Franz Manzinger                 Sebastian Nicki
Fabian Maurer                   Karl-Heinz Schmitz
------------------------------------------------------------------------

    Rotel believes these drivers continue to possess sufficient
knowledge, skills, and experience to ensure a level of safety that is
equivalent to, or greater than, the level of safety that would be
obtained by complying with the requirement for a U.S. CDL. If the
Agency determines that this application for renewal should be granted,
the Rotel drivers would be subject to the terms and conditions of the
current Rotel exemption.
    In accordance with 49 U.S.C. 31315(b)(4) and 31136(e), FMCSA
requests public comments on Rotel's request for renewal of its
exemption to allow the 22 Rotel CDL drivers named above to continue to
be exempt from 49 CFR 383.23 from July 31, 2010, through July 31, 2012.
FMCSA will consider all comments received by close of business on July
14, 2010. All comments will be available for examination in the docket
at the location listed under the ADDRESSES section of this notice. The
Agency will consider to the extent practicable comments received in the
public docket after the closing date of the comment period.

    Issued on: June 4, 2010.
Larry W. Minor,
Associate Administrator for Policy and Program Development.
[FR Doc. 2010-14223 Filed 6-11-10; 8:45 am]
BILLING CODE 4910-EX-P