| Page Range | 75671-76270 | |
| FR Document |
| Page and Subject | |
|---|---|
| 81 FR 76269 - National Adoption Month, 2016 | |
| 81 FR 76267 - Military Family Month, 2016 | |
| 81 FR 75874 - Sunshine Act Meeting | |
| 81 FR 75811 - Sunshine Act Meetings | |
| 81 FR 75842 - Government in the Sunshine Act Meeting Notice | |
| 81 FR 75858 - Sunshine Act Meeting | |
| 81 FR 75838 - Freedom of Information Act; Notice of Lawsuit | |
| 81 FR 75867 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change Related to Compliance With Section 871(m) of the Internal Revenue Code | |
| 81 FR 75781 - Additions to List of Section 241.4 Categorical Non-Waste Fuels: Other Treated Railroad Ties | |
| 81 FR 75812 - Agency Information Collection Activities; Comment Request; Formula Grant EASIE (Electronic Application System for Indian Education) | |
| 81 FR 75861 - New Postal Products | |
| 81 FR 75811 - Threat Reduction Advisory Committee; Notice of Closed Federal Advisory Committee Meeting | |
| 81 FR 75764 - Approval and Promulgation of Implementation Plans; State of California; Coachella Valley; Attainment Plan for 1997 8-Hour Ozone Standards | |
| 81 FR 75816 - Final National Pollutant Discharge Elimination System (NPDES) Pesticide General Permit for Point Source Discharges From the Application of Pesticides; Reissuance | |
| 81 FR 75822 - Notification of a Public Meeting of the Chartered Science Advisory Board | |
| 81 FR 75820 - Notice of Approval of the Primacy Revision Application for the Public Water Supply Supervision Program from the State of Missouri | |
| 81 FR 75821 - Board of Scientific Counselors (BOSC) Chemical Safety for Sustainability Subcommittee Meeting-November 2016 | |
| 81 FR 75814 - Integrated System Power Rates | |
| 81 FR 75859 - Advisory Committee On Reactor Safeguards (ACRS); Meeting Of The ACRS Subcommittee On Metallurgy & Reactor Fuels; Notice of Meeting | |
| 81 FR 75808 - Initiation of Five-Year (“Sunset”) Reviews | |
| 81 FR 75806 - Ferrovanadium From the Republic of Korea: Affirmative Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination and Extension of Provisional Measures | |
| 81 FR 75860 - Susquehanna Nuclear, LLC; Establishment of Atomic Safety and Licensing Board | |
| 81 FR 75823 - Formations of, Acquisitions by, and Mergers of Bank Holding Companies | |
| 81 FR 75860 - Advisory Committee on Reactor Safeguards (ACRS); Meeting of the ACRS Subcommittee on Plant License Renewal; Notice of Meeting | |
| 81 FR 75905 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel ARC TIME; Invitation for Public Comments | |
| 81 FR 75859 - Advisory Committee on Reactor Safeguards (ACRS); Meeting of the ACRS Subcommittee on Fukushima; Notice of Meeting | |
| 81 FR 75898 - Agency Information Collection Activities: Requests for Comments; Clearance of Renewed Approval of Information Collection: Aviation Insurance | |
| 81 FR 75906 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel SPELLBOUND; Invitation for Public Comments | |
| 81 FR 75899 - Agency Information Collection Activities: Requests for Comments; Clearance of Renewed Approval of Information Collection: Anti-Drug Program for Personnel Engaged in Specific Aviation Activities | |
| 81 FR 75899 - Agency Information Collection Activities: Requests for Comments; Clearance of Renewed Approval of Information Collection: Certification of Aircraft and Airmen for the Operation of Light-Sport Aircraft | |
| 81 FR 75904 - Agency Requests for Renewal of a Previously Approved Information Collection(s): Approval of Underwriters of Marine Hull Insurance | |
| 81 FR 75905 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel MANNA; Invitation for Public Comments | |
| 81 FR 75906 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel Gotta Love It; Invitation for Public Comments | |
| 81 FR 75740 - Fisheries of the Exclusive Economic Zone Off Alaska; Exchange of Flatfish in the Bering Sea and Aleutian Islands Management Area | |
| 81 FR 75823 - Appraisal Subcommittee Notice of Meeting | |
| 81 FR 75840 - Deepwater Horizon Oil Spill; Louisiana Trustee Implementation Group Draft Restoration Plan #1: Restoration of Wetlands, Coastal, and Nearshore Habitats; Habitat Projects on Federally Managed Lands; and Birds | |
| 81 FR 75921 - Additional Designations, Foreign Narcotics Kingpin Designation Act | |
| 81 FR 75858 - Extension of Comment Period on the Environmental Impact Statement for the Proposed Changes to Green Bank Observatory Operations | |
| 81 FR 75694 - Safety Zone; Delaware River, Philadelphia, PA | |
| 81 FR 75742 - Energy Conservation Standards for Commercial and Industrial Fans and Blowers: Availability of Provisional Analysis Tools | |
| 81 FR 75900 - Application From the State of Florida to the Surface Transportation Project Delivery Program and Proposed Memorandum of Understanding (MOU) Assigning Environmental Responsibilities to the State | |
| 81 FR 75671 - Child and Adult Care Food Program: Meal Pattern Revisions Related to the Healthy, Hunger-Free Kids Act of 2010; Corrections | |
| 81 FR 75856 - Agency Information Collection Activities; Submission for OMB Review; Comment Request; Notice of Medical Necessity Criteria Under the Mental Health Parity and Addiction Equity Act of 2008 | |
| 81 FR 75857 - Agency Information Collection Activities; Submission for OMB Review; Comment Request; Ready To Work Partnership Grants Evaluation 18-Month Follow-up Survey | |
| 81 FR 75824 - Submission for OMB Review; Comment Request | |
| 81 FR 75762 - Airworthiness Directives; Rolls-Royce plc Turbofan Engines | |
| 81 FR 75727 - Hours of Service of Drivers: Specialized Carriers & Rigging Association (SC&RA); Application for Exemption; Final Disposition | |
| 81 FR 75813 - Application To Export Electric Energy; Castleton Commodities Merchant Trading L.P. | |
| 81 FR 75836 - Section 184 Indian Housing Loan Guarantee Program Increase to Annual Premium | |
| 81 FR 75837 - Endangered and Threatened Wildlife and Plants; Technical/Agency Draft Recovery Plan for the Chucky Madtom | |
| 81 FR 75683 - Requirements for the Distribution and Control of Donated Foods and the Emergency Food Assistance Program: Implementation of the Agricultural Act of 2014 | |
| 81 FR 75920 - Advisory Committee on Automation in Transportation | |
| 81 FR 75809 - Availability of Seats for National Marine Sanctuary Advisory Councils | |
| 81 FR 75757 - Airworthiness Directives; Dassault Aviation Airplanes | |
| 81 FR 75759 - Airworthiness Directives; Fokker Services B.V. Airplanes | |
| 81 FR 75803 - Pacific Island Fisheries; 2016-17 Annual Catch Limit and Accountability Measures; Main Hawaiian Islands Deep 7 Bottomfish | |
| 81 FR 75824 - Agency Information Collection Activities; Proposed Collection; Comment Request; Patent Term Restoration, Due Diligence Petitions, Filing, Format, and Content of Petitions | |
| 81 FR 75831 - Agency Information Collection Activities; Submission to OMB for Review and Approval; Public Comment Request | |
| 81 FR 75731 - Fisheries of the Northeastern United States; Atlantic Herring Fishery; Specification of Management Measures for Atlantic Herring for the 2016-2018 Fishing Years | |
| 81 FR 75815 - Proposed Information Collection Request; Comment Request; Implementation of the Ambient Air Protocol Gas Verification Program | |
| 81 FR 75828 - Medical Device User Fee Amendments; Public Meeting; Request for Comments; Extension of Comment Period | |
| 81 FR 75902 - Notice of Proposed Buy America Waiver for Radio Consoles | |
| 81 FR 75903 - Notice of Proposed Buy America Waiver for Ultrastraight Rail | |
| 81 FR 75692 - What You Need To Know About the Food and Drug Administration Regulation: Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food; Small Entity Compliance Guide; Availability | |
| 81 FR 75693 - What You Need To Know About the Food and Drug Administration Regulation: Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Food for Animals; Small Entity Compliance Guide; Availability | |
| 81 FR 75833 - Accreditation and Approval of Intertek USA, Inc., as a Commercial Gauger and Laboratory | |
| 81 FR 75834 - Accreditation and Approval of Inspectorate America Corporation, as a Commercial Gauger and Laboratory | |
| 81 FR 75921 - Sanctions Action Pursuant to Executive Order 13224 | |
| 81 FR 75689 - Listing of Color Additives Exempt From Certification; Titanium Dioxide and Listing of Color Additives Subject to Certification; [Phthalocyaninato (2-)] Copper | |
| 81 FR 75805 - Submission for OMB Review; Comment Request | |
| 81 FR 75842 - Cancellation of November 9, 2016, Meeting of the Wekiva River System Advisory Management Committee | |
| 81 FR 75841 - Notice of December 12, 2016, Meeting for Cape Cod National Seashore Advisory Commission | |
| 81 FR 75874 - Hartford Mutual Funds Inc., et al.; Notice of Application | |
| 81 FR 75883 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; National Securities Clearing Corporation; Order Granting Approval of Proposed Rule Changes To Describe the Backtesting Charge and the Holiday Charge That May Be Imposed on Members | |
| 81 FR 75865 - Self-Regulatory Organizations; The Depository Trust Company; Fixed Income Clearing Corporation; National Securities Clearing Corporation; Notice of Designation of a Longer Period for Commission Action on Proposed Rule Changes Relating to Clearing Agency Investment Policy | |
| 81 FR 75862 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend Rule 4702 To Adopt a New Retail Post-Only Order | |
| 81 FR 75875 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Exchange Rule 11.23, Auctions, To Enhance the Reopening Auction Process Following a Trading Halt Declared Pursuant to the Plan To Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS | |
| 81 FR 75865 - Order Granting Limited Exemptions From Exchange Act Rule 10b-17 and Rules 101 and 102 of Regulation M to Premise Capital Frontier Advantage Diversified Tactical ETF Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) and 102(e) of Regulation M | |
| 81 FR 75879 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Enhance the Reopening Auction Process Following a Trading Halt Declared Pursuant to the Plan To Address Extraordinary Market Volatility | |
| 81 FR 75885 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees and Credits for Transactions Involving Complex Orders | |
| 81 FR 75894 - Data Collection Available for Public Comments | |
| 81 FR 75895 - Data Collection Available for Public Comments | |
| 81 FR 75896 - Data Collection Available for Public Comments | |
| 81 FR 75896 - Florida Disaster Number FL-00119 | |
| 81 FR 75896 - Florida Disaster # FL-00120 | |
| 81 FR 75907 - Denial of Motor Vehicle Defect Petition, DP12-004 | |
| 81 FR 75895 - Washington Disaster # WA-00067 Declaration of Economic Injury | |
| 81 FR 75894 - California Disaster # CA-00252 | |
| 81 FR 75897 - Wisconsin Disaster # WI-00056 | |
| 81 FR 75894 - Georgia Disaster # GA-00082 | |
| 81 FR 75830 - Agency Information Collection Activities: Proposed Collection: Public Comment Request; Maternal, Infant, and Early Childhood Home Visiting Program Fiscal Year (FY) 2015, FY 2016, FY 2017 Non-Competing Continuation Progress Report for Formula Grant | |
| 81 FR 75828 - Agency Information Collection Activities: Proposed Collection: Public Comment Request; Nurse Anesthetist Traineeship Program Specific Data Forms | |
| 81 FR 75861 - Product Change-Priority Mail Negotiated Service Agreement | |
| 81 FR 75862 - Product Change-Priority Mail Negotiated Service Agreement | |
| 81 FR 75684 - Airworthiness Directives; Engine Alliance Turbofan Engines | |
| 81 FR 75811 - Proposed Information Collection; Comment Request; Marine Mammal Health and Stranding Response Program, Level A Stranding and Rehabilitation Disposition Data Sheet | |
| 81 FR 75835 - DHS Data Privacy and Integrity Advisory Committee | |
| 81 FR 75861 - Product Change-Priority Mail Express Negotiated Service Agreement | |
| 81 FR 75805 - National Advisory Committee on Meat and Poultry Inspection | |
| 81 FR 75897 - Environmental Impact Statement for Shawnee Fossil Plant Coal Combustion Residual Management | |
| 81 FR 75922 - Exchange of Coin | |
| 81 FR 75902 - Notice of Meeting of the Transit Advisory Committee for Safety (TRACS) | |
| 81 FR 75845 - Certain Welded Stainless Steel Pipe From Korea and Taiwan; Institution of Five-Year Reviews | |
| 81 FR 75851 - Helical Spring Lock Washers From China and Taiwan; Institution of Five-Year Reviews | |
| 81 FR 75848 - Gray Portland Cement and Cement Clinker From Japan; Institution of a Five-Year Review | |
| 81 FR 75842 - Solid Urea From Russia and Ukraine; Institution of Five-Year Reviews | |
| 81 FR 75854 - Multilayered Wood Flooring From China Institution of Five-Year Reviews | |
| 81 FR 75832 - Eunice Kennedy Shriver National Institute of Child Health & Human Development; Notice of Closed Meetings | |
| 81 FR 75832 - Government-Owned Invention; Availability for Licensing | |
| 81 FR 75832 - National Cancer Institute; Amended Notice of Meeting | |
| 81 FR 75826 - Agency Information Collection Activities: Proposed Collection; Comment Request; Institutional Review Boards | |
| 81 FR 75695 - Designation of Agent To Receive Notification of Claimed Infringement | |
| 81 FR 75729 - Administrative Rules; Official Seal; Rules Implementing the Government in the Sunshine Act | |
| 81 FR 75687 - Airworthiness Directives; Turbomeca S.A. Turboshaft Engines | |
| 81 FR 75686 - Airworthiness Directives; Pratt & Whitney Division Turbofan Engines | |
| 81 FR 75780 - Approval and Promulgation of State Plans for Designated Facilities and Pollutants; New York, New Jersey and Commonwealth of Puerto Rico; Other Solid Wsate Incineration Units (OSWIs) | |
| 81 FR 75708 - Approval and Promulgation of State Plans for Designated Facilities and Pollutants; State of New York, State of New Jersey and Commonwealth of Puerto Rico; Other Solid Waste Incineration Units | |
| 81 FR 75801 - Endangered and Threatened Wildlife and Plants; Threatened Species Status for the Headwater Chub and a Distinct Population Segment of the Roundtail Chub | |
| 81 FR 75710 - Wireless Emergency Alerts; Amendments to Rules Regarding the Emergency Alert System | |
| 81 FR 75753 - Removal of Transferred OTS Regulations Regarding Minimum Security Procedures Amendments to FDIC Regulations | |
| 81 FR 75761 - Airworthiness Directives; CFM International S.A. Turbofan Engines | |
| 81 FR 76092 - Change in Rates and Classes of General Applicability for Competitive Products | |
| 81 FR 76220 - 2014 Quadrennial Regulatory Review | |
| 81 FR 75926 - Student Assistance General Provisions, Federal Perkins Loan Program, Federal Family Education Loan Program, William D. Ford Federal Direct Loan Program, and Teacher Education Assistance for College and Higher Education Grant Program |
Food and Nutrition Service
Food Safety and Inspection Service
International Trade Administration
National Oceanic and Atmospheric Administration
Southwestern Power Administration
Children and Families Administration
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
Coast Guard
U.S. Customs and Border Protection
Fish and Wildlife Service
National Park Service
Copyright Office, Library of Congress
Federal Aviation Administration
Federal Highway Administration
Federal Motor Carrier Safety Administration
Federal Transit Administration
Maritime Administration
National Highway Traffic Safety Administration
Foreign Assets Control Office
United States Mint
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents electronic mailing list, go to https://public.govdelivery.com/accounts/USGPOOFR/subscriber/new, enter your e-mail address, then follow the instructions to join, leave, or manage your subscription.
Food and Nutrition Service, USDA.
Correcting amendments.
This document contains technical corrections to the final rule published in the
This document is effective November 1, 2016. Compliance with the provisions of this rule must begin October 1, 2017 except as otherwise noted in the final rule.
Andrea Farmer or Laura Carroll, Policy and Program Development Division, Child Nutrition Programs, Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park Center Drive, Room 1206, Alexandria, Virginia 22302-1594; 703-305-2590.
The Food and Nutrition Service (FNS) published a final rule in the
Children, Commodity School Program, Food assistance programs, Grants programs—social programs, National School Lunch Program, Nutrition, Reporting and recordkeeping requirements, Surplus agricultural commodities.
Grant programs—education, Grant programs—health, Infants and children, Nutrition, Reporting and recordkeeping requirements, School breakfast and lunch programs.
Accounting, Aged, American Indians, Day care, Food assistance programs, Grant programs, Grant programs— health, Individuals with disabilities, Infants and children, Intergovernmental relations, Loan programs, Reporting and recordkeeping requirements, Surplus agricultural commodities.
Accordingly, 7 CFR parts 210, 220, and 226 are corrected by making the following correcting amendments:
42 U.S.C. 1751-1760, 1779.
The revisions read as follows:
(a) * * *
(1) * * *
(i) * * * Schools offering lunches to children ages 1 through 4 and infants must meet the meal pattern requirements in paragraphs (p) and (q), as applicable, of this section. * * *
(o) * * *
(3) * * *
(ii) * * *
(4) * * *
(ii) * * *
(p) * * *
(2) * * *
(q) * * *
(2) * * *
42 U.S.C. 1773, 1779, unless otherwise noted.
The revisions read as follows:
(a) * * *
(1) * * * Schools offering breakfasts to children ages 1 to 4 and infants must meet the meal pattern requirements in paragraphs (o) and (p), as applicable, of this section. * * *
(o) * * *
(1)
(2) * * *
(p) * * *
(1)
(2) * * *
Secs. 9, 11, 14, 16, and 17, Richard B. Russell National School Lunch Act, as amended (42 U.S.C. 1758, 1759a, 1762a, 1765 and 1766).
The revisions read as follows:
(a) * * *
(4) * * *
(ii) * * * Breakfast cereals must contain no more than 6 grams of sugar per dry ounce (no more than 21.2 grams sucrose and other sugars per 100 grams of dry cereal).
(b) * * *
(5) * * *
(c) * * *
(1) * * *
(2) * * *
(3) * * *
(o)
(i)
(B)
(C)
(ii)
(2) In pricing programs, the price of the reimbursable meal must not be affected if a participant declines a food item.
Food and Nutrition Service (FNS), USDA.
Correcting amendments.
This document contains corrections to the final rule published in the
This document is effective November 1, 2016.
Carolyn Smalkowski, Program Analyst, Policy Branch, Food Distribution Division, Food and Nutrition Service, 3101 Park Center Drive, Room 500, Alexandria, Virginia 22302, or by telephone (703) 305-2680.
The Food and Nutrition Service published a final rule in the
Disaster assistance, Food assistance programs, Grant programs—social programs, Reporting and recordkeeping requirements.
Accordingly, 7 CFR part 250 is corrected by making the following correcting amendments:
5 U.S.C. 301; 7 U.S.C. 612c, 612c note, 1431, 1431b, 1431e, 1431 note, 1446a-1, 1859, 2014, 2025; 15 U.S.C. 713c; 22 U.S.C. 1922; 42 U.S.C. 1751, 1755, 1758, 1760, 1761, 1762a, 1766, 3030a, 5179, 5180.
(c) * * *
(2) These criteria will be reviewed by the appropriate FNS Regional Office during the management evaluation review of the distributing agency. Distributing agencies and subdistributing agencies which enter into contracts on behalf of recipient agencies but which do not limit the types of end products which can be sold or the number of processors which can sell end products within the State are not required to follow the selection
Federal Aviation Administration (FAA), DOT.
Final rule; request for comments.
We are superseding airworthiness directive (AD) 2013-02-06 for all Engine Alliance (EA) GP7270 and GP7277 turbofan engines with certain part number (P/N) high-pressure turbine (HPT) stage 2 nozzle segments installed. AD 2013-02-06 required initial and repetitive borescope inspections (BSI) and removal from service of these nozzles before further flight if one or more burn holes were detected in any HPT stage 2 nozzle segment. AD 2013-02-06 also required removal from service of these HPT stage 2 nozzle segments at the next engine shop visit. This AD requires the same inspections as AD-2013-02-06, requires removal of affected HPT stage 2 nozzles at next piece-part exposure, and adds certain P/Ns to the applicability. This AD was prompted by another report of inadequate cooling of the HPT stage 1 shroud and stage 2 nozzle, leading to damage to the HPT stage 2 nozzle, burn-through of the turbine case, and in-flight shutdown. We are issuing this AD to prevent HPT stage 2 nozzle failure, uncontrolled fire, in-flight shutdown, and damage to the airplane.
This AD is effective November 16, 2016.
We must receive any comments on this AD by December 16, 2016.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
You may examine the AD docket on the Internet at
Martin Adler, Aerospace Engineer, Engine & Propeller Directorate, FAA, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7157; fax: 781-238-7199; email:
On January 15, 2013, we issued AD 2013-02-06, Amendment 39-17327 (78 FR 5710, January 28, 2013), (“AD 2013-02-06”), for all Engine Alliance GP7270 and GP7277 turbofan engines with an HPT stage 2 nozzle, P/N 2101M24G01, 2101M24G02, or 2101M24G03, installed. AD 2013-02-06 required initial and repetitive BSIs and removal from service of these nozzles before further flight if any burn holes were detected in the affected nozzles. AD 2013-02-06 also required removal from service of the affected nozzles at the next engine shop visit. AD 2013-02-06 resulted from a report of inadequate cooling of the HPT stage 2 nozzle, leading to damage to the HPT stage 2 nozzle, burn-through of the turbine case, and in-flight shutdown. We issued AD 2013-02-06 to prevent HPT stage 2 nozzle failure, uncontrolled fire, in-flight shutdown, and damage to the airplane.
Since we issued AD 2013-02-06, we received another report of inadequate cooling of the HPT stage 1 shroud and stage 2 nozzle, leading to damage to the HPT stage 2 nozzle, burn-through of the turbine case, and in-flight shutdown. This event occurred with HPT stage 2 nozzle, P/N 2101M24G04, 2101M24G05, or 2101M24G06 installed. Investigation revealed that the event was caused by damage to the HPT stage 2 nozzle due to inadequate part cooling. We are issuing this AD to prevent HPT stage 2 nozzle failure, uncontrolled fire, in-flight shutdown, and damage to the airplane.
We reviewed EA Service Bulletins EAGP7-72-190, dated December 6, 2012 and EAGP7-72-262, Revision No. 5, dated December 18, 2015. This service information describes procedures for inspecting the HPT stage 2 nozzle segments.
We are issuing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This AD requires initial and repetitive BSIs of the HPT stage 1 shroud and HPT
No domestic operators use this product. Therefore, we find that notice and opportunity for prior public comment are unnecessary and that good cause exists for making this amendment effective in less than 30 days.
This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments before it becomes effective. However, we invite you to send any written data, views, or arguments about this AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
We estimate that this AD will affect no engines installed on airplanes of U.S. registry. We also estimate that it will take about two hours per engine to perform a BSI of the HPT stage 2 nozzle. The average labor rate is $85 per hour. Required parts cost about $504,486 per engine. Based on these figures, we estimate the cost of this AD to U.S. operators to be $0.
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.
We are 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.
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,
(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective November 16, 2016.
This AD replaces AD 2013-02-06, Amendment 39-17327 (78 FR 5710, January 28, 2013).
This AD applies to all Engine Alliance GP7270 and GP7277 turbofan engines with a high-pressure turbine (HPT) stage 2 nozzle segment, part number (P/N) 2101M24G01, 2101M24G02, 2101M24G03, 2101M24G04, 2101M24G05, or 2101M24G06, installed.
This AD was prompted by a report of inadequate cooling of the HPT stage 1 shroud and stage 2 nozzle, leading to damage to the HPT stage 2 nozzle, burn-through of the turbine case, and in-flight shutdown. We are issuing this AD to prevent HPT stage 2 nozzle failure, uncontrolled fire, in-flight shutdown, and damage to the airplane.
Comply with this AD within the compliance times specified, unless already done.
(1) Perform a 360 degree borescope inspection of the HPT stage 1 shroud and stage 2 nozzle as follows:
(i) For engines with nozzles installed at a shop visit that did not include full engine overhaul, borescope inspect the HPT stage 1 shroud and stage 2 nozzle as follows:
(A) If the nozzle has fewer than 1,050 cycles-since-new (CSN) or cycles-since-repair (CSR) on the effective date of this AD, before the nozzle has accumulated 1,100 CSN or CSR.
(B) If the nozzle has 1,050 or more CSN or CSR on the effective date of this AD, within the next 50 cycles.
(ii) For all other engines, borescope inspect the HPT stage 1 shroud and HPT stage 2 nozzle as follows:
(A) If the nozzle has fewer than 1,450 CSN or CSR on the effective date of this AD, before the nozzle has accumulated 1,500 CSN or CSR.
(B) If the nozzle has 1,450 or more CSN or CSR on the effective date of this AD, within the next 50 cycles.
(iii) Thereafter, repetitively borescope inspect the HPT stage 1 shroud and stage 2 nozzle as follows:
(A) For engines with HPT stage 2 nozzle segments, P/N 2101M24G01, 2101M24G02, or 2101M24G03, within every 150 additional cycles-in-service (CIS).
(B) For engines with HPT stage 2 nozzle segments, P/N 2101M24G04, 2101M24G05, or 2101M24G06, within every 300 additional CIS.
(2) If any burn holes are detected through the surface of the nozzle or if the shroud is distorted radially inward with evidence of blade tip rubs, remove the HPT stage 1 shroud and HPT stage 2 nozzle from service before further flight.
Replace HPT stage 2 nozzle segments, P/N 2101M24G01, 2101M24G02, 2101M24G03, 2101M24G04, 2101M24G05, and 2101M24G06, at the next piece-part exposure, with parts eligible for installation.
For the purpose of this AD, piece-part exposure is when the HPT stage 2 nozzle is removed from the engine and completely disassembled.
The Manager, Engine Certification Office, FAA, may approve AMOCs for this AD. Use the procedures found in 14 CFR 39.19 to make your request. You may email your request to:
For more information about this AD, contact Martin Adler, Aerospace Engineer, Engine & Propeller Directorate, FAA, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7157; fax: 781-238-7199; email:
None.
Federal Aviation Administration (FAA), DOT.
Final rule.
We are adopting a new airworthiness directive (AD) for certain Pratt & Whitney (PW) PW4164, PW4164-1D, PW4168, PW4168-1D, PW4168A, PW4168A-1D, and PW4170 turbofan engines. This AD was prompted by several instances of fuel leaks on PW engines installed with the Talon IIB combustion chamber configuration. This AD requires initial and repetitive inspections of the affected fuel nozzles and their replacement with parts eligible for installation. We are issuing this AD to prevent failure of the fuel nozzles, which could lead to engine fire and damage to the airplane.
This AD is effective December 6, 2016.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of December 6, 2016.
For service information identified in this final rule, contact Pratt & Whitney Division, 400 Main St., East Hartford, CT 06108; phone: 860-565-8770; fax: 860-565-4503. You may view this service information at the FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA. For information on the availability of this material at the FAA, call 781-238-7125. It is also available on the internet at
You may examine the AD docket on the Internet at
Besian Luga, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7750; fax: 781-238-7199; email:
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain PW PW4164, PW4164-1D, PW4168, PW4168-1D, PW4168A, PW4168A-1D, and PW4170 turbofan engines. The NPRM published in the
We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.
Delta Air Lines (Delta) requested that the definition of an “engine shop visit” be defined as the induction of an engine into the shop for maintenance involving the separation of pairs of major mating engine flanges. Delta requested this change so that the definition of an engine shop visit in this AD would be consistent with prior ADs.
We disagree. The redefined shop visit interval as requested would result in less frequent replacements of fuel nozzles and an unacceptable fleet risk. We did not change this AD.
We reviewed the relevant data, considered the comment received, and determined that air safety and the public interest require adopting this AD as proposed.
We reviewed PW Alert Service Bulletin (ASB) PW4G-100-A73-45, dated February 16, 2016. The ASB describes procedures for inspecting and replacing the fuel nozzles. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We estimate that this AD will affect 72 engines installed on airplanes of U.S. registry. We also estimate that it will take about 2.2 hours per engine to perform each inspection and 48 hours per engine to replace the fuel nozzle. The average labor rate is $85 per hour. We also estimate that parts cost would be $15,780 per engine. Based on these figures, we estimate the cost of this AD on U.S. operators to be $1,443,384.
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:
We are 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.
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,
(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective December 6, 2016.
None.
This AD applies to Pratt & Whitney (PW):
(1) PW4164, PW4168, and PW4168A model engines that have incorporated PW Service Bulletin (SB) PW4G-100-72-214, dated December 15, 2011, or PW SB PW4G-100-72-219, Revision No. 1, dated October 5, 2011, or original issue, and have fuel nozzles, part number (P/N) 51J345, installed;
(2) PW4168A model engines with Talon IIA outer combustion chamber assembly, P/N 51J100, and fuel nozzles, P/N 51J345, with serial numbers CGGUA19703 through CGGUA19718 inclusive or CGGUA22996 and higher, installed;
(3) PW4168A-1D and PW4170 model engines with engine serial numbers P735001 thru P735190 inclusive and fuel nozzles, P/N 51J345, installed; and
(4) PW4164-1D, PW4168-1D, PW4168A-1D, and PW4170 model engines that have incorporated PW SB PW4G-100-72-220, Revision No. 4, dated September 30, 2011, or earlier revision, and have fuel nozzles, P/N 51J345, installed.
This AD was prompted by nine instances of fuel leaks on PW engines with the Talon IIB combustion chamber configuration installed. We are issuing this AD to prevent failure of the fuel nozzles, which could lead to engine fire and damage to the airplane.
Comply with this AD within the compliance times specified, unless already done.
(1) Within 800 flight hours after the effective date of this AD, and thereafter within every 800 flight hours accumulated on the fuel nozzles, do the following:
(i) Inspect all fuel nozzles, P/N 51J345. Use Part A of PW Alert Service Bulletin (ASB) PW4G-100-A73-45, dated February 16, 2016, to do the inspection.
(ii) For any fuel nozzle that fails the inspection, before further flight, remove and replace it with a part that is eligible for installation.
(2) At the next shop visit after the effective date of this AD, and thereafter at each engine shop visit, remove all fuel nozzles, P/N 51J345, unless fuel nozzles were replaced within the last 100 flight hours. Use Part B of PW ASB PW4G-100-A73-45, dated February 16, 2016, to replace the fuel nozzles with parts eligible for installation.
(1) For the purpose of this AD, an “engine shop visit” means the induction of an engine into the shop for any maintenance.
(2) For the purpose of this AD, a part that is “eligible for installation” is a fuel nozzle, with a P/N other than 51J345, that is FAA-approved for installation or a fuel nozzle, P/N 51J345, that meets the requirements of Part A, paragraph 4.B., or Part B, paragraph 1.B. of PW ASB PW4G-100-A73-45, dated February 16, 2016.
The Manager, Engine Certification Office, FAA, may approve AMOCs for this AD. Use the procedures found in 14 CFR 39.19 to make your request. You may email your request to:
For more information about this AD, contact Besian Luga, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7750; fax: 781-238-7199; email:
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) Pratt & Whitney (PW) Alert Service Bulletin PW4G-100-A73-45, dated February 16, 2016.
(ii) Reserved.
(3) For PW service information identified in this AD, contact Pratt & Whitney Division, 400 Main St., East Hartford, CT 06108; phone: 860-565-8770; fax: 860-565-4503.
(4) You may view this service information at FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA. For information on the availability of this material at the FAA, call 781-238-7125.
(5) You may view this service information at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
Federal Aviation Administration (FAA), DOT.
Final rule.
We are adopting a new airworthiness directive (AD) for certain Turbomeca S.A. Arriel 1, 1A, 1A1, 1A2, 1B, 1B2, 1C, 1C1, 1C2, 1D, 1D1, 1E, 1E2, 1K1, 1S, and 1S1 turboshaft engines. This AD requires removing the centrifugal impeller and replacing with a part eligible for installation. This AD was prompted by an anomaly that occurred during the grinding operation required by modification TU376, which increases the clearance between the rear curvic coupling of the centrifugal impeller and the fuel injection manifold. We are issuing this AD to prevent failure of the centrifugal impeller, uncontained centrifugal impeller release, damage to the engine, and damage to the helicopter.
This AD becomes effective December 6, 2016.
See the
You may examine the AD docket on the Internet at
Philip Haberlen, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7770; fax: 781-238-7199; email:
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to the specified products. The NPRM was published in the
Turbomeca reported an anomaly that was generated during the grinding operation associated to the application of modification TU376, which increases the clearance between the rear curvic coupling of the centrifugal impeller and the fuel injection manifold.
This condition, if not corrected, could lead to crack initiation and propagation in the centrifugal impeller bore area, possibly resulting in centrifugal impeller failure, with consequent damage to, and reduced control of, the helicopter. To address this potential unsafe condition, the life of the affected centrifugal impellers was reduced and Turbomeca published Mandatory Service Bulletin (MSB) 292 72 0848 to inform operators about the life reduction and to provide instructions for the replacement of the affected centrifugal impellers.
For the reasons described above, this AD requires replacement of each affected centrifugal impeller before it exceeds the applicable reduced life limit.
You may obtain further information by examining the MCAI in the AD docket on the Internet at
We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (81 FR 49575, July 28, 2016) or on the determination of the cost to the public.
We reviewed the available data and determined that air safety and the public interest require adopting this AD as proposed.
Turbomeca S.A. has issued Mandatory Service Bulletin (MSB) 292 72 0848, Version B, dated April 13, 2016. The MSB describes procedures for reducing the life limit of the centrifugal impellers affected by an anomaly that occurred during the grinding operation required by modification TU376. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We estimate that this AD affects 3 engines installed on helicopters of U.S. registry. We also estimate that it would take about 22 hours per engine to comply with this AD. The average labor rate is $85 per hour. Required parts cost about $96,518 per engine. Based on these figures, we estimate the cost of this AD on U.S. operators to be $295,164.
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.
We are 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.
We determined that 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 this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD becomes effective December 6, 2016.
None.
This AD applies to certain Arriel 1, 1A, 1A1, 1A2, 1B, 1B2, 1C, 1C1, 1C2, 1D, 1D1, 1E, 1E2, 1K1, 1S, and 1S1 turboshaft engines, with modification TU376 installed.
This AD was prompted by an anomaly that occurred during the grinding operation required by modification TU376, which increases the clearance between the rear curvic coupling of the centrifugal impeller and the fuel injection manifold. We are issuing this AD to prevent failure of the centrifugal impeller, uncontained centrifugal impeller release, damage to the engine, and damage to the helicopter.
Comply with this AD within the compliance times specified, unless already done.
(1) Remove from service, any centrifugal impeller listed in Table 1 to paragraph (e) of this AD, before exceeding the applicable cycles since new (CSN) and replace with a centrifugal impeller not listed in Table 1 to paragraph (e) of this AD.
(2) Reserved.
The Manager, Engine Certification Office, FAA, may approve AMOCs for this AD. Use the procedures found in 14 CFR 39.19 to make your request. You may email your request to:
(1) For more information about this AD, contact Philip Haberlen, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7770; fax: 781-238-7199; email:
(2) Refer to MCAI, European Aviation Safety Agency AD 2016-0090, dated May 10, 2016, for more information. You may examine the MCAI in the AD docket on the Internet at
None.
Food and Drug Administration, HHS.
Final rule.
The Food and Drug Administration (FDA or we) is amending the color additive regulations to provide for the safe use of titanium dioxide and [phthalocyaninato (2-)] copper to color orientation marks for intraocular lenses. This action is in response to a petition filed by Milton W. Chu, M.D.
This rule is effective December 2, 2016. See section IX for further information on the filing of objections. Submit either electronic or written objections and requests for a hearing by December 1, 2016.
You may submit objections and requests for a hearing as follows:
Submit electronic objections in the following way:
•
• If you want to submit an objection with confidential information that you do not wish to be made available to the public, submit the objection as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper objections submitted to the Division of Dockets Management, FDA will post your objection, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit an objection with confidential information that you do not wish to be made publicly available, submit your objections only as a written/paper
Laura A. Dye, Center for Food Safety and Applied Nutrition (HFS-265), Food and Drug Administration, 5001 Campus Dr., College Park, MD 20740-3835, 240-402-1275.
In a document published in the
Titanium dioxide is already approved as a color additive for foods (§ 73.575), drugs (§ 73.1575), cosmetics (§ 73.2575), and medical devices (§ 73.3126). Regarding its use in medical devices, titanium dioxide (CAS Reg. No. 13463-67-7, Color Index No. 77891) is currently approved under § 73.3126(b)(1) for use as a color additive in contact lenses in amounts not to exceed the minimum reasonably required to accomplish the intended coloring effect and must meet the identity and specification requirements in § 73.575(a)(1) and (b). Titanium dioxide is exempt from certification under section 721(c) of the FD&C Act because we previously determined that certification was not necessary for the protection of public health (51 FR 24815, July 9, 1986).
[Phthalocyaninato (2-)] copper (CAS Reg. No. 147-14-8, Color Index No. 74160) is currently approved as a color additive under § 74.3045(c)(1) for use in coloring certain non-absorbable sutures for general and ophthalmic surgery, and for use in coloring specific monofilaments used as supporting side struts (haptics) that hold the IOLs in place in the eye, at a level up to 0.5 percent by weight of the suture or haptic material. In addition, it is currently approved as a color additive under § 74.3045(c)(2) for use in coloring contact lenses in amounts not to exceed the minimum amount reasonably required to accomplish the intended coloring effect. We previously determined that batch certification was necessary to ensure the safety of [phthalocyaninato (2-)] copper (34 FR 6777, April 23, 1969).
Under section 721(b)(4) of the FD&C Act, a color additive may not be listed for a particular use unless the data and information available to FDA establish that the color additive is safe for that use. Our color additive regulations at 21 CFR 70.3(i) define “safe” to mean that there is convincing evidence that establishes with reasonable certainty that no harm will result from the intended use of the color additive. To establish with reasonable certainty that these color additives intended to color IOL orientation marks are not harmful under their intended conditions of use, we considered exposure to the additives and their impurities, each additive's toxicological data, and other relevant information (such as published literature) available to us.
Regarding the petitioned use, titanium dioxide and [phthalocyaninato (2-)] copper are intended to color orientation marks for IOL materials (polymers) to create white and translucent or opaque blue marks that are typically 100-250 microns (μm) in diameter and 80-150 μm in depth. Titanium dioxide will be used in amounts not to exceed the minimum reasonably required to accomplish the intended coloring effect of the orientation marks. [Phthalocyaninato (2-)] copper will be used at levels not to exceed 0.5 percent by weight of the orientation marks.
