B. Description and Estimates of the Number of Small Entities Affected 
by This Rule

    A ``small business'' is defined by the Regulatory Flexibility Act 
(RFA) to be the same as a ``small business concern'' under the Small 
Business Act (SBA), 15 U.S.C. 632. Under the SBA, a ``small-business 
concern'' is one that: (1) is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) meets any additional 
criteria established by the SBA. See 5 U.S.C. 601(3) (incorporating by 
reference the definition of ``small business concern'' in 15 U.S.C. 
632).
    Based upon the information available to the Department through past 
investigations and enforcement actions involving the affected industry, 
there are likely to be a number of producers of sexually explicit 
depictions who hire or pay for performers and who, accordingly, would 
come under the ambit of the proposed rule. However, none of the changes 
made by this rule affect the number of producers that would be covered. 
The rule clarifies the meaning of an existing definition and how that 
definition covers electronic sexually explicit depictions, but does not 
expand that definition.
    Pursuant to the RFA, in the proposed rule the Department encouraged 
all affected commercial entities to provide specific estimates, 
wherever possible, of the economic costs that this rule will impose on 
them and the benefits that it will bring to them and to the public. The 
Department asked affected small businesses to estimate what these 
regulations will cost as a percentage of their total revenues in order 
to enable the Department to ensure that small businesses are not unduly 
burdened. No specific estimates of the economic costs that the rule 
would impose were received.
    The regulation has no effect on State or local governmental 
agencies.

C. Specific Requirements Imposed That Would Impact Private Companies

    The final rule provides clearer requirements for private companies 
to maintain records of performers of sexually explicit depictions to 
ensure that minors are not used in such sexually explicit depictions. 
The final rule requires that these records be properly indexed and 
cross-referenced. In the proposed rule, the Department specifically 
sought information from affected producers on the costs of the record-
keeping, indexing, and cross-referencing requirements. No commenters 
provided such information beyond qualitative assessments, which

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are addressed in the Responses to Public Comments section of this 
Supplemental Information.
    Nevertheless, the Department is aware from those qualitative 
statements that certain alternatives to the rule are possible. For 
example, two commenters commented that the regulation should permit 
third-party custody of records in order to reduce the burdens of 
storing material at a producer's place of business and of maintaining 
certain business hours in order to be available for inspection. The 
Department believes that allowing third-party custody, however, would 
be detrimental to the goals of the statute. It would unnecessarily 
complicate the compliance and inspection processes by removing the 
records from the physical location where they were initially collected, 
sorted, indexed, and compiled. Furthermore, permitting a third party to 
maintain the records would, if anything, exacerbate the concerns of 
numerous commenters regarding the privacy of information on performers 
and businesses by placing that information in the hands of another 
party.
    Other alternatives suggested by commenters included the 
establishment of a national ``sex ID'' system with which performers 
would register with the government in a national database, and the 
creation of a password-protected database of identification records 
available to law enforcement. As explained above, the Department 
believes that they would be more burdensome on both the Department and 
producers to create, implement, and manage than the record-keeping 
system established by the rule. In addition, creation of such systems 
would likely require several years' work and delay implementation of 
the statute's record-keeping requirements.
    The Department has, however, adopted numerous changes to the 
proposed rule in response to comments that it was too burdensome. For 
example, because commenters argued that the requirement that the 
statement appear on the homepage of any web site was too burdensome, 
the final rule permits web sites to contain a hypertext link that 
states, ``18 U.S.C. 2257 Record-Keeping Requirements Compliance 
Statement,'' that will open in a separate window that contains the 
required statement. Likewise, in response to public comments, the 
Department amended the proposed rule such that the final rule no longer 
requires businesses to be available for inspection from 8 a.m. to 6 
p.m. every day, but rather permits inspections during the producer's 
normal business hours. Further, the Department modified the 
requirements regarding the size and typeface of the statement in 
response to public comments, as well as clarified that records may be 
maintained in either ``hard'' (paper) form or digital form.
    At the same time, the Department also rejected potential changes 
that would extend the burdensomeness of the rule. For example, the 
Department did not adopt a comment that two forms of identification 
should be required of performers.
    For these reasons, the Department believes that, although private 
companies will be affected by the rule, the costs are reasonable in 
light of the purpose of the statute and that it has imposed the 
regulation in the least burdensome manner possible.

Executive Order 12866