To assess safety, we compared an individual's estimated exposure to these two color additives for the petitioned use to color IOL orientation marks to the approved uses of these color additives, including in IOL haptics and opaque contact lenses, because these uses are similar. As part of our previous approval for titanium dioxide used to color contact lenses, we estimated exposure to titanium dioxide from this use to be 270 nanograms per person per day (ng/p/d) over the lens lifetime (51 FR 24815), which does not significantly contribute to the cumulative exposure when compared to the exposure to titanium dioxide from the approved uses of mica-based pearlescent pigments (of which titanium dioxide is a component) in food and pharmaceuticals (Ref. 1). Similarly, we previously estimated exposure to [phthalocyaninato (2-)] copper from the use of surgical sutures, contact lenses, and specific monofilaments used as supporting haptics for IOLs to be 310 ng/p/d, 280 ng/p/d, and 0.3 ng/p/d, respectively (64 FR 23185, April 30, 1999; 51 FR 39370, October 28, 1986; and 52 FR 15944, May 1, 1987). With respect to the petitioned use, we estimated that the worst-case lifetime exposure to titanium dioxide and [phthalocyaninato (2-)] copper used to color orientation marks would be no greater than 0.06 ng/p/d and 0.004 ng/
In assessing biocompatibility and toxicity of IOLs, we consider the International Standard for intraocular lens testing for biocompatibility (ISO 11979-5) as an appropriate standard. In general, ISO 11979-5 recommends investigations on the following biological endpoints: Cytotoxicity, genotoxicity, local effects after implantation, and sensitization potential, in the context of physicochemical properties.
The petitioner conducted a cytotoxicity study in which cultured cells were exposed to a mixture of titanium dioxide and [phthalocyaninato (2-)] copper in direct contact for at least 24 hours. Both color additives were found to be noncytotoxic in this study. Cytotoxicity studies of [phthalocyaninato (2-)] copper in previous petitions also indicated no cytotoxicity (Ref. 3). Additionally, the toxicology data for [phthalocyaninato (2-)] copper from previous petitions, as well as relevant data found in the Organization for Economic Cooperation and Development's Screening Information Dataset (OECD's SIDS) database, all indicated negative results for genotoxicity, carcinogenicity, implantation safety, and sensitization potential (Ref. 3). Similarly, data on titanium dioxide in OECD's SIDS database reported negative results for genotoxicity and sensitization potential. We conclude that the available toxicology data are sufficient to support the safety of the proposed expanded uses of titanium dioxide and [phthalocyaninato (2-)] copper.
Based on the data and information in the petition and other relevant material, we conclude that the petitioned use of titanium dioxide and [phthalocyaninato (2-)] copper to color orientation marks for IOLs is safe. We further conclude that these additives will achieve their intended technical effect and are suitable for the petitioned use. Consequently, we are amending the color additive regulations in parts 73 and 74 as set forth in this document. In addition, based upon the factors listed in 21 CFR 71.20(b), we conclude that certification of titanium dioxide remains unnecessary for the protection of the public health. We also conclude that batch certification of [phthalocyaninato (2-)] copper continues to be necessary to protect the public health.
In accordance with § 71.15 (21 CFR 71.15), the petition and the documents that we considered and relied upon in reaching our decision to approve the petition will be made available for public disclosure (see
We previously considered the environmental effects of this rule, as stated in the March 22, 2016, notice of petition for CAP 6C0305 (81 FR 15173). We stated that we had determined, under 21 CFR 25.32(
This final rule contains no collection of information. Therefore, clearance by the Office of Management and Budget under the Paperwork Reduction Act of 1995 is not required.
This rule is effective as shown in the
Any objections received in response to the regulation may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday, and will be posted to the docket at
The following references are on display in the Division of Dockets Management (see
Color additives, Cosmetics, Drugs, Medical devices.
Color additives, Cosmetics, Drugs.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs and re-delegated to the Director, Center for Food Safety and
21 U.S.C. 321, 341, 342, 343, 348, 351, 352, 355, 361, 362, 371, 379e.
(b) * * * (1) The substance listed in paragraph (a) of this section may be used as a color additive in contact lenses and intraocular lens orientation marks in amounts not to exceed the minimum reasonably required to accomplish the intended coloring effect.
21 U.S.C. 321, 341, 342, 343, 348, 351, 352, 355, 361, 362, 371, 379e.
(c) * * * (1) The color additive [phthalocyaninato(2-)] copper may be safely used to color polypropylene sutures, polybutester (the generic designation for the suture fabricated from 1,4-benzenedicarboxylic acid, polymer with 1,4-butanediol and
(i) The quantity of the color additive does not exceed 0.5 percent by weight of the suture, haptic material, or orientation mark.
Food and Drug Administration, HHS.
Notification of availability.
The Food and Drug Administration (FDA, the Agency, or we) is announcing the availability of a guidance for industry entitled “What You Need To Know About the FDA Regulation: Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food”—Small Entity Compliance Guide. The small entity compliance guide (SECG) is intended to help small entities comply with the final rule titled “Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food.”
Submit either electronic or written comments on FDA guidances at any time.
You may submit comments as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Submit written requests for single copies of the SECG to the Office of Food Safety, Center for Food Safety and Applied Nutrition, Food and Drug Administration, 5001 Campus Dr., College Park, MD 20740. Send two self-addressed adhesive labels to assist that office in processing your request. See the
Jenny Scott, Center for Food Safety and Applied Nutrition, Food and Drug Administration, 5001 Campus Dr., College Park, MD 20740, 240-402-1700.
In the
We examined the economic implications of the final rule as required by the Regulatory Flexibility Act (5 U.S.C. 601-612) and determined that the final rule will have a significant economic impact on a substantial number of small entities. In compliance with section 212 of the Small Business Regulatory Enforcement Fairness Act (Pub. L. 104-121, as amended by Pub. L. 110-28), we are making available the SECG to explain the actions that a small entity must take to comply with the rule.
We are issuing the SECG consistent with our good guidance practices regulation (21 CFR 10.115(c)(2)). The SECG represents the current thinking of FDA on this topic. It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.
This guidance refers to previously approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in 21 CFR part 117 have been approved under OMB control number 0910-0751.
Persons with access to the Internet may obtain the SECG at either
Food and Drug Administration, HHS.
Notification of availability.
The Food and Drug Administration (FDA, the Agency, or we) is announcing the availability of a guidance for industry #241 entitled “What You Need To Know About the FDA Regulation: Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Food for Animals”—Small Entity Compliance Guide. The small entity compliance guide (SECG) is intended to help small entities comply with the final rule titled “Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Food for Animals.”
Submit either electronic or written comments on FDA guidances at any time.
You may submit comments as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION”. The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Submit written requests for single copies of the SECG to the Policy and Regulations Staff (HFV-6), Center for Veterinary Medicine, Food and Drug Administration, 7519 Standish Pl., Rockville, MD 20855. Send two self-addressed adhesive labels to assist that office in processing your request. See the
Jeanette Murphy, Center for Veterinary Medicine (HFV-200), Food and Drug Administration, 7519 Standish Pl., Rockville, MD 20800, 240-402-6246.
In the
We examined the economic implications of the final rule as required by the Regulatory Flexibility Act (5 U.S.C. 601-612) and determined that the final rule will have a significant economic impact on a substantial number of small entities. In compliance with section 212 of the Small Business Regulatory Enforcement Fairness Act (Pub. L. 104-121, as amended by Pub. L. 110-28), we are making available the SECG to explain the actions that a small entity must take to comply with the rule.
We are issuing the SECG consistent with our good guidance practices regulation (21 CFR 10.115(c)(2)). The SECG represents the current thinking of FDA on this topic. It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.
This draft guidance refers to previously approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in part 507 have been approved under 0910-0789.
Persons with access to the Internet may obtain the SECG at
Coast Guard, DHS.
Notice of enforcement of regulation.
The Coast Guard will enforce regulations for a safety zone for an annual fireworks event in the Captain of the Port Delaware Bay zone from 6 p.m. to 8 p.m. on November 19, 2016. Enforcement of this zone is necessary and intended to ensure safety of life on
The regulations in 33 CFR 165.506 will be enforced from 6 p.m. to 8 p.m. on November 19, 2016, for the safety zone identified in row (a)(16) of Table to § 165.506.
If you have questions about this notice of enforcement, call or email MST1 Thomas Simkins, Sector Delaware Bay Waterways Management Division, U.S. Coast Guard; telephone 215-271-4889, email
From 6 p.m. to 8 p.m. on November 19, 2016, the Coast Guard will enforce regulations in 33 CFR 165.506 for the safety zone in the Delaware River in Philadelphia, PA listed in row (a)(16) in the table in that section. This action is being taken to provide for the safety of life on navigable waterways during the fireworks display.
Our regulations for recurring firework events in Captain of the Port Delaware Bay Zone, appear in § 165.506, Safety Zones; Fireworks Displays in the Fifth Coast Guard District, which specifies the location of the regulated area for this safety zone as all waters of Delaware River, adjacent to Penn's Landing, Philadelphia, PA, bounded from shoreline to shoreline, bounded on the south by a line running east to west from points along the shoreline at latitude 39°56′31.2″ N., longitude 075°08′28.1″ W.; thence to latitude 39°56′29″ .1 N., longitude 075°07′56.5″ W., and bounded on the north by the Benjamin Franklin Bridge.
As specified in § 165.506, during the enforcement period no vessel may transit this safety zone without approval from the Captain of the Port Delaware Bay. If permission is granted, all persons and vessels shall comply with the instructions of the COTP or designated representative.
This notice of enforcement is issued under authority of 33 CFR 165.506 and 5 U.S.C. 552(a). In addition to this notice of enforcement in the
If the Captain of the Port Delaware Bay determines that the regulated area need not be enforced for the full duration, a BNM to grant general permission to enter the safety zone may be used.
U.S. Copyright Office, Library of Congress.
Final rule.
Under the Digital Millennium Copyright Act (“DMCA”), the U.S. Copyright Office is required to maintain a “current directory” of agents that have been designated by online service providers to receive notifications of claimed infringement. Since the DMCA's enactment in 1998, online service providers have designated agents with the Copyright Office using the Office's or their own paper form, and the Office has made scanned copies these filings available to the public by posting them on the Office's Web site. Although the DMCA requires service providers to update their designations with the Office as information changes, an examination of the Office's current directory reveals that many have failed to do so, and that much of the information currently contained in the directory has become inaccurate and out of date. On September 28, 2011, the Office issued a notice of proposed rulemaking to update relevant regulations in anticipation of creating a new electronic system through which service providers would be able to more efficiently submit, and the public would be better able to search for, designated agent information. On May 25, 2016, with the electronic system in its final stages of development, the Office issued a notice of proposed rulemaking proposing significantly lower fees for designating agents through the forthcoming online system. As the next step in implementation, the Office today announces the adoption of a final rule to govern the designation and maintenance of DMCA agent information under the new electronic system and to establish the applicable fees.
Effective December 1, 2016.
Sarang V. Damle, General Counsel and Associate Register of Copyrights, by email at
In 1998, Congress enacted section 512 of title 17, United States Code, as part of the Digital Millennium Copyright Act (“DMCA”).
The language of section 512(c)(2) makes clear that a service provider must maintain the same contact information required under section 512(c)(2)(A) and (B) both on its Web site and at the Copyright Office.
As Congress made clear in enacting section 512(c)(2), its expectation was that “the parties will comply with the functional requirements of the notification provisions—such as providing sufficient information so that a designated agent or the complaining party submitting a notification may be contacted efficiently—in order to ensure that the notification and take down procedures set forth in this subsection operate smoothly.”
Moreover, the statute specifically directs the Copyright Office to “maintain a current directory of agents,” and authorizes a fee to cover the “costs of maintaining the directory.”
Because the DMCA was effective on its date of enactment, and a procedure to enable the designation of agents needed to be in place immediately, the Copyright Office issued interim regulations governing the designation of agents to receive notifications of claimed infringement without the opportunity for a public comment period.
Over time it has become clear to the Office that the designation process established under the interim regulations needs to be updated to better fulfill the objectives of section 512(c)(2). The paper designation system is inefficient and expensive for service providers, and represents a significant drain on Office resources due to the largely manual process of scanning paper designations and posting them online. Furthermore, the search capabilities of the paper-generated directory, even in its online format, are limited. To effectuate an update of the interim regulations, the Office issued a notice of proposed rulemaking on September 28, 2011 (“NPRM”) proposing a new fully-electronic system through which service providers could more efficiently designate agents and maintain service provider and agent information with the Copyright Office, and the public could more easily search for agents in an online directory.
In 2013, the Department of Commerce's Internet Policy Task Force
More recently, to confirm the NPRM's initial assessment of the quality of the information in the current designated agent directory, the Office examined a larger sampling of 500 existing paper designations and found that approximately 70% either had inaccurate information or were for defunct service providers. Specifically, 110 (22%) appeared to be for defunct service providers.
Accordingly, for each of the 390 non-defunct service providers in the sample, the Office assessed whether the telephone number, physical mail address, and email address listed for the designated agent in the Office's directory matched the contact information on the service provider's Web site. The Office found that the Web sites for 20 service providers did not appear to contain any contact information whatsoever. Although these service providers' failure to provide designated agent information on their Web sites renders them ineligible for the section 512 safe harbors, that failure also meant that the Office could not ascertain the accuracy of the designations in the Office's directory one way or the other, because there was no information against which to compare. This left the Office with a sample of 370 service providers that had at least some of the required contact information on their Web sites that the Office could use to compare against the paper designations filed with the Office.
As this analysis shows, the apparent volume of designations in the Office's directory belonging to defunct service providers or containing inaccurate information is extremely high. These findings are particularly concerning because they show that service providers might unwittingly be losing the protection of the safe harbors in section 512 by forgetting to maintain complete, accurate, and up-to-date information with the Copyright Office. These findings are also concerning because the directory in many cases would seem to be an unreliable resource, at best, to identify or obtain contact information for a particular service provider's designated agent.
Though the Office did not yet know the full extent of the inaccuracy of the current directory, the Office issued the NPRM with these general concerns of accuracy, cost, and efficiency in mind. In addition to describing the proposed electronic system, the NPRM sought public comment on modified regulations that would govern the submission and updating of information relating to designated agents through such proposed system.
To effectuate the system described in the NPRM, the Library of Congress authorized the necessary software development effort through its Information and Technology Services unit (now called the Office of the Chief Information Officer). Over the past year, the Library has committed development resources to this effort and it is now anticipated that the new electronic system to register designated agents with the Office will be launched on December 1, 2016.
As the software development effort was reaching its final stages, the Office on May 25, 2016 issued a notice of proposed rulemaking to lower the fee for designating an agent through the new system (“Fee NPRM”).
Having reviewed and carefully considered all of the public comments received in response to the NPRM and the Fee NPRM, the Copyright Office now issues a final rule, effective as of the implementation of the new electronic system on December 1, 2016, governing the designation of agents to receive notifications of claimed infringement with the Office pursuant to 17 U.S.C. 512(c)(2), including associated fees. The Register's authority to implement such system and promulgate these regulations governing the designation of agents and the use and operation of the electronic system derive directly from section 512(c)(2), which explicitly permits the Register to require service providers to supply “contact information which [she] may deem appropriate” and expressly requires the Register to “maintain a current directory of agents available to the public.”
The new electronic system to designate agents with the Copyright Office pursuant to 17 U.S.C. 512(c)(2) will fully replace the paper-based system implemented through the interim regulations adopted in 1998. Beginning December 1, 2016, a service provider must use the online registration system to electronically submit service provider and designated agent information to the Copyright Office. Accordingly, as of December 1, 2016, the Office will no longer accept paper designations.
The comments received in response to the NPRM and Fee NPRM indicate widespread support for the creation of an electronic registration system,
As detailed above, the Copyright Office has confirmed that a substantial amount of the designated agent information currently listed in the Office's directory is inaccurate or out of date. To ensure that the new electronic directory is accurate and up to date, all service providers seeking to comply with 17 U.S.C. 512(c)(2), including those that have previously designated an agent using the paper process under the Office's interim regulations, are required to submit new designations through the electronic system by December 31, 2017. Moreover, the Office made clear that “[i]nterim designations filed pursuant to these interim regulations will be valid until the effective date of the final regulations. At that time, service providers wishing to invoke section 512(c)(2) will have to file new designations that satisfy the requirements of the final regulations, which will include the payment of the fee required under the final regulations.”
While service providers must file new designations in the electronic system, they will have over a year to do so. Previously filed paper designations will continue to satisfy the service provider's statutory obligations under section 512(c)(2) until the service provider registers electronically, or through December 31, 2017, whichever occurs earlier. For a further discussion of this aspect of the final rule, including responses to public comments, see “Phaseout of Paper Directory and Requirement to Register in Electronic Directory” below.
As under the old system, service providers will be required to keep their designations current and accurate by timely updating information in the system when it has changed (
The Office notes that one commenting party asked that an email address for the individual who actually registered the designation be made available in the public directory.
In the NPRM, the Office mentioned its willingness to consider allowing a service provider to delegate responsibility for managing the registration process or otherwise administering its account to a third-party entity.
After considering these competing comments, the Office finds no compelling reason to deny a service provider the option of hiring a third party to manage its designation on its behalf, so long as the service provider is willing to accept the risk that it could lose the safe harbor protections of section 512 if such third party fails to provide accurate information and maintain an up-to-date designation at the Copyright Office. In light of this conclusion, the electronic system has been designed to facilitate third-party management of service provider designations. In particular, a single registrant is able to use a single account to designate agents (and amend and resubmit designations) for multiple service providers.
After reviewing the comments and working with the Library's software development team, the Office has concluded that permitting joint designations as originally conceived in the NPRM would needlessly complicate the online registration system and would also require a significantly more complex and costly development effort. As explained above, the Office has designed the system so that a single account user can register and manage designations for multiple service providers. Thus, a parent company can manage the designations of all of its subsidiaries through one central account should it so choose. The ability of a single registrant to manage multiple designations, combined with the modest fee for registration, set at $6 (see “Fees” below), should largely address the concerns that would have been addressed by permitting joint designations. Accordingly, under the final rule, as under the interim rule, related or affiliated service providers that are separate legal entities are considered separate service providers, and each must have its own separate designation.
The Office has determined that the information required from service providers through the online registration system will remain, for the most part, the same as has been required under the interim regulations. A service provider is required to supply its full legal name, physical street address (not a post office box), telephone number, email address, any alternate names used by the service provider, and the name, organization, physical mail address, telephone number, and email address
The Office has modified this provision to clarify that the requirement to provide alternate names is not limited solely to names under which a service provider is doing business, such as a “d/b/a” name. Rather, service providers must list all alternate names that the public would be likely to use to search for the service provider's designated agent in the directory, including all names under which the service provider is doing business, Web site names and addresses (
Separate
Some commenters noted that it could be burdensome to list all of a service provider's Web sites in the system.
In addition, pursuant to the Register's separate authority to issue regulations necessary to “maintain” the public directory, the Office is now also requiring service providers to provide a telephone number and email address, solely for use by the Office for administrative purposes essential to the functioning and continued usability of the registration system and directory—for example, to send system confirmations, renewal reminders, or other notices about its designation or the system itself.
The NPRM proposed continuation of the practice of allowing service providers to designate an agent either by name or by position or title.
There was widespread support among commenters for maintaining the Office's current practice of allowing service providers to designate agents by position or title rather than an individual's proper name, both to address the problem of personnel changes and to avoid misuse of personal information.
After considering the comments and reevaluating its initial inclination with respect to the naming of an individual or position versus a department or entity as a whole to serve as a designated agent, the Office has concluded that any one of these appears to be a reasonable interpretation of the statute. The Office believes, contrary to its initial inclination, that the sounder policy is to allow a service provider to designate as its agent an individual (
The Copyright Office emphasizes, however, that these changes to the rule are in no way intended to excuse the loss or mishandling of notices addressed to departments or entities rather than individuals, or to otherwise absolve service providers from their statutory responsibility to “respond[ ] expeditiously” to notices of claimed infringement.
Because an individual serving as a designated agent may be located outside of the service provider's organization, the Office is now also requiring that the designated agent's organization be identified, when applicable. If the designated agent is an individual, a position or title, or a department within
The NPRM proposed permitting post office boxes to serve as a designated agent's address due to concerns about agents' privacy and safety, particularly where an agent's only address is a home address.
After weighing these conflicting viewpoints, the Office has determined that, consistent with the proposed rule, the final rule will allow a designated agent to specify a post office box and will not require a street address. Irrespective of the safety and privacy concerns of designated agents, requiring a physical street address is unnecessary to achieve the goals of the statute. To satisfy section 512(c)(2), service providers are required to supply accurate and reliable information for their designated agents, regardless of whether their agents are using a street address or post office box. While a post office box may not be as direct of a point of contact as a street address, copyright owners may still contact the designated agent by telephone or email. Moreover, allowing use of post office boxes may actually allow for faster and more efficient processing of mailed notices. For example, a large corporate mailroom receiving a broad mix of correspondence might be slower in identifying time-sensitive notices and delivering them to the responsible person within the organization. In contrast, a post office box could be dedicated solely to the receipt of DMCA takedown requests and could be checked directly by the agent.
Furthermore, in designating an agent, or amending or resubmitting such designation, the online registration system requires the account user to attest both to having the authority of the service provider to take that action and to the accuracy and completeness of the information being submitted to the Office by checking a box acknowledging the user's agreement to such an attestation. The transaction cannot be completed without such attestation.
The new registration system described is directly tied to the public, searchable DMCA designated agent directory. Information submitted by service providers through the registration system will automatically populate in the directory, providing fast and efficient public access to designated agent information. Members of the public will be able to access the directory through the Office's Web site and can search the directory either by service provider name or alternate name to obtain contact information for a designated agent. The search results will show not only service provider names and alternate names matching the search query, but will also indicate whether the agent designation is still active.
Having weighed these comments, the Office has decided to make prior versions of electronic designations available in the online directory so that the public can access them immediately and free of charge. At present, the Office plans for the directory to contain prior versions going back for up to ten years. Each time a designation is amended or resubmitted, the system creates a new version of the designation. Additionally, new versions are created whenever a designation, after having expired or been terminated, is reactivated. Because the earlier records are automatically maintained by the system, there is little added cost to the Office to permit users to access this information. Such historical information may be useful, for example, in a litigation or research context.
In addition, the Office has designed the directory layout to clearly indicate whether a designation is currently active or historical, and any results from a search of the directory will initially only display the most recent version of a designation. From there, a user can then navigate to prior versions of that designation. Accordingly, there should
A number of commenters opposed the requirement of periodic renewal.
Opponents also complained that the proposed renewal requirement was an unreasonable burden, especially on smaller service providers.
On the other side, trade associations representing both copyright owners and a coalition of large internet companies, including broadband providers and technology companies like Amazon, eBay and Google, agreed with the NPRM that renewal is important to address the issue of stale information and ensure the continued accuracy of the directory.
Having considered the competing views of stakeholders concerning the renewal requirement—as well as its own research into the accuracy of the listings under the existing paper system without a renewal requirement—the Office concludes that in order to “maintain a current directory” of designated agents, as the Register is obligated to do under section 512(c)(2), the Office should adopt a periodic renewal requirement. That said, in view of the concerns expressed by some regarding the burden of renewal—particularly with respect to smaller entities—the Office believes it is reasonable to extend the renewal period from two years to three.
A service provider may fulfill the periodic renewal requirement by reviewing its existing designation and either amending it to correct or update
The final rule also makes clear that the three-year renewal period will be reset after a service provider either amends or resubmits its designation through the online system. To illustrate, if a service provider registers a new designation on January 1, 2017, and thereafter makes no amendment to that designation, it must renew the designation prior to January 1, 2020. But if that service provider instead amends its initial designation on March 1, 2019 to update it with new information, the three-year renewal clock is reset, and March 1, 2022 becomes the date prior to which the service provider must renew the designation.
To alleviate any concern that a service provider may accidentally forget to renew its designation during the three-year period, the online registration system will automatically generate a series of reminder emails well in advance of the renewal deadline to every email address associated with the service provider in the system (including the primary and secondary account contacts, the service provider, and the designated agent).
Should a service provider fail to renew within the allotted time, the designation will expire and become invalid, resulting in its being labeled as “terminated” in the directory. The primary and secondary account contacts, service provider, and designated agent will be notified of this. A service provider whose designation has expired, however, will be able to reactivate the expired designation by logging into the system and following the same process as a renewal (including payment of the applicable fee). Once the process is complete and payment has been successfully received, the designation will no longer be invalid and will be relabeled as “active” in the directory. Reactivation of a designation will create a new version of the designation in the historical record (see “Prior Versions of Electronic Designations” above). Thus, the directory will show a gap in time between expiration and reactivation, during which the service provider had no active designated agent listed in the Office's directory.
The Copyright Office finds the arguments made against the renewal requirement unpersuasive. First, imposition of a renewal requirement is within the authority delegated to the Office by the Copyright Act. Section 512(c)(2) not only requires service providers to maintain up-to-date information, but explicitly obligates the Register of Copyrights to “maintain a
Second, contrary to opponents' arguments, relying on service providers' general statutory obligation to maintain accurate designations is an inadequate means of ensuring the directory remains current. For instance, the Office's interim regulations have long obligated service providers to affirmatively notify the Office when they terminate operations.
One commenter stated that the presence of designations by defunct service providers is harmless because the public will not be searching for them.
Third, with respect to the burden imposed and severity of the consequences for the failure to renew, opponents' arguments are significantly overstated. Renewal—which will initially cost a mere $6, take minutes to complete, and need only be attended to when information has changed or once every three years—should be a manageable proposition for even the smallest of service providers. Nor does the rule create “a trap for the unwary” as some opponents allege;
Indeed, while opponents highlight the consequences of failing to comply with the renewal requirement, the fact is that opponents' preferred solution—which would rely on service providers to remember to update their information with the Copyright Office—is
As of the effective date of this rule, the Office will no longer accept paper designations and amendments; service providers must use the online system to submit designations. Furthermore, service providers that have previously designated agents with the Office under the interim regulations must submit new designations through the electronic system. The final rule gives service providers a generous period—until December 31, 2017—to register their designations in the online system. Previously filed paper designations will continue to be effective until the service provider has registered using the new online system or through December 31, 2017, whichever is earlier.
As discussed above (see “Prior Versions of Paper Designations” above), the Office will continue to maintain the old paper-generated directory on its Web site during the transition period and for ten years following it, in addition to the new electronically-generated directory. During the 13-month transition period—that is, through December 31, 2017—members of the public will need to search both directories for designated agent information, since a service provider may have a valid designation in either. To the extent there is a discrepancy between designations registered in the old and new systems, the information in the new directory will control. As of January 1, 2018, all paper designations will become invalid and only those designations made through the online registration system will satisfy the statutory requirement for designating an agent with the Copyright Office.
The Office is requiring service providers who have previously filed a paper designation to register in the electronic system for two principal reasons. First, as discussed above, the old paper-generated directory contains a significant amount of outdated information, including information about service providers that no longer exist. The electronic submission requirement will encourage service providers that have neglected to update their designations to provide updated information as necessary. Second, for the Office to migrate information from the old directory into the new directory would require extensive manual review and data entry, an effort that would be extraordinarily burdensome and expensive for the Office to undertake. The old directory consists of approximately 23,300 designations, all in PDF format. It would be a significant drain on the Copyright Office's limited resources to have Office personnel manually transfer information from the PDFs into the new database.
The arguments made by commenters opposed to the requirement to re-register in the electronic system were essentially the same as those made by commenters opposed to renewals: It is burdensome, it is a trap for the unwary, it imposes potentially harsh consequences for noncompliance, and the Office lacks authority to implement it.
In keeping with the specific fee-setting authority in section 512(c)(2), the NPRM proposed establishing fees to designate agents.
Although some comments filed in response to the NPRM argued against imposition of any fee, or for the imposition of a reduced fee, in certain cases,
The NPRM proposed two potential solutions to this problem.
The Office believes that this rulemaking and the online directory are not the proper forums to attempt to police rights holders who send improper notices or otherwise misuse the process. The Office notes that in fact, such issues are among those currently being reviewed in the Office's pending study of section 512.
Copyright.
For the reasons set forth above, the Copyright Office amends 37 CFR part 201 as follows:
17 U.S.C. 702.
(c) * * *
(a)
(1) Designate an agent by making available through its service, including on its Web site in a location accessible to the public, and by providing to the Copyright Office, the service provider and designated agent information required by paragraph (b) of this section;
(2) Maintain the currency and accuracy of the information required by paragraph (b) both on its Web site and with the Office by timely updating such information when it has changed; and
(3) Comply with the electronic registration requirements in paragraph (c) to designate an agent with the Office.
(b)
(1)(i) The full legal name and physical street address of the service provider. Related or affiliated service providers that are separate legal entities (
(ii) A post office box may not be substituted for the street address for the service provider, except in exceptional circumstances (
(2) All alternate names that the public would be likely to use to search for the service provider's designated agent in the Copyright Office's online directory of designated agents, including all names under which the service provider is doing business, Web site names and addresses (
(3) The name of the agent designated to receive notifications of claimed infringement and, if applicable, the name of the agent's organization. The designated agent may be an individual (
(4) The physical mail address (street address or post office box), telephone number, and email address of the agent designated to receive notifications of claimed infringement.
(c)
(1)
(i) The first name, last name, position or title, organization, physical mail address (street address or post office box), telephone number, and email address of two representatives of the service provider who will serve as primary and secondary points of contact for communications with the Office.
(ii) A telephone number and email address for the service provider for communications with the Office.
(2)
(i) The information provided to the Office is true, accurate, and complete to the best of his or her knowledge; and
(ii) He or she has been given authority to make the designation, amendment, or resubmission on behalf of the service provider.
(3)
(4)
(d)
(e)
(2) A service provider that has designated an agent with the Office under the previous version of this section, which was effective between November 3, 1998 and November 30, 2016, and desires to remain in compliance with section 512(c)(2) of title 17, United States Code, must submit a new designation electronically using the online registration system by December 31, 2017. Any designation not made through the online registration system will expire and become invalid after December 31, 2017.
(3) During the period beginning with the effective date of this section, December 1, 2016, through December 31, 2017 (the “transition period”), the Copyright Office will maintain two directories of designated agents: the directory consisting of paper designations made pursuant to the prior interim regulations (the “old directory”), and the directory consisting of designations made electronically through the online registration system (the “new directory”). During the transition period, a compliant designation in either the old directory or the new directory will satisfy the service provider's obligation under section 512(c)(2) of title 17, United States Code to designate an agent with the Copyright Office.
Environmental Protection Agency (EPA).
Direct final rule.
The Environmental Protection Agency (EPA) is taking direct final action to approve the Clean Air Act (CAA) section 111(d)/129 negative declarations for the States of New York and New Jersey and the Commonwealth of Puerto Rico, for other solid waste incineration (OSWI) units. Other solid waste incineration (OSWI) unit means either a very small municipal waste
The EPA is accepting the negative declaration in accordance with the requirements of the CAA.
This direct final rule will be effective January 3, 2017, without further notice, unless the EPA receives adverse comment by December 1, 2016. If EPA receives adverse comment, we will publish a timely withdrawal of the direct final rule in the
Submit your comments, identified by Docket ID No. EPA-R02-OAR-2016-0161, to
The EPA will generally not consider comments or comment contents located outside of the primary submission (
For additional submission methods, the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit
Edward J. Linky, Environmental Protection Agency, Air Programs Branch, 290 Broadway, New York, New York 10007-1866 at 212-637-3764 or by email at
Throughout this document “we,” “us,” or “our” refer to the EPA. This section provides additional information by addressing the following:
The Clean Air Act (CAA) requires that state
The general provisions for the submittal and approval of state plans are codified in 40 CFR part 60, subpart B and 40 CFR part 62, subpart A. section 111(d) establishes general requirements and procedures on state plan submittals for the control of designated pollutants.
Section 129 requires emission guidelines to be promulgated for all categories of solid waste incineration units, including OSWI units. Section 129 mandates that all plan requirements be at least as protective and restrictive as the promulgated emission guidelines. This includes fixed final compliance dates, fixed compliance schedules, and Title V permitting requirements for all affected sources. Section 129 also requires that state plans be submitted to EPA within one year after EPA's promulgation of the emission guidelines and compliance times.
States have options other than submitting a state plan in order to fulfill their obligations under CAA sections 111(d) and 129. If a State does not have any existing OSWI units for the relevant emission guidelines, a letter can be submitted certifying that no such units exist within the State (
The negative declaration exempts the State from the requirements of subpart B that would otherwise require the submittal of a CAA section 111(d)/129 plan.
On March 21, 2011 (76 FR 15372), the EPA established emission guidelines and compliance times for existing OSWI units. The emission guidelines and compliance times are codified at 40 CFR 60, subpart FFFF.
In order to fulfill obligations under CAA sections 111(d) and 129, the State of New York submitted a negative declaration letter to the EPA on November 13, 2006, the State of New Jersey submitted a negative declaration letter to the EPA on April 5, 2006 and the Commonwealth of Puerto Rico submitted a negative declaration letter to the EPA on September 25, 2006.
The submittal of these declarations exempts the State of New York, State of New Jersey and Commonwealth of Puerto Rico from the requirement to submit a state plan for existing OSWI units.
In this Direct Final action, the EPA is amending part 62 to reflect receipt of the negative declaration letters from the State of New York, State of New Jersey and Commonwealth of Puerto Rico, certifying that there are no existing OSWI units subject to 40 CFR part 60, subpart FFFF, in accordance with section 111(d) of the CAA.
The EPA is publishing this direct final rule without a prior proposed rule because we view this as a noncontroversial action and anticipate no adverse comment.
However, in the “Proposed Rules” section of this
Under the CAA, the Administrator is required to approve a section 111(d)/129 plan submission that complies with the provisions of the Act and applicable Federal regulations. 40 CFR 62.04.
Thus, in reviewing section 111(d)/129 plan submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA.
Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law.
For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272) note, because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition this action does not have tribal implications as specified by Executive Order 13175 because the section 111(d)/129 plan is not approved to apply in Indian country located in the state, and EPA notes will not impose substantial direct costs on tribal governments or preempt tribal law. Thus, Executive Order 13175 does not apply to this section.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by January 3, 2017.
Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements (See section 307(b)(2)).
Environmental protection, Air pollution control, Administrative practice and procedure, Intergovernmental relations, Reporting and recordkeeping requirements, Sewage sludge incinerators.
For the reasons stated in the preamble, EPA amends 40 CFR part 62 as set forth below:
42 U.S.C. 7401 et seq.
Letter from New Jersey Department of Environmental Protection submitted April 5, 2006 to Alan J. Steinberg Regional Administrator EPA Region 2 certifying there are no existing OSWI units in the State of New Jersey subject to 40 CFR part 60, subpart FFFF.
Letter from New York State Department of Environmental Conservation submitted November 13, 2006 to Alan J. Steinberg Regional Administrator EPA Region 2 certifying that there are no existing OSWI units in the State of New York subject to 40 CFR part 60, subpart FFFF.
Letter from Commonwealth of Puerto Rico, Office of Environmental Quality Board, September 25, 2006 to Alan Steinberg Regional Administrator EPA Region 2 certifying that there are no existing OSWI units in the Commonwealth of Puerto Rico subject to 40 CFR part 60, subpart FFFF.
Federal Communications Commission.
Final rule.
In this document, the Federal Communications Commission (Commission) adopts revisions to Wireless Emergency Alert (WEA) rules to take advantage of the significant technological changes and improvements experienced by the mobile wireless industry since the passage of the Warning, Alert and Response Network (WARN) Act, and deployment of Wireless Emergency Alerts (WEA) to improve utility of WEA as a life-saving tool. By this action, the Commission adopts rules that will improve Alert Message content in order to help communities communicate clearly and effectively about imminent threats and local crises. It also adopts rules to meet alert originators' needs for the delivery of the Alert Messages they transmit and creates a framework that will allow emergency managers to test, exercise, and raise public awareness about WEA. Through this action, the Commission hopes to empower state and local alert originators to participate more fully in WEA, and to enhance the utility of WEA as an alerting tool.
Amendments and revisions to §§ 10.280, 10.400, 10.410, 10.430,
James Wiley, Attorney Advisor, Public Safety and Homeland Security Bureau, at (202) 418-1678, or by email at
This is a summary of the Commission's Report and Order in PS Docket No. 15-91, No. 15-94, FCC 16-127, released on September 29, 2016. The document is available for download at
This Report and Order adopts new or revised information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13 (44 U.S.C. 3501-3520). The requirements will be submitted to the Office of Management and Budget (OMB) for review under Section 3507 of the PRA. The Commission will publish a separate notice in the Federal Register inviting comment on the new or revised information collection requirements adopted in this document. In addition, we note that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA) the Commission incorporated an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in the
2. Today's
3. Specifically, with respect to message content, we increase the maximum Alert Message length from 90 to 360 characters for 4G-LTE and future networks only. We classify Public Safety Messages as an Alert Message eligible to be issued in connection with any other class of Alert Message. We require Participating Commercial Mobile Service (CMS) Providers to support embedded references, and allow Participating CMS providers to include embedded references in all Alert Message types for the purpose of an industry-led pilot of this functionality. We also require Participating CMS Providers to support transmission of Spanish-language Alert Messages.
4. With respect to message delivery, we require Participating CMS Providers to narrow their geo-targeting of Alert Messages to an area that best approximates the alert area specified by the alert originator. We require that mobile devices process and display Alert Messages concurrent with other device activity. We also require Participating CMS Providers to log Alert Messages, to maintain those logs for at least 12 months, and to make those logs available upon request.
5. With respect to testing and outreach, we require support for State/Local WEA Tests and encourage emergency managers to engage in proficiency training exercises using alert origination software. We require periodic testing of the broadcast-based backup to the C-interface. Finally, we allow federal, state, local, tribal and territorial entities, as well as non-governmental organizations (NGOs) in coordination with such entities to issue Public Service Announcements (PSAs) aimed at raising public awareness about WEA.
6. No commenter raised issues in response to the IRFA included in the
7. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the rules. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small-business concern” under the Small Business Act. A small-business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.
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11. On January 26, 2001, the Commission completed the auction of 422 C and F Block Broadband PCS licenses in Auction No. 35. Of the 35 winning bidders in that auction, 29 claimed small business status. Subsequent events concerning Auction 35, including judicial and agency determinations, resulted in a total of 163 C and F Block licenses being available for grant. On February 15, 2005, the Commission completed an auction of 242 C-, D-, E-, and F-Block licenses in Auction No. 58. Of the 24 winning bidders in that auction, 16 claimed small business status and won 156 licenses. On May 21, 2007, the Commission completed an auction of 33 licenses in the A, C, and F Blocks in Auction No. 71. Of the 12 winning bidders in that auction, five claimed small business status and won 18 licenses. On August 20, 2008, the Commission completed the auction of 20 C-, D-, E-, and F-Block Broadband PCS licenses in Auction No. 78. Of the eight winning bidders for Broadband PCS licenses in that auction, six claimed small business status and won 14 licenses.
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16. In 2007, the Commission reexamined its rules governing the 700 MHz band in the
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20. In 2009, the Commission conducted Auction 86, the sale of 78 licenses in the BRS areas. The Commission offered three levels of bidding credits: (i) A bidder with attributed average annual gross revenues that exceed $15 million and do not exceed $40 million for the preceding three years (small business) received a 15 percent discount on its winning bid; (ii) a bidder with attributed average annual gross revenues that exceed $3 million and do not exceed $15 million for the preceding three years (very small business) received a 25 percent discount on its winning bid; and (iii) a bidder with attributed average annual gross revenues that do not exceed $3 million for the preceding three years (entrepreneur) received a 35 percent discount on its winning bid. Auction 86 concluded in 2009 with the sale of 61 licenses. Of the ten winning bidders, two bidders that claimed small business status won 4 licenses; one bidder that claimed very small business status won three licenses; and two bidders that claimed entrepreneur status won six licenses.
21. In addition, the SBA's Cable Television Distribution Services small business size standard is applicable to EBS. There are presently 2,436 EBS licensees. All but 100 of these licenses are held by educational institutions. Educational institutions are included in this analysis as small entities. Thus, we estimate that at least 2,336 licensees are small businesses. Since 2007,
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26. In addition, an element of the definition of “small business” is that the entity not be dominant in its field of operation. We are unable at this time to define or quantify the criteria that would establish whether a specific television station is dominant in its field of operation. Accordingly, the estimate of small businesses to which rules may apply do not exclude any television station from the definition of a small business on this basis and are therefore over-inclusive to that extent. Also as noted, an additional element of the definition of “small business” is that the entity must be independently owned and operated. We note that it is difficult at times to assess these criteria in the context of media entities and our estimates of small businesses to which they apply may be over-inclusive to this extent. There are also 2,117 low power television stations (LPTV). Given the nature of this service, we will presume that all LPTV licensees qualify as small entities under the above SBA small business size standard.
27. The Commission has, under SBA regulations, estimated the number of licensed NCE television stations to be 380. We note, however, that, in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included. Our estimate, therefore, likely overstates the number of small entities that might be affected by our action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. The Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities.
28. In the
29. We consider compliance costs associated with the alert logging and geo-targeting disclosure rules that we adopt today to be reporting and recordkeeping costs. These costs
30. The RFA requires an agency to describe any significant, specifically small business alternatives that it has considered in reaching its conclusions, which may include the following four alternatives (among others): “(1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.”
31. The compliance requirements in this
32. Based on our review of the record, we find that it is practicable for all Participating CMS Providers, including non-nationwide Participating CMS Providers, to implement WEA improvements without incurring unduly burdensome costs, especially considering the special treatment that we afford non-nationwide Participating CMS Providers. The
33. In considering the record received in response to the
34. Finally, in the event that small entities face unique circumstances with respect to these rules, such entities may request waiver relief from the Commission. Accordingly, we find that we have discharged our duty to consider the burdens imposed on small entities.
35. The legal basis for the actions taken pursuant to this
36. None
37. The Commission will send a copy of this Report & Order to Congress and the Government Accountability Office pursuant to the Congressional Review Act,
A. Alert Message Content
38. We amend Section 10.430 to expand the character limit for Alert Messages from 90 to 360 characters for 4G-LTE and future networks. A 360-character maximum Alert Message length balances emergency managers' needs to communicate more clearly with their communities with the technical limitations of CMS networks. While Hyper-Reach states that support for “1,000+” characters would be preferable because it would be consistent with the
39. We also find that expanding the maximum character length to 360 for 4G-LTE networks is technically feasible. As we observed in the
40. We also find, however, that we should continue to allow Participating CMS Providers to transmit 90-character Alert Messages on legacy networks until those networks are retired. While many public safety commenters, including APCO and Harris County OSHEM, state that it would be feasible and desirable to support 360-character Alert Messages on legacy networks by linking together (concatenating) multiple 90-character messages, we are convinced by AT&T that message concatenation would be problematic because “[m]essages are not guaranteed to be received by the device in the correct order,” which would likely cause confusion that would be exacerbated during the pendency of multiple alerts. Further, according to AT&T, concatenating 90-character Alert Messages on legacy networks would have an adverse effect on mobile device battery life. T-Mobile, Sprint and Microsoft agree that, unlike 4G-LTE networks, it would be infeasible to expand the character limit for legacy networks due to the technical limitations of those networks, and because of financial disincentives to continue to update networks that will soon be retired. The risks that public confusion and other complications would result from Alert Message concatenation are too great for public safety messaging where the potential for panic is heightened, and the consequences of misinterpretation could be deadly.
41. Emergency managers will be free to transmit an Alert Message containing as many as 360 characters as of the rules' implementation date. FEMA IPAWS will make this possible, while also ensuring that all community members in the target area, including those on legacy networks, can receive an Alert Message, by automatically generating a 90-character Alert Message from the CAP fields of a 360-character message for distribution on legacy networks whenever an emergency manager transmits only a 360-character Alert Message. Once a CMS network is able to support 360-character messages, it will cease to receive the 90-character version, and begin to receive the full 360-character version instead. CSRIC IV and FEMA attest that this co-existence of 90- and 360-character Alert Messages is technically feasible. Indeed, FEMA IPAWS already treats Alert Messages that do not contain free-form text in this manner, and their approach is consistent with the methodology that the Participating CMS Provider Alert Gateway will use to process Alert Messages in multiple languages. For example, if FEMA IPAWS receives an Alert Message today without free-form text, it will use the CAP parameters [hazard][location][time][guidance][source] to generate Alert Message text along the lines of “Tornado Warning in this area until 6:30 p.m. Take Shelter. Check Local Media.—NWS.” The CMS Provider Alert Gateway will send the longer free-form message to devices on 4G-LTE networks, and the automatically generated 90-character Alert Message to mobile devices on legacy networks. Pursuant to the approach we adopt today, no matter how an alert originator transmits a WEA Alert Message, members of their community in the target area will receive a version of it.
42. Increasing the maximum character length for WEA Alert Messages will produce valuable public safety benefits. Emergency managers state that the current 90-character limit is insufficient to communicate clearly with the public because 90-character Alert Messages rely on difficult-to-understand jargon and abbreviations. Expanding the character limit will reduce reliance on these potentially confusing terms and will allow emergency managers to provide their communities with information that is clear and effective at encouraging swift protective action. The value of this benefit will be increased when taken together with several of the improvements that we adopt in this
43. We amend Section 10.400 to create a fourth classification of Alert Message, “Public Safety Message.” The current rules only provides for three classes of WEA: (1) Presidential Alert; (2) Imminent Threat Alert; and (3) AMBER Alert. For an alert originator to issue an Alert Message using WEA, it must fall within one of these three classifications. Whereas we proposed to name this new Alert Message classification “Emergency Government Information” in the
44. Public Safety Messages will only be eligible for issuance in connection with an Imminent Threat Alert, an AMBER Alert, or a Presidential Alert, as recommended by AT&T, CTIA and several emergency management agencies. We do not expand the definition of an “emergency” situation in which it is appropriate to issue an Alert Message so as to avoid alert fatigue. Instead, we add a tool for emergency managers to better communicate with the public during and after emergencies, in a manner that naturally complements existing Alert Message classifications. We note that several commenters state that our new Alert Message classification should be eligible for issuance even in the absence of another Alert Message type. If we were to allow Public Safety Messages to stand alone, however, it would expand the definition of an “emergency” during which the issuance of a WEA Alert Message is appropriate, contrary to our reasoning in the
45. Any entity authorized to use WEA may initiate Public Safety Messages. Some commenters state that we should limit eligibility to issue Public Safety Messages to government entities. This may be because it would not make sense for non-governmental entities to issue Alert Messages under our proposed title, “Emergency Government Information.” Moreover, we agree with the majority of emergency managers treating the issue that all entities that have completed FEMA IPAWS alert originator authorization process may send Public Safety Messages.
46. Within this framework, we agree with commenters that the development of best practices around the use of Public Safety Messages will help ensure that this new Alert Message classification is used appropriately. NYCEM offers a number of best practices that would help inform emergency managers' determination of whether it is appropriate to send a Public Safety Message. These best practices include answering the following questions prior to initiating a Public Safety Message: “ ‘Is your emergency operations center activated?' `Has a competent, authorized party declared a state of emergency and/or are emergency orders being issued?' `Is there a need for broad public action or awareness of a condition that is occurring or likely to occur?' `Will the message prevent public fear or serve to preserve critical public safety functions that are (or could be) overwhelmed (
47. We do not agree with commenters that, rather than create a new Alert Message classification, we should clarify that the types of Alert Messages that would be issued as Public Safety Messages can be issued as Imminent Threat Alerts. The term “Imminent Threat Alert” is defined in our rules as “an alert that meets a minimum value for each of three CAP elements: Urgency, Severity, and Certainty.” Public Safety Messages would not fit within this definition because the “severity” and “urgency” elements of an Imminent Threat Alert describe the underlying imminently threatening emergency condition, whereas Public Safety Messages are intended to provide supplemental instructions about how to protect life or property during an AMBER Alert, Presidential Alert, or Imminent Threat Alert. We anticipate that this separate and broader applicability for Public Safety Messages will make them more versatile emergency management tools than if we were to limit such Alert Messages to the preexisting definition of an Imminent Threat Alert.
48. In addition to tailoring the scope of emergency managers' use of Public Safety Messages, we also take steps to ensure that the public receives Public Safety Messages in an appropriate manner. Specifically, we amend Section 10.280 to specify that Participating CMS Providers shall provide for their subscribers to receive Public Safety Messages by default, and may provide their subscribers with the option to opt out of receiving Public Safety Messages if they decide that they no longer wish to receive them. We agree with the majority of commenters that the public should be opted in to receiving Public Safety Messages by default because the information that they provide is essential by definition. We agree with Hyper-Reach that treating Public Safety Messages in this manner ensures that a greater percentage of the public will receive the information that Public Safety Messages are intended to provide than would be possible if the public were opted out of receiving Public Safety Messages by default.
49. Further, we allow, but do not require Participating CMS Providers to associate a unique attention signal or vibration cadence with Public Safety Messages. We agree with ATIS that requiring a new, unique attention signal and vibration cadence could create “significant technical impacts” for currently deployed WEA-capable mobile devices. We also agree with FEMA, however, that “the option to silence alerts that do not present an immediate threat” may have value in reducing consumer opt out. By allowing Participating CMS Providers to offer this functionality, we allow the market to determine whether or not any costs that may be implicated by these personalization options are outweighed by the benefits. Similarly, we will allow, but do not require Participating CMS Providers to provide their customers with the ability to turn off Public Safety Messages during certain hours. For example, if customers want to receive Public Safety Messages, but only during the daytime, they may be given the option to suppress the presentation of Public Safety Messages during nighttime hours.
50. APCO and many emergency management agencies support our creation of a new Alert Message classification because it “will enable public safety alert originators to take advantage of WEA when helpful, as compared to less secure and less immediate methods they may be employing presently.” We agree with commenters that adding a new Alert
51. We require Participating CMS Providers to support embedded references, as proposed. Accordingly, Participating CMS Providers must support the transmission of embedded URLs and phone numbers in WEA Alert Messages. This rule will become effective one year from the rules' publication in the
52. Participating CMS Providers express concern that allowing embedded references in Alert Messages would risk network congestion, but the weight of the record supports our conclusion that this action will be more likely to reduce network loading than to increase it. The public already accesses public safety and other resources using the data network upon receipt of WEA messages that do not include embedded references. This behavior, known as “milling,” is a predictable public response to receiving an Alert Message, as members of the public will seek to confirm that the indicated emergency condition is indeed occurring, and to gather additional information not provided by the Alert Message to inform their response. Milling is considered undesirable from a public safety perspective because it increases the delay between receiving an Alert Message and taking an appropriate protective action, and from a network management perspective because it increases use of the data network. We agree with FEMA, the National Weather Service (NWS), NYCEM, Dennis Mileti, Professor Emeritus of Sociology at The University of Colorado, and the many emergency managers treating this issue that providing access to additional text and resources through URLs embedded in WEA Alert Messages could actually reduce network congestion by channeling the public's milling behavior through a single authoritative and comprehensive resource. This finding is also supported by the 2014 and 2015
53. Finally, Participating CMS Providers who claim that embedded references will result in harmful network congestion have offered no network models, or any other form of rigorous network analysis, to support their proposition that allowing embedded references in WEA would cause or contribute to network congestion. While all network activity contributes to network congestion to some degree, the unsupported assertion of a risk of network congestion cannot be the sole basis for declining to adopt any measure that utilizes the data network, particularly a measure that has been demonstrated to have a statistically significant impact on WEA's ability to save lives. In the absence of data to the contrary, and in light of the significant record outlined above, we conclude that even if support for embedded references were to result in an incremental increase in data network usage in some cases, this increase would be insufficient to affect network performance during emergencies. Further, we observe that many WEA-capable mobile devices are set to offload network usage to Wi-Fi where available by default, and nearly all smartphones make this option available through the settings menu. Thus, many individuals who choose to click on an embedded reference will not use the mobile data network to access them at all.
54. At the same time, however, we seek to ensure that Participating CMS Providers are able to assess the performance of their networks in real-world conditions and have an opportunity to make any necessary adjustments to accommodate embedded references. AT&T and CCA support “moving ahead with a time-limited trial on their wireless network for purposes of determining whether embedded URLs result in unmanageable congestion when included in Amber Alerts.” We therefore allow voluntary, early adoption of embedded references through an industry-established and industry-led pilot. In this regard, we allow Participating CMS Providers, if they choose, to “pressure test” the use of embedded references in Alert Messages in a sample of their network area or subscriber base, prior to full implementation. To this end, Participating CMS Providers may voluntarily coordinate with NCMEC, NWS, FEMA, and other stakeholders to accomplish a targeted, pilot deployment of embedded references in WEA in a particular geographic location, Alert Message classification, or to a particular subset of subscribers thirty days from the rule's publication in the
55. CSRIC IV and FEMA agree that support for embedded references in alert origination software, IPAWS, the C-interface, and on mobile devices can be enabled through a straightforward process of updating standards and software. The successful use of embedded references will also require the development of appropriate best practices. Specifically, CSRIC IV observes that some individuals, particularly those with feature phones, may not have access to the data connection necessary to access content made available by URLs. We share this concern, and urge emergency managers to continue to convey the most important actionable information through the Alert Message text to ensure that all members of the public are able to receive that information, even if they are unable to access the URL. Commenters also express concern that inadequately prepared web servers or call centers may become overloaded as a result of mass access. NCMEC assures us that the AMBER Alerts Web site is capable of handling the expected increase in traffic, and we urge all alert originators to take appropriate steps to ensure the preparedness of their web hosting service before initiating an Alert Message that contains a URL. Further, we urge emergency managers to consider the capacity of their call centers or hotlines before embedding a phone number in an Alert Message.
56. Finally, commenters express concern that allowing embedded references in Alert Messages may provide an opportunity for a malicious actor to compromise WEA. To the extent that Participating CMS Providers take part in this opportunity to pilot the use of embedded references in WEA Alert Messages, they should take appropriate steps, in concert with their pilot program partners, to ensure the integrity of the embedded references they transmit. We also encourage emergency management agencies to continue to work with FEMA and Participating CMS Providers to ensure the authenticity and integrity of every Alert Message they initiate. For example, NCMEC confirms that it already authenticates the content on every AMBER Alert on its Web site and that it will take measures to ensure the security of any URL that it might embed in a WEA AMBER Alert. We note that all WEA Alert Messages are protected with a CAP digital signature that effectively prevents malicious intrusion into Alert Message content in transit. We also note that industry has already begun to take steps to address any particular cybersecurity issues that may be implicated by allowing URLs to be included in WEA. Pursuant to the recommendation of CSRIC V, ATIS is completing a best practice standard to address potential threat vectors for WEA, including embedded references. We also encourage Participating CMS Providers and alert originators to work with FEMA to develop protocols that may help to mitigate potential risks.
57. Commenters identify the inclusion of embedded references in Alert Messages as the most critical among all of our proposed improvements to WEA. NCMEC, in particular, has found this capability to be paramount to the success of AMBER Alerts. We agree that allowing emergency managers to embed URLs in Alert Messages empowers them to offer the public multimedia-capable, comprehensive emergency response resources. Including an authoritative URL will also likely lead to swifter community response by reducing the likelihood that consumers will seek to verify information through additional sources before taking action. We also agree with commenters that allowing URLs to be included in Alert Messages will improve WEA accessibility, could streamline the public's use of 911 services, and would provide alert originators with a method to ensure the public has access to up-to-date information.
58. In addition to embedded URLs, allowing embedded phone numbers to be included in Alert Messages will offer the public significant public safety benefits. We agree with emergency managers, disability rights advocates and individuals that support including phone numbers in Alert Messages because integrating clickable phone numbers into WEA will provide an accessible method to quickly contact public safety officials. This capability may be particularly relevant to WEA AMBER Alerts where emergency management organizations will often establish special hotlines or call centers to receive reports about missing children that may be reached at a phone number other than 911 that may not be as commonly known. According to FEMA, providing the public with a direct emergency telephone number could hasten emergency response, and help to ensure that calls to 911 will not have to be rerouted. In sum, allowing embedded references to be included in WEA Alert Messages will dramatically improve WEA's effectiveness at moving the public to take protective action.
59. With respect to multimedia, our decision to require support for embedded references in WEA Alert Messages is an important first step towards ensuring that WEA can be used to provide the public with actionable multimedia content during emergencies. The record shows that WEA's effectiveness depends on its ability to help the all members of the public to close the thought-action gap, and that including multimedia content in Alert Messages themselves would hasten protective action taking, reduce milling, and improve Alert Message accessibility. We therefore believe that support for multimedia content has the potential to provide tremendous public safety benefits and should be implemented as soon as technically feasible. Recognizing that further standards development remains necessary to integrate multimedia technology into WEA, we seek comment in the
60. We adopt a new Section 10.480 requiring Participating CMS Providers to support the transmission of Spanish-language Alert Messages. This, along with Section 10.500(e) of the Commission's WEA rules, which requires “extraction of alert content in English or the subscriber's preferred language,” will provide a framework to ensure that Spanish-language Alert Messages will be processed and displayed properly. Pursuant to this framework, we would expect that Spanish-language WEA Alert Messages would be displayed on and only on WEA-capable mobile devices where the subscriber has specified Spanish as their preferred language.
61. The record demonstrates that it is technically feasible for Participating CMS Providers to support Spanish-language Alert Messages. ATIS has
62. We agree with Participating CMS Providers that they should not be responsible for Alert Message translation. Rather, emergency managers are the entities best equipped to determine message content, including content in other languages. We recognize that some emergency management agencies report that they do not currently have the capability to initiate Alert Messages in languages other than English. Other emergency management agencies, such as Harris County OHSEM, state that they do have this capability, and “NYCEM is in the final stages of preparing to offer . . . [its] 80 most common messages in the 13 most commonly spoken languages in New York City, including American Sign Language,” but those messages would have to be transmitted using alternative alerting platforms until WEA's multilingual alerting capabilities improve.
63. We anticipate that requiring Participating CMS Providers to support Spanish-language Alert Messages where available will encourage other emergency management agencies to continue to develop their multilingual alerting capabilities. Indeed, many emergency managers state that they can use State/Local WEA Tests as a tool to exercise and improve their multilingual alerting capability over time with the help of voluntary community feedback. We do not agree with NYCEM and Clark County OEM, however, that we should facilitate Alert Message translation by requiring Participating CMS Providers to “place a `translate' button/link” in WEA Alert Messages. Rather, we agree with FEMA and the majority of emergency management agencies that automatic translation technologies that may reside on some mobile devices are currently too inaccurate to support emergency messaging.
64. The overwhelming majority of emergency management agencies support expanding WEA's language capabilities because it will help them to reach members of their communities that are currently inaccessible to them. Emergency managers in areas with large Spanish-speaking populations, as well as those in areas popular among tourists, state that requiring support for Spanish-language WEA Alert Messages will be particularly beneficial. We also anticipate that this action will allow emergency managers to better facilitate the inclusion of Spanish-speaking individuals, and particularly those with limited English proficiency, into their emergency response plans.
65. We require Participating CMS Providers to log their receipt of Alert Messages at their Alert Gateway and to appropriately maintain those records for review. Specifically, we adopt a new Section 10.320(g) that will require Participating CMS Providers' Alert Gateways to log Alert Messages as described below. Based on the record, we have modified the rules we proposed in the
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66. We find that compliance with these minimal alert logging requirements will be technically feasible. Indeed, the approach we adopt today is a more flexible and less burdensome alternative to that which we proposed in the
67. Alert logging has been a fundamental aspect of the WEA Trust Model. As we adopt changes to our rules that reflect our four years of experience with WEA and the underlying advancements of technology, it is time to ensure this fundamental component of system integrity is implemented. Authorized WEA alert originators agree that alert logs maintained at the Participating CMS Provider Alert Gateway have potential to increase their confidence that WEA will work as intended when needed. According to emergency managers, this increased confidence in system availability will encourage emergency managers that do not currently use WEA to become authorized. Alert logs are also necessary to establish a baseline for system integrity against which future iterations of WEA can be evaluated. Without records that can be used to describe the quality of system integrity, and the most common causes of message transmission failure, it will be difficult to evaluate how any changes to WEA that we may adopt subsequent to this
68. We narrow our WEA geo-targeting requirement from the current county-level standard to a polygon-level standard. Specifically, we amend Section 10.450 to state that a Participating CMS Provider must transmit any Alert Message that is specified by a geocode, circle, or polygon to an area that best approximates the specified geocode, circle, or polygon. While we initially proposed that Participating CMS Providers should transmit the Alert Message to an area “no larger than” the specified area, the record shows that implementation of such a standard, in the absence of geo-fencing, would routinely and predictably lead to under alerting. We acknowledge, as do many emergency managers, that cell broadcast technology has a limited capacity for accurate geo-targeting. The “best approximates” standard we adopt today, recommended by CSRIC IV and supported by Participating CMS Providers, requires Participating CMS Providers to leverage that technology to its fullest extent, given its limitations. At the same time, as we discuss below, we acknowledge that emergency managers need even more granular geo-targeting than the “best approximates” standard requires. We commend Participating CMS Providers for voluntarily geo-targeting Alert Messages more accurately than our rules require, where possible, in the years since WEA's deployment. We expect that Participating CMS Providers will continue to innovate in order to provide their subscribers with the best emergency alerting service it is feasible for them to offer. In this regard, we clarify that the geo-targeting requirement we adopt today does not preclude Participating CMS Providers from leveraging the location-sensing capability of WEA-capable mobile devices on their networks to geo-target Alert Message more accurately. As discussed below, the Commission will be adopting even more granular, handset-based, geo-targeting requirements. Our ultimate objective is for all Participating CMS Providers to match the target area provided by an alert originator.
69. Some alert originators remain concerned that a “best approximates” standard will continue to result in over-alerting and subsequent consumer opt-out. NYCEM, for example, warns that the “best approximates” approach is vague and risks weakening our current geo-targeting requirement. While we do not adopt specific parameters for what constitutes “best approximates,” we expect Participating CMS Providers to take reasonable efforts to leverage existing technology to its fullest extent, as noted above. We observe that in a recently adopted report, CSRIC V articulates expectations for cell broadcast-based geo-targeting in rural, suburban and urban areas pursuant to a “best approximates” approach. Specifically, in rural areas, CSRIC V expects that Participating CMS Providers would be able to approximate the target area with 30,000 meters of “overshoot.” In suburban areas, where cell broadcast facilities are likely to be more densely deployed, CSRIC V expects that geo-targeting would become more accurate, achieving an average overshoot of five miles. In urban areas, CSRIC V expects that geo-targeting would be more accurate still, averaging two miles of overshoot. We find that these values would satisfy reasonable efforts to “best approximate” the alert area, consistent with our requirement. In this regard, we believe we strike an appropriate balance between the limitations of Participating CMS Providers' current geo-targeting capabilities using cell broadcast, and WEA stakeholders' goal of sending WEA Alert Messages only to those members of the public who are at risk.
70. We find that compliance with this geo-targeting requirement is technically feasible, and, in fact, every commenting CMS Provider except one states that they already use network-based cell
71. Participating CMS Providers' support for polygon-level geo-targeting will produce significant public safety benefits. Relative to county-level geo-targeting, we expect that polygon-level geo-targeting will reduce over-alerting. When the public regularly receives alerts that do not apply to them, it creates alert fatigue, a driving factor behind consumers' decisions to opt out of receiving WEA Alert Messages. Further, the Houston Office of Public Safety and Homeland Security comments that “[c]ounty-level WEA warning is not only inconvenient, but can be dangerous, as protective actions may vary depending on the proximity to the hazard.” Under-alerting also poses severe public safety risks. According to Austin Homeland Security and Emergency Management, under a county-level geo-targeting standard, “if there are no cell towers physically located in the warning area, the alert may not be transmitted at all by some carriers.” This would be impermissible under the “best approximates” standard we adopt today. We also agree with Dennis Mileti, Professor Emeritus of Sociology at The University of Colorado, that with improved geo-targeting, “it is quite likely that milling after a received WEA message would decrease since people would not need to determine if they are in the intended audience for the WEA.” A reduction in milling is desirable because it reduces the delay between the time an Alert Message is received, and the time that the public will begin to take protective action. This reduction in milling behavior is also likely to benefit Participating CMS Providers by reducing network usage at times when their network is otherwise vulnerable to congestion due to the pending emergency event. Finally, we agree with BRETSA and Douglas County Emergency Management that more granular alerting will encourage emergency managers to become authorized as WEA alert originators. Simply put, Participating CMS Providers' support for polygon-level geo-targeting is an important step towards ensuring that everyone affected by an emergency has access to the emergency information provided by WEA, and contributes to the public perception that “if you receive a WEA, take action, because it applies to you.”
72. Our decision to require support for Participating CMS Providers' best approximation of the target area is an important step towards ensuring that WEA Alert Messages can be sent to only those individuals for whom they are relevant. The record shows that over-alerting leads to alert fatigue, residents that ignore the Alert Messages, and public safety officials who refrain from using WEA in emergencies. The record also demonstrates consensus among emergency managers and Participating CMS Providers that we should clear a path forward for even more accurate geo-targeting, and that we should make progress towards the achievement of this goal by adopting an appropriate regulatory framework, and by continuing to collaborate with WEA stakeholders to establish standards and best practices, and to better understand technical issues. Recognizing that standards development and network modifications may be necessary to further improve geo-targeting, in the
73. Finally, we take action to ensure that emergency alert originators better understand the manner in which their messages will be geo-targeted. In the
74. We amend Section 10.510 to require WEA-capable mobile devices to present WEA Alert Messages as soon as they are received. We expect that devices engaged in active voice or data sessions on 4G-LTE networks will receive and prominently present WEA Alert Messages as soon as they are available, whereas WEA-capable mobile devices engaged in active voice or data sessions on legacy networks will not be able to receive available Alert Messages until the active voice or data session concludes. This approach is consistent with the
75. We also allow Participating CMS Providers to provide their subscribers with the option to specify how the vibration cadence and attention signal should be presented when a WEA Alert Message is received during an active voice or data session in a manner that does not “preempt” it. Pursuant to the
76. This approach reflects the critical importance of a WEA Alert Message to its recipient, while also respecting that the Alert Message recipient may be using their mobile device to engage in a protective action that should not be interrupted, such as placing a call to 911, at the time the Alert Message is received. This approach is consistent with mobile device manufacturers' perspective that giving full priority to WEA Alert Messages during active voice calls “would be distracting to the user,” and that the WEA Alert Message should not disrupt the voice telephony capability of the device. It is also consistent with emergency managers' perspective that the readily recognizable common attention signal and vibration cadence should be presented to the public as quickly as technically possible, particularly during emergency situations where every second is critical. Conversely, we agree with commenters that a “priority access” requirement that would require ongoing voice and data sessions to be terminated by the receipt of a WEA Alert Message would not be in the public interest because it could result in the termination of other critical emergency communications.
77. We require Participating CMS Providers to support State/Local WEA Tests, as proposed in the
78. The 24-hour delivery window that currently applies to RMTs under Section 10.350(a)(2) will not apply to State/Local WEA Tests. Rather, we require that Participating CMS Providers transmit State/Local WEA Tests immediately upon receipt. We agree with commenters that allowing Participating CMS Providers to delay delivery of State/Local WEA Tests would make it impossible for emergency managers to evaluate message delivery latency, and might result in individuals who do opt in to receive State/Local WEA Tests receiving them in the middle of the night, which is unlikely to promote participation. A Participating CMS Provider may not forgo or delay delivery of a State/Local WEA Test, except when the test is preempted by actual Alert Message traffic, or if an unforeseen condition in the Participating CMS Provider infrastructure precludes distribution of the State/Local WEA Test. If a Participating CMS Provider Gateway forgoes or delays a State/Local WEA Test for one of these reasons, it shall send a response code to the Federal Alert Gateway indicating the reason consistent with how we currently require Participating CMS Providers to handle forgone RMTs. We anticipate that allowing Participating CMS Providers to forgo transmittal of a State/Local WEA Test if it is preempted by actual alert traffic or if unforeseen conditions arise will ensure that State/Local WEA Tests do not “overwhelm wireless provides' limited resources, ” as stated by CTIA. We defer to emergency managers to determine how frequently testing is appropriate, given this constraint.
79. We encourage emergency management agencies to engage in proficiency training exercises using this State/Local WEA Testing framework where appropriate. We agree with commenters that proficiency training exercises are a helpful and meaningful way for emergency managers to engage with alert and warning issues. Moreover, we agree with San Joaquin County OES that “proficiency training is an essential element of verifying competency” in the alert origination skill set necessary to issue effective WEA Alert Messages. We observe that our rules allow such proficiency training exercises now. We agree with APCO that alert origination software can be used to support internal proficiency training exercises where emergency managers wish to iterate alert origination best practices in a closed environment, and that the State/Local WEA Testing framework described above is sufficient to support cases where emergency management agencies find it appropriate to involve the public in their WEA exercises. We hope that proficiency training exercises will provide emergency management agencies with a method of generating their own WEA alert origination best practices, particularly with respect to the kinds of enhanced Alert Messages enabled by this proceeding (
80. We find that requiring Participating CMS Providers to support this State/Local WEA Testing framework is technically feasible, requiring only updates to software and standards in order to allow users the option to opt in to receive such tests, and that it will result in significant public safety benefits. Specifically, we agree with Clarion County OES and the Lexington Division of Emergency Management that while occasional system failures are probable, a solid testing and training platform such as this can ensure that failures can be
81. We agree with the public broadcasting and NCE commenters that in order to be fully effective and reflective of WEA system needs, a test of the public television broadcast-based backup to the C-interface should be implemented as an end-to-end test from the IPAWS to the CMS Provider Gateways. Accordingly, we amend our rules to make it clear that periodic C interface testing must include the testing of its public television broadcast-based backup. Pursuant to this framework, FEMA would initiate a test of the broadcast-based C-interface backup by sending a test message through that infrastructure to the CMS Provider Alert Gateway, which would respond by returning an acknowledgement of receipt of the test message to the FEMA Gateway. This approach ensures reliable continuity between FEMA and Participating CMS Providers, even during a disaster in which internet connectivity may be lost. We defer to FEMA as the IPAWS and Federal Alert Gateway administrator to determine the periodicity of these tests in conversation with Participating CMS Providers.
82. By requiring CMS Providers to participate in periodic testing of the broadcast-based backup to the C-interface, “we develop and implement the appropriate safeguards to ensure delivery of critical infrastructure services,” as recommended by the
83. We amend Sections 11.45 and 10.520 to allow federal, state and local, tribal and territorial entities, as well as non-governmental organizations (NGOs) in coordination with such entities, to use the attention signal common to EAS and WEA to raise public awareness about WEA. WEA PSAs that use the WEA attention signal must make clear that it is being used in the context of the PSA, “and for the purpose of educating the viewing or listening public about the functions of their WEA-capable mobile devices and the WEA program,” including by explicitly stating that the WEA attention signal is being used in the context of a PSA for the purpose of educating the public about WEA.
84. We agree with commenters that facilitating federal, state, local, tribal and territorial governments' issuance of WEA PSAs, as proposed, is in the public interest, and that the utility of WEA PSAs will only be augmented by allowing NGOs to produce them in coordination with governmental entities by promoting effective community partnership. Specifically, WEA PSAs can be effective tools to raise public awareness about, and promote positive perceptions of WEA, which may reduce consumer opt-out and reduce milling. We note the PSA campaign of Minnesota Emergency, Community Health and Outreach (ECHO), a program and service of Twin Cities Public Television, as an example of how governmental entities can partner with NGOs to raise community awareness about the significance of the common alerting attention signal for EAS and WEA. We also note that WEA PSAs have become a critical part of FEMA's
85. Therefore, nationwide Participating CMS Providers' subscribers should have greater confidence that WEA Alert Messages they receive are intended for them as of February, 2017. Participating CMS Providers' subscribers should expect to be able to receive Alert Messages in Spanish by 2019. Then, by June 2019, they should expect to see 360-character maximum alerts on 4G LTE and future networks, Public Safety Messages, Alert Messages that contain embedded references, and State/Local WEA Tests presented as soon as they are received. While we expect that updates to our WEA PSA, C-interface backup testing, and alert logging rules will produce significant public safety benefits, as described below, we do not anticipate that consumers will immediately notice a change in service due to these updates.
86. Accordingly,
87.
88.
89. Governmental Affairs Bureau, Reference Information Center,
The rules in this part are issued pursuant to the authority contained in the Warning, Alert, and Response Network Act, Title VI of the Security and Accountability for Every Port Act of 2006, Public Law 109-347, Titles I through III of the Communications Act of 1934, as amended, and Executive Order 13407 of June 26, 2006, Public Alert and Warning System, 71 FR 36975 (June 28, 2006).
Communications common carriers, Emergency alerting.
Radio, Television, Emergency alerting.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 10 and 11 to read as follows:
47 U.S.C. 151, 154(i) and (o), 201, 303(r), 403, and 606; sections 602(a), (b), (c), (f), 603, 604 and 606 of Pub. L. 109-347, 120 Stat. 1884.
(a) CMS providers may provide their subscribers with the option to opt out of the “Child Abduction Emergency/AMBER Alert,” “Imminent Threat Alert” and “Public Safety Message” classes of Alert Messages.
(g)
(1)
(2)
(3)
This section specifies the testing that is required of Participating CMS Providers.
(b)
(c)
(1) A Participating CMS Provider's Gateway shall support the ability to receive a State/Local WEA Test message initiated by the Federal Alert Gateway Administrator.
(2) A Participating CMS Provider shall immediately transmit a State/Local WEA Test to the geographic area specified by the alert originator.
(3) A Participating CMS Provider may forego a State/Local WEA Test if the State/Local WEA Test is pre-empted by actual alert traffic or if an unforeseen condition in the CMS Provider infrastructure precludes distribution of the State/Local WEA Test. If a Participating CMS Provider Gateway forgoes a State/Local WEA Test, it shall send a response code to the Federal Alert Gateway indicating the reason.
(4) Participating CMS Providers shall provide their subscribers with the option to opt in to receive State/Local WEA Tests.
A Participating CMS Provider is required to receive and transmit four classes of Alert Messages: Presidential Alert; Imminent Threat Alert; Child Abduction Emergency/AMBER Alert; and Public Safety Message.
(d)
A Participating CMS Provider is required to transmit Presidential Alerts upon receipt. Presidential Alerts preempt all other Alert Messages. A Participating CMS Provider is required to transmit Imminent Threat Alerts, AMBER Alerts and Public Safety Messages on a first in-first out (FIFO) basis.
A Participating CMS Provider must support transmission of an Alert Message that contains a maximum of 360 characters of alphanumeric text. If, however, some or all of a Participating CMS Provider's network infrastructure is technically incapable of supporting the transmission of a 360-character maximum Alert Message, then that Participating CMS Provider must support transmission of an Alert Message that contains a maximum of 90 characters of alphanumeric text on and only on those elements of its network incapable of supporting a 360 character Alert Message.
Participating CMS Providers are required to support Alert Messages that include an embedded Uniform Resource Locator (URL), which is a reference (an address) to a resource on the Internet, or an embedded telephone number.
This section establishes minimum requirements for the geographic targeting of Alert Messages.
(a) A Participating CMS Provider will determine which of its network facilities, elements, and locations will be used to geographically target Alert Messages. A Participating CMS Provider must transmit any Alert Message that is specified by a geocode, circle, or polygon to an area that best approximates the specified geocode, circle, or polygon. If, however, the Participating CMS Provider cannot broadcast the Alert Message to an area that best approximates the specified geocode, circle, or polygon, a Participating CMS Provider may transmit an Alert Message to an area not larger than the propagation area of a single transmission site.
(b) Upon request from an emergency management agency, a Participating CMS Provider will disclose information regarding their capabilities for geo-targeting Alert Messages. A Participating CMS Provider is only required to disclose this information to an emergency management agency insofar as it would pertain to Alert Messages initiated by that emergency management agency, and only so long as the emergency management agency offers confidentiality protection at least equal to that provided by the federal FOIA.
Participating CMS Providers are required to transmit WEA Alert Messages that are issued in the Spanish language or that contain Spanish-language characters.
Devices marketed for public use under part 10 must present an Alert Message as soon as they receive it, but may not enable an Alert Message to preempt an active voice or data session. If a mobile device receives a WEA Alert Message during an active voice or data session, the user may be given the option to control how the Alert Message is presented on the mobile device with respect to the use of the common
(d) No person may transmit or cause to transmit the WEA common audio attention signal, or a recording or simulation thereof, in any circumstance other than in an actual National, State or Local Area emergency or authorized test, except as designed and used for Public Service Announcements (PSAs) by federal, state, local, tribal and territorial entities, and non-governmental organizations in coordination with those entities, to raise public awareness about emergency alerting, provided that the entity presents the PSA in a non-misleading manner, including by explicitly stating that the emergency alerting attention signal is being used in the context of a PSA for the purpose of educating the viewing or listening public about emergency alerting.
47 U.S.C. 151, 154 (i) and (o), 303(r), 544(g) and 606.
No person may transmit or cause to transmit the EAS codes or Attention Signal, or a recording or simulation thereof, in any circumstance other than in an actual National, State or Local Area emergency or authorized test of the EAS, or as specified in § 10.520(d) of this chapter.
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Notice of final disposition; partial grant and partial denial of application for exemption.
FMCSA announces its decision to grant the Specialized Carriers & Rigging Association (SC&RA) an exemption from the 30-minute rest break rule of the Agency's hours-of-service (HOS) regulations for certain commercial motor vehicle (CMV) drivers. The Agency denies SC&RA's further request for exemption from the 14-hour driving window of the HOS rules. All qualifying motor carriers and drivers operating mobile cranes with a rated lifting capacity of greater than 30 tons are exempt from the 30-minute break provision. FMCSA has analyzed the exemption application and public comments and has determined that the exemption, subject to the terms and conditions imposed, will achieve a level of safety that is equivalent to, or greater than, the level that would be achieved absent such exemption.
The exemption is effective November 1, 2016 and expires on November 1, 2018.
For information concerning this notice, contact Mr. Thomas Yager, Chief, FMCSA Driver and Carrier Operations Division; Office of Carrier, Driver and Vehicle Safety Standards; Telephone: 614-942-6477. Email:
FMCSA has authority under 49 U.S.C. 31136(e) and 31315 to grant exemptions from certain Federal Motor Carrier Safety Regulations (FMCSRs). FMCSA must publish a notice of each exemption request in the
The Agency reviews safety analyses and public comments submitted, 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 the current regulation (49 CFR 381.305). The decision of the Agency must be published in the
On December 27, 2011 (76 FR 81133), FMCSA published a final rule amending its HOS regulations for drivers of property-carrying CMVs. The rule requires most drivers to take a rest break during the workday. Generally, if 8 hours have passed since the end of the driver's last off-duty or sleeper-berth period of at least 30 minutes, the driver may not operate a CMV until he or she takes at least 30 minutes off duty (49 CFR 395.3(a)(3)(ii)). FMCSA did not specify when drivers must take the 30-minute break. The HOS rules also limit drivers of property-carrying CMVs to a 14-hour driving window each duty day (49 CFR 395.3(a)(2)). The window begins when the driver comes on duty following at least 10 consecutive hours off duty. After the 14th consecutive hour from that point, the driver cannot operate a CMV until he or she obtains at least 10 consecutive hours off duty. The requirements of the HOS rules apply to drivers of CMVs and to their motor carrier employers who direct the drivers to operate the CMVs.
On June 18, 2015, FMCSA granted SC&RA an exemption from the 30-minute rest-break requirement for qualifying drivers operating certain large and heavy vehicles that require an oversize/overweight (OS/OW) permit issued by State or local government (80 FR 34957). The Agency granted this exemption for the maximum period of 2 years permitted by the FMCSRs at that time. On December 4, 2015, the President signed the “Fixing America's Surface Transportation Act” (FAST Act)(Pub. L. 114-94). Section 5206(a)(3) of the FAST Act amended 49 U.S.C. 31315(b) to give FMCSA the authority to grant exemptions for up to 5 years. In
SC&RA advises that there are approximately 85,000 trained and certified mobile crane operators in the United States, and, of these, approximately 65,000 operate cranes with a lifting capacity over 30 tons. While some of these cranes require a permit due to their size or weight, others do not. SC&RA seeks an exemption from the 14-hour rule and the requirement for a 30-minute break for drivers operating mobile cranes with a rated lifting capacity of greater than 30 tons. SC&RA states that the HOS rules create complications because it is difficult to find suitable parking when crane drivers are required to go off duty. SC&RA cites data indicating that there is a shortage of parking places for CMVs in the United States and notes ongoing Federal and State efforts to address this problem. Parking for cranes is even more limited because of their size. SC&RA asserts that these two HOS rules often require crane drivers to stop operating a CMV to avoid violating their provisions. The result is that cranes are often parked on the shoulder of public roads. SC&RA states the width of some cranes means they cannot be parked entirely off the travel lanes, creating a safety hazard for their own drivers and others.
SC&RA describes the unpredictable nature of the typical workday of a crane operator. It lists a variety of variables that can complicate the scheduling of operations, including delays waiting for the item to be lifted to arrive at the work site or to be rigged for lifting. Unexpected inclement weather can also trigger delays. SC&RA asserts that the primary result is that the workday may be extended unexpectedly. Thus, timing a crane's movement from the worksite and onto public roads at the end of the day is highly problematic. It notes that State and local restrictions limit the hours of the day, and sometimes the days of the week, that cranes may move on public roads. In addition, the movement of cranes may require a pilot car, the display of signs and lights, and even a police escort. Cranes normally move much slower than the posted speed limit, and are highly susceptible to weather and traffic conditions.
SC&RA does not foresee any negative impact to safety from the requested exemption. It believes that granting the exemption would have a favorable impact on overall safety by reducing the frequency of cranes being parked along public roads. It points out that its members generally drive a crane less than 2 hours a day and have low crash rates.
FMCSA published the SC&RA exemption application for comment on March 16, 2016 (81 FR 14052). The Agency received 13 comments, most supporting the exemption. These commenters asserted that crane operators actually drive very little on public roads, and thus are less likely to suffer from driving fatigue than long-haul CMV drivers. Commenters also described the typical duty day of crane operators at the work site, and pointed out that there are substantial periods when they have to wait for others to complete preparations for the lift. These commenters also described the relatively short distances cranes are driven on public roads at the beginning and end of the day. NationsBuilders Insurance Services, Inc. commented that the drive unit of a crane generally logs only 60,000 miles in 9 years.
Commenters opposing the exemption suggest that motor carriers could avoid or ameliorate their scheduling difficulties by employing a second crane driver. Advocates for Highway and Auto Safety (Advocates) found the application for exemption fatally deficient because it “fails to include any analysis of the safety impacts of the requested exemption.” Advocates also stated that SC&RA ignored the requirement that it “carefully review the regulation to determine whether there are any practical alternatives already available” that would allow it to conduct its operations and comply with the HOS rules. Advocates also believes that SC&RA carriers could overcome the numerous variables affecting these operations by stronger management of their CMV fleets.
FMCSA has evaluated SC&RA's application and the public comments and has decided to grant an exemption from the 30-minute rule but to deny an exemption from the 14-hour rule. The Agency believes that the exempt crane drivers will likely achieve a level of safety that is equivalent to or greater than, the level of safety achieved without the exemption [49 CFR 381.305(a)]. The schedules of these CMV drivers are characterized by daytime hours, low-stress periods of waiting during the workday, and very limited hours of actual driving on public roads. In addition, these loads are sometimes escorted by other vehicles and operate at low speeds.
The unpredictable workday of a mobile-crane operator, with its frequent interruptions and down time, reduces the risk of cumulative fatigue and thus the urgency of a 30-minute break. Providing an exemption from the break will also reduce the number of situations where a crane operator has to park at roadside midway through a move between job sites in order to comply with the 30-minute break rule. The Agency is concerned with parking shortages, especially for very large vehicles. It is highly undesirable to have cranes parked on the shoulders of highways, much less extending into the travel lanes. No matter how well marked, trucks parked at roadside, especially at night, are too easily mistaken for moving vehicles and struck at full speed, with serious consequences.
However, the Agency is not granting exemption from the 14-hour rule. The absence of this limit would allow drivers to operate without any restriction on the length of their duty day. The risk that safety would deteriorate in the absence of this requirement is high. While we agree that the 30-minute break rule is unnecessarily restrictive for operators of large mobile cranes, the 14-hour window is far less restrictive. It is a critical factor in containing fatigue that might otherwise develop. The 14-hour rule is a limit that should be built into the planning of mobile crane operations.
For these reasons, the Agency grants an exemption from the 30-minute rest-break requirement, subject to the terms and conditions in this
1. All motor carriers and drivers operating mobile cranes with a rated lifting capacity of greater than 30 tons are exempt from the 30-minute break requirement of 49 CFR 395.3(a)(3)(ii). The lifting capacity of the crane must be displayed on a manufacturer's certification plate on the crane or in manufacturer's documentation carried on the vehicle.
2. Drivers must have a copy of this exemption document in their possession while operating under the terms of the exemption. The exemption document
3. Motor carriers operating under this exemption must have a “Satisfactory” safety rating with FMCSA, or be “Unrated.” Motor carriers with “Conditional” or “Unsatisfactory” FMCSA safety ratings are prohibited from using this exemption.
This exemption from the requirements of 49 CFR 395.3(a)(3)(ii) is granted for the period from 12:01 a.m., November 1, 2016 through 11:59 p.m., November 1, 2018.
This exemption is limited to the provisions of 49 CFR 395.3(a)(3)(ii). These motor carriers and drivers must comply with all other applicable provisions of the FMCSRs.
In accordance with 49 U.S.C. 31313(d), as implemented by 49 CFR 381.600, during the period this exemption is in effect, no State shall enforce any law or regulation applicable to interstate commerce that conflicts with or is inconsistent with this exemption with respect to a firm or person operating under the exemption. States may, but are not required to, adopt the same exemption with respect to operations in intrastate commerce.
Any motor carrier utilizing this exemption must notify FMCSA within 5 business days of any accident (as defined in 49 CFR 390.5), involving any of the motor carrier's CMV drivers operating under the terms of this exemption. The notification must include the following information:
a. Name of Exemption: “SC&RA cranes”
b. Name of operating motor carrier and USDOT number,
c. Date of the accident,
d. City or town, and State, in which the accident occurred, or closest to the accident scene,
e. Driver's name and license number and State of issuance
f. Vehicle number and State license plate number,
g. Number of individuals suffering physical injury,
h. Number of fatalities,
i. The police-reported cause of the accident,
j. Whether the driver was cited for violation of any traffic laws or motor carrier safety regulations, and
k. The driver's total driving time and total on-duty time prior to the accident.
Reports filed under this provision shall be emailed to
FMCSA believes motor carriers conducting crane operations under this exemption will continue to maintain their safety record while operating under this exemption. However, should safety be compromised, FMCSA will take all steps necessary to protect the public interest, including revocation or restriction of the exemption. The FMCSA will immediately revoke or restrict the exemption for failure to comply with its terms and conditions.
National Transportation Safety Board (NTSB).
Final rule.
The NTSB makes technical updates and corrects citations in its administrative regulations governing agency organization and functions, delegations of authority to staff members, and procedures for adopting rules, regulations governing the agency's official seal, and regulations implementing the Government in the Sunshine Act. These revisions make no substantive changes.
This rule is effective November 1, 2016.
A copy of this Final Rule, published in the
Matthew D. McKenzie, Attorney-Advisor, (202) 314-6080,
The Administrative Procedure Act (APA), 5 U.S.C. 553, provides exceptions to its notice and public comment rulemaking procedures where (1) the rules are rules of agency organization, procedure, or practice; or (2) the agency finds there is good cause to forego notice and comment, and incorporates the finding and a brief statement of reasons therefore in the rule issued. Generally, good cause exists where the agency determines that notice and public comment procedures are impractical, unnecessary, or contrary to the public interest. 5 U.S.C. 553(b).
Parts 800, 803, and 804 govern internal agency organization, procedure, or practice. Part 800, subparts A and B, describes the organization of the agency. Part 800, subpart C, prescribes procedures for the agency's rulemakings. Part 803 describes the agency's seal and limits its use. Part 804 prescribes procedures for the agency's open meetings.
The amendments made in this final rule merely correct inadvertent errors and omissions, remove obsolete references, and make minor editorial changes to improve clarity and consistency. The technical amendments do not impose any new requirements, nor do they make any substantive changes to the Code of Federal Regulations. For these reasons, the NTSB finds good cause that notice and public comment on this final rule are unnecessary. For these same reasons, this rule will be effective on the date of publication in the
On June 25, 2012, the NTSB announced its plan to review its regulations, 49 CFR parts 800 through 850, to comply with Executive Order (E.O.) 13563,
On January 8, 2013, after reviewing its regulations, the NTSB announced its plan to update its regulations, including revising internal agency procedures for which no public comment was required.
Pursuant to that plan, in this Final Rule, the NTSB makes editorial improvements and corrects obsolete information and citations in parts 800 (Administrative Rules), 803 (Official Seal), and 804 (Rules Implementing the Government in the Sunshine Act).
This rule does not require an assessment of its potential costs and benefits under section 6(a)(3) of E.O. 12866,
In addition, under the Regulatory Flexibility Act, 5 U.S.C. 601-12, the NTSB has considered whether this rule would have a significant economic impact on a substantial number of small entities. The NTSB certifies under 5 U.S.C. 605(b) that this rule would not have a significant economic impact on a substantial number of small entities. Moreover, in accordance with 5 U.S.C. 605(b), the NTSB will submit this certification to the Chief Counsel for Advocacy at the Small Business Administration.
Moreover, the NTSB does not anticipate this rule will have a substantial, direct effect on state or local governments or will preempt state law; as such, this rule does not have implications for federalism under E.O. 13132,
This rule also complies with all applicable standards in sections 3(a) and 3(b)(2) of E.O. 12988,
NTSB has evaluated this rule under: E.O. 12630,
Administrative practice and procedure, Authority delegations (Government agencies), Government employees, Organization and functions (Government agencies).
Seals and insignia.
Sunshine Act.
For the reasons stated in the preamble, the National Transportation Safety Board amends 49 CFR parts 800, 803, and 804 as set forth below:
49 U.S.C. 1101
(a) The primary function of the Board is to promote safety in transportation. The Board is responsible for the investigation, determination of facts, conditions, and circumstances and the cause or probable cause or causes of:
(1) All accidents involving civil aircraft, and certain public aircraft;
(2) Highway accidents, including railroad grade-crossing accidents, the investigation of which is selected in cooperation with the States;
(3) Railroad accidents in which there is a fatality, substantial property damage, or which involve a passenger train;
(4) Pipeline accidents in which there is a fatality, significant injury to the environment, or substantial property damage; and
(5) Major marine casualties and marine accidents involving a public and a non-public vessel or involving Coast Guard functions.
(b) The Board makes transportation safety recommendations to federal, state, and local agencies and private organizations to reduce the likelihood of transportation accidents. It initiates and conducts safety studies and special investigations on matters pertaining to safety in transportation, assesses techniques and methods of accident investigation, evaluates the effectiveness of transportation safety consciousness and efficacy of other Government agencies, and evaluates the adequacy of safeguards and procedures concerning the transportation of hazardous materials.
(c) Upon application of affected parties, the Board reviews in quasijudicial proceedings, conducted pursuant to the Administrative Procedure Act, 5 U.S.C. 551
(d) The Board, as provided in part 801 of this chapter, issues reports and orders pursuant to its duties to determine the cause or probable cause or causes of transportation accidents and to report the facts, conditions and circumstances relating to such accidents; issues opinions and/or orders in accordance with 49 U.S.C. 1133 after reviewing on appeal the imposition of a civil penalty or the suspension, amendment, modification, revocation, or denial of a certificate or license issued by the Secretary of the Department of Transportation (who acts through the Administrator of the Federal Aviation Administration) or by the Commandant of the United States Coast Guard; and issues and makes available to the public safety recommendations, safety studies, and reports of special investigations.
49 U.S.C. 1111(j), 1113(f).
5 U.S.C. 552b; 49 U.S.C. 1113(f).
(d) Disclose trade secrets or privileged or confidential commercial or financial information obtained from a person;
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule.
NMFS is implementing final specifications and management measures for the 2016-2018 Atlantic herring fishery. This action sets harvest specifications and river herring/shad catch caps for the herring fishery for the 2016-2018 fishing years, as recommended to NMFS by the New England Fishery Management Council. The river herring/shad catch caps are area and gear-specific. River herring and shad catch from a specific area with a specific gear counts against a cap for trips landing more than a minimum amount of herring. The specifications and management measures in this action meet conservation objectives while providing sustainable levels of access to the fishery.
Effective December 1, 2016.
Copies of supporting documents used by the New England Fishery Management Council, including the Environmental Assessment (EA) and Regulatory Impact Review (RIR)/Initial Regulatory Flexibility Analysis (IRFA), are available from: Thomas A. Nies, Executive Director, New England Fishery Management Council, 50 Water Street, Mill 2, Newburyport, MA 01950, telephone (978) 465-0492. The EA/RIR/IRFA is also accessible via the Internet at
Shannah Jaburek, Fishery Management
NMFS published a proposed rule for the 2016-2018 specifications on June 21, 2016 (81 FR 40253). The comment period on the proposed rule ended on July 21, 2016. NMFS received 32 comments, which are summarized in the “Comments and Responses” section of this final rule.
Regulations implementing the Atlantic Herring Fishery Management Plan (FMP) appear at 50 CFR part 648, subpart K. Regulations at § 648.200 require NMFS to make final determinations on the herring specifications recommended by the New England Fishery Management Council in the
An operational update to the herring stock assessment, completed in May 2015, indicated that herring was not overfished and overfishing was not occurring. However, the assessment contained a retrospective pattern suggesting that spawning stock biomass (SSB) is likely overestimated and fishing mortality (F) is likely underestimated. Following an adjustment for the retrospective pattern, the assessment estimated the herring stock at approximately double its target biomass (SSB
The herring ABC of 111,000 mt (a 3-mt decrease from status quo) for 2016-2018 is based on the current control rule (constant catch with 50-percent probability that F > F
Under the FMP, the herring ACL is reduced from ABC to account for management uncertainty, and the primary source of management uncertainty is catch in the New Brunswick weir fishery. Catch in the weir fishery is variable, but has declined in recent years. This final rule implements a management uncertainty buffer of 6,200 mt, which is equivalent to the value of the buffer in 2015. To help ensure catch in the New Brunswick weir fishery does not exceed the management uncertainty buffer, NMFS specifies a buffer greater than the most recent 3-year and 5-year average catch in the New Brunswick weir fishery. The resulting stockwide ACL will be 104,800 mt.
Given the variability of the New Brunswick weir catch and the likelihood that weir catch may be less than 6,200 mt, NMFS also specifies a New Brunswick weir fishery payback provision. Specifically, NMFS will subtract 1,000 mt from the management uncertainty buffer and add it to the ACL if the weir fishery harvests less than 4,000 mt by October 1. The 1,000 mt added to the ACL would also increase the sub-ACL for Herring Management Area 1A. NMFS selects the October 1 date to trigger the payback provision for two reasons. First, there is typically only minimal catch in the New Brunswick weir fishery after October 1 (less than four percent of total reported landings from 1978 to 2014) so the likelihood of weir catch exceeding the management uncertainty buffer after October 1 is low. Second, adding 1,000 mt to the Area 1A sub-ACL in October is expected to allow herring vessels to access the additional harvest before catch in the herring fishery is limited in Area 1A. NMFS implements a 2,000-lb (907-kg) herring possession limit in Area 1A when it projects that 92 percent the sub-ACL has been harvested. If New Brunswick weir catch is less than 4,000 mt by October 1, the management uncertainty buffer will be reduced to 5,200 mt, the ACL will be increased to 105,800 mt, and the Herring Management Area 1A sub-ACL will be increased to 31,300 mt. The New Brunswick weir fishery payback provision was last in effect during fishing years 2010-2012, so this final rule puts the payback provision back in place for 2016-2018. NMFS is currently awaiting final data to decide whether or not to subtract 1,000 mt from the management uncertainty buffer and increase the ACL and the Area 1A sub-ACL.
BT is a processing allocation available to Canadian dealers. The MSA provides for the issuance of permits to Canadian vessels transporting U.S.-harvested herring to Canada for sardine processing. The amount specified for BT has equaled 4,000 mt since 2000. As there continues to be interest in transporting herring to Canada for sardine processing, NMFS maintains BT at 4,000 mt.
The Atlantic Herring FMP specifies that DAH will be set less than or equal to OY and be composed of DAP and BT. DAP is the amount of U.S. harvest that is processed domestically, as well as herring that is sold fresh (
A portion of DAP may be specified for the at-sea processing of herring in Federal waters. When determining this USAP specification, the Council considered the availability of shore-side processing, status of the resource, and opportunities for vessels to participate in the herring fishery. During the 2007-2009 fishing years, the Council maintained a USAP specification of 20,000 mt (Herring Management Areas
The herring ABC specification recommended by the SSC for 2016-2018 is not substantially different from the 2013-2015 ABC specification because, in part, key attributes of the herring stock (SSB, recruitment, F, and survey indices) have not significantly changed since the 2013-2015 herring specifications. Therefore, NMFS determined that there is no new information on which to modify the allocation of the total ACL between the herring management areas. This final rule maintains status quo percentage allocations for the herring sub-ACLs for the 2016-2018 specifications. The resulting sub-ACLs are slightly lower than 2013-2015 specifications (see Table 1).
NMFS maintains the 2016-2018 RSA specification at 3 percent of each herring management area sub-ACL. The herring RSA is removed from each sub-ACL prior to allocating the sub-ACL to the fishery. If an RSA proposal is approved, but a final award is not made by NMFS, or if NMFS determines that the RSA cannot be utilized by a project, NMFS shall reallocate the unallocated or unused amount of the RSA to the respective sub-ACL. On February 29, 2016, NMFS fully awarded the herring RSA for fishing years 2016-2018.
Herring regulations at § 648.201(e) specify that up to 500 mt of the Herring Management Area 1A sub-ACL shall be allocated for the fixed gear fisheries (weirs and stop seines) in Area 1A that occur west of 67°16.8′ W. long. This set-aside shall be available for harvest by the fixed gear fisheries within Area 1A until November 1 of each year; any unused portion of the allocation will be restored to the Area 1A sub-ACL after November 1. During the 2013-2015 fishing years, the fixed gear set-aside was specified at 295 mt. Because the proposed Area 1A sub-ACL for the 2016-2018 fishing years is not substantially different from the Area 1A sub-ACL in 2015, NMFS maintains the fixed gear set-aside at 295 mt.
Framework 3 to the Atlantic Herring FMP established gear and area-specific river herring/shad catch caps for the herring fishery in 2014. These included catch caps for midwater trawl vessels fishing in the Gulf of Maine, off Cape Cod, and in Southern New England, as well as for small-mesh bottom trawl vessels fishing in Southern New England. The caps are intended to minimize river herring and shad bycatch and bycatch mortality to the extent practicable while allowing the herring fishery an opportunity to fully harvest the herring ACL. The incentive to minimize the catch of river herring and shad is to avoid the implementation of a herring possession limit. Herring regulations at § 648.201(a)(4)(ii) state that once 95 percent of a catch cap is harvested, the herring possession limit for vessels using that gear type and fishing in that area is reduced to 2,000 lb (907 kg) for the remainder of the fishing year. Once a 2,000-lb (907-kg) possession limit is in effect for a particular gear and area, the herring fishery's ability to harvest the herring sub-ACL associated with that area is limited. The herring fleet's avoidance of river herring and shad combined with the catch caps are expected to minimize river herring and shad bycatch and bycatch mortality. Additionally, the herring fishery is expected to be able to harvest the herring ACL, provided the fishery continues to avoid river herring and shad.
As noted in Framework 3, available data are not robust enough to specify biologically-based catch caps that reflect river herring and shad abundance or to evaluate the potential impacts of catch caps on the river herring and shad stocks. Specific biological impacts on river herring and shad are influenced by fishing activity, environmental factors, climate change, restoration efforts, and other factors. In the absence of sufficient data to specify biologically-based catch caps, the caps have been set using recent river herring and shad catch data with the intent of keeping catch below its highest levels to limit fishing mortality on river herring and shad. Limiting fishing mortality is expected to result in positive impacts on the stocks.
To date the values of the caps have been specified using the median catch of river herring and shad catch over the previous 5 years (2008-2012). The 2016-2018 river herring/shad catch caps, as specified below in Table 2, are calculated using a revised methodology and updated data over a longer time period. The revised methodology uses a weighted mean catch of river herring and shad (versus median catch). This methodology better accounts for the inter-annual variability in the level of sampling by both observers and portside samplers by weighting years with higher sampling levels more heavily than years with lower sampling levels. Additionally, the revised methodology includes previously omitted catch data, including some shad landings and trips from catch cap areas where trips did not meet the 6,600-lb (3-mt) herring landing threshold, and updated extrapolation methodology (using sampled trips to estimate catch on unsampled trips). Lastly, by using a longer time series (the most recent 7 years versus 5 years), the value of the caps can be based on more data, especially the most recent catch information, to better ensure the catch caps reflect the herring fishery's interactions with river herring and shad and overall fishing effort.
NMFS determined that using a longer time series, including more recent and previously omitted data, as well as using a weighted mean to generate the values for river herring/shad catch caps is consistent with using the best available science. Setting cap amounts
NMFS is adjusting the river herring/shad catch caps to reflect the use of best available scientific data and a revised, superior methodology. This adjustment increases the catch caps for three of the four river herring/shad catch caps in the herring fishery. Based on fishing practices to date, however, NMFS expects river herring and shad catch to remain below the catch cap amounts. For example, the herring industry currently has harvested only 57 percent of the total river herring and shad catch allowed under the 2015 river herring/shad catch caps. Because river herring and shad catch is currently well below allowable catch limits, NMFS does not expect that any catch cap increases implemented in this action will result in a substantial increase in river herring and shad catch. Rather, NMFS anticipates that the 2,000-lb (907-kg) herring possession limit that will result if a cap is harvested will continue to provide a strong incentive for the herring industry to avoid catching river herring and shad and that the herring industry will continue to harvest less than the river herring and shad catch allowed under the adjusted catch caps.
NMFS received 32 comment letters on the proposed rule: 9 from interested members of the public; 3 from herring industry participants; 2 from other fishing industry participants (Massachusetts Lobstermen's Association (MLA) and the Cape Cod Commercial Fishermen's Alliance); 4 from local watershed groups (Jones River, Ipswich River, Mystic River, and the Herring Ponds Watershed Associations); and 12 from non-governmental organizations (NGOs), including 6 prominent environmental advocacy groups (Conservation Law Foundation, Earth Justice, the Herring Alliance, Save the Bay-Narragansett, the Mohegan Tribe, and Alewife Harvesters of Maine). Two of the environmental advocacy group comments were form letters that contained signatures and personalized comments, including: A letter from PEW Charitable Trusts with 10,593 signatures and 931 personalized comments; and a letter from Earth Justice with 2,298 signatures and 234 personalized comments.
The incentive to minimize the catch of river herring and shad is to avoid the implementation of a herring possession limit. For example, catch tracked against the Southern New England/Mid-Atlantic bottom trawl cap is currently 21 mt compared to 51 mt at this same time last year. This suggests that the existence of the catch caps is an effective incentive to avoid river herring and shad catch and more restrictive caps are not required to provide an incentive to continue to avoid river herring and shad catch.
The University of Massachusetts and Massachusetts Division of Marine Fisheries operate a river herring avoidance program for vessels participating in the herring fishery. This program is funded, in part, by the herring RSA for 2016-2018. The participation level of midwater trawl and bottom trawl vessels in the avoidance program has increased in recent years and currently includes the majority of midwater trawl and bottom trawl vessels. The river herring avoidance program provides vessels with near real-time information on where herring vessels are encountering river herring and encourages vessels to avoid and/or leave those areas. Select vessels that comply with the requirements of the avoidance program are able to harvest the herring RSA. Both the river herring avoidance program and the opportunity to harvest the herring RSA provide additional incentive for herring vessels to avoid river herring and shad.
For these reasons, NMFS concludes the catch caps implemented in this action are consistent with the incentives to avoid and minimize catch to the extent practicable.
Catch caps for the 2016-2018 fishing years were calculated by using previously omitted catch data and a longer time series (most recent 7 years rather than 5 years). This ensures that the value of the catch caps are based on more data, especially the most recent catch information, to better ensure the catch caps reflect the herring fishery's interactions with river herring and shad and overall fishing effort. Because catch data may indirectly reflect stock abundance, setting catch caps based on recent catch data are expected to result in catch caps that are more consistent with current fishing activity, and possibly stock conditions. Commenters provided no information to substantiate claims that the herring industry intentionally caught more river herring and shad in 2013 and 2014 in order to artificially inflate catch caps. Therefore, NMFS concludes extending the time series used to calculate caps to include the two most recent years (2013 and 2014) best reflects the recent catch of river herring and shad, makes the best use of new information, and is consistent with Framework 3.
Using a weighted mean, rather than the median or unweighted mean, to calculate catch caps best accounts for the inter-annual variability in the level of sampling (both observer and portside) of river herring and shad catch. Caps calculated using the median catch of river herring and shad would base the value of the cap on the total number of catch estimates, giving equal weight to all years regardless of sampling level. Using the unweighted mean, caps would be based on the average catch each year regardless of sampling level. In contrast, using a weighted mean to calculate catch caps adjusts for the sampling level each year and incorporates those averages into the overall average, thereby giving more weight to years with more sampling versus years with less sampling. Therefore, using a weighted mean helps account for the fluctuations in levels of sampling relative to observed catch of river herring and shad to help mitigate the effects of any outlier years.
The revised methodology was developed by the Herring Plan Development Team (PDT). The PDT is the Council's technical group responsible for developing and preparing analyses to support the Council's management actions. The PDT is responsible for generating analyses to calculate quotas, caps, or any other technical aspects of the FMP. For the 2016-2018 catch caps, the PDT reviewed updated river herring and shad catch data and generated a range of catch cap alternatives for the
Using the revised methodology to calculate river herring/shad catch caps is consistent with using the best available science and it balances the incentive to avoid river herring and shad against the opportunity for the herring fishery to harvest the ACL. For these reasons, NMFS disagrees that the basis for setting river herring/shad catch caps implemented through this action, including the revised methodology, is arbitrary and capricious.
When the MAFMC developed the river herring and shad catch cap for the mackerel fishery, the catch cap was based on median river herring and shad catch in the mackerel fishery during 2005-2012. This methodology was identical to the river herring and shad catch cap methodology developed by the Council for the 2014-2015 herring fishery. However, the Council considers both observer and portside sampling data to set catch caps while the MAFMC only considers observer data. The MAFMC continues to use the median river herring and shad catch estimate from 2005-2012 to set the catch cap for the mackerel fishery. However, if the mackerel fishery harvests 10,000 mt of mackerel in a given year, the river herring and shad catch cap is scaled up to the match the median river herring and shad catch estimate based on the mackerel ACL.
NMFS agrees that river herring/shad catch caps for the herring and mackerel fisheries should not cause management inconsistencies between the two fisheries. Midwater trawl and bottom trawl vessels often participate in both the herring and mackerel fisheries. When fishing trips meet the minimum harvest threshold for catch caps in the herring fishery (6,600 lb (3 mt) of herring) and the minimum harvest threshold for the catch cap in the mackerel fishery (20,000 lb (9,072 kg) of mackerel), then river herring and shad catch on those trips is counted against both caps and vessels would be subject to the most restrictive catch cap. Rather than management inconsistencies, river herring/shad catch caps in both the herring and mackerel fisheries provide an additional incentive to avoid river herring and shad catch, thereby potentially limiting fishing mortality on these species.
As discussed previously, the incentive to minimize the catch of river herring and shad is to avoid the implementation of a herring possession limit. Once a 2,000-lb (907-kg) possession limit is in effect for a particular gear and area, the herring fishery's ability to harvest the herring sub-ACL associated with that area or the herring ACL is limited. This potential economic loss must be weighed against the role of river herring and shad in the herring fishery. River herring and shad are not target species in the herring fishery. Rather, they are harvested because they co-occur with herring and
When evaluating the river herring/shad catch caps recommended by the Council, NMFS considered the ecological and economic considerations associated with the catch caps, as well fishing practices and behavior. The catch caps are intended to minimize river herring and shad bycatch and bycatch mortality to the extent practicable, while allowing the herring fishery an opportunity to fully harvest the herring ACL. The total catch of river herring and shad (both retained and discarded) is tracked against the catch caps. Because total catch of river herring and shad catch is counted against the catch caps, these caps not only help minimize the retained catch of river herring and shad, but they also help minimize any river herring and shad catch that is discarded at sea. As described in the responses to previous comments, NMFS concludes that catch caps are calculated using new and updated information and are based on the best available science. NMFS also concludes that if vessels continue to avoid river herring and shad, they would have an opportunity to harvest the herring ACL. Additionally, NMFS concludes that catch caps may limit fishing mortality on river herring and shad, thereby supporting ongoing Federal, state, and local conservation efforts. For these reasons, NMFS determines the river herring/shad catch caps implemented in this action reduce bycatch and bycatch mortality to the extent practicable and are consistent with the MSA, National Standard 9, and the Atlantic Herring FMP.
The Assistant Administrator for Fisheries, NOAA, has determined that this rule is consistent with the national standards and other provisions of the MSA and other applicable laws.
This final rule has been determined to be not significant for purposes of Executive Order 12866.
NMFS, pursuant to section 604 of the Regulatory Flexibility Act (RFA), has completed a final regulatory flexibility analysis (FRFA) in support of this action. The FRFA incorporates the IRFA, a summary of the significant issues raised by the public comments in response to the IRFA, NMFS responses to those comments, and a summary of the analyses completed in the 2016-2018 herring specifications EA. A summary of the IRFA was published in the proposed rule for this action and is not repeated here. A description of why this action was considered, the objectives of, and the legal basis for this action is contained in the preamble to the proposed rule (81 FR 40253), and is not repeated here. All of the documents that constitute the FRFA are available from NMFS and a copy of the IRFA, the RIR, and the EA are available upon request (see
NMFS received 32 comment letters on the proposed rule. Those comments, and NMFS' responses, are contained in the Comments and Responses section of this final rule and are not repeated here. None of the comments addressed the IRFA and NMFS did not make any changes in the final rule based on public comment.
This final rule would affect all permitted herring vessels; therefore, the regulated entity is the business that owns at least one herring permit. From 2014 permit data, there were 1,206 firms that held at least one herring permit; of those, 1,188 were classified as small businesses. There were 103 firms, 96 classified as small businesses, which held at least one limited access permit. There were 38 firms, including 34 small businesses, which held a limited access permit and were active in the herring fishery. All four of the active large entities, held at least one limited access herring permit. The small firms with limited access permits had 60 percent higher gross receipts and 85 percent higher revenue from herring than the small firms without a limited access herring permit. Based on 2014 permit data, the number of potential fishing vessels in each permit category in the herring fishery are as follows: 39 for Category A (limited access, all herring management areas); 4 for Category B (limited access, Herring Management Areas
On December 29, 2015, NMFS issued a final rule establishing a small business size standard of $11 million in annual gross receipts for all businesses primarily engaged in the commercial fishing industry (NAICS 11411) for RFA compliance purposes only (80 FR 81194, December 29, 2015). The $11 million standard became effective on July 1, 2016, and is to be used in place of the U.S. Small Business Administration's (SBA) previous standards of $20.5 million, $5.5 million, and $7.5 million for the finfish (NAICS 114111), shellfish (NAICS 114112), and other marine fishing (NAICS 114119) sectors, respectively, of the U.S. commercial fishing industry.
An IRFA was developed for this regulatory action prior to July 1, 2016, using SBA's previous size standards. Under the SBA's size standards, 4 of 38 active herring fishing entities with limited access permits were determined to be large. NMFS has qualitatively reviewed the analyses prepared for this action using the new size standard. The new standard could result in fewer commercial finfish businesses being considered small (due to the decrease in size standards).
Taking this change into consideration, NMFS has identified no additional significant alternatives that accomplish statutory objectives and minimize any significant economic impacts of the proposed rule on small entities. The ACLs are fishery wide and any closures would apply to the entire fishery, and should be felt proportionally by both large and small entities. Further, the new size standard does not affect the decision to prepare a FRFA as opposed to a certification for this regulatory action.
This final rule does not introduce any new reporting, recordkeeping, or other compliance requirements.
Specification of commercial harvest and river herring/shad catch caps are constrained by the conservation objectives set forth in the FMP and implemented at 50 CFR part 648, subpart K under the authority of the MSA. Furthermore, specifications must be based on the best available scientific information, consistent with National Standard 2 of the MSA. With the specification options considered, the measures in this final rule are the only measures that both satisfy these overarching regulatory and statutory requirements while minimizing, to the extent possible, impacts on small entities. This rule implements the herring specifications outlined in Table 1 and the river herring/shad catch caps outlined in Table 2. Other options considered by the Council, including those that could have less of an impact on small entities, failed to meet one or more of these stated objectives and, therefore, cannot be implemented. Under Alternatives 1 and 2 for harvest specifications, small entities may have experienced slight increases in both gross revenues and herring revenues over the preferred alternative due to higher ACLs. However, Alternative 1 would fail to create a sustainable fishery because the ABC exceeds the ABC recommended by the SSC for 2016-2018 and has an increased risk of overfishing as compared to the preferred alternative. The ABC associated with Alternative 2 is equal to the ABC associated with the preferred alternative; however, the management uncertainty buffer is less under Alternative 2, resulting in a higher ACL than the preferred alternative. Rather than select an alternative with a higher ACL, the Council selected Alternative 3 to be more precautionary. Alternatives 1 and 2 for the river herring/shad catch caps failed to use the best available science as compared to the Alternative 3, which uses a longer time series, including more recent and previously omitted data, as well as a weighted mean, to best account for the inter-annual variability in the level of river herring and shad sampling, to generate the values for river herring/shad catch caps. The impacts of the specifications, as implemented by this final rule, are not expected to disproportionately affect large or small entities.
Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. As part of this rulemaking process, a letter to permit holders that also serves as small entity compliance guide was prepared. Copies of this final rule are available from the Greater Atlantic Regional Fisheries Office (GARFO), and the compliance guide,
Fisheries, Fishing, Recordkeeping and reporting requirements.
For the reasons set out in the preamble, 50 CFR part 648 is amended as follows:
16 U.S.C. 1801
(h) If NMFS determines that the New Brunswick weir fishery landed less than
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; reallocation.
NMFS is exchanging unused flathead sole and rock sole Community Development Quota (CDQ) for yellowfin sole CDQ acceptable biological catch (ABC) reserves in the Bering Sea and Aleutian Islands management area. This action is necessary to allow the 2016 total allowable catch of yellowfin sole in the Bering Sea and Aleutian Islands management area to be harvested.
Effective November 1, 2016 through December 31, 2016.
Steve Whitney, 907-586-7228.
NMFS manages the groundfish fishery in the Bering Sea and Aleutian Islands management area (BSAI) according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The 2016 flathead sole, rock sole, and yellowfin sole CDQ reserves specified in the BSAI are 1,233 metric tons (mt), 4,970 mt, and 17,562 mt as established by the final 2016 and 2017 harvest specifications for groundfish in the BSAI (81 FR 14773, March 18, 2016) and following revision (81 FR 72740, October 21, 2016). The 2016 flathead sole, rock sole, and yellowfin sole CDQ ABC reserves are 5,856 mt, 12,268 mt, and 5,090 mt as established by the final 2016 and 2017 harvest specifications for groundfish in the BSAI (81 FR 14773, March 18, 2016) and following revision (81 FR 72740, October 21, 2016).
The Yukon Delta Fisheries Development Association has requested that NMFS exchange 73 mt of flathead sole and 606 mt of rock sole CDQ reserves for 679 mt of yellowfin sole CDQ ABC reserves under § 679.31(d). Therefore, in accordance with § 679.31(d), NMFS exchanges 73 mt of flathead sole and 606 mt of rock sole CDQ reserves for 679 mt of yellowfin sole CDQ ABC reserves in the BSAI. This action also decreases and increases the TACs and CDQ ABC reserves by the corresponding amounts. Tables 11 and 13 of the final 2016 and 2017 harvest specifications for groundfish in the BSAI (81 FR 14773, March 18, 2016), and following revision (81 FR 72740, October 21, 2016), are revised as follows:
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the flatfish exchange by the Yukon Delta Fisheries Development Association in the BSAI. Since these fisheries are currently open, it is important to immediately inform the industry as to the revised allocations. Immediate notification is necessary to allow for the orderly conduct and efficient operation of this fishery, to allow the industry to plan for the fishing season, and to avoid potential disruption to the fishing fleet as well as processors. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of October 24, 2016.
The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
This action is required by § 679.20 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of data availability (NODA).
The U.S. Department of Energy (DOE) has completed a provisional analysis that estimates the potential economic impacts and energy savings that could result from promulgating a regulatory energy conservation standard for commercial and industrial fans and blowers (“fans”). At this time, DOE is not proposing any energy conservation standard for fans. However, it is publishing this analysis so stakeholders can review the analysis results and the underlining assumptions and calculations that might ultimately support a proposed standard. DOE encourages stakeholders to provide any additional data or information that may improve the analysis. The analysis is now publically available at
DOE will accept comments, data, and information regarding the NODA no later than December 1, 2016.
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The docket Web page can be found at:
Ms. Ashley Armstrong, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies, EE-2J, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-6590. Email:
Mr. Peter Cochran, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-9496. Email:
On June 28, 2011, DOE published a notice of proposed determination of coverage to initiate the energy conservation standards rulemaking for fans, blowers, and fume hoods. 76 FR 37678. Subsequently, DOE published a notice of public meeting and availability of the Framework document for commercial and industrial fans and blowers (“fans”) in the
On December 10, 2014, DOE published a notice of data availability (December 2014 NODA) that estimated the potential economic impacts and energy savings that could result from promulgating energy conservation standards for fans. 79 FR 73246. The December 2014 NODA comment period was originally scheduled to close on January 26, 2015. However, DOE subsequently published a notice extending the comment period to February 25, 2015, to allow additional time for interested parties to submit
Concurrent with these efforts, DOE also began a process through the Appliance Standards Rulemaking Federal Advisory Committee (ASRAC) to discuss negotiated energy conservation standards and test procedure for fans.
The Working Group negotiations comprised 16 meetings and three webinars and covered scope, metrics, test procedures, and energy conservation standard levels for fans.
Since the negotiations, DOE has revised its analysis to reflect the term sheet recommendations regarding the metric and energy conservation standards. DOE is publishing this NODA to inform stakeholders of the impacts of potential energy conservation standards for fans based on term sheet recommendations and to request feedback on specific issues.
DOE made several changes to its analysis in preparing this NODA to address the term sheet recommendations as well as other stakeholder concerns expressed during the negotiations. Table II-1 lists the stakeholders who commented on issues addressed in this NODA. These changes and the ensuing results are described in section III, the accompanying analysis spreadsheets, or both. The most significant changes include
(1) the augmentation of the AMCA sales data used in the May 2015 NODA to better account for fans made by companies that incorporate those fans for sale in their own equipment (see section III.G);
(2) the augmentation of the AMCA sales data used in the May 2015 NODA to represent additional sales of forward curved fans, which AMCA stated were underrepresented in the original data AMCA provided. (AMCA, Public Meeting Transcript, No. 85 at p. 91); and
(3) the inclusion of OEM equipment conversion costs.
At this time, DOE is not proposing any energy conservation standards for fans. DOE may revise the analyses presented in today's NODA based on any new or updated information or data it obtains during the course of the rulemaking. DOE encourages stakeholders to provide any additional data or information that may improve the analysis.
DOE developed provisional analyses of fans in the following areas: (1) Engineering; (2) manufacturer impacts; (3) LCC and PBP; and (4) national impacts. The Government Regulatory Impact Model (GRIM), the engineering spreadsheet, the life-cycle cost spreadsheet, and the national impact analysis spreadsheet used in preparing these analyses and their respective results are available at:
Fan energy performance is a critical input in the provisional analyses discussed in this notice. DOE used the fan electrical input power metric (FEP) as recommended by the Working Group to characterize the efficiency levels and represent fan performance. (No. 179, Recommendation #6 at p. 5)
The recommended FEP metric represents the electrical input power of the fan and includes the performance of the motor, and any transmission and/or control if integrated, assembled, or packaged with the fan. The Working Group recommended to require manufacturers to determine the FEP at each manufacturer-declared operating point, at standard air density, where the operating point is characterized by a value of airflow and total pressure for ducted fans and by a value of airflow and static pressure for unducted fans.
As noted previously, the FEP of a fan includes the performance of the bare shaft fan and of its drive system.
Based on this recommendation, and applying the same approach for embedded fans (see Section III.B), this NODA calculates the
The Working Group recommended a fan efficiency equation to use for all fans when calculating
The detailed equations and assumptions used to calculate FEP
In addition, for this NODA, DOE maintained the Working Group recommendation for the FEI calculation, with one modification as follows: DOE calculated the FEI using a reference value of FEP (FEP
DOE requests feedback on the calculation of the FEP
In the December 2014 NODA and the May 2015 NODA, DOE analyzed the following fan categories: Axial housed fans, axial unhoused fans, centrifugal housed fans, centrifugal unhoused fans, inline and mixed flow fans, radial fans, and power roof ventilators. This NODA analyzes the same fan categories based on the recommendation of the Working Group, but renames axial housed fans as axial cylindrical housed fans and axial unhoused fans as panel fans based on information provided by the Working Group. In addition, based on the discussions of the Working Group, DOE incorporated more embedded fans into its analysis for this NODA.
In addition, based on the recommendation of the Working Group, this NODA only considered fans with operating points with a fan shaft input power equal to, or greater than, 1 horsepower and a fan airpower equal to or less than 150 horsepower. (No. 179, Recommendation #5 at p. 4) The horsepower scope limitations are further explained in the engineering analysis and conversion cost spreadsheet.
When evaluating and establishing energy conservation standards, DOE divides covered equipment into equipment classes by the type of energy used or by capacity or other performance-related features that justify differing standards. In making a determination whether a performance-related feature justifies a different standard, DOE must consider such factors as the utility of the feature to the consumer and other factors DOE determines are appropriate. (42 U.S.C. 6295(q)) In the December 2014 and May 2015 NODAs, DOE divided commercial and industrial fans into seven equipment classes based primarily on the direction of the airflow through the fan and other features that impact the energy use and utility of a fan (see Table III-3). In addition, DOE grouped inline and mixed flow fans into a single equipment class and included all power roof ventilators in a single equipment class.
During the negotiations, the Working Group did not come to a consensus regarding the equipment classes and stakeholders provided several suggestions for modifying these equipment classes. (No. 179, Recommendation #30 at p. 19)
ASAP and AMCA, supported by the CA IOUs, recommended grouping all ducted fans into a single equipment class, and all unducted fans in a single equipment class. (ASAP and AMCA, No. 50 at p. 2; CA IOUs, No. 49 at p. 2) Flowcare commented that fans should be classified into three classes: Axial fans, centrifugal fans, and mixed flow fans. (Flowcare, No. 46 at p. 6)
Ingersoll Rand/Trane commented that centrifugal housed fans with a forward curved blade design have a distinct utility compared to other centrifugal housed fans (
DOE did not group all fans into only ducted and unducted equipment classes because fans have other unique features that provide different utilities to the customer and, as a result, justify additional equipment classes. However, DOE recognizes that ducted and unducted fans perform differently. For this NODA, the FEP
With respect to establishing a separate equipment class for forward curved centrifugal housed fans, DOE analyzed a sample of fan selections
Regarding the application range, DOE agrees with AHRI and Ingersoll Rand/Trane that forward curved centrifugal housed fans are most typically used in low pressure (less than 5.0 in.wg.), low speed applications (between 800 and 1200 rpm). DOE accounted for the specificity of the application range in the metric, which allows calculating the FEP
Finally, DOE notes that the latest revision of the European Regulation 327/2011
AHRI and Bade commented that regulating return fans and exhaust fans requires special consideration because they typically operate at similar flows but lower static pressures compared to supply fans, which inherently affects the fan operating efficiency. (AHRI, No. 158 at pp. 5-6; Bade, No 116 at p. 1) Similarly, Ingersoll Rand/Trane commented that using efficient fans in variable-air-volume applications might decrease the capability of the fans to achieve an airflow reduction at lower system requirements, which may increase a building's energy consumption by pushing consumers to constant volume systems or requiring different systems. (Ingersoll Rand/Trane, No. 153 at p. 3) DOE agrees with AHRI and Ingersoll Rand/Trane that fans operating at lower pressures will have a lower efficiency compared to fans of equivalent design operating at higher pressures. To account for this effect and preserve the utility of low-pressure fans, DOE is considering a metric that is a function of the operating pressure, where the required FEP at a given efficiency level is less stringent at lower operating pressures. Consequently, a return or exhaust fan operating at a lower pressure than a supply fan at a given flow would have a lower required FEP at a given efficiency level, which mitigates the disproportionate impacts suggested by AHRI and Ingersoll Rand/Trane.
Based on these comments, DOE maintained the equipment classes used in the May 2015 NODA and presented in Table III-3.
DOE seeks comments on the equipment classes used in this notice, including information on specific sizes or operating points for which forward curved fans would no longer be available at efficiency levels up to EL 5 and whether, at those sizes or operating points, an acceptable non-forward curved fan is available.
For this analysis, DOE assumed a compliance date of five years after publication of a final energy conservation standards rule. (42 U.S.C. 6316(a); 42 U.S.C. 6295(l)(2)) The Working Group did not make any recommendation on the compliance year, and DOE believes that five years would allow fan manufacturers sufficient time to redesign their existing equipment, as necessary, to meet new energy conservation standards. DOE anticipates the final rule to publish in
ebm-papst commented that a three-year compliance period would represent sufficient time. (ebm-papst, No. 45 at p. 2) Morrison commented that even five years may not be enough. (Morrison, No. 51 at p. 9)
Ingersoll Rand/Trane and AHRI commented that, in order to allow OEMs to redesign their existing equipment to use fans of different types or sizes, the compliance date for fans that are components of larger piece of equipment should be delayed. For such fans, Ingersoll Rand/Trane recommended an additional two years and AHRI recommended an additional five years after the compliance date for standalone fans. (Ingersoll Rand/Trane, No. 153 at p. 4; AHRI, No. 158 at p. 9)
In the December 2014 NODA, DOE requested comments on the redesign time per fan model. United Technologies/Carrier stated three years would be too short in terms of compliance period and that it could take 18 to 24 months per fan for an OEM to complete a redesign for an embedded fan and the equipment incorporating the fan. (United Technologies/Carrier, No. 43 at p. 2)
DOE believes that manufacturers will be able to offer fans that are compliant with any energy conservation standards DOE may set before 5 years after publication of a final rule. Many fans are compliant with the highest efficiency levels for at least part of their operating range. Consequently, for many fans, any standard may only require certifying a different operating range rather than redesigning the fan. DOE's analysis estimates that at the most stringent EL (EL 6), 70 percent of current fan selections
DOE seeks comments on the use a compliance date of five years after the publication of the final rule.
The engineering analysis establishes the relationship between the manufacturer production cost (MPC) and efficiency levels of fans. This relationship serves as the basis for calculations performed in the other analysis tools to estimate the costs and benefits to individual consumers, manufacturers, and the Nation.
DOE used the same methodology in the engineering analysis of this NODA as for the December 2014 NODA and the May 2015 NODA. For each fan equipment class, DOE identified existing technology options that could affect efficiency. Next, DOE conducted a screening analysis to review each technology option and decide whether it: (1) Is technologically feasible; (2) is practicable to manufacture, install, and service; (3) would adversely affect product utility or product availability; or (4) would have adverse impacts on health and safety. The technology options remaining after the screening analysis consisted of a variety of impeller types and guide vanes. DOE categorized the fan equipment classes into subcategories by the technology options the fans use. DOE then conducted a market-based assessment of the prevalence of each subcategory at each efficiency level analyzed. DOE estimated market prevalence using the sales data provided by AMCA that was within the scope of the analysis and for which there was sufficient information. This NODA, like the May 2015 NODA has fewer subgroups than the December 2014 NODA due to limitations in the sales data provided by AMCA.
For this NODA, DOE augmented the AMCA sales data used in the May 2015 NODA to account for embedded fans made by companies that incorporate those fans for sale in their own equipment (see section III.G) and to represent additional sales of forward curved fans, which AMCA stated were underrepresented in the original data AMCA provided. (AMCA, Public Meeting Transcript, No. 85 at p. 91) The resulting engineering database was analyzed at six efficiency levels (ELs) representing different target efficiencies (
DOE calculated MPCs at each efficiency level using the same methodology as used in the December 2014 NODA and the May 2015 NODA. The MPCs were derived from product teardowns and publically available product literature and were informed by interviews with manufacturers. DOE calculated the MPCs for fans in each subcategory. DOE used these MPCs to characterize the relationship between MPC and blade or impeller diameter for each subcategory. DOE found that all fan subcategories were represented at all ELs, so DOE did not use subcategory MPC differences to directly represent higher efficiency. DOE found some subcategories to be more prevalent at higher ELs. Therefore, DOE calculated MPCs for each fan equipment class at each efficiency level analyzed by weighting the MPCs of each subcategory within a class by its prevalence at the efficiency level being analyzed.
DOE's preliminary MPC estimates indicate that the changes in MPC as efficiency level increases are small or, in some fan equipment classes, zero. However, DOE is aware that aerodynamic redesigns are a primary method by which manufacturers improve fan performance. These redesigns require manufacturers to make large upfront investments for R&D, testing and prototyping, and purchasing new production equipment. DOE's preliminary findings indicate that the magnitude of these upfront costs are more significant than the difference in MPC of a fan redesigned for efficiency compared to its precursor. For this NODA, DOE included a conversion cost markup in its calculation of the manufacturer selling price (MSP) to account for these conversion costs. These markups and associated MSPs were developed and applied in downstream analyses. They are discussed in section III.F and presented in the LCC spreadsheet.
The main outputs of the fans engineering analysis are the MPCs of each fan equipment class (including material, labor, and overhead) and technology option distributions at each efficiency level analyzed.
For the MIA, DOE used the Government Regulatory Impact Model (GRIM) to assess the economic impact of potential standards on commercial and industrial fan manufacturers. DOE
Additionally, DOE calculated total industry capital and product conversion costs associated with meeting all analyzed efficiency levels. Using a proprietary cost model and feedback received from manufacturers during interviews, DOE first estimated the average industry capital and product conversion costs associated with redesigning a single size of a fan series to meet a specific efficiency level. DOE estimated the costs for all subcategories within each fan equipment class. DOE multiplied these per model conversion costs by the number of models that would be required to be redesigned at each efficiency level to arrive at the total industry conversion costs. The number of models that would be redesigned was calculated using information from the engineering database developed from the AMCA sales database (see section III.E). Additional information on the number of models redesigned is available in the engineering analysis and conversion cost spreadsheet, “Total Fan Conversion Costs” section of the “Database Overview and Use” tab.
The GRIM uses these estimated values in conjunction with inputs from other analyses, including the MPCs from the engineering analysis, the annual shipments by fan equipment class from the NIA, and the fan manufacturer markups for the cost recovery markup scenario from the LCC analysis to model industry annual cash flows from the reference year through the end of the analysis period. The primary quantitative output of this model is the industry net present value (INPV), which DOE calculates as the sum of industry annual cash flows, discounted to the present day using the industry specific weighted average cost of capital, or manufacturer discount rate.
Standards can affect INPV in several ways including requiring upfront investments in manufacturing capital as well as research and development expenses, which increase the cost of production and potentially alter manufacturer markups. DOE expects that manufacturers may lose a portion of INPV due to standards. The potential loss in INPV due to standards is calculated as the difference between INPV in the no-standards case (absent new energy conservation standards) and the INPV in the standards cases (with new energy conservation standards in effect). DOE examines a range of possible impacts on industry by modeling various pricing strategies commercial and industrial fan manufacturers may adopt following the adoption of new energy conservations standards for fans.
In addition to INPV, the MIA also calculates the manufacturer markups, which are applied to the MPCs derived in the engineering analysis, to arrive at the manufacturer selling prices (MSPs) in the no-standards case. In the standards cases manufacturers will incur costs from the redesign of models that do not meet the required FEP at a given efficiency levels. DOE modeled two markup scenarios for the standards cases, a preservation of gross margin markup scenario and a conversion cost pass through markup scenario.
In the preservation of gross margin markup scenario, DOE assumes that manufacturers maintain the same manufacturer markup, as a percentage, in the standards cases as they do in the no-standards case, despite higher levels of investment in the standards cases. This markup scenario represents the lower bound, or worst-case scenario for manufacturers, since manufacturers are not able to pass the conversion costs associated with complying with higher efficiency levels on to their customers. In the fan conversion cost recovery markup scenario, DOE assumes that manufacturers are able to pass on to their customers the fan conversion costs they incur to meet higher efficiency levels. In this markup scenario, manufacturer markups are based on the total manufacturer fan conversion costs and calculated to allow manufacturers to recover their upfront fan conversion costs, in addition to their normal no-standards case markup. DOE calculated the conversion cost pass through markups for each efficiency level by amortizing the conversion costs over the units shipped throughout the analysis period that were redesigned to meet the efficiency level being analyzed. This fan conversion cost pass through markup scenario represents the upper bound, or best-case scenario for manufacturers, since manufacturers are able to pass on to their customers the fan conversion costs associated with complying with higher efficiency levels. For the standards cases, all other downstream analyses use the fan manufacturer markups calculated in the fan conversion costs pass through markup scenario.
DOE requests information on the per-model (size of a fan series) redesign costs presented in the engineering analysis and conversion cost spreadsheet.
DOE requests information on the number of models (sizes of a fan series) that are currently in the scope of the rulemaking nationally.
DOE requests feedback on the quantity of redesigns, methodology, and results used to calculate the total industry conversion costs by equipment class and EL, as presented in the engineering analysis and conversion cost spreadsheet.
DOE requests information on the extent to which product conversion costs and/or capital conversion costs are shared among sizes in a fan series.
DOE requests information on the extent to which product conversion costs and/or capital conversion costs are shared between belt and direct drive fans with the same aerodynamic design.
DOE requests information on the extent to which product conversion costs and/or capital conversion costs are shared between fans of different construction classes of the same aerodynamic design.
Several stakeholders commented that the previous DOE analyses did not take into account the significant costs incurred by manufacturers who incorporate fans into their equipment. Ingersoll Rand/Trane, United Technologies/Carrier, Morrison, AHRI, and Greenheck commented that separate costs to redesign the units in which fans are installed would be incurred due to this regulation. (Ingersoll Rand/Trane, No. 42 at p. 4; United Technologies/Carrier, No. 43 at p. 4; Morrison, No. 51 at p. 5; AHRI, No. 53 at p. 6; Greenheck, No. 54-A at pp. 4-5) AHRI added that the cost to redesign the units in which fans are installed can be several times greater in terms of both time and money than the cost to redesign the fan itself. (AHRI, No. 53 at p. 7) Morrison and Ingersoll Rand/Trane commented that fans in commercial and industrial building applications are typically housed within other equipment such as air handlers or unitary rooftop units that are sized specifically around the fan. (Morrison, No. 51 at p. 5; Ingersoll Rand/Trane, No. 42 at p. 11) AHRI commented that any change to fan size, operating range, or fan type will increase the OEM production cost, and urged DOE to consider the production cost impact to OEMs as part of the rulemaking. (AHRI, No. 53 at p. 6) Ingersoll Rand/Trane added that this increased cost would affect building
AHRI also commented that in order to pass a regulation imposing additional costs (testing, implementation, time-frame, spare part availability, re-certification) on OEMs, DOE must consider the costs to these manufacturers and compare them to the potential energy saved, and in order to do so must conduct manufacturer interviews with OEMs. AHRI requested that DOE conduct such interviews and delineate DOE-covered equipment made by OEMs as a separate fan equipment class to assess the costs and relative benefits of a second layer of regulation on currently regulated HVACR equipment and publish a new NODA specifically addressing the impact on OEMs who were excluded from DOE's initial analysis. (AHRI, No. 158 at p. 3).
After careful consideration of these comments and the Working Group discussions, DOE recognizes that its previous analyses did not accurately account for the cost impacts of a fans regulation on all impacted manufacturers. DOE revised its analysis for this NODA to better account for cost impacts on fan manufacturers, especially OEMs. DOE understands that some OEMs manufacture their own fans that they then incorporate in the equipment that they manufacture for sale. As discussed in section III.B, DOE augmented the database it used for this NODA by incorporating fans made by companies that then incorporate those fans for sale in their own equipment (see section III.G). The presence of these fans in the database DOE used for this NODA ensures that its analysis accounts for the impacts on MPC (see section III.E) and conversion costs (see previous discussion in this section) for OEMs that manufacture fans and incorporate them in the equipment that they manufacture for sale. DOE also understands that OEMs that incorporate fans may incur additional conversion costs for their equipment not directly associated with improving the efficiency of the fan. For this NODA, DOE estimated OEM equipment conversion costs and included them in its analysis. DOE conducted interviews with manufacturers of equipment with embedded fans. DOE used information gathered during these interviews in conjunction with its engineering database to estimate OEM equipment conversion costs at each EL. In each fan equipment class, fan models in the engineering database that were representing fans sold by OEMs (whether or not the OEM made the fan) and that needed to be redesigned or reselected were determined to incur OEM equipment conversion costs. The aggregated industry OEM equipment conversion costs are presented in the engineering analysis and conversion cost spreadsheet.
DOE applied OEM equipment conversion costs to all embedded fans in its analysis. For OEMs that manufacture the fans that they incorporate in the equipment they manufacture for sale, DOE added the OEM equipment conversion costs to the fan conversion costs to develop total conversion cost recovery markups at each EL, for each fan equipment class, using the cost recovery markup methodology described in section III.F. For OEMs that incorporate fans that they do not manufacture themselves, the OEM equipment conversion cost is used to develop a cost recovery markup that is applied downstream of the fan conversion cost recovery markup. DOE then used the results as an input to the LCC analysis. Consequently, the cost to consumers of embedded fans, and, in turn, the cost-justification for the analyzed efficiency levels, accounts for both fan and OEM equipment conversion costs in this NODA.
DOE believes the revisions made for this NODA analysis—augmenting DOE's database to more completely incorporate embedded fans and including OEM equipment conversion costs—better account for the costs and benefits associated with potential energy conservation standards for fans incorporated in larger pieces of equipment and address the concerns of Ingersoll Rand/Trane, United Technologies/Carrier, Morrison, AHRI, and Greenheck.
DOE did not analyze a separate equipment class for embedded fans. DOE believes the revisions to its analysis described previously in this section appropriately account for the costs and benefits associated with embedded fans. However, the LCC spreadsheet published as part of this NODA provides the option to view results by subgroup for embedded fans and standalone fans separately.
DOE requests information on the portion of equipment with embedded fans that would require heat testing for certification with any new energy conservation standards. DOE also requests feedback on the number of embedded fans that would require redesign as presented in the engineering analysis and conversion costs spreadsheet.
The LCC and PBP analyses determine the economic impact of potential standards on individual consumers, in the compliance year. The LCC is the total cost of purchasing, installing, and operating a commercial or industrial fan over the course of its lifetime.
DOE determines the LCC by considering: (1) The total installed cost to the consumer (which consists of manufacturer selling price, the conversion costs, distribution channel markups, and sales taxes); (2) the range of fan annual energy consumption as they are used in the field; (3) the fan operating costs; (4) fan lifetime; and (5) a discount rate that reflects the real consumer cost of capital and puts the LCC in present-value terms. The PBP represents the number of years needed to recover the increase in purchase price of higher-efficiency fans through savings in the operating cost. The PBP is calculated by dividing the incremental increase in installed cost of the higher efficiency product, compared to the baseline product, by the annual savings in operating costs.
For each considered standards case corresponding to each efficiency level, DOE measures the change in LCC relative to the no-standards case. The no-standards case is characterized by the distribution of fan efficiencies in the absence of new standards (
To characterize annual fan operating hours, DOE established statistical distributions of consumers of each fan equipment class across sectors and applications, which in turn determined the fan operating hours. Recognizing that several inputs to the determination of consumer LCC and PBP are either variable or uncertain (
In addition to characterizing several of the inputs to the analyses with probability distributions, DOE developed a sample of individual fan selections representative of the market.
The primary outputs of the LCC and PBP analyses are: (1) Average LCC in each standards case; (2) average PBPs; (3) average LCC savings at each standards case relative to the no-standards case; and (4) the percentage of consumers that experience a net benefit, have no impact, or have a net cost for each fan equipment class and efficiency level. The average annual energy consumption derived in the LCC analysis is used as an input in the NIA (see section III.H).
In the December 2014 NODA and the May 2015 NODA, DOE developed a sample of individual fan selections (
In this NODA, DOE collected additional technical and market information specific to embedded fans and revised the LCC sample to represent both the embedded fan and standalone fan markets. For each fan equipment class, DOE used confidential AMCA sales data for over 57,000 fan selections (with complete performance data), representing over 92,000 units sold, to develop a sample representative of fans sold on the US market. Each row in the sample represents a fan selection. The number of rows was adjusted to match the US market distributions across fan equipment classes, subcategory, fan shaft input power, and drive configuration. DOE adjusted the number of standalone fans in the LCC sample to mirror the actual standalone fan market distributions based on confidential market estimates from AMCA for the U.S standalone fan market. For embedded fans, DOE adjusted the number of fan selections in the LCC sample to reflect the actual embedded fan market distributions based on embedded fan shipments data.
The “2012 Shipments” worksheet of the NIA spreadsheet presents the standalone fan market and embedded fan market data used to calibrate the LCC sample. The worksheet includes breakdowns by equipment class, subcategory, as well as the HVACR equipment shipments and estimated number of fans per unit used by DOE to calculate the number of embedded fans. The LCC sample description worksheet in the LCC spreadsheet provides more detailed breakdown of the fan selections by power bins and efficiency levels.
DOE seeks feedback and input on the 2012 standalone fan and embedded fan shipments values, by equipment class and subcategory. Specifically, DOE requests feedback on: (1) The estimated number of fans per HVACR equipment; (2) the distribution of HVACR fans across fan subcategories by fan application; and (3) the share of standalone fans purchased and incorporated in HVACR equipment.
DOE seeks feedback and input on the distribution of fan selections by power bin and subcategory for standalone fans and embedded fans as presented in the “LCC sample Description” worksheet of the LCC spreadsheet.
In the December 2014 NODA and the May 2015 NODA, DOE calculated the FEP of a fan selection in the LCC sample using the default values and calculation algorithms for bare shaft fans. DOE applied this approach because the fan selection data included performance data for fans in bare shaft configurations. In this NODA, in order to establish the FEP of a fan considered in the analysis, DOE retained this approach and used the default values and calculation algorithms for bare shaft fans as recommended by the Working Group. The engineering analysis and conversion cost spreadsheet presents the detailed equations and default values used to calculate the FEP of a given fan model in a bare shaft configuration. In addition, based on the Working Group recommendation, the spreadsheet includes default values and calculation algorithms for other fan configurations such as fans with dynamic continuous controls. (No. 179, Recommendation #12-16 at pp. 7-9)
After the publication of the December 2014 NODA, Morrison and AHRI commented that the operating hours seemed high but did not provide quantified estimates. (Morrison, No. 51 at p. 8; AHRI, No. 53 at p. 13) In the December 2014 and May 2015 NODAs, DOE used industrial plant assessment and Energy Plus building simulation data to estimate fan operating hours, which averaged around 6,500 hours per year.
DOE seeks feedback and inputs on fan operating hours.
In the December 2014 NODA and the May 2015 NODA, DOE assumed that all fans operated at full design flow and pressure when performing the energy use calculation. AHRI noted that most fans in HVAC equipment do not run at full design speed but at 60 percent of full speed (equivalent to running at 60 percent of design flow). (AHRI, No. 129-1 at p. 2) AHRI additionally provided input on the typical fan load profiles in VAV systems. (AHRI, No. 53 at p. 13) ACME commented that, 50 percent of the time, the actual operating point of a fan is not equal to the design point selection of the fan and has a higher pressure value. ACME added that in some situations, the design point of the fan is not known and the actual operating point of a fan may fall in a region of operation where the fan has a
Based on these comments and stakeholder feedback received during negotiations DOE revised its December 2014 and May 2015 NODA analyses to account for part load operation. For the commercial sector, DOE assumed that 80 percent of the fans operated at an airflow that differed from the design flow at least some of the time. DOE based the 80 percent value on results from the EnergyPlus building energy use simulation software
DOE seeks feedback and inputs on the fan load profiles used in the energy use calculation and on the percentage of fans used in variable load applications.
In the December 2014 NODA and the May 2015 NODA, DOE estimated the average fan lifetime for standalone fans to be 30 years. AHRI commented that the lifetimes seemed high but did not provide quantified estimates. Morrison commented that the lifetimes seemed high and that fans used in HVAC typically have 12-15 year lifetimes. (AHRI, No. 53 at p. 5, Morrison, No. 51 at p. 8) In this NODA, DOE revised the fan lifetimes to account for the fact that fans in HVACR application may have shorter lifetimes. In line with Morrison's comment, DOE used an average embedded fan lifetime of 17 years based on estimates of HVACR equipment lifetimes, but maintained an average lifetime of 30 years for other fans.
U.S. Department of Energy-Office of Energy Efficiency and Renewable Energy. Energy Conservation Program for Certain Industrial Equipment: Energy Conservation Standards for Small, Large, and Very Large Commercial Package Air Conditioning and Heating Equipment. Life-Cycle Cost Spreadsheet (NOPR) (2014). Available at
DOE seeks feedback and inputs on fan lifetimes.
The NIA estimates the national energy savings (NES) and the net present value (NPV) of total consumer costs and savings expected to result from potential new standards at each EL. DOE calculated NES and NPV for each EL as the difference between a no-standards case forecast (without new standards) and the standards case forecast (with standards). Cumulative energy savings are the sum of the annual NES determined for the lifetime of all fans shipped during a 30-year analysis period assumed to start in 2022. Energy savings include the full-fuel cycle energy savings (
To calculate the NES and NPV, DOE projected future shipments and efficiency distributions (for each EL) for each potential fan equipment class. DOE recognizes the uncertainty in projecting shipments and electricity prices; as a result, the NIA includes several different scenarios for each. Other inputs to the NIA include the estimated fan lifetime used in the LCC analysis, fan price, average annual energy consumption, and efficiency distributions from the LCC.
DOE is interested in receiving comment on all aspects of this analysis. DOE is particularly interested in receiving comments and views of interested parties concerning the following issues:
1. DOE requests feedback on the calculation of the FEP
2. DOE seeks comments on the equipment classes used in this notice.
3. DOE seeks information on whether there are specific sizes or operating points where forward curved fans would no longer be available at efficiency levels up to EL 5.
4. DOE seeks comments on the use a compliance date of five years after the publication of the final rule.
5. DOE requests information on the per-model (
6. DOE requests information on the number of models that are currently in the scope of the rulemaking nationally.
7. DOE requests feedback on the quantity of redesigns, methodology, and results used to calculate the total industry conversion costs by equipment class and EL, as presented in the engineering analysis and conversion cost spreadsheet.
8. DOE requests information on the extent to which product conversion costs and/or capital conversion costs are shared among sizes in a fan series.
9. DOE requests information on the extent to which product conversion costs and/or capital conversion costs are shared between belt and direct drive fans with the same aerodynamic design.
10. DOE requests information on the extent to which product conversion costs and/or capital conversion costs are shared between fans of different construction classes of the same aerodynamic design.
11. DOE requests information on the portion of equipment with embedded fans that would require heat testing for certification with any new energy conservation standards.
12. DOE requests feedback on the number of embedded fans that would require redesign presented in the engineering analysis and conversion costs spreadsheet.
13. DOE seeks feedback and input on the 2012 standalone fan and embedded fan shipments values, by equipment class and subcategory. Specifically, DOE
14. DOE seeks feedback and input on the distribution of fan selections by power bin and subcategory for standalone fans and embedded fans as presented in the “LCC sample Description” worksheet of the LCC spreadsheet.
15. DOE seeks feedback and inputs on the fan operating hours.
16. DOE seeks feedback and inputs on the fan load profiles used in the energy use calculation and on the percentage of fans used in variable load applications.
17. DOE seeks feedback and inputs on the fan lifetimes.
The purpose of this NODA is to notify industry, manufacturers, consumer groups, efficiency advocates, government agencies, and other stakeholders of the publication of an analysis of potential energy conservation standards for commercial and industrial fans and blowers. Stakeholders should contact DOE for any additional information pertaining to the analyses performed for this NODA.
Federal Deposit Insurance Corporation.
Notice of proposed rulemaking.
In this notice of proposed rulemaking (“NPR” or “Proposed Rule”), the Federal Deposit Insurance Corporation (“FDIC”) proposes to rescind and remove a part from the Code of Federal Regulations entitled “Security Procedures” and to amend FDIC regulations to make the removed Office of Thrift Supervision (“OTS”) regulations applicable to state savings associations.
Comments must be received on or before January 3, 2017.
You may submit comments by any of the following methods:
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Please include your name, affiliation, address, email address, and telephone number(s) in your comment. Where appropriate, comments should include a short Executive Summary consisting of no more than five single-spaced pages. All statements received, including attachments and other supporting materials, are part of the public record and are subject to public disclosure. You should submit only information that you wish to make publicly available.
Lauren Whitaker, Attorney, Consumer Compliance Section, Legal Division (202) 898-3872; Martha L. Ellett, Counsel, Consumer Compliance Section, Legal Division, (202) 898-6765; Karen Jones Currie, Senior Examination Specialist, Division of Risk Management and Supervision (202) 898-3981.
Part 391, subpart A was included in the regulations that were transferred to the FDIC from the Office of Thrift Supervision (“OTS”) on July 21, 2011, in connection with the implementation of applicable provisions of title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). With the exception of one provision (§ 391.5) the requirements for State savings associations in part 391, subpart A are substantively identical to the requirements in the FDIC's 12 CFR part 326 (“part 326”), which is entitled “Minimum Security Procedures.” The one exception directs savings associations to comply with appendix B to subpart B of
The FDIC proposes to rescind in its entirety part 391, subpart A and to modify the scope of part 326 to include state savings associations to conform to and reflect the scope of the FDIC's current supervisory responsibilities as the appropriate Federal banking agency. The FDIC also proposes to define “FDIC-supervised insured depository institution or institution” and “State savings association.” Upon removal of part 391, subpart A, the Security Procedures, regulations applicable for all insured depository institutions for which the FDIC has been designated the appropriate Federal banking agency will be found at 12 CFR part 326.
The Dodd-Frank Act
Section 316(c) of the Dodd-Frank Act, codified at 12 U.S.C. 5414(c), further directed the FDIC and the OCC to consult with one another and to publish a list of the continued OTS regulations that would be enforced by the FDIC and the OCC, respectively. On June 14, 2011, the FDIC's Board of Directors approved a “List of OTS Regulations to be enforced by the OCC and the FDIC Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.” This list was published by the FDIC and the OCC as a Joint Notice in the
Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act, codified at 12 U.S.C. 5412(b)(2)(B)(i)(II), granted the OCC rulemaking authority relating to both State and Federal savings associations, nothing in the Dodd-Frank Act affected the FDIC's existing authority to issue regulations under the FDI Act and other laws as the “appropriate Federal banking agency” or under similar statutory terminology. Section 312(c) of the Dodd-Frank Act amended the definition of “appropriate Federal banking agency” contained in section 3(q) of the FDI Act, 12 U.S.C. 1813(q), to add State savings associations to the list of entities for which the FDIC is designated as the “appropriate Federal banking agency.” As a result, when the FDIC acts as the designated “appropriate Federal banking agency” (or under similar terminology) for state savings associations, as it does here, the FDIC is authorized to issue, modify and rescind regulations involving such associations, as well as for state nonmember banks and insured branches of foreign banks.
As noted, on June 14, 2011, pursuant to this authority, the FDIC's Board of Directors reissued and redesignated certain transferring regulations of the former OTS. These transferred OTS regulations were published as new FDIC regulations in the
One of the OTS rules transferred to the FDIC governed OTS oversight of minimum security devices and procedures for state savings associations. The OTS rule, formerly found at 12 CFR part 568, was transferred to the FDIC with only nominal changes and is now found in the FDIC's rules at part 391, subpart A, entitled “Security Procedures.” Before the transfer of the OTS rules and continuing today, the FDIC's rules contained part 326, subpart A entitled “Minimum Security Procedures,” a rule governing FDIC oversight of security devices and procedures to discourage burglaries, robberies and larcenies and assist law enforcement in the identification and apprehension of those who commit such crimes with respect to insured depository institutions for which the FDIC has been designated the appropriate Federal banking agency. One provision in part 391, subpart A (391.5) is not contained in part 326, subpart A. It directs savings associations and certain subsidiaries to comply with the
After careful review and comparison of part 391, subpart A, and part 326, the FDIC proposes to rescind part 391, subpart A, because, as discussed below, it is substantively redundant to existing part 326 and simultaneously proposes to make technical conforming edits to the FDIC's existing rule.
Section 3 of the Bank Protection Act of 1968 directed the appropriate federal banking agencies and the OTS' predecessor, the Federal Home Loan Bank Board (“FHLBB”) to establish minimum security standards for banks and savings associations, at reasonable cost, to serve as a deterrent to robberies, burglaries, and larcenies and to assist law enforcement in identifying and prosecuting persons who commit such acts.
In 1991, the minimum security rules were substantially revised to reduce unnecessary specificity, remove obsolete requirements and place greater responsibility on the boards of directors of insured financial institutions for establishing and ensuring the implementation and maintenance of security programs and procedures. The former FHLBB rules at 12 CFR part 563a were redesignated as 12 CFR part 568 by the OTS. The OTS rules remained substantively the same as the FDIC's rules in part 326, subpart A.
In 2001, the FDIC and other federal banking agencies and the OTS issued
Regarding the functions of the former OTS that were transferred to the FDIC, section 316(b)(3) of the Dodd-Frank Act, 12 U.S.C. 5414(b)(3), in pertinent part, provides that the former OTS's regulations will be enforceable by the FDIC until they are modified, terminated, set aside, or superseded in accordance with applicable law. After reviewing the rules currently found in part 391, subpart A, the FDIC proposes
If the proposal is finalized, oversight of minimum security procedures in part 326, subpart A would apply to all FDIC-supervised institutions, including state savings associations, and part 391, subpart A, would be removed because it is largely redundant of the rules found in part 326. Rescinding part 391, subpart A, will serve to streamline the FDIC's rules and eliminate unnecessary regulations.
The FDIC invites comments on all aspects of this proposed rulemaking, and specifically requests comments on the following:
(1.) What impacts, positive or negative, can you foresee in the FDIC's proposal to rescind part 391, subpart A?
Written comments must be received by the FDIC no later than January 3, 2017.
In accordance with the requirements of the Paperwork Reduction Act (“PRA”) of 1995, 44 U.S.C. 3501-3521, the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (“OMB”) control number.
The proposed rule would rescind and remove from FDIC regulations part 391, subpart A from the FDIC regulations. This rule was transferred with only nominal changes to the FDIC from the OTS when the OTS was abolished by title III of the Dodd-Frank Act. Part 391, subpart A, is substantively similar to the FDIC's existing part 326, subpart A regarding oversight of minimum security procedures for depository institutions with the exception of one provision at the end of Part 391, Subpart A which directs savings associations to comply with
The proposed rule also would (1) amend part 326, subpart A to include state savings associations and their subsidiaries within its scope; (2) define “FDIC-supervised insured depository institution or institution” and “state savings association;” and (3) make conforming technical edits throughout. These measures clarify that state savings associations, as well as state nonmember banks are subject to part 326, subpart A. With respect to part 326, subpart A, the Proposed Rule does not revise any existing, or create any new information collection pursuant to the PRA. Consequently, no submission will be made to the Office of Management and Budget for review. The FDIC requests comment on its conclusion that this aspect of the NPR does not create a new or revise an existing information collection.
The Regulatory Flexibility Act requires that, in connection with a notice of proposed rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities (defined in regulations promulgated by the Small Business Administration to include banking organizations with total assets of less than or equal to $550 million).
As discussed in this notice of proposed rulemaking, part 391, subpart A, was transferred from OTS part 568, which governed minimum security procedures for depository institutions. The initial minimum security rules, though issued separately by the agencies, were all published in January 1969. The OTS rule, part 568 had been in effect since 1991 and all State savings associations were required to comply with it. Because it is substantially the same as existing part 326, subpart A of the FDIC's rules and therefore redundant, the FDIC proposes rescinding and removing the transferred regulation now located in part 391, subpart A. As a result, all FDIC-supervised institutions—including state savings associations and their subsidiaries—would be required to comply with the minimum security procedures in part 326, subpart A. Because all state savings associations and their subsidiaries have been required to comply with nearly identical security procedures rules since 1969, the Proposed Rule would not place additional requirements or burdens on any state savings association irrespective of its size. Therefore, the Proposed Rule would not have a significant impact on a substantial number of small entities.
Section 722 of the Gramm-Leach- Bliley Act, codified at 12 U.S.C. 4809, requires each Federal banking agency to use plain language in all of its proposed and final rules published after January 1, 2000. The FDIC invites comments on whether the Proposed Rule is clearly stated and effectively organized, and how the FDIC might make it easier to understand. For example:
• Has the FDIC organized the material to suit your needs? If not, how could it present the rule more clearly?
• Have we clearly stated the requirements of the rule? If not, how could the rule be more clearly stated?
• Does the rule contain technical jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes would make the regulation easier to understand?
• What else could we do to make the regulation easier to understand?
Under section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (“EGRPRA”), the FDIC is required to review all of its regulations, at least once every 10 years, in order to identify any outdated or otherwise unnecessary regulations imposed on insured institutions.
Banks, Banking, Minimum security procedures, Savings associations.
Security procedures.
For the reasons stated in the preamble, the Board of Directors of the Federal Deposit Insurance Corporation proposes to amend 12 CFR part 326 and 12 CFR part 391 as set forth below:
12 U.S.C. 1813, 1815, 1817, 1818, 1819 (Tenth), 1881-1883; 31 U.S.C. 5311-5314 and 5316-5332.2.
(a) This part is issued by the Federal Deposit Insurance Corporation (“FDIC”) pursuant to section 3 of the Bank Protection Act of 1968 (12 U.S.C. 1882). It applies to FDIC-supervised insured depository institutions. It requires each institution to adopt appropriate security procedures to discourage robberies, burglaries, and larcenies and to assist in identifying and apprehending persons who commit such acts.
(b) It is the responsibility of the institution's board of directors to comply with this part and ensure that a written security program for the institution's main office and branches is developed and implemented.
For the purposes of this part—
(a) The term
(b) The term
(c) The term
(d) The term
Upon the issuance of Federal deposit insurance, the board of directors of each institution shall designate a security officer who shall have the authority, subject to the approval of the board of directors, to develop, within a reasonable time, but no later than 180 days, and to administer a written security program for each banking office.
(a)
(1) Establish procedures for opening and closing for business and for the safekeeping of all currency, negotiable securities, and similar valuables at all times;
(2) Establish procedures that will assist in identifying persons committing crimes against the institution and that will preserve evidence that may aid in their identification and prosecution; such procedures may include, but are not limited to:
(i) Retaining a record of any robbery, burglary, or larceny committed against the institution;
(ii) Maintaining a camera that records activity in the banking office; and
(iii) Using identification devices, such as prerecorded serial-numbered bills, or chemical and electronic devices;
(3) Provide for initial and periodic training of officers and employees in their responsibilities under the security program and in proper employee conduct during and after a robbery, burglar or larceny; and
(4) Provide for selecting, testing, operating and maintaining appropriate security devices, as specified in paragraph (b) of this section.
(b)
(1) A means of protecting cash or other liquid assets, such as a vault, safe, or other secure space;
(2) A lighting system for illuminating, during the hours of darkness, the area around the vault, if the vault is visible from outside the banking office;
(3) An alarm system or other appropriate device for promptly notifying the nearest responsible law enforcement officers of an attempted or perpetrated robbery or burglary;
(4) Tamper-resistant locks on exterior doors and exterior windows that may be opened; and
(5) Such other devices as the security officer determines to be appropriate, taking into consideration:
(i) The incidence of crimes against financial institutions in the area;
(ii) The amount of currency or other valuables exposed to robbery, burglary, and larceny;
(iii) The distance of the banking office from the nearest responsible law enforcement officers;
(iv) The cost of the security devices;
(v) Other security measures in effect at the banking office; and
(vi) The physical characteristics of the structure of the banking office and its surroundings.
The security officer for each institution shall report at least annually to the institution's board of directors on the implementation, administration, and effectiveness of the security program.
12 U.S.C. 1819(Tenth).
By order of the Board of Directors.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for all Dassault Aviation Model FAN JET FALCON airplanes; all Model FAN JET FALCON SERIES C, D, E, F, and G airplanes; and all Model MYSTERE-FALCON 20-C5, 20-D5, 20-E5, and 20-F5 airplanes. This proposed AD was prompted by a determination that inspections for discrepancies of the fuselage bulkhead are necessary. This proposed AD would require repetitive inspections for discrepancies of the fuselage bulkhead, and repair if necessary. We are proposing this AD to detect and correct discrepancies of the fuselage bulkhead; such discrepancies could result in the deterioration and failure of the bulkhead, which could result in rapid decompression of the airplane and consequent injury to occupants.
We must receive comments on this proposed AD by December 16, 2016.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
You may examine the AD docket on the Internet at
Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1137; fax: 425-227-1149.
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2016-0096, dated May 19, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Dassault Aviation Model FAN JET FALCON airplanes; all Model FAN JET FALCON SERIES C, D, E, F, and G airplanes; and all Model MYSTERE-FALCON 20-C5, 20-D5, 20-E5, and 20-F5 airplanes. The MCAI states:
A detailed inspection (DET) of the fuselage bulkhead at frame (FR) 33 is established through a subset of inspection/check maintenance procedure referenced in the applicable aircraft maintenance manual (AMM), task 53-10-0-6 “MAIN FRAME—INSPECTION/CHECK”, with periodicity established in Chapter 5-10, at every C-Check. Failure to accomplish this DET could lead to deterioration of the affected structure.
This condition, if not detected and corrected, could lead to bulkhead failure, possibly resulting in a rapid depressurization of the aeroplane and consequent injury to occupants.
For the reasons described above, this [EASA] AD requires repetitive DET of the bulkhead at FR33 [for discrepancies, such as buckling, deformations, cracks, loose countersinks, scratches, dents, and corrosion], and depending on findings, repair of the affected structure.
You may examine the MCAI in the AD docket on the Internet at
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of these same type designs.
We estimate that this proposed AD affects 133 airplanes of U.S. registry.
We also estimate that it would take about 8 work-hours per product to
We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this proposed AD.
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.
We are 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.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would 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 this proposed regulation:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by December 16, 2016.
None.
This AD applies to the Dassault Aviation airplanes specified in paragraphs (c)(1) and (c)(2) of this AD, certificated in any category, all manufacturer serial numbers.
(1) Model FAN JET FALCON and FAN JET FALCON SERIES C, D, E, F, and G airplanes.
(2) Model MYSTERE-FALCON 20-C5, 20-D5, 20-E5, and 20-F5 airplanes.
Air Transport Association (ATA) of America Code 53, Fuselage.
This AD was prompted by a determination that inspections for discrepancies of the fuselage bulkhead at frame (FR) 33 are necessary. We are issuing this AD to detect and correct discrepancies of the fuselage bulkhead; such discrepancies could result in the deterioration and subsequent failure of the bulkhead, which could result in rapid decompression of the airplane and consequent injury to occupants.
Comply with this AD within the compliance times specified, unless already done.
Before exceeding 5,000 total flight cycles since first flight of the airplane, or within 500 flight cycles after the effective date of this AD, whichever occurs later: Do a detailed inspection for discrepancies of the fuselage bulkhead at FR 33 using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the European Aviation Safety Agency (EASA); or Dassault Aviation's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature. Repeat the inspection thereafter at intervals not to exceed 5,000 flight cycles.
If any discrepancy is found during any inspection required by paragraph (g) of this AD: Before further flight, repair using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the EASA; or Dassault Aviation's EASA DOA. If approved by the DOA, the approval must include the DOA-authorized signature. Repair of an airplane as required by this paragraph does not constitute terminating action for the repetitive actions required by paragraph (g) of this AD, unless specified otherwise in the repair instructions.
The following provisions also apply to this AD:
Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2016-0096, dated May 19, 2016, for related information. This MCAI may be found in the AD docket on the Internet at
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for Fokker Services B.V. Model F28 Mark 0100 series airplanes equipped with Rolls-Royce TAY 650-15 engines. This AD was prompted by reports of uncontained engine fan blade failures in Rolls-Royce TAY 650-15 engines. The fan blade failures occurred due to cracking of the fan blades, which was initiated under conditions of fan blade flutter during engine ground operation. This proposed AD would require installation of a caution placard in the flight compartment. We are proposing this AD to prevent certain engine thrust settings during ground operation, which can cause the fan blades to flutter and fail, resulting in damage to the airplane and possible injury to personnel.
We must receive comments on this proposed AD by December 16, 2016.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL Hoofddorp, the Netherlands; telephone: +31 (0)88-6280-350; fax: +31 (0)88-6280-111; email:
You may examine the AD docket on the Internet at
Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1137; fax 425-227-1149.
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive Airworthiness Directive 2013-0141, dated July 12, 2013 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for Fokker Services B.V. Model F28 Mark 0100 series airplanes equipped with Rolls-Royce TAY 650-15 engines. The MCAI states:
In the past, two F28 [Mark] 0100 aeroplanes with TAY [650-15] engines were involved in incidents as a result of uncontained engine fan blade failures. The fan blade failures occurred due to cracking of the fan blades, which was initiated under conditions of fan blade flutter. This fan blade flutter can occur during stabilized reverse thrust operation within a specific N1 RPM-range [revolutions per minute], known as Keep Out Zone (KOZ), which has been identified to be between 57% and 75% N1 RPM.
To address this potential unsafe condition [which can result in damage to the airplane and possible injury to personnel], CAA-NL issued AD (BLA) nr. 2002-119 for the aeroplane, while Luftfahrt-Bundesamt (LBA) Germany issued AD (LTA) 2002-090 (later revised) for the Rolls-Royce Tay [650-15] engines. More recently, LBA AD 2002-090R1 was superseded by EASA AD 2013-0070.
During stabilized forward thrust operation of an engine with the aeroplane stationary on the ground (
For the reasons described above, this [EASA] AD requires the installation of a caution placard in the flight compartment, between the Standby Engine Indicator (SEI) and the Multi-Functional Display Unit (MFDU).
You may examine the MCAI in the AD docket on the Internet at
We reviewed Fokker Service Bulletin SBF100-11-027, dated April 18, 2013. This service information describes procedures for the installation of a caution placard.
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.
We estimate that this proposed AD affects 4 airplanes of U.S. registry.
We estimate the following costs to comply with this proposed AD:
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.
We are 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.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would 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 this proposed regulation:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by December 16, 2016.
None.
This AD applies to Fokker Services B.V. Model F28 Mark 0100 series airplanes, certificated in any category, all serial numbers if equipped with Rolls-Royce TAY 650-15 engines.
Air Transport Association (ATA) of America Code 11, Placards and Markings.
This AD was prompted by reports of uncontained engine fan blade failures in Rolls-Royce TAY 650-15 engines. The fan blade failures occurred due to cracking of the fan blades, which was initiated under conditions of fan blade flutter during engine ground operation. We are issuing this AD to prevent certain engine thrust settings during ground operation, which can cause the fan blades to flutter and fail, resulting in damage to the airplane and possible injury to personnel.
Comply with this AD within the compliance times specified, unless already done.
Within 6 months after the effective date of this AD, install a caution placard in the flight compartment, between the standby engine indicator (SEI) and the multi-functional display unit (MFDU), in accordance with the Accomplishment Instructions of Fokker Service Bulletin SBF100-11-027, dated April 18, 2013.
Note 1 to paragraph (g) of this AD: Additional information can be found in Fokker All Operators Message AOF100.177 #05, dated April 18, 2013.
The following provisions also apply to this AD:
(1) Alternative Methods of Compliance (AMOCs): The Manager, International Branch, ANM-116, Transport Airplane Directorate, 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 International Branch, send it to ATTN: Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1137; fax 425-227-1149. Information may be emailed to:
(2) Contacting the Manufacturer: For any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Fokker Services B.V.'s EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature.
(1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2013-0141, dated July 12, 2013, for related information. This MCAI may be found in the AD docket on the Internet at
(2) For service information identified in this AD, contact Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL Hoofddorp, the Netherlands; telephone: +31 (0)88-6280-350; fax: +31
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for certain CFM International S.A. (CFM) CFM56-5B turbofan engines. This proposed AD was prompted by reports of the failure of the radial drive shaft (RDS) on CFM CFM56-5B engines. This proposed AD would require removal of the RDS assembly and the RDS outer housing and their replacement with parts eligible for installation. We are proposing this AD to prevent failure of the RDS, which could lead to failure of one or more engines, loss of thrust control, and damage to the airplane.
We must receive comments on this proposed AD by December 16, 2016.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact CFM International Inc., Aviation Operations Center, 1 Neumann Way, M/D Room 285, Cincinnati, OH 45125; phone: 877-432-3272; fax: 877-432-3329; email:
You may examine the AD docket on the Internet at
Kyle Gustafson, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7183; fax: 781-238-7199; email:
We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the
We will post all comments we receive, without change, to
We have received 9 reports of failure of the RDS on CFM CFM56-5B engines. CFM has identified an affected population of RDSs suspected of generating unbalance levels that would lead to failure of the RDS bearing. This proposed AD would require removal of the RDS assembly and the RDS outer housing for the affected population. This condition, if not corrected, could result in failure of the RDS, which could lead to failure of one or more engines, loss of thrust control, and damage to the airplane.
We reviewed CFM Service Bulletin (SB) CFM56-5B S/B 72-0934, dated August 1, 2016. The service information describes procedures for removal of the suspect RDS assembly and the RDS outer housing. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This proposed AD would require removal of the RDS assembly and the RDS outer housing and their replacement with parts eligible for installation.
CFM SB CFM56-5B S/B 72-0934, dated August 1, 2016, separates the affected RDS population into three batches with different removal dates for each batch. This proposed AD requires removal of the affected RDS assembly and RDS outer housing within 6 months of the effective date after this AD.
We estimate that this proposed AD affects eight engines installed on airplanes of U.S. registry.
We estimate the following costs to comply with this proposed AD:
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.
We are 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.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would 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 this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by December 16, 2016.
None.
This AD applies to CFM International S.A. (CFM) CFM56-5B series, CFM56-5B/P series, CFM56-5B/3 series, CFM56-5B/2P series, CFM56-5B/P1 series, CFM56-5B/2P1 series, and CFM56-5B/3B1 series engines with a radial drive shaft (RDS) serial number (S/N) listed in Appendix A of CFM Service Bulletin (SB) CFM56-5B S/B 72-0934, dated August 1, 2016, installed.
Air Transport Association (ATA) of America Code 83, Accessory Gearboxes.
This AD was prompted by reports of the failure of the RDS on CFM CFM56-5B engines. We are issuing this AD to prevent failure of the RDS, which could lead to failure of one or more engines, loss of thrust control, and damage to the airplane.
Comply with this AD within the compliance times specified, unless already done.
Within 6 months after the effective date of this AD, remove the RDS assembly, part number (P/N) 305-165-101-0, and RDS outer housing, P/N 301-295-106-0, and replace with parts eligible for installation.
After the effective date of this AD, do not install on any engine an RDS with an S/N identified in Appendix A of CFM S/B No. CFM56-5B S/B 72-0934, dated August 1, 2016.
The Manager, Engine Certification Office, FAA, may approve AMOCs for this AD. Use the procedures found in 14 CFR 39.19 to make your request. You may email your request to:
(1) For more information about this AD, contact Kyle Gustafson, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7183; fax: 781-238-7199; email:
(2) CFM SB CFM56-5B S/B 72-0934, dated August 1, 2016, can be obtained from CFM using the contact information in paragraph (i)(3) of this proposed AD.
(3) For service information identified in this AD, contact CFM International Inc., Aviation Operations Center, 1 Neumann Way, M/D Room 285, Cincinnati, OH 45125; phone: 877-432-3272; fax: 877-432-3329; email:
(4) You may view this service information at the FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA. For information on the availability of this material at the FAA, call 781-238-7125.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to supersede airworthiness directive (AD) 2014-16-
We must receive comments on this proposed AD by December 16, 2016.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact Rolls-Royce plc, P.O. Box 31, Derby DE24 8BJ, UK; phone: 44 0 1332 242424; fax: 44 0 1332 249936. You may view this service information at the FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA. For information on the availability of this material at the FAA, call 781-238-7125.
You may examine the AD docket on the Internet at
Robert Green, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7754; fax: 781-238-7199; email:
We invite you to send any written relevant data, views, or arguments about this NPRM. Send your comments to an address listed under the
We will post all comments we receive, without change, to
On August 1, 2014, we issued AD 2014-16-10, Amendment 39-17934 (79 FR 48961, August 19, 2014), (“AD 2014-16-10”) for all RR RB211 Trent 768-60, 772-60, and 772B-60 turbofan engines. AD 2014-16-10 requires initial and repetitive UIs of the affected LP compressor blades. AD 2014-16-10 resulted from LP compressor blade partial airfoil blade release events. We issued AD 2014-16-10 to prevent LP compressor blade airfoil separations, damage to the engine, and damage to the airplane.
Since we issued AD 2014-16-10, RR issued Alert Non-Modification Service Bulletin (NMSB) RB.211-72-AH465, Revision 2, dated May 11, 2016. The Alert NMSB reduced the inspection threshold for UI of the LP compressor blades. Also since we issued AD 2014-16-10, the European Aviation Safety Agency (EASA) issued a correction to AD 2016-0141, dated July 20, 2016, requiring the revised inspection threshold.
RR has issued Alert NMSB RB.211-72-AH465, Revision 2, dated May 11, 2016. The NMSB describes procedures for performing a UI of the LP compressor blades. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This proposed AD would require initial and repetitive UIs of the affected LP compressor blades. This proposed AD would require conducting the UIs at a reduced inspection threshold.
We estimate that this proposed AD affects 56 engines installed on airplanes of U.S. registry. We also estimate that it would take about 40 hours per engine to comply with this proposed AD. The average labor rate is $85 per hour. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $190,400.
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.
We are 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.
We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would 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 the proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by December 16, 2016.
This AD supersedes AD 2014-16-10, Amendment 39-17934 (79 FR 48961, August 19, 2014).
This AD applies to Rolls-Royce plc (RR) RB211 Trent 768-60, 772-60, and 772B-60 turbofan engines, with low-pressure (LP) compressor blade, part number (P/N) FK23411, FK25441, FK25968, FW11901, FW15393, FW23643, FW23741, FW23744, KH23403, or KH23404, installed.
This AD was prompted by LP compressor blade partial airfoil release events. We are issuing this AD to prevent LP compressor blade airfoil separations, damage to the engine, and damage to the airplane.
Comply with this AD within the compliance times specified, unless already done.
(1) Ultrasonic Inspection (UI) of LP Compressor Blade
(i) After the effective date of this AD, for LP compressor blades that have accumulated less than 1,800 cycles since new (CSN) or cycles since last inspection (CSLI), perform a UI of each LP compressor blade before the blade exceeds 2,400 CSN or CSLI. Repeat the UI of the blade before exceeding 2,400 CSLI.
(ii) For any LP compressor blade that exceeds 1,800 CSN on the effective date of this AD, inspect the blade before exceeding 600 flight cycles after the effective date of this AD or before exceeding 3,600 CSN, whichever occurs first. Thereafter, perform the repetitive inspections before exceeding 2,400 CSLI.
(iii) For any blade that exceeds 2,200 CSLI on September 23, 2014 (the effective date of AD 2014-16-10), inspect the blade before exceeding 3,000 CSLI or before further flight, whichever occurs later. Thereafter, perform the repetitive inspections before exceeding 2,400 CSLI.
(iv) Use paragraph 3, excluding subparagraphs 3.C.(2)(b), 3.D.(2) and 3.G, of RR Alert Non-Modification Service Bulletin (NMSB) RB.211-72-AH465, Revision 2, dated May 11, 2016, to perform the inspections required by this AD.
(2) Use of Replacement Blades
(i) After the effective date of this AD, LP compressor blade, P/N FK23411, FK25441, FK25968, FW11901, FW15393, FW23643, FW23741, FW23744, KH23403, or KH23404, that has accumulated at least 2,400 CSN or CSLI is eligible for installation if the blade has passed the UI required by this AD.
(ii) Reserved.
You may take credit for the UI required by paragraph (e) of this AD, if you performed the UI before the effective date of this AD using RR NMSB No. RB.211-72-G702, dated May 23, 2011; or RR NMSB No. RB.211-72-G872, Revision 2, dated March 8, 2013, or earlier revisions; or RR NMSB No. RB.211-72-H311, dated March 8, 2013; or the Engine Manual E-Trent-1RR, Task 72-31-11-200-806.
The Manager, Engine Certification Office, may approve AMOCs for this AD. Use the procedures found in 14 CFR 39.19 to make your request. You may email your request to:
(1) For more information about this AD, contact Robert Green, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7754; fax: 781-238-7199; email:
(2) Refer to MCAI European Aviation Safety Agency AD 2016-0141, dated July 20, 2016, for more information. You may examine the MCAI in the AD docket on the Internet at
(3) RR Alert NMSB RB.211-72-AH465, Revision 2, dated May 11, 2016, can be obtained from RR, using the contact information in paragraph (h)(4) of this AD.
(4) For service information identified in this AD, contact Rolls-Royce plc, P.O. Box 31, Derby DE24 8BJ, UK; phone: 44 0 1332 242424; fax: 44 0 1332 249936.
(5) You may view this service information at the FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA. For information on the availability of this material at the FAA, call 781-238-7125.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve state implementation plan (SIP) revisions submitted by the State of California to provide for attainment of the 1997 8-hour ozone national ambient air quality standards in the Coachella Valley nonattainment area. The EPA is proposing to find the emissions inventories to be acceptable and to approve the reasonably available control measures, transportation control strategies and measures, rate of progress and reasonable further progress demonstrations, attainment demonstration, vehicle miles traveled offset demonstration and the transportation conformity motor vehicle emission budgets.
Any comments must be submitted by December 1, 2016.
Submit your comments, identified by Docket ID No. EPA-R09-OAR-2016-0244 at
Tom Kelly, Air Planning Office (AIR-2), U.S. Environmental Protection Agency, Region IX, (415) 972-3856,
Throughout this document, “we,” “us” and “our” refer to the EPA.
Ground-level ozone is formed when oxides of nitrogen (NO
Scientific evidence indicates that adverse public health effects occur following exposure to ozone, particularly in children and adults with lung disease. Breathing air containing ozone can reduce lung function and inflame airways, which can increase respiratory symptoms and aggravate asthma or other lung diseases. Ozone exposure also has been associated with increased susceptibility to respiratory infections, medication use, doctor visits, as well as emergency department visits and hospital admissions for individuals with lung disease. Ozone exposure also increases the risk of premature death from heart or lung disease. Children are at increased risk from exposure to ozone because their lungs are still developing and they are more likely to be active outdoors, which increases their exposure.
In 1979, under section 109 of the Clean Air Act (CAA), the EPA established primary and secondary national ambient air quality standards (NAAQS or standards) for ozone at 0.12 parts per million (ppm) averaged over a 1-hour period.
On July 18, 1997, the EPA revised the primary and secondary standards for ozone to set the acceptable level of ozone in the ambient air at 0.08 ppm, averaged over an 8-hour period (“1997 8-hour ozone standards”).
Following promulgation of a new or revised NAAQS, the EPA is required by the CAA to designate areas throughout the nation as attaining or not attaining the standards. Effective June 15, 2004, we designated nonattainment areas for the 1997 8-hour ozone standards.
The Coachella Valley area is located within Riverside County. For a precise description of the geographic boundaries of the area, see 40 CFR 81.305. The Coachella Valley is under the jurisdiction of the South Coast Air Quality Management District (SCAQMD or District). The District and CARB are responsible for adopting and submitting a state implementation plan (SIP) to attain the 1997 8-hour ozone standards for nonattainment areas in their jurisdiction.
Air quality in the Coachella Valley has steadily improved in recent years. Design values have declined from 0.108 ppm in 2003 to 0.088 ppm in 2015.
The Coachella Valley is downwind from the South Coast Air Basin, which is also regulated by the SCAQMD. The South Coast Air Basin's continued progress toward meeting the 1997 Ozone standards is critical to the Coachella Valley attaining the 1997 ozone standards. The SCAQMD's Final 2007 Air Quality Management Plan (2007 AQMP) states, “pollutant transport from the South Coast Air Basin to the Coachella Valley is the primary cause of its ozone nonattainment status.”
States must implement the 1997 8-hour ozone standards under Title 1, Part D of the CAA, which includes section 172, “Nonattainment plan provisions,” and subpart 2, “Additional Provisions for Ozone Nonattainment Areas” (sections 181-185).
In order to assist states in developing effective plans to address ozone nonattainment problems, the EPA issued an implementation rule for the 1997 8-hour ozone standards (“1997 Ozone Implementation Rule”). This rule was finalized in two phases. The first phase of the rule addressed classifications for the 1997 8-hour ozone standards, applicable attainment dates for the various classifications, and the timing of emissions reductions needed for attainment.
The EPA announced the revocation of the 1997 8-hour ozone NAAQS and the anti-backsliding requirements that apply upon revocation, in a rulemaking that established final implementation rules for the 2008 8-hour ozone NAAQS. 80 FR 12264 (March 6, 2015). Consistent with the anti-backsliding provisions in CAA section 172(e), the EPA included anti-backsliding requirements that apply upon revocation of the 1997 8-hour ozone NAAQS. Notwithstanding revocation of the 1997 8-hour ozone NAAQS, areas that were designated as nonattainment for the 1997 8-hour ozone NAAQS at the time the standards were revoked continue to be subject to certain SIP requirements that had previously applied based on area classifications for the standards.
We discuss the CAA and regulatory requirements for 1997 8-hour ozone nonattainment plans in more detail below.
Designation of an area as nonattainment starts the process for a state to develop and submit to the EPA a SIP providing for attainment of the NAAQS under title 1, part D of the CAA. For areas designated as nonattainment for the 1997 8-hour ozone NAAQS effective June 15, 2004, this attainment SIP was due by June 15, 2007.
• “Final 2007 Air Quality Management Plan,” South Coast Air Quality Management District, June 2007 (2007 AQMP);
• “2007 State Strategy for the California State Implementation Plan,” Release Date April 26, 2007 and Appendices A—G, CARB, Release Date May 7, 2007 (2007 State Strategy);
• “Status Report on the State Strategy for California's 2007 State Implementation Plan (SIP) and Proposed Revision to the SIP Reflecting Implementation of the 2007 State Strategy,” CARB, Release Date: March 24, 2009 (2009 State Strategy Status Report);
• “Progress Report on Implementation of PM
• “Staff Report, Proposed Updates to the 1997 8-Hour Ozone Standard, State Implementation Plans; Coachella Valley and Western Mojave Desert,” CARB, Release Date: September 22, 2014 (2014 SIP Update).
Additionally, on March 24, 2008, CARB submitted an Ozone Early Progress Plan
In today's proposal, we refer to the portions of these documents relevant to the Coachella Valley collectively as the “Coachella Valley Ozone Plan” or “the Plan.” EPA has already approved portions of these documents in actions for other nonattainment areas.
The 2007 AQMP discusses attainment of the 1997 ozone NAAQS for both the South Coast Air Basin and Coachella Valley, and the 1997 p.m.2.5 NAAQS for the South Coast Air Basin. We are only acting on the ozone portions of the 2007 AQMP, and only on the portions applicable to the Coachella Valley, which includes the following sections of the 2007 AQMP: the emissions estimates, RFP demonstrations, and motor vehicle emission budgets for the Coachella Valley in Chapter 8; the detailed base and future emission inventories in Appendix III; the modeling for the attainment demonstration in Chapter 5 and Appendix V; the control strategy in Chapters 4 and 7; and the RACM discussion in Chapter 6 and Appendix VI.
The 2007 State Strategy, as amended by the 2009 State Strategy Status Report and 2011 State Strategy Progress Report, provides a RACM demonstration for mobile sources. The relevant portions of the 2007 State Strategy include Chapter 3, which describes California's SIP commitments, and Chapter 5, which lists individual measures in more detail, as part of the State's submittal. We note, however, that other portions of the 2007 State Strategy contain additional information relevant to Coachella Valley, such as emissions reductions from the Strategy contained in Appendix A. Appendix F of the 2011 State Strategy Progress Report provides revised control measure commitments and a revised rule implementation schedule for the 2007 AQMP.
The 2014 SIP Update, which covers both the Coachella Valley and Western Mojave Desert 1997 8-hour ozone nonattainment areas, updates the following sections of the 2007 AQMP: emissions inventories; RFP demonstration, and vehicle miles travelled (VMT) offset demonstration. The 2014 SIP Update also updates the motor vehicle emissions budgets in the Ozone Early Progress Plan mentioned above. It also revises the attainment targets for NO
CAA sections 110(a)(1) and (2) and 110(l) require a state to provide reasonable public notice and opportunity for public hearing prior to the adoption and submittal of a SIP or SIP revision. To meet this requirement, every SIP submittal should include evidence that adequate public notice was given and an opportunity for a public hearing was provided consistent with the EPA's implementing regulations in 40 CFR 51.102.
The SCAQMD and CARB provided public notice and an opportunity for public comment through public comment periods, and held public hearings prior to adopting the components of the Coachella Valley Ozone Plan. Hearing and adoption dates are shown in Table 1. The SCAQMD's and CARB's submittals both include proof of publication for notices of the District's and CARB's public hearings, as evidence that all hearings were properly noticed. Therefore, we find the submittals meet the procedural requirements of CAA sections 110(a) and 110(l).
CAA section 110(k)(1)(B) requires that the EPA determine whether a SIP submittal is complete within 60 days of receipt. This section of the CAA also provides that any plan that the EPA has not affirmatively determined to be complete or incomplete will be deemed complete by operation of law six months after the date of submittal. The EPA's SIP completeness criteria are found at 40 CFR part 51, Appendix V. The EPA's completeness determinations for each submittal are shown in Table 2.
CAA section 182(a)(1) requires each state with an ozone nonattainment area classified under subpart 2 to submit a “comprehensive, accurate, current inventory of actual emissions from all sources” of the relevant pollutants in accordance with guidance provided by the Administrator. While this inventory is not a specific requirement under the anti-backsliding provisions at 40 CFR 51.1105 and 51.1100(o), it provides support for demonstrations required under these anti-backsliding rules. Additionally, a baseline emissions inventory is needed for the attainment demonstration and for meeting RFP requirements. EPA's 1997 Ozone Implementation Rule identifies 2002 as the baseline year for the SIP planning emissions inventory.
We have evaluated the emissions inventories in the Coachella Valley Ozone Plan to determine if they are consistent with EPA guidance and adequate to support the Plan's RACM, RFP, rate of progress (ROP) and attainment demonstrations.
Appendix A of the 2014 SIP Update contains detailed emissions inventories for the Coachella Valley. A partial summary of this information is contained in Table 3. The average summer weekday emissions typical of the ozone season are used for the 2002 base year planning inventory and the 2018 attainment year.
The on-road motor vehicles inventory category consists of trucks, automobiles, buses, and motorcycles. California's model for estimating emissions from on-road motor vehicles operating in California is referred to as “EMFAC” (short for EMission FACtor). EMFAC has undergone many revisions over the years. At the time the 2014 SIP Update was submitted, EMFAC2011 was the model approved by the EPA for estimating on-road motor source emissions in California.
The 2014 SIP Update contains off-road VOC and NO
The stationary source category of the emissions inventory includes non-mobile, fixed sources of air pollution comprised of individual industrial, manufacturing, and commercial facilities. Examples of stationary sources (a.k.a., point sources) include fuel combustion (
The area sources category includes aggregated emissions data from processes that are individually small and widespread or not well-defined point sources. The area source subcategories include solvent evaporation (
The emission inventories in the 2014 SIP Update use the California Emission Projection Analysis Model (CEPAM).
We have reviewed the emissions inventories in the Coachella Valley Ozone Plan and the inventory methodologies used by the District and CARB for consistency with CAA section 182(a)(1) and EPA guidance. We find that the base year and projected attainment year inventories are comprehensive, accurate, and current inventories of actual and projected emissions of NO
CAA section 172(c)(1) requires that each attainment plan provide for the implementation of all reasonable available control measures as expeditiously as practicable and provide for attainment of the NAAQS. The RACM demonstration requirement is a continuing applicable requirement for the Coachella Valley under the EPA's anti-backsliding rules that apply once a standard has been revoked.
The EPA has previously provided guidance interpreting the RACM requirement in the “General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990” (“General Preamble”)
Any measures that are necessary to meet these requirements that are not already either federally promulgated, part of the state's SIP, or otherwise creditable in SIPs must be submitted in enforceable form as part of a state's attainment plan for the area. CAA section 172(c)(6) requires nonattainment plans to include enforceable emission limitations, and such other control measures, means or techniques (including economic incentives such as fees, marketable permits, and auctions of emission rights), as well as schedules and timetables for compliance, as may be necessary or appropriate to provide for attainment of such standards in such area by the applicable attainment date.
The purpose of the RACM analysis is to determine whether or not control measures exist that are economically and technically reasonable and that provide emissions reductions that
For ozone nonattainment areas classified as moderate or above, CAA section 182(b)(2) also requires implementation of RACT for all major sources of VOC and for each VOC source category for which the EPA has issued a Control Techniques Guidelines (CTG) document. CAA section 182(f) requires that RACT under section 182(b)(2) also apply to major stationary sources of NO
Appendix VI of the 2007 AQMP includes a RACM demonstration covering both the South Coast Air Basin and the Coachella Valley, which focuses on control measures for stationary and area sources. The process to identify RACM involved public meetings to solicit input, evaluation of the EPA's suggested RACM, and evaluation of air emissions rules in other areas (including the San Joaquin Valley, the San Francisco Bay Area, Sacramento, Ventura, Dallas-Fort Worth, the Houston-Galveston area and the Lake Michigan Air Directors Consortium). The District also reevaluated all 82 of its existing rules and regulations. The RACM evaluation process included a summit where CARB technical experts, local government representatives and the public suggested alternative ways to attain air quality standards. More than 200 potential control measures were identified. The District then screened the identified measures and rejected those that would not individually or collectively advance attainment in the area by at least one year, had already been adopted as rules, or were in the process of being adopted. The remaining measures were evaluated by taking into account baseline inventories, available control technologies, and potential emission reductions as well as whether the measure could be implemented on a schedule that would advance attainment of the 1997 8-hour ozone standards by at least a year.
Based on this analysis, SCAQMD scheduled 16 new or revised stationary source control measures for development and adoption, including revisions to make SCAQMD rules at least as stringent as other California districts' rules and several innovative measures. Since submission of the AQMP in 2007, the SCAQMD has adopted 12 of these rules and submitted them to the EPA for approval into the SIP. Table 4 lists the measures identified in the 2007 AQMP,
The EPA determined that the 2007 AQMP met the RACM requirement for the 1997 8-hour ozone standards in the South Coast Air Basin.
With respect to on-road mobile sources, we note that SCAG is the designated metropolitan planning organization (MPO) for a large portion of southern California, including Coachella Valley, and SCAG's membership includes local jurisdictions within the Coachella Valley. For the 2007 AQMP, SCAG evaluated a list of possible transportation control measures (TCMs) as one element of the larger RACM evaluation for the plan. TCMs are, in general, measures designed to reduce emissions from on-road motor vehicles through reductions in VMT or traffic congestion. SCAG's TCM development process is described in Appendix IV-C (“Regional Transportation Strategy and Control Measures”) of the 2007 AQMP, pages 49 to 55.
In our final action on the 2007 AQMP for the South Coast Air Basin, we concluded that the evaluation processes undertaken by SCAG were consistent with the EPA's RACM guidance and found that there were no additional RACM, including no additional TCMs that would advance attainment of the 1997 8-hour ozone standards in the South Coast Air Basin.
While TCMs are being implemented in the upwind South Coast Air Basin area to meet CAA requirements, neither the SCAQMD nor CARB rely on implementation of any TCMs in the Coachella Valley to demonstrate implementation of RACM in the Coachella Valley Ozone Plan. The SCAQMD and CARB justify the absence of TCMs in the Coachella Valley by reference to the significant influence of pollutant transport from the South Coast Air Basin on ozone conditions in the Coachella Valley. We agree that pollutant transport from the South Coast Air Basin is significant, and find that, given the influence of such transport and the minimal and diminishing emissions benefit generally associated with TCMs, no TCM or combination of TCMs implemented in the Coachella Valley would advance the attainment date in the Coachella Valley, and thus, no TCMs are reasonably available for implementation in the Coachella Valley for the purposes of meeting the RACM requirement. Lastly, we note that, while not required for CAA purposes, SCAG's most recent Regional Transportation Plan/Sustainable Communities Strategy (RTP/SCS) (April 2016) includes a list of projects for the Coachella Valley, some of which represent the types of projects often identified as TCMs, such as traffic signalization projects and bike lane projects.
CARB has primary responsibility for reducing emissions in California from new and existing on-road and off-road engines and vehicles, motor vehicle fuels, and consumer products. Given the need for significant emissions reductions from mobile sources to meet the ozone standards in California nonattainment areas, CARB has been a leader in the development of stringent control measures for on-road and off-road mobile sources, fuels and
CARB developed its 2007 State Strategy after an extensive public consultation process to identify potential SIP measures. From this process, CARB identified and committed to propose 15 new defined measures. These measures focus on cleaning up the in-use fleet as well as increasing the stringency of emissions standards for a number of engine categories, fuels, and consumer products. Many, if not most, of these measures have been adopted or are being proposed for adoption for the first time anywhere in the nation. They build on CARB's already comprehensive program described above that addresses emissions from all types of mobile sources and consumer products, through both regulations and incentive programs.
In adopting the 2007 State Strategy, CARB committed to reducing Coachella Valley NO
CARB adopted the 2009 State Strategy Status Report in April 2009. This submittal updated the 2007 State Strategy to reflect its implementation during 2007 and 2008, and also to reflect changes resulting from the adoption of the scoping plan mandated by Assembly Bill 32 that will help reduce ozone during SIP implementation.
CARB again revised the state strategy in the 2011 State Strategy Progress Report. While the changes primarily address attainment of the 1997 PM
We have previously determined that CARB's mobile source control programs constituted RACM for the attainment plan for the 1997 Ozone NAAQS in the South Coast Air Basin.
For the Coachella Valley in 2017 (the year prior to the attainment year), the emissions inventory shows that nearly all of the locally generated NO
CAA section 182(c)(2)(A) requires states with ozone nonattainment areas classified as “Serious” or above to submit plans that demonstrate attainment of the ozone NAAQS as expeditiously as practicable but no later than the specified attainment date. For any ozone nonattainment area classified as serious or above, section 182(c)(2)(A) of the CAA specifically requires the State to submit a modeled attainment demonstration based on a photochemical grid modeling evaluation or any other analytical method determined by the Administrator to be at least as effective as photochemical modeling. The attainment demonstration requirement is a continuing applicable requirement for the Coachella Valley under the EPA's anti-backsliding rules that apply once a standard has been revoked.
For more detail on the requirements for modeling an 8-hour ozone attainment demonstration, see the Technical Support Document (TSD) for today's proposal. The modeling section of the TSD includes a complete list of applicable modeling guidance documents. These documents describe the components of the attainment demonstration, explain how the modeling and other analyses should be conducted, and provide overall guidance on the technical analyses for attainment demonstrations.
As with any predictive tool, inherent uncertainties are associated with photochemical grid modeling. The EPA's guidance recognizes these limitations and provides recommended approaches for considering other analytical evidence to help assess whether attainment of the NAAQS is likely. This process is called a weight of evidence (WOE) analysis.
The EPA's modeling guidance (updated in 1996, 1999, and 2002) discusses various WOE analyses. This guidance was updated again in 2005 and 2007 for the 1997 8-hour attainment demonstration procedures to include a WOE analysis as an integral part of any attainment demonstration. This guidance strongly recommends that all attainment demonstrations include supplemental analyses beyond the recommended modeling. These supplemental analyses can provide
The model selected for the 2007 AQMP attainment demonstrations is the Comprehensive Air Quality Model with Extensions (CAMx), version 4.4 (Environ, 2006), using Statewide Air Pollution Research Center-99 (SAPRC-99) gas phase mechanisms (Carter, 2000).
Six meteorological episodes from three years are used as the basis for the plan. An earlier modeling effort, contained in SCAQMD's 2003 Air Quality Management Plan, benefited from the intensive monitoring conducted under the 1997 Southern California Ozone Study (SCOS 1997) where the August 4-7, 1997, episode was the cornerstone of the modeling analysis. One of the primary modeling episodes used in the earlier modeling from August 5-6, 1997, was also selected for this plan. In addition, five episodes that occurred during the Multiple Air Toxics Exposure Study III (MATES-III) sampling program in 2004 (August 7-8) and 2005 (May 21-22, July 15-19, August 4-6, and August 27-28) were selected.
The modeling for the Coachella Valley attainment demonstration uses the same approach used for the South Coast Air Basin attainment demonstration, which was based on an air quality modeling domain that covers the entire South Coast Air Basin, the Coachella Valley, and much of southern California. Model performance was evaluated in three zones in the South Coast Basin: The San Fernando Valley; the eastern San Gabriel, Riverside and San Bernardino Valleys; and Los Angeles and Orange County. Normalized Gross Bias, Normalized Gross Error, and Peak Prediction Accuracy were determined for each area. Although not a requirement for determining acceptable model performance, the performance statistics were compared to the EPA performance goals presented in guidance documents. The performance goals for Normalized Gross Error and Peak Prediction Accuracy were met in the eastern San Gabriel, Riverside and San Bernardino Valleys. In general, the statistic for bias (Normalized Gross Bias) tends to be negative, indicating that the model tends to slightly under-predict ozone. Based on the analysis, the SCAQMD concludes that model performance is acceptable for this application.
CAMx simulations were conducted for the base year 2002, and future-year 2017 baseline and controlled emissions.
The attainment demonstration included in the 2007 AQMP indicates that the Coachella Valley will attain the federal 1997 8-hour ozone standards by the proposed attainment date of June 15, 2019. The 2007 AQMP projects the Coachella Valley air monitoring stations of Palm Springs and Indio to have 8-hour ozone design values of 75.9 ppb and 66.2 ppb respectively in the year 2017.
The South Coast Air Basin's continued progress toward meeting the 1997 ozone NAAQS is critical to the Coachella Valley's ability to attain the 1997 ozone standards. The Coachella Valley is downwind of the South Coast Air Basin, which is regulated by the SCAQMD. The 2007 AQMP states, “pollutant transport from the South Coast Air Basin to the Coachella Valley is the primary cause of its ozone nonattainment status.” The plan cites several studies that confirm the transport between the two air basins.
We are proposing to approve an attainment date of June 15, 2019, which reflects a 2018 attainment year. This is based on our evaluation of the air quality modeling analyses in the 2007 AQMP and our WOE analysis. The WOE analysis considered the attainment demonstration from the 2012 AQMP and more recent ambient air quality monitoring data that were not available at the time SCAQMD performed the attainment modeling. The basis for our proposed approval is discussed in more detail in the TSD. The modeling shows significant reductions in ozone from the base period. The most recent ambient air quality data that we have reviewed indicate that the area is on track to attain the 1997 8-hour ozone standards by 2018.
Based on the analysis above and in the TSD, the EPA proposes to find that the air quality modeling in the 2007 AQMP provides an adequate basis for the RACM, RFP and attainment demonstrations in the Coachella Valley Ozone Plan, and is consistent with the applicable requirements of CAA section 182(c)(2)(a) and 40 CFR 51.1105(a)(1) and 51.1100(o)(12).
For areas classified as moderate or above, Section 182(b)(1) requires a SIP revision providing for rate of progress (ROP), defined as a one time, 15% actual VOC emission reduction during the six years following the baseline year 1990, or an average of 3% per year. For areas designated serious nonattainment or above, no further action is necessary if the area fulfilled its ROP requirement for the 1-hour standards (from 1990-1996). As the EPA explained in the 1997 Ozone Implementation Rule, 69 FR 23980 (October 27, 2004), for areas that did not meet the 15% ROP reduction for the 1-hour ozone standards, a state may notify the EPA that it wishes to rely on a previously submitted SIP (for the 1-hour ozone standards), or it may elect to submit a new or revised SIP (for the 1997 ozone standards) addressing the 15% ROP reduction. The ROP demonstration requirement is a continuing applicable requirement for the Coachella Valley under the EPA's anti-backsliding rules that apply once a standard has been revoked.
The CAA outlines and EPA guidance details the method for calculating the requirements for the 1990-1996 period. Section 182(b)(1) requires that reductions: (1) Be in addition to those needed to offset any growth in emissions between the base year and the milestone year; (2) exclude emission reductions from four prescribed federal programs (
The adjusted base year inventory excludes the emission reductions from fleet turnover between 1990 and 1996 and from federal RVP regulations promulgated by November 15, 1990, or required under section 211(h) of the Act. The net effect of these adjustments is that states are not able to take credit for emissions reductions that would result from fleet turnover of current federal standard cars and trucks, or from already existing federal fuel regulations. However, the SIP can take full credit for the benefits of any new (
While a SIP revision for attainment of the 1-hour ozone standards was submitted for the Southeast Desert area (
The 2014 SIP Update incorporates the ROP demonstration as an element of the RFP demonstration. We note that this approach is valid, but different from the organization of this notice, where we first, and separately, assess the ROP demonstration and then assess the RFP demonstration.
CAA sections 172(c)(2) and 182(b)(1) require plans for nonattainment areas to provide for RFP. RFP is defined in section 171(1) as “such annual incremental reductions in emissions of the relevant air pollutant as are required by this part or may reasonably be required by the Administrator for the purpose of ensuring attainment of the applicable [NAAQS] by the applicable date.” CAA section 182(c)(2)(B) requires ozone nonattainment areas classified as serious or higher to submit no later than 3 years after designation for the 8-hour ozone standards an RFP SIP providing for an average of 3% per year of VOC and/or NO
CAA section 182(c)(2)(C) allows for the substitution of NO
The 2014 SIP Update contains emissions estimates for the baseline, milestone and attainment years, and additional discussion of the RFP demonstration.
Based on our review of the ROP calculations in the 2014 SIP Update, summarized in Table 5 above, we conclude that the state has demonstrated that sufficient emission reductions have been achieved to meet the ROP requirements in 2008. And as shown in Table 6, the South Coast 2007 8-hour Ozone SIP provides for RFP in each milestone year, consistent with applicable CAA requirements and EPA guidance. We therefore propose to approve the ROP and RFP demonstrations under sections 182(b)(1) and 182(c)(2) of the CAA and 40 CFR 51.1105(a)(1) and 51.1100(o)(4).
CAA section 176(c) requires federal actions in nonattainment and maintenance areas to conform to the goals of SIPs. This means that such actions will not: (1) Cause or contribute to violations of a NAAQS, (2) worsen the severity of an existing violation, or (3) delay timely attainment of any NAAQS or any interim milestone.
Actions that involve Federal Highway Administration (FHWA) or Federal Transit Administration (FTA) funding or approval are subject to the EPA's transportation conformity rule, which is codified in 40 CFR part 93, subpart A. Under this rule, metropolitan planning organizations (MPOs) in nonattainment and maintenance areas coordinate with state and local air quality and transportation agencies, the EPA, FHWA, and FTA to demonstrate that an area's RTP and transportation improvement programs (TIP) conform to the applicable SIP. This demonstration is typically done by showing that estimated emissions from existing and planned highway and transit systems are less than or equal to the motor vehicle emissions budgets (MVEBs or budgets) contained in the SIP. An attainment, RFP, or maintenance SIP establishes MVEBs for the attainment year, each required RFP year or last year of the maintenance plan, as appropriate. MVEBs are generally established for specific years and specific pollutants or precursors. Ozone attainment and RFP plans establish MVEBs for NO
Before an MPO may use MVEBs in a submitted SIP, the EPA must first either determine that the MVEBs are adequate or approve the MVEBs. In order for us to find the MVEBs adequate and approvable, the submittal must meet the conformity adequacy requirements of 40 CFR 93.118(e)(4) and (5) and be approvable under all pertinent SIP requirements. To meet these requirements, the MVEBs must be consistent with the approvable attainment and RFP demonstrations and reflect all of the motor vehicle control measures contained in the attainment and RFP demonstrations.
The EPA's process for determining adequacy of a MVEB consists of four basic steps: (1) Providing public notification of a SIP submission; (2) providing the public the opportunity to comment on the MVEB during a public comment period and responding to any comments that are submitted; (3) reviewing the submitted SIP to determine if it meets the adequacy criteria; and, (4) making a finding of adequacy or inadequacy.
The 2007 AQMP did not propose budgets for transportation conformity for the Coachella Valley. CARB submitted the 2008 Early Progress Plan, an amendment to the SIP, to establish MVEBs for many areas of California including the Coachella Valley.
The 2014 SIP Update includes updated MVEBs.
The MVEBs are the projected on-road mobile source VOC and NO
As part of our review of the budgets' approvability, we have evaluated the revised budgets using our adequacy criteria in 40 CFR 93.318(e)(4) and (5). We found that the 2017 and 2018 budgets meet each adequacy criterion. We have completed our review of the 2014 SIP Update and are proposing to approve the SIP's attainment and RFP demonstrations. We have also reviewed the proposed budgets submitted with the 2014 SIP Update and have found that the 2017 and 2018 budgets are consistent with the attainment and RFP demonstrations, were based on control measures that have already been adopted and implemented, and meet all other applicable statutory and regulatory requirements including the adequacy criteria in 40 CFR 93.118(e)(4) and (5). Therefore, we are proposing to approve the 2017 and 2018 budgets as shown in Table 7.
CAA section 182(d)(1)(A) requires a state with areas classified as “Severe” or “Extreme” to “submit a revision that identifies and adopts specific enforceable transportation control strategies (TCSs) and TCMs to offset any growth in emissions from growth in VMT or numbers of vehicle trips in such area.” Herein, we refer to the SIP requirement as the “VMT emissions offset requirement,” and the SIP revision intended to demonstrate compliance with the VMT emissions offset requirement as the “VMT emissions offset demonstration.” The VMT emissions offset requirement is a continuing applicable requirement for the Coachella Valley under the EPA's anti-backsliding rules that apply once a standard has been revoked.
CAA section 182(d)(1)(A) also includes two additional elements requiring that the SIP include: (1) TCSs and TCMs as necessary to provide (along with other measures) the reductions needed to meet the applicable RFP requirement, and (2) include strategies and measures to the extent needed to demonstrate attainment. As noted above, the first element of CAA section 182(d)(1)(A) requires that areas classified as “Severe” or “Extreme” submit a SIP revision that identifies and adopts TCSs and TCMs sufficient to offset any growth in emissions from growth in VMT or the number of vehicle trips.
In response to the Court's decision in
The August 2012 guidance also explains how states may demonstrate that the VMT emissions offset requirement is satisfied in conformance with the Court's ruling. It recommends states estimate emissions for the nonattainment area's base year and the attainment year. One emission inventory is developed for the base year, and three different emissions inventory scenarios are developed for the attainment year. Two of these scenarios would represent hypothetical emissions scenarios that would provide the basis to identify the “growth in emissions” due solely to the growth in VMT, and one that would represent projected actual motor vehicle emissions after fully accounting for projected VMT growth and offsetting emissions reductions obtained by all creditable TCSs and TCMs. The August 2012 guidance contains specific details on how states might conduct the calculations.
The base year on-road VOC emissions inventory should be based on VMT in that year and it should reflect all enforceable TCSs and TCMs in place in the base year. This would include vehicle emissions standards, state and local control programs such as I/M programs or fuel rules, and any additional implemented TCSs and TCMs that were already required by or credited in the SIP as of the base year.
The first of the emissions calculations for the attainment year would be based on the projected VMT and trips for that year, and assume that no new TCSs or TCMs beyond those already credited in the base year inventory have been put in place since the base year. This calculation demonstrates how emissions would hypothetically change if no new TCSs or TCMs were implemented, and VMT and trips were allowed to grow at the projected rate from the base year. This estimate would show the potential for an increase in emissions due solely to growth in VMT and trips, representing a no-action scenario. Emissions in the attainment year in this scenario may be lower than those in the base year due to fleet turnover to lower-emitting vehicles. Emissions may also be higher if VMT and/or vehicle trips are projected to sufficiently increase in the attainment year.
The second of the attainment year emissions calculations would also assume that no new TCSs or TCMs beyond those already credited have been put in place since the base year, but would also assume no growth in VMT and trips between the base year and attainment year. Like the no-action attainment year estimate described above, emissions in the attainment year may be lower than those in the base year due to fleet turnover, but the emissions would not be influenced by any growth
These two hypothetical status quo estimates are necessary steps in identifying target emission levels. These levels determine whether further TCMs or TCSs beyond those that have been adopted and implemented are needed to fully offset any increase in emissions due solely to VMT and vehicle trips identified in the no action scenario.
The third calculation incorporates the emissions that are actually expected to occur in the area's attainment year after taking into account reductions from all enforceable TCSs and TCMs that in reality were put in place after the baseline year. This estimate would be based on the VMT and trip levels expected to occur in the attainment year (
If the projected actual attainment year emissions are greater than the VMT offset ceiling established in the second of the attainment year emissions calculations even after accounting for post-baseline year TCSs and TCMs, the state would need to adopt and implement additional TCSs or TCMs. To meet the VMT offset requirement of section 182(d)(1)(A) as interpreted by the Court, the additional TCSs or TCMs would need to offset the growth in emissions and bring the actual emissions down to at least the same level as the attainment year VMT offset ceiling estimate.
The Coachella Valley VMT Offset demonstration is contained in Appendix E of the 2014 SIP Update. The State used EMFAC2011,
Emissions from running exhaust, start exhaust, hot soak, and running losses are a function of how much a vehicle is driven. As such, emissions from these processes are directly related to VMT and vehicle trips, and the State included emissions from them in the calculations that provide the basis for the revised Coachella Valley VMT emissions offset demonstration. The 2014 SIP Update (
The VMT emissions offset demonstration also includes the previously described three different attainment year scenarios (
For the base year scenario, CARB ran the EMFAC2011 model for the 2002 base year using VMT and starts data corresponding to those years. As shown in Table 8, the 2014 SIP Update estimates Coachella Valley VOC emissions to be 8 tpd in 2002.
For the no-action scenario, the State first identified the on-road motor vehicle control programs (
For the VMT offset ceiling scenario, the State ran the EMFAC2011 model for the attainment year but with VMT and starts data corresponding to base year values. Like the no- action scenario, the EMFAC2011 model was adjusted to reflect VOC emissions levels in the attainment year without the benefits of the on-road motor vehicle control programs implemented after the base year. Thus, the VMT offset ceiling scenario reflects hypothetical VOC emissions if the State had not put in place any TCSs or TCMs after the base year and if there had been no growth in VMT or vehicle trips between the base year and the attainment year. As shown in Table 8, CARB estimates VMT offset ceiling VOC emissions to be 3 tpd in 2018.
The hypothetical growth in emissions due to growth in VMT and trips can be determined from the difference between the VOC emissions estimates under the no action scenario and the corresponding estimate for the VMT offset ceiling scenario. Based on the values in Table 9, the hypothetical growth in emissions due to growth in VMT and trips in the Coachella Valley would have been 1 tpd (
For the projected actual scenario calculation, the State included the emissions benefits from TCSs and TCMs
The Coachella Valley VMT emissions offset demonstrations established 2002 as the base year for the purpose of the VMT emissions offset demonstration for the 1997 8-hour ozone standards. The base year for VMT emissions offset demonstration purposes should generally be the same base year used for nonattainment planning purposes. In today's action, the EPA is proposing to approve the 2002 base year inventory for Coachella Valley for the purposes of the 1997 8-hour ozone standards. Thus, CARB's selection of 2002 as the base year for the VMT emissions offset demonstration for the 1997 8-hour ozone standards is appropriate.
As shown in Table 8, the results from these calculations establish projected actual attainment-year VOC emissions of 2 tpd in the Coachella Valley for the 1997 8-hour standards demonstration. By comparing these values against the corresponding VMT offset ceiling value, we can determine whether additional TCMs or TCSs would need to be adopted and implemented to offset any increase in emissions due solely to VMT and trips. Because the projected actual emissions are less than the corresponding VMT offset ceiling emissions, the State's demonstration shows compliance with the VMT emissions offset requirement. This means that the adopted TCSs and TCMs are sufficient to offset the growth in emissions from the growth in VMT and vehicle trips in Coachella Valley for the 1997 8-hour ozone standards. Taking into account the creditable post-baseline year TCMs and TCSs, the demonstration shows Coachella Valley offset hypothetical growth in emissions due to growth in VMT by 2 tpd of VOC, which is more than the required 1 tpd offset.
Based on our review of the 2014 SIP Update, we find the State's analysis to be acceptable and agree that the State has adopted sufficient TCSs and TCMs to offset the growth in emissions from growth in VMT and vehicle trips in the Coachella Valley for the purposes of the 1997 8-hour ozone standards. Thus we find that the VMT emissions offset demonstration for this area complies with the VMT emissions offset requirement in CAA section 182(d)(1)(A), consistent with 40 CFR 40 CFR 51.1105(a)(1) and 51.1100(o)(10). Therefore, we propose approval of the revised VMT emissions offset demonstration for the 1997 8-hour ozone standards, contained in the 2014 SIP Update, as a revision to the California SIP.
For the reasons discussed above, the EPA is proposing to approve the Coachella Valley Ozone Plan for the 1997 8-hour ozone NAAQS. The Plan includes the relevant portions of the following documents: (1) “Final 2007 Air Quality Management Plan,” South Coast Air Quality Management District, June 2007; (2) CARB's “2007 State Strategy for the California State Implementation Plan,” Release Date April 26, 2007 and Appendices A-G, Release Date May 7, 2007; (3) CARB's “Status Report on the State Strategy for California's 2007 State Implementation Plan (SIP) and Proposed Revision to the SIP Reflecting Implementation of the 2007 State Strategy,” Release Date: March 24, 2009; (4) CARB's “Progress Report on Implementation of PM
The EPA is proposing to approve the following elements of the Coachella Valley Ozone Plan under CAA section 110(k)(3):
1. The RACM demonstration as meeting the requirements of CAA section 172(c)(1) and 40 CFR 51.1105(a)(1) and 51.1100(o)(17);
2. The ROP and RFP demonstrations as meeting the requirements of CAA sections 172(c)(2) and 182(c)(2)(B) and 40 CFR 51.1105(a)(1) and 51.1100(o)(4);
3. The attainment demonstration as meeting the requirements of CAA section 182(c)(2)(A) and 40 CFR 51.1105(a)(1) and 51.1100(o)(12);
4. The demonstration that the SIP provides for transportation control strategies and measures sufficient to offset any growth in emissions from growth in VMT or the number of vehicle trips, and to provide for RFP and attainment, as meeting the requirements of CAA section 182(d)(1)(A) and 40 CFR 51.1105(a)(1) and 51.1100(o)(10).
We are also approving the revised MVEBs for RFP for 2017 and for the attainment year of 2018, because they are derived from approvable RFP and attainment demonstrations and meet the requirements of CAA sections 176(c) and 40 CFR part 93, subpart A.
The EPA is soliciting public comments on the issues discussed in this document or on other relevant matters. We will accept comments from the public on this proposal for the next 30 days. We will consider these comments before taking final action.
Additional information about these statutes and Executive Orders can be found at
This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget (OMB) for review.
This action does not impose an information collection burden under the PRA because this action does not impose additional requirements beyond those imposed by state law.
I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. This action will not impose any requirements on small entities beyond those imposed by state law.
This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. This action does not impose additional requirements beyond those imposed by state law. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, will result from this action.
This action does not have federalism implications. It will not have substantial direct effects 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.
This action does not have tribal implications, as specified in Executive Order 13175, because the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction, and will not impose substantial direct costs on tribal governments or preempt tribal law. Thus, Executive Order 13175 does not apply to this action.
The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it does not impose additional requirements beyond those imposed by state law.
This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.
Section 12(d) of the NTTAA directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. The EPA believes that this action is not subject to the requirements of section 12(d) of the NTTAA because application of those requirements would be inconsistent with the CAA.
The EPA lacks the discretionary authority to address environmental justice in this rulemaking.
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental regulations, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) proposes to approve the Clean Air Act (CAA) section 111(d)/129 negative declaration for the States of New York and New Jersey and the Commonwealth of Puerto Rico,for other solid waste incineration units(OSWIs) units. Other solid waste incineration (OSWI) unit means either a very small municipal waste combustion unit or an institutional waste incineration unit within our regulations. This negative declaration certifies that existing OSWI units subject to sections 111(d) and 129 of the CAA do not exist within the jurisdiction of the Sates of New York and New Jersey or the Commonwealth of Puerto Rico. The EPA is accepting the negative declaration in accordance with the requirements of the CAA.
Comments must be received on or before December 1, 2016.
Submit your comments, identified by Docket ID No. EPA-R02-OAR-2016—to
Once submitted, comments cannot be edited or removed from
Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (
Edward J. Linky, Environmental Protection Agency, Air Programs Branch, 290 Broadway New York, New York 1007-1866 at 212-637-3764 or by email at
In the final rules section of this
A detailed rationale for the approval is set forth in the direct final rule. If no adverse comments are received in response to this action, no further activity is contemplated in relation to this action. If the EPA receives adverse comments,the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed action. The EPA will not institute a second comment period on this action. Any parties interested in commenting on this action should do so at this time.
For additional information, see the direct final rule which is located in the rules section of this
Environmental protection, Air pollution control, Administrative practice and procedure, Intergovernmental relations, Reporting and recordkeeping requirements, Sewage sludge incinerators.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA or the Agency) is proposing to issue amendments to the Non-Hazardous Secondary Materials rule, initially promulgated on March 21, 2011, and amended on February 7, 2013 and February 8, 2016, under the Resource Conservation and Recovery Act. The Non-Hazardous Secondary Materials rule generally established standards and procedures for identifying whether non-hazardous secondary materials are solid wastes when used as fuels or ingredients in combustion units. In the February 7, 2013 amendments, the EPA listed particular non-hazardous secondary materials as “categorical non-waste fuels” provided certain conditions are met. Persons burning these non-hazardous secondary materials do not need to evaluate them under the general self-implementing case-by-case standards and procedures that would otherwise apply to non-hazardous secondary materials used in combustion units. The February 8, 2016 amendments added three materials including creosote treated railroad ties to the list of categorical non-waste fuels. This action proposes to add other treated railroad ties to the list, which are processed creosote-borate, copper naphthenate and copper naphthenate-borate treated railroad ties, under certain conditions depending on the chemical treatment.
Comments must be received on or before January 3, 2017.
Submit your comments, identified by Docket ID No. EPA-HQ-OLEM-2016-0248, at
George Faison, Office of Resource Conservation and Recovery, Materials Recovery and Waste Management Division, MC 5304P, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; telephone number: (703) 305-7652; email:
The following outline is provided to aid in locating information in this preamble.
The EPA is proposing that additional non-hazardous secondary materials (NHSMs) be categorically listed as non-waste fuels in 40 CFR 241.4(a) under the authority of sections 2002(a)(1) and 1004(27) of the Resource Conservation and Recovery Act (RCRA), as amended, 42 U.S.C. 6912(a)(1) and 6903(27). Section 129(a)(1)(D) of the Clean Air Act (CAA) directs the EPA to establish standards for Commercial and Industrial Solid Waste Incinerators (CISWI), which burn solid waste. Section 129(g)(6) of the CAA provides that the term “solid waste” is to be established by the EPA under RCRA (42 U.S.C. 7429(g)(6)). Section 2002(a)(1) of RCRA authorizes the Agency to promulgate regulations as are necessary to carry out its functions under the Act. The statutory definition of “solid waste” is stated in RCRA section 1004(27).
Categories and entities potentially affected by this action, either directly or indirectly, include, but may not be limited to the following:
This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities potentially impacted by this action. This table lists examples of the types of entities of which EPA is aware that could potentially be affected by this action. Other types of entities not listed could also be affected. To determine whether your facility, company, business, organization, etc., is affected by this action, you should examine the applicability criteria in this rule. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed in the
The RCRA statute defines “solid waste” as “any garbage, refuse, sludge from a waste treatment plant, water supply treatment plant, or air pollution control facility and
The meaning of “solid waste,” as defined under RCRA, is of particular importance as it relates to section 129 of the CAA. If material is a solid waste under RCRA, a combustion unit burning it is required to meet the CAA section 129 emission standards for solid waste incineration units. If the material is not a solid waste, combustion units are required to meet the CAA section 112 emission standards for commercial, industrial, and institutional boilers. Under CAA section 129, the term “solid waste incineration unit” is defined, in pertinent part, to mean “a distinct operating unit of any facility which combusts any solid waste material from commercial or industrial establishments.” 42 U.S.C. 7429(g)(1). CAA section 129 further states that the term “solid waste” shall have the meaning “established by the Administrator pursuant to the Solid Waste Disposal Act.”
Regulations concerning NHSMs used as fuels or ingredients in combustion units are codified in 40 CFR part 241.
• Creosote-borate railroad ties (and mixtures of creosote, copper naphthenate and copper naphthenate-borate railroad ties) that are processed and then combusted in units designed to burn both biomass and fuel oil. Such combustion must be part of normal operations and not solely as part of start-up or shut-down operations. Also included are units at major source pulp and paper mills or power producers
○ Must be burned in existing (
○ Can comprise no more than 40 percent of the fuel that is used on an annual heat input basis.
• Copper naphthenate railroad ties combusted in units designed to burn biomass, or biomass and fuel oil.
• Copper naphthenate-borate railroad ties combusted in units designed to burn biomass, or biomass and fuel oil.
The Agency first solicited comments on how the RCRA definition of solid waste should apply to NHSMs when used as fuels or ingredients in combustion units in an advanced notice of proposed rulemaking (ANPRM), which was published in the
In the March 21, 2011 rule, the EPA finalized standards and procedures to be used to identify whether NHSMs are solid wastes when used as fuels or ingredients in combustion units. “Secondary material” was defined for the purposes of that rulemaking as any material that is not the primary product of a manufacturing or commercial process, and can include post-consumer material, off-specification commercial chemical products or manufacturing chemical intermediates, post-industrial material, and scrap (codified in 40 CFR 241.2). “Non-hazardous secondary material” is a secondary material that, when discarded, would not be identified as a hazardous waste under 40 CFR part 261 (codified in 40 CFR 241.2). Traditional fuels, including historically managed traditional fuels (
A key concept under the March 21, 2011 rule is that NHSMs used as non-waste fuels in combustion units must meet the legitimacy criteria specified in 40 CFR 241.3(d)(1). Application of the legitimacy criteria helps ensure that the fuel product is being legitimately and beneficially used and not simply being discarded through combustion (
Based on these criteria, the March 21, 2011 rule identified the following NHSMs as not being solid wastes:
• The NHSM is used as a fuel and remains under the control of the generator (whether at the site of generation or another site the generator has control over) that meets the legitimacy criteria (40 CFR 241.3(b)(1));
• The NHSM is used as an ingredient in a manufacturing process (whether by the generator or outside the control of the generator) that meets the legitimacy criteria (40 CFR 241.3(b)(3));
• Discarded NHSM has been sufficiently processed to produce a fuel or ingredient that meets the legitimacy criteria (40 CFR 241.3(b)(4)); or
• Through a case-by-case petition process, it has been determined that the NHSM handled outside the control of the generator has not been discarded and is indistinguishable in all relevant aspects from a fuel product, and meets the legitimacy criteria (40 CFR 241.3(c)).
In October 2011, the Agency announced it would be initiating a new rulemaking proceeding to revise certain aspects of the NHSM rule.
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The February 8, 2016 amendments (81 FR 6688) added the following to the list of categorical non-waste fuels:
• Construction and demolition (C&D) wood processed from C&D debris according to best management practices. Under this listing, combustors of C&D wood must obtain a written certification from C&D processing facilities that the C&D wood has been processed by trained operators in accordance with best management practices. Best management practices must include sorting by trained operators that excludes or removes the following materials from the final product fuel: Non-wood materials (
• Paper recycling residuals generated from the recycling of recovered paper, paperboard and corrugated containers and combusted by paper recycling mills whose boilers are designed to burn solid fuel.
• Creosote-treated railroad ties (CTRT) that are processed (which includes metal removal and shredding or grinding at a minimum) and then combusted in the following types of units:
○ Units designed to burn both biomass and fuel oil as part of normal operations and not solely as part of start-up or shut-down operations, and
○ Units at major source pulp and paper mills or power producers subject to 40 CFR part 63, subpart DDDDD, that combust CTRTs and had been designed to burn biomass and fuel oil, but are modified (
Based on these non-waste categorical determinations, as discussed previously, facilities burning NHSMs that meet the categorical listing description will not need to make individual determinations that the NHSM meets the legitimacy criteria or provide further information demonstrating their non-waste status on a site-by-site basis, provided they meet the conditions of the categorical listing.
The Agency received a petition from the Treated Wood Council (TWC) in April 2013 requesting that nonhazardous treated wood (including borate and copper naphthenate) be categorically listed as non-waste fuels in 40 CFR 241.4(a). Under the April 2013 petition, nonhazardous treated wood would include: Waterborne borate based preservatives; waterborne organic based preservatives; waterborne copper based wood preservatives (ammoniacal/alkaline copper quat, copper azole, copper HDO, alkaline copper betaine, or copper naphthenate); creosote; oilborne copper naphthenate; pentachlorophenol; or dual-treated with any of the above.
In the course of EPA's review of the April 2013 petition, additional data was requested and received, and meetings were held between TWC and EPA representatives. Overall, the EPA review determined that there were limited data points available and the analytical techniques for some contaminants were not appropriate to provide information on the entire preserved wood sample as it would be combusted. EPA also questioned the representativeness of the samples being analyzed and the repeatability of the analyses.
In the subsequent August 21, 2015 letter from TWC to Barnes Johnson,
The Agency reviewed TWC's information on the three treated railroad ties, creosote borate, copper naphthenate, and copper naphthenate-borate, submitted on September 11, 2015 and requested additional contaminant data, which was submitted on October 5, 2015 and October 19, 2015.
The February 7, 2013 revisions to the NHSM rule discuss the process and decision criteria whereby the Agency would make additional categorical non-waste determinations (78 FR 9158). While the categorical non-waste determinations in this action are not based on rulemaking petitions, the criteria the EPA used to assess these NHSMs as categorical non-wastes match the criteria to be used by the Administrator to determine whether to grant or deny the categorical non-waste petitions.
Based on the information in the rulemaking record, the Agency is proposing to amend 40 CFR 241.4(a) by listing in addition to CTRT, three other types of treated railroad ties as categorical non-wastes. Specific determinations regarding these other treated railroad ties (OTRT),
The rulemaking record for this rule (
The following sections describe the OTRTs that EPA is proposing to list in section 241.4(a) as categorical non-wastes when burned as a fuel in combustion units.
Industry representatives stated that the removal of OTRTs from service and processing of those ties into a product fuel is analogous to that of CTRTs described in the February 2016 rule.
After crossties are removed from service, they are transferred for sorting/processing, but in some cases, they may be temporarily stored in the railroad rights-of-way or at another location selected by the reclamation company. One information source
Typically, reclamation companies receive OTRTs by rail. The processing of the crossties into fuel by the reclamation/processing companies involves several steps. Contaminant metals (spikes, nails, plates, etc.) undergo initial separation and removal by the user organization (railroad company) during inspection. At the reclamation company, metal is further removed by magnets and may occur in multiple stages. After removal of contaminant metals, the crossties are then ground or shredded to a specified size depending on the particular needs of the end-use combustor, with chip size typically between 1-2 inches. Such
Once the crossties are ground to a specific size, there is further screening based on the particular needs of the end-use combustor. Depending on the configuration of the facility and equipment, screening may occur concurrently with grinding or at a subsequent stage. Once the processing of OTRTs is complete, the OTRTs are sold directly to the end-use combustor for energy recovery. Processed OTRTs are delivered to the buyers by railcar or truck. The OTRTs are then stockpiled prior to combustion, with a typical storage timeframe ranging from a day to a week. When the OTRTs are to be burned for energy recovery, the material is then transferred from the storage location using a conveyor belt or front-end loader. The OTRTs may be combined with other biomass fuels, including hog fuel and bark. OTRTs are commonly used to provide the high Btu fuel to supplement low (and sometimes wet) Btu biomass to ensure proper combustion, often in lieu of coal or other fossil fuels.
In general, contracts for the purchase and combustion of OTRTs include fuel specifications limiting contaminants, such as metals, and prohibiting the receipt of wood treated with other preservatives such as pentachlorophenol.
Copper naphthenate's effectiveness as a preservative has been known since the early 1900s, and various formulations have been used commercially since the 1940s. It is an organometallic compound formed as a reaction product of copper salts and naphthenic acids derived from petroleum. Unlike other commercially applied wood preservatives, small quantities of copper naphthenate can be purchased at retail hardware stores and lumberyards. Cuts or holes in treated wood can be treated in the field with copper naphthenate. Wood treated with copper naphthenate has a distinctive bright green color that weathers to light brown. The treated wood also has an odor that dissipates somewhat over time. Oil borne copper naphthenate is used for treatment of railroad ties since that treatment results in the ties being more resistant to cracks and checking. Waterborne copper naphthenate is used only for interior millwork and exterior residential dimensional lumber applications such as decking, fencing, lattice, recreational equipment, and other structures. Thus, this proposal does not address waterborne copper naphthenate.
Copper naphthenate can be dissolved in a variety of solvents. The heavy oil solvent (specified in American Wood Protection Association (AWPA) Standard P9, Type A) or the lighter solvent (AWPA Standard P9, Type C) are the most commonly used. Copper naphthenate is listed in AWPA standards for treatment of major softwood species that are used for a variety of wood products. It is not listed for treatment of any hardwood species, except when the wood is used for railroad ties. The minimum copper naphthenate retentions (as elemental copper) range from 0.04 pounds per cubic foot (0.6 kilograms per cubic meter) for wood used aboveground, to 0.06 pounds per cubic foot (1 kilograms per cubic meter) for wood that will contact the ground and 0.075 pounds per cubic foot (1.2 kilograms per cubic meter) for wood used in critical structural applications.
When dissolved in No. 2 fuel oil, copper naphthenate can penetrate wood that is difficult to treat. Copper naphthenate loses some of its ability to penetrate wood when it is dissolved in heavier oils. Copper naphthenate treatments do not significantly increase the corrosion of metal fasteners relative to untreated wood.
Copper naphthenate is commonly used to treat utility poles, although fewer facilities treat utility poles with copper naphthenate than with creosote or pentachlorophenol. Unlike creosote and pentachlorophenol, copper naphthenate is not listed as a Restricted Use Pesticide (RUP) by the EPA. Even though human health concerns do not require copper naphthenate to be listed as an RUP, precautions such as the use of dust masks and gloves are used when working with wood treated with copper naphthenate.
Borates is the name for a large number of compounds containing the element boron. Borate compounds are the most commonly used unfixed waterborne preservatives. Unfixed preservatives can leach from treated wood. They are used for pressure treatment of framing lumber used in areas with high termite hazard and as surface treatments for a wide range of wood products, such as cabin logs and the interiors of wood structures. They are also applied as internal treatments using rods or pastes. At higher rates of retention, borates also are used as fire-retardant treatments for wood.
Performance characteristics include activity against fungi and insects, with low mammalian toxicity. Another advantage of boron is its ability to diffuse with water into wood that normally resists traditional pressure treatment. Wood treated with borates has no added color, no odor, and can be finished (primed and painted).
Inorganic boron is listed as a wood preservative in the AWPA standards, which include formulations prepared from sodium octaborate, sodium tetraborate, sodium pentaborate, and boric acid. Inorganic boron is also standardized as a pressure treatment for a variety of species of softwood lumber used out of contact with the ground and continuously protected from water. The minimum borate (B
Borate preservatives are available in several forms, but the most common is disodium octaborate tetrahydrate (DOT). DOT has higher water solubility than many other forms of borate, allowing more concentrated solutions to be used and increasing the mobility of the borate through the wood. With the use of heated solutions, extended pressure periods, and diffusion periods after treatment, DOT can penetrate species that are relatively difficult to treat, such as spruce. Several pressure treatment facilities in the United States use borate solutions. For refractory species destined for high decay areas, it has now become relatively common practice to use borates as a pre-treatment to protect the wood prior to processing with creosote.
Creosote was introduced as a wood preservative in the late 1800's to prolong the life of railroad ties. CTRTs remain the material of choice by
The March 2011 NHSM final rule stated that most creosote-treated wood is non-hazardous. However, the presence of hexachlorobenzene, a CAA section 112 HAP, as well as other HAP suggested that creosote-treated wood, including CTRTs, contained contaminants at levels that are not comparable to or lower than those found in wood or coal, the fuel that creosote-treated wood would replace. In making the assessment, the Agency did not consider fuel oil
Regarding borate treated wood, after reviewing data from one commenter which shows that the levels of contaminants in this material are comparable to those found in unadulterated wood for the seven contaminants for which data was presented, the Agency stated in the March 2011 rule that such treated-wood meets the legitimacy criterion on the level of contaminants and comparability to traditional fuels. Therefore, under that rule, borate-treated wood could be classified as a non-waste fuel, provided they met the other two legitimacy criteria and provided that the contaminant levels for any other HAP that may be present in this material are also comparable to or less than those in traditional fuels. The rule noted that such borate-treated wood would need to be burned as a fuel for energy recovery within the control of the generator. Finally, the rule indicated that some borate-treated wood is subsequently treated with creosote, to provide an insoluble barrier to prevent the borate compounds from leaching out of the wood. The Agency did not receive data on the contaminant levels of the resulting material, but data presented on creosote treated lumber when combusted in units designed to burn biomass indicated that this NHSM would likely no longer meet the legitimacy criteria and would be considered a solid waste when burned as a fuel.
The rule did not have information generally about the transfer of borate-treated wood to other companies to make a broad determination about its use as a fuel outside the control of the generator. Thus, under the March 2011 rule, borate-treated wood would need to be burned as a fuel for energy recovery within the control of the generator (76 FR 15484).
With regard to wood treated with copper naphthenate, no additional contaminant data was provided for the March 2011 rule that would reverse the position in the January 2010 proposed rule, which considered wood treated with copper naphthenate a solid waste because of concerns of elevated levels of contaminants (76 FR 15484). The rule acknowledged, as in the proposed rule, that the Agency did not have sufficient information on the contaminant levels in wood treated with copper naphthenate. Thus, if a person could demonstrate that copper naphthenate treated-wood is burned in a combustion unit as a fuel for energy recovery within the control of the generator and meets the legitimacy criteria or, if discarded, can demonstrate that they have sufficiently processed the material, that person can handle its copper naphthenate treated-wood as a non-waste fuel.
In the February 2013 NHSM final rule, EPA noted that the American Forest and Paper Association (AF&PA) and the American Wood Council submitted a letter with supporting information on December 6, 2012, seeking a categorical listing for CTRTs combusted in any unit.
While this information was useful, it was not sufficient for the EPA to propose that CTRTs be listed categorically as a non-waste fuel at that time. Therefore, to further inform the Agency as to whether to list CTRTs categorically as a non-waste fuel, EPA requested that additional information be provided, and indicated that if this additional information supported and supplemented the representations made in the December 2012 letter, EPA would expect to propose a categorical listing for CTRTs. The requested information included:
• A list of industry sectors, in addition to forest product mills, that burn railroad ties for energy recovery.
• The types of boilers (
• The traditional fuels and relative amounts (
• Laboratory analyses for contaminants known or reasonably suspected to be present in creosote-treated railroad ties, and contaminants known to be significant components of creosote, specifically polycyclic aromatic hydrocarbons (
As discussed in section II.B of this preamble, EPA stated in the February 2016 final rule that it had reviewed the information submitted from stakeholders regarding CTRTs and determined that the information received supported a categorical determination for those materials under certain conditions (see 40 CFR
As discussed previously in section II.B of this preamble, TWC submitted letters and supporting documents to EPA seeking a categorical listing for OTRTs. The contaminants found in OTRTs are not materially different from the traditional fuels (fuel oil and/or biomass) that these facilities are designed to burn as fuel. Therefore, the Agency is proposing to list, as categorical non-wastes, processed OTRTs when used as fuels. The rationale for this proposal is discussed in detail in the following sections.
When deciding whether an NHSM should be listed as a categorical non-waste fuel in accordance with 40 CFR 241.4(b)(5), EPA first evaluates whether or not the NHSM has been discarded, and if not discarded, whether or not the material is legitimately used as a product fuel in a combustion unit. If the material has been discarded, EPA evaluates the NHSM as to whether it has been sufficiently processed into a material that is legitimately used as a product fuel.
Data submitted by petitioners regarding OTRTs removed from service and processed was analogous to that for CTRTs. Specifically, OTRTs removed from service are sometimes temporarily stored in the railroad right-of-way or at another location selected by the reclamation company. This means that not all OTRTs originate from crossties removed from service in the same year; some OTRTs are processed from crossties removed from service in prior years and stored by railroads or removal/reclamation companies until a contract for reclamation is in place.
EPA is reiterating its statement from the February 8, 2016 final rule regarding cases where a railroad or reclamation company waits for more than a year to realize the value of OTRTs as a fuel. The Agency again concludes that OTRTs are removed from service and stored in a railroad right-of-way or location for long periods of time—that is, a year or longer, without a determination regarding their final end use (
Since the OTRTs removed from service are considered discarded because they can be stored for long periods of time without a final determination regarding their final end use, in order for them to be considered a non-waste fuel, they must be processed, thus transforming the OTRTs into a product fuel that meets the legitimacy criteria.
• Contaminants (
• Removal of contaminant metals occurs again at the reclamation facility using magnets; such removal may occur in multiple stages.
• The fuel characteristics of the material are improved when the crossties are ground or shredded to a specified size (typically 1-2 inches) depending on the particular needs of the end-use combustor. The grinding may occur in one or more phases.
• Once the contaminant metals are removed and the OTRTs are ground, there may be additional screening to bring the material to a specified size.
EPA can list a discarded NHSM categorically as a non-waste fuel if it has been “sufficiently processed,” and meets the legitimacy criteria. The three legitimacy criteria to be evaluated are: (1) The NHSM must be managed as a valuable commodity, (2) the NHSM must have a meaningful heating value and be used as a fuel in a combustion unit to recover energy, and (3) the NHSM must have contaminants or groups of contaminants at levels comparable to or less than those in the traditional fuel the unit is designed to burn.
Data submitted
The process begins when the railroad or utility company removes the old OTRTs from service. An initial inspection is conducted where non-combustible materials are sorted out. OTRTs are stored in staging areas until shippable quantities are collected. Shippable quantities are transported via truck or rail to a reprocessing center.
At the reprocessing center, pieces are again inspected, sorted, and non-combustible materials are removed. Combustible pieces then undergo size reduction and possible blending with compatible combustibles. Once the OTRTs meet the end use specification, they are then sold directly to the end-use combustor for energy recovery.
After receipt, OTRTs are stockpiled similar to analogous biomass fuels (
Since the storage of the processed material clearly does not exceed reasonable time frames and the processed ties are handled/treated similar to analogous biomass fuels by end-use combustors, OTRTs meet the criterion for being managed as a valuable commodity.
EPA received the following information for the heating values of processed OTRTs: 6,867 Btu/lb for creosote-borate; 7,333 Btu/lb for copper naphthenate; 5,967 Btu/lb for copper naphthenate-borate; 5,232 Btu/lb for mixed railroad ties containing 56% creosote, 41% creosote-borate, 1% copper naphthenate, 2% copper naphthenate-borate; and 7,967 Btu/lb for mixed ties containing 25% creosote, 25% creosote borate, 25% copper naphthenate and 25% copper naphthenate-borate.
For each type of OTRT, EPA has compared the September 2015 data submitted on contaminant levels by petitioners to contaminant data for two traditional fuels: Biomass, including untreated clean wood, and fuel oil (petitioners did not provide data or request that contaminant comparisons be made to coal). The petitioner's data included samples taken from 15 different used creosote-borate ties, 15 different copper naphthenate-borate ties, 15 creosote ties, and 15 copper naphthenate ties. Each type of tie sample was divided into three groups of five tie samples each. This resulted in 12 total groups corresponding to the four different types ties. Each group was then isolated, mixed together, processed into a fuel-type consistency, and shipped to the laboratory for analysis.
As noted previously, use of these types of ties are relatively new compared to creosote, so few have transitioned to fuel use at this time. To simulate that transition over time, three samples of unevenly-blended tie material (56% creosote, 41% creosote-borate, 1% copper naphthenate, 2% copper naphthenate-borate) and three samples of equally blended tie material (25% creosote, 25% creosote-borate, 25% copper naphthenate, 25% copper naphthenate-borate) were analyzed. The lab analyzed three samples of each of tie-derived boiler fuel treated with creosote, creosote-borate, copper naphthenate and copper naphthenate-borate. In addition, the lab analyzed three samples of equally-blended tie material, three samples of unevenly-blended tie material, and three samples of untreated wood for a total of 21 samples.
In addition to September 2015 data, copper naphthenate-borate, and copper naphthenate test data had also been submitted in conjunction with TWC's earlier December 4, 2013 petition and are included in the following tables. As noted in section II.B of this preamble, the data did not have details on the number of samples collected. In addition, sulfur was measured using leachable anion techniques that do not provide results of the total contaminant content, and heat content was not measured. The results of the analysis of the 2015 and 2013 data are shown in the following tables.
As indicated, railroad ties treated with copper naphthenate have contaminants that are comparable to or less than those in biomass or fuel oil. Given that these railroad ties are a type of treated wood biomass, such ties can be combusted in units designed to burn biomass or biomass and fuel oil.
As indicated, railroad ties treated with copper naphthenate-borate have contaminants that are comparable to or less than those in biomass or fuel oil. Given that these railroad ties are a type of treated wood biomass, such ties can be combusted in units designed to burn biomass or biomass and fuel oil.
Semi-volatile organic compound (SVOC) levels in creosote-borate processed railroad ties are not comparable to biomass. Given that creosote-borate railroad ties are a type of treated wood biomass, and any unit burning these ties typically burns untreated wood, the EPA considered two scenarios.
In the first scenario, where a combustion unit is designed to only burn biomass, EPA compared contaminant levels in creosote-borate to contaminant levels in biomass. In this scenario, the total SVOC levels can reach 39,000 ppm, driven by high levels of polycyclic aromatic hydrocarbons (PAHs).
In the second scenario, a combustion unit is designed to burn biomass and fuel oil. As previously mentioned, SVOCs are present in CTRTs (up to 39,000 ppm) at levels well within the range observed in fuel oil (up to 54,700 ppm). Therefore, creosote-borate railroad ties have comparable contaminant levels to other fuels combusted in units designed to burn both biomass and fuel oil, and as such, meet this criterion if used in facilities that are designed to burn both biomass and fuel oil.
As stated in the preamble to the February 7, 2013, NHSM final rule, combustors may burn NHSMs as a product fuel if they compare appropriately to any traditional fuel the unit can or does burn (78 FR 9149). Combustion units are often designed to burn multiple traditional fuels, and some units can and do rely on different fuel types at different times based on availability of fuel supplies, market conditions, power demands, and other factors. Under these circumstances, it is arbitrary to restrict the combustion for energy recovery of NHSMs based on contaminant comparison to only one traditional fuel if the unit could burn a second traditional fuel chosen due to such changes in fuel supplies, market conditions, power demands or other factors. If a unit can burn both a solid and liquid fuel, then comparison to either fuel would be appropriate.
In order to make comparisons to multiple traditional fuels, units must be designed to burn those fuels. If a facility compares contaminants in an NHSM to a traditional fuel a unit is not designed to burn, and that material is highly contaminated, a facility would then be able to burn excessive levels of waste components in the NHSM as a means of discard. Such NHSMs would be considered wastes regardless of any fuel value (78 FR 9149).
In the mixed treated wood scenarios above, as previously discussed, SVOCs are present (up to 17,000 ppm) at levels well within the range observed in fuel oil (up to 54,700 ppm). Therefore, mixed railroad ties with creosote, borate and copper naphthenate have comparable contaminant levels to other fuels combusted in units designed to burn both biomass and fuel oil, and as such, meet this criterion if used in facilities that are designed to burn both biomass and fuel oil.
The data collection supporting the OTRT non-waste determination has been based on several rounds of data submittals by TWC followed by EPA questions and comments on the data provided. We have described the process of forming the OTRT data set, and all materials provided by TWC are available in the docket to this rulemaking.
The TWC submitted data on various wood preservative types, including those referred to as OTRTs, in their April 3, 2013 petition letter requesting a categorical determination that all preserved wood types were non-waste fuels. However, the contaminant comparison data presented in the petition were incomplete and not based on established analytical data. The EPA response to TWC requested submittal of analytical data to determine contaminant concentrations in the OTRT wood.
In November 2013, TWC responded to EPA's request, submitting laboratory reports on analyses of the various preservative wood types, including OTRTs. The EPA reviewed the laboratory reports and techniques, and determined that there were limited data points available (
In August, 2015, TWC performed additional sampling and analyses to address these deficiencies in the data. In response to EPA's concerns on previous data, and as described previously, TWC developed a sampling program in which 15 OTRT railroad ties of each preservative type were collected from various geographical areas. These 15 ties were then separated into three 5 tie groups, then processed into a boiler-fuel consistency using commercial processing techniques. A sample of each 5-tie group was then shipped to an independent laboratory for analysis, thereby producing 3 data points for each preservative type. TWC also prepared two blends: One with equal portions of creosote, creosote-borate, copper naphthenate, and copper naphthenate-borate; and the second a weighted blend of these tie types in proportion to current usage ratios of each preservative chemistry. These blends samples were analyzed in triplicate, for a total of 18 samples being analyzed (
The EPA reviewed the 2015 test data, which was provided by TWC on September 11, 2015, and provided TWC with additional follow-up questions and clarifications, including the specific sources of the ties. TWC's response noted the sources of ties for each chemistry and indicated that the ties generally originated in the southeast, but there are also ties from Pennsylvania, South Dakota, and Kentucky represented within the TWC data set. The EPA also noted some exceptions and flags within the analytical report, such as sample coolers upon receipt at the lab were outside the required temperature criterion; surrogate recoveries for semivolatile samples (which represent extraction efficiency within a sample matrix) were sometimes lower or higher than those for samples containing creosote-treated wood; and dilution factors (dilution is used when the sample is higher in concentration than can be analyzed) for creosote-treated wood samples were high (up to 800). The laboratory noted these issues in the report narrative, but concluded that there were no corrective actions necessary.
Finally, EPA requested further information on these issues noted in the report narrative, as well as supporting quality assurance documentation from the laboratories. With respect to surrogate recoveries and dilutions, the lab indicated that the high dilutions were required for the creosote-containing matrix to avoid saturation of the detector instrument.
EPA believes it has sufficient information to propose to list OTRTs categorically as non-waste fuels. For units combusting copper-naphthenate-borate and/or copper naphthenate railroad ties, such materials could be combusted in units designed to burn biomass or biomass and fuel oil. For units combusting railroad ties containing cresosote, including creosote-borate or any mixtures of ties containing cresosote, borate and copper naphthenate, such materials must be burned in combustion units that are designed to burn both biomass and fuel oil. The Agency would consider units to meet this requirement if the unit combusts fuel oil as part of normal operations and not solely as part of start up or shut down operations.
Consistent with the approach for CTRTs outlined in the February 2016 rule, the Agency is also proposing that units combusting railroad ties treated
• Must be combusted in existing (
• Must comprise no more than 40 percent of the fuel that is used on an annual heat input basis.
The standard would be applicable to existing units burning creosote-borate, and mixtures of creosote, copper naphthenate and borate treated railroad ties that had been designed to burn fuel oil and biomass and have been modified to burn natural gas. The standard will also apply if an existing unit designed to burn fuel oil and biomass is modified at some point in the future.
The approach addresses only the circumstance where contaminants in these railroad ties are comparable to or less than the traditional fuels the unit was originally designed to burn (both fuel oil and biomass) but that design was modified in order to combust natural gas. The approach is not a general means to circumvent the contaminant legitimacy criterion by allowing combustion of any NHSM with elevated contaminant levels,
This case is no different from the Agency's determination in the February 2016 rule with respect to CTRTs. This determination is accepted Agency policy and is appropriately applied to the case of other treated railway ties in this proceeding. This determination, as discussed in the February 2016 rule, is based on the historical usage as a product fuel in stoker, bubbling bed, fluidized bed and hybrid suspension grate boilers (
The Agency solicits comments on the proposed non-waste categorical determination as described previously. The Agency is also specifically requesting comment on the following:
• Whether railroad ties with de minimis levels of creosote should be allowed to be combusted in biomass only units;
• Should a particular de minimus level should be designated and on what should this level be based;
• Whether these OTRTs are combusted in units designed to burn coal in lieu of, or in addition to biomass and fuel oil, and whether the contaminant comparisons to meet legitimacy criteria should include comparisons to coal;
• In light of the data and sampling history described above, whether the quality of data is adequate to support the proposed determination;
• Additional data that should be considered in making the comparability determinations for OTRTs.
Neither copper nor borate are hazardous air pollutants (HAP), and thus are not contaminants under NHSM standards.
Under the Clean Water Act, EPA's Office of Water developed the Lead and Copper Rule which became effective in 1991 (56 FR 26460). This rule set a limit of 1.3 ppm copper concentration in 10% of tap action level for public water. Exceedances of this limit require additional treatment steps in order to reduce waste corrosivity and prevent leaching of these metals (including copper) from plumbing and distribution systems. EPA's Office of Water also issued a fact sheet for copper under the Clean Water Act section 304(a) titled the Aquatic Life Ambient Freshwater Quality Criteria.
EPA also investigated whether there were any concerns that copper and borate can react to form polychlorinated dibenzodioxin and dibenzofurans (PCDD/PCDF) during the combustion process. Specific studies evaluating copper involvement in dioxins and furans formation in municipal or medical waste incinerator flue gas have been conducted.
Generally, borates have a low toxicity, and should not be a concern from a health risk perspective. As indicated previously, neither boron nor borates are listed as HAP under CAA section 112, nor are they considered to be criteria air pollutants subject to any emissions limitations. However, elemental boron has been identified by EPA in the coal combustion residuals (CCR) risk analysis
Copper has some acute toxicity, but these exposures appear to be the result of direct drinking water or cooking-related intake. We anticipate the only routes that copper releases to the environment could result from burning copper naphthenate treated ties would be stormwater runoff from the ties and deposition from boiler emissions. The amount of copper remaining in the tie after its useful life, however, may be greatly reduced from the original content, and facilities manage the shredded tie material in covered areas to prevent significant moisture swings, therefore, we do not expect impacts from copper-containing runoff. Due to the high vaporization temperature, copper will exist in solid phase after it leaves the furnace, and would therefore be controlled in the air pollution control device operated to control particulate emissions from the boiler.
EPA solicits comment and seeks any additional information (
Beyond expanding the list of NHSMs that categorically qualify as non-waste fuels, this rule does not change the effect of the NHSM regulations on other programs as described in the March 21, 2011 NHSM final rule, as amended on February 7, 2013 (78 FR 9138) and February 8, 2016 (81 FR 6688). Refer to section VIII of the preamble to the March 21, 2011 NHSM final rule
This proposal does not change the relationship to state programs as described in the March 21, 2011 NHSM final rule. Refer to section IX of the preamble to the March 21, 2011 NHSM final rule
No federal approval procedures for state adoption of this proposed rule are included in this rulemaking action under RCRA subtitle D. Although the EPA does promulgate criteria for solid waste landfills and approves state municipal solid waste landfill permitting programs, RCRA does not provide the EPA with authority to approve state programs beyond those landfill permitting programs. While states are not required to adopt regulations promulgated under RCRA subtitle D, some states incorporate federal regulations by reference or have specific state statutory requirements that their state program can be no more stringent than the federal regulations. In those cases, the EPA anticipates that, if required by state law, the changes being proposed in this document, if finalized, will be incorporated (or possibly adopted by authorized state air programs) consistent with the state's laws and administrative procedures.
The value of any regulatory action is traditionally measured by the net change in social welfare that it generates. This rulemaking, as proposed, establishes a categorical non-waste listing for selected NHSMs under RCRA. This categorical non-waste determination allows these materials to be combusted as a product fuel in units, subject to the CAA section 112 emission standards, without being subject to a detailed case-by-case analysis of the material(s) by individual combustion facilities, provided they meet the conditions of the categorical listing. The proposal establishes no direct standards or requirements relative to how these materials are managed or combusted. As a result, this action alone does not directly invoke any costs
Because this RCRA action is definitional only, any costs or benefits indirectly associated with this action would not occur without the corresponding implementation of the relevant CAA rules. However, in an effort to ensure rulemaking transparency, the EPA prepared an assessment in support of this action that examines the scope and direction of these indirect impacts, for both costs and benefits.
The assessment document, as mentioned previously, finds that facilities operating under CAA section 129 standards that are currently burning CTRTs, and no other solid wastes, and who had planned to continue burning these materials, may experience cost savings associated with the potential modification and operational adjustments of their affected units. In this case, the unit-level cost savings are
Additional information about these statutes and Executive Orders can be found at
This action is not a significant regulatory action. The Office of Management and Budget (OMB) waived review. The EPA prepared an economic analysis of the potential costs and benefits associated with this action. This analysis, “Assessment of the Potential Costs, Benefits, and Other Impacts for the Proposed Rule—Categorical Non-Waste Determination for Selected Non-Hazardous Secondary Materials (NHSMs): Creosote-Borate Treated Railroad Ties, Copper Naphthenate Treated Railroad Ties, and Copper Naphthenate-Borate Treated Railroad Ties”, is available in the docket. Interested persons are encouraged to read and comment on this document.
This action does not impose any new information collection burden under the PRA as this action only proposes to add three new categorical non-waste fuels to the NHSM regulations. OMB has previously approved the information collection activities contained in the existing regulations and has assigned OMB control number 2050-0205.
I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden or otherwise has a positive economic effect on the small entities subject to the rule. The proposed addition of three NHSMs to the list of categorical non-waste fuels is expected to indirectly reduce materials management costs. In addition, this action will reduce regulatory uncertainty associated with these materials and help increase management efficiency. We have therefore concluded that this action will relieve regulatory burden for all directly regulated small entities. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts.
This action contains no Federal mandates as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. UMRA generally excludes from the definition of “Federal intergovernmental mandate” duties that arise from participation in a voluntary Federal program. Affected entities are not required to manage the proposed additional NHSMs as non-waste fuels. As a result, this action may be considered voluntary under UMRA. Therefore, this action is not subject to the requirements of section 202 or 205 of the UMRA
This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. In addition, this proposal will not impose direct compliance costs on small governments.
This action does not have federalism implications. It will not have substantial direct effects 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.
This action does not have tribal implications as specified in Executive Order 13175. It will neither impose substantial direct compliance costs on tribal governments, nor preempt Tribal law. Potential aspects associated with the categorical non-waste fuel determinations under this proposed rule may invoke minor indirect tribal implications to the extent that entities generating or consolidating these NHSMs on tribal lands could be affected. However, any impacts are expected to be negligible. Thus, Executive Order 13175 does not apply to this action.
This action is not subject to Executive Order 13045 because it is not economically significant as defined in the Executive Order 12866, and because the EPA does not believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. Based on the following discussion, the Agency found that populations of children near potentially affected boilers are either not significantly greater than national averages, or in the case of landfills, may potentially result in reduced discharges near such populations.
The proposed rule, in conjunction with the corresponding CAA rules, may indirectly stimulate the increased fuel use of one of more the three NHSMs by providing enhanced regulatory clarity and certainty. This increased fuel use may result in the diversion of a certain quantity of these NHSMs away from current baseline management practices. Any corresponding disproportionate impacts among children would depend upon whether children make up a disproportionate share of the population living near the affected units. Therefore, to assess the potential an indirect disproportionate effect on children, we conducted a demographic analysis for this population group surrounding CAA section 112 major source boilers, municipal solid waste landfills, and construction and demolition (C&D) landfills for the Major and Area Source Boilers rules and the CISWI rule.
* U.S. GAO (Government Accountability Office). Demographics of People Living Near Waste Facilities. Washington DC: Government Printing Office 1995.
* Mohai P, Saha R. “Reassessing Racial and Socio-economic Disparities in Environmental Justice Research”. Demography. 2006;43(2): 383-399.
* Mennis, Jeremy “Using Geographic Information Systems to Create and Analyze Statistical Surfaces
* Bullard RD, Mohai P, Wright B, Saha R et al. Toxic Wastes and Race at Twenty, 1987-2007, March 2007. 5 CICWI Rule and Major Source Boilers Rule.
For major source boilers, our findings indicate that the percentage of the population in these areas under age 18 years is generally the same as the national average.
This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.
This rulemaking does not involve technical standards.
The EPA believes that it is not feasible to determine whether this action has disproportionately high and adverse effects on minority populations, low-income populations, and/or indigenous peoples as specified in Executive Order 12898 (59 FR 7629, February 16, 1994). However, the overall level of emissions, or the emissions mix from affected boilers are not expected to change significantly because the three NHSMs proposed to be categorically listed as non-waste fuels are generally comparable to the types of fuels that these combustors would otherwise burn. Furthermore, these units remain subject to the protective standards established under CAA section 112.
Our environmental justice demographics assessment conducted for the prior rulemaking
In addition to the demographics assessment described previously, we also considered the potential for non-combustion environmental justice concerns related to the potential incremental increase in NHSMs diversions from current baseline management practices. These may include the following:
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Finally, this rule, in conjunction with the corresponding CAA rules, may help accelerate the abatement of any existing stockpiles of the targeted NHSMs. To the extent that these stockpiles may represent negative human health or environmental implications, minority and/or low-income populations that live near such stockpiles may experience marginal health or environmental improvements. Aesthetics may also be improved in such areas.
As previously discussed, this RCRA proposed action alone does not directly require any change in the management of these materials. Thus, any potential materials management changes stimulated by this action, and corresponding impacts to minority and low-income communities, are considered to be indirect impacts, and would only occur in conjunction with the corresponding CAA rules.
Environmental protection, Air pollution control, Waste treatment and disposal.
For the reasons stated in the preamble, EPA proposes to amend 40,CFR chapter I as set forth below:
42 U.S.C. 6903, 6912, 7429.
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(8) Creosote-borate treated railroad ties, and mixtures of creosote, borate and copper naphthenate treated railroad ties that are processed (which must include at a minimum, metal removal and shredding or grinding) and then combusted in the following types of units:
(i) Units designed to burn both biomass and fuel oil as part of normal operations and not solely as part of start-up or shut-down operations, and
(ii) Units at major source pulp and paper mills or power producers subject to 40 CFR part 63, subpart DDDDD that combust creosote-borate treated railroad ties and mixed creosote, borate and copper naphthenate treated railroad ties, and had been designed to burn biomass and fuel oil, but are modified (
(A) Creosote-borate and mixed creosote, borate and copper naphthenate treated railroad ties must be burned in existing (
(B) Creosote-borate and mixed creosote, borate and copper naphthenate treated railroad ties can comprise no more than 40 percent of the fuel that is used on an annual heat input basis.
(9) Copper naphthenate treated railroad ties that are processed (which must include at a minimum, metal removal and shredding or grinding) and then combusted in units designed to burn biomass or units designed to burn both biomass and fuel oil.
(10) Copper naphthenate-borate treated railroad ties that are processed (which must include at a minimum, metal removal and shredding or grinding) and then combusted in units designed to burn biomass or units designed to burn both biomass and fuel oil.
Fish and Wildlife Service, Interior.
Proposed rule; reopening of the comment period.
We, the U.S. Fish and Wildlife Service (Service), announce the comment period reopening on our proposed rules to add the headwater chub (
The comment period end date for the proposed rule that published at 80 FR 60754 on October 7, 2015, is December 16, 2016. We request that comments be submitted by 11:59 p.m. Eastern Time on the closing date.
We request that you send comments only by the methods described above. We will post all comments on
Steve Spangle, Field Supervisor, U.S. Fish and Wildlife Service, Arizona Ecological Services Field Office; telephone 602-242-0210; facsimile 602-242-2513. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at (800-877-8339).
On October 7, 2015 (80 FR 60754), we published a proposed rule that the headwater chub and the lower Colorado River basin roundtail chub DPS are threatened species under the Endangered Species Act of 1973, as amended (Act) (16 U.S.C. 1531
In the proposed rule (October 7, 2015; 80 FR 60754), we evaluated headwater and roundtail chubs as separate species. However, commenters raised questions regarding the headwater and roundtail chubs' taxonomic distinctness, as related to one another and to the Gila chub (
For this reason, the Arizona Game and Fish Department requested that the AFS/ASIH evaluate the most recent literature associated with roundtail chub, headwater chub, and Gila chub taxonomy. The AFS/ASIH is recognized as the authority in establishing the taxonomic status of fish. The panel met in April 2016 and again in August 2016, and presented their conclusions in a final report to the Arizona Game and Fish Department on September 1, 2016 (Page
We will accept written comments and information during this reopened comment period on our proposed headwater chub and roundtail chub DPS listing published in the
In considering the new information received from the AFS/ASIH, as well as the information provided in the proposed rule, we are particularly seeking comments considering:
(a) Roundtail, headwater, and Gila chub genetics and taxonomy;
(b) Roundtail, headwater, and Gila chubs' morphological characteristics;
(c) Those topics previously noted in the October 7, 2015, proposed rule (see 80 FR 60754).
If you previously submitted comments or information on the proposed rule, please do not resubmit them. We have incorporated them into the public record, and we will fully consider them in preparing our final determinations. Our final determinations will take into consideration all written comments and any additional information we received.
You may submit your comments and materials concerning this proposed rule by one of the methods listed above in
If you submit information via
Comments and materials we receive, as well as supporting documentation we used in preparing the proposed rule, will be available for public inspection on
The primary author(s) of this notice are the Arizona Ecological Services Field Office staff members.
The authority for this action is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed specifications; request for comments.
NMFS proposes to specify an annual catch limit (ACL) of 318,000 lb for Deep 7 bottomfish in the main Hawaiian Islands (MHI) for the 2016-17 fishing year, which began on September 1, 2016, and ends on August 31, 2017. If the ACL is projected to be reached, NMFS would close the commercial and non-commercial fisheries for MHI Deep 7 bottomfish for the remainder of the fishing year as an accountability measure (AM). The proposed ACL and AM support the long-term sustainability of Hawaii bottomfish.
NMFS must receive comments by November 16, 2016.
You may submit comments on the 2016-2107 annual catch limit (ACL), identified by NOAA-NMF-2016-0112, by either of the following methods:
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NMFS prepared an environmental analysis that describes the potential impacts on the human environment that could result from the proposed specification. The environmental analysis and other supporting documents are available at
Sarah Ellgen, NMFS PIR Sustainable Fisheries, 808-725-5173.
NMFS and the Western Pacific Fishery Management Council (Council) manage the bottomfish fishery in Federal waters around Hawaii under the Fishery Ecosystem Plan for the Hawaiian Archipelago (FEP), as authorized by the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). Title 50, Code of Federal Regulations, part 665 (50 CFR 665.4) requires NMFS to specify an ACL for MHI Deep 7 bottomfish each fishing year, based on a recommendation from the Council. The Deep 7 bottomfish are onaga (
NMFS proposes to specify an ACL of 318,000 lb of Deep 7 bottomfish in the MHI for the 2016-17 fishing year. The Council recommended the proposed ACL, based on a 2011 bottomfish stock assessment updated with three additional years of data, and in consideration of the risk of overfishing, past fishery performance, the acceptable biological catch recommendation from its Scientific and Statistical Committee, and input from the public. An update to the 2011 NMFS bottomfish stock assessment estimated the overfishing limit for the MHI Deep 7 bottomfish stock complex to be 352,000 lb, which is 31,000 lb less than the estimated overfishing limit in the 2011 stock assessment. Based on this update, the Council recommended a three-year phased reduction of the ACL. NMFS prepared an environmental assessment dated March 17, 2016, of the Council's three-year phased reduction of the ACL (“Specification of Annual Catch Limits and Accountability Measures for Main Hawaiian Islands Deep 7 Bottomfish Fisheries in Fishing Years 2015-16, 2016-17, and 2017-18”), which is available from
The ACL is associated with a 42 percent probability of overfishing, and is more conservative than the 50 percent risk threshold allowed under NMFS guidelines for National Standard 1 of the Magnuson-Stevens Act. NMFS monitors Deep 7 bottomfish catches based on data provided by commercial fishermen to the State of Hawaii. If NMFS projects the fishery will reach this limit, NMFS would close the commercial and non-commercial fisheries for MHI Deep 7 bottomfish for the remainder of the fishing year, as an accountability measure (AM). In addition, if NMFS and the Council determine that the final 2016-17 Deep 7 bottomfish catch exceeds the ACL, NMFS would reduce the Deep 7 bottomfish ACL for the 2017-18 fishing year by the amount of the overage.
The fishery has not caught the specified limit in any year since 2011. NMFS does not expect the proposed ACL and AM specifications for 2016-17 to result in a change in fishing operations, or other changes to the conduct of the fishery that would result in significant environmental impacts. After considering public comments on the proposed ACL and AMs, NMFS will publish the final specifications.
Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator for Fisheries has determined that this proposed specification is consistent with the Hawaii FEP, other provisions of the Magnuson-Stevens Act, and other applicable laws, subject to further consideration after public comment.
This action is exempt from review under Executive Order 12866.
The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration that these proposed specifications, if adopted, would not have a significant economic impact on a substantial number of small entities. A description of the action, why it is being considered, and the legal basis for it are contained in the preamble to these proposed specifications.
NMFS proposes to specify an annual catch limit (ACL) of 318,000 lb for Main Hawaiian Islands (MHI) Deep 7 bottomfish for the 2016-17 fishing year, as recommended by the Western Pacific
This rule would affect participants in the commercial and non-commercial fisheries for MHI Deep 7 bottomfish. During the 2015-16 fishing year, 368 fishermen reported landing 259,530 lb of MHI Deep 7 bottomfish. Based on available information, NMFS has determined that all vessels in the commercial and non-commercial fisheries for MHI Deep 7 bottomfish are small entities under the Small Business Administration's definition of a small entity. That is, they are engaged in the business of fish harvesting, independently owned or operated, not dominant in their field of operation, and have annual gross receipts not in excess of $11 million, the small business size standard for commercial fishing (NAICS Code: 11411). Therefore, there would be no disproportionate economic impacts between large and small entities. Furthermore, there would be no disproportionate economic impacts among the universe of vessels based on gear, home port, or vessel length.
As for revenues earned by fishermen from MHI Deep 7 bottomfish, State of Hawaii records report 328 of the 368 fishermen sold their MHI Deep 7 bottomfish catch. These 328 individuals sold a combined total of 240,183 lb (92.5 percent of reported catch) at a value of $1,716,313. Based on these revenues, the average price for MHI Deep 7 bottomfish in 2015-16 was approximately $7.15/lb. NMFS assumes that the remaining 40 commercial fishermen either sold no Deep 7 bottomfish or the State of Hawaii reporting program did not capture their sales.
Assuming the fishery attains the ACL of 318,000 in 2016-17, and using the 2015-16 average price of $7.15/lb, the potential fleet wide revenue during 2016-17 is expected to be $2,273,700 (or approximately $2,103,173 under the assumption that 92.5 percent of catch is sold). If the same number of fishermen sell MHI Deep 7 bottomfish in 2016-17 as in 2015-16, each of these 328 commercial fishermen could potentially sell an average of 970 lb of Deep 7 bottomfish valued at $6,932, if all Deep 7 bottomfish caught were sold. If 92.5 percent of all Deep 7 bottomfish that had been caught had been sold, then these 328 commercial fishermen could potentially sell an average of 897 lb of Deep 7 bottomfish valued at about $6,412.
In general, the relative importance of MHI bottomfish to commercial participants as a percentage of overall fishing or household income is unknown, as the total suite of fishing and other income-generating activities by individual operations across the year has not been examined.
In terms of scenarios immediately beyond the 2016-17 fishing year, three possible outcomes may occur. First, in the event that 2016-17 catch does not reach 318,000 lb, the ACL will decrease by 12,000 lb for the 2017-2018 fishing year, as set by the multi-year specification. Second, if the fishery exceeds the ACL for the 2016-17 fishing year, NMFS would reduce the MHI Deep 7 bottomfish ACL for the 2017-18 fishing year by the amount of the overage, in addition to the 12,000 lb reduction for the 2017-18 fishing year. The last possible scenario is one where NMFS would prepare a new stock assessment or update that NMFS and the Council would use to set a new 2017-2018 ACL (without inclusion of any overage, even if catch exceeds ACL for the 2016-17 fishing year), although this is unlikely, since NMFS plans to undertake the next stock assessment in 2018.
Even though this proposed specification would apply to a substantial number of vessels,
16 U.S.C. 1801
The Department of Agriculture has submitted the following information collection requirement(s) to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104-13. Comments are requested regarding (1) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of burden including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
Comments regarding this information collection received by December 1, 2016 will be considered. Written comments should be addressed to: Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), New Executive Office Building, 725 17th Street NW., Washington, DC 20502. Commenters are encouraged to submit their comments to OMB via email to:
An agency may not conduct or sponsor a collection of information unless the collection of information displays a currently valid OMB control number and the agency informs potential persons who are to respond to the collection of information that such persons are not required to respond to the collection of information unless it displays a currently valid OMB control number.
Food Safety and Inspection Service, USDA.
Notice of the re-establishment of the U.S. Department of Agriculture National Advisory Committee on Meat and Poultry Inspection.
The U.S. Department of Agriculture (USDA) intends to re-establish the National Advisory Committee on Meat and Poultry Inspection (NACMPI). The purpose of the Committee is to provide advice to the Secretary of Agriculture concerning State and Federal programs with respect to meat, poultry and processed egg products inspection, food safety, and other matters that fall within the scope of the Federal Meat Inspection Act (FMIA), the Poultry Products Inspection Act (PPIA), and the Egg Products Inspection Act (EPIA).
Ms. Natasha Williams, Program Specialist, Designated Federal Officer, Office of Outreach, Employee Education and Training, Outreach and Partnership Staff, FSIS, Patriot Plaza III Building, 355 E Street SW., Washington, DC 20024, Telephone: (202)-690-6531, Fax: (202) 690-6519; Email:
In accordance with the Federal Advisory Committee Act (5 U.S.C. App.), notice is hereby given that the Secretary of Agriculture intends to re-establish the National Advisory Committee on Meat and Poultry Inspection (NACMPI) for two years. The Committee provides advice and recommendations to the Secretary on meat and poultry inspection programs, pursuant to sections 7(c), 24, 301(a)(3), and 301(c) of the Federal Meat Inspection Act, 21 U.S.C. 607(c), 624, 645, 661(a)(3), and 661(c), and to sections 5(a)(3), 5(c), 8(b), and 11(e) of the Poultry Products Inspection Act, 21 U.S.C. 454(a)(3), 454(c), 457(b), and 460(e).
A copy of the current charter and other information about the committee
Public awareness of all segments of rulemaking and policy development is important. Consequently, FSIS will announce this
FSIS also will make copies of this publication available through the FSIS Constituent Update, which is used to provide information regarding FSIS policies, procedures, regulations,
No agency, officer, or employee of the USDA shall, on the grounds of race, color, national origin, religion, sex, gender identity, sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, or political beliefs, exclude from participation in, deny the benefits of, or subject to discrimination any person in the United States under any program or activity conducted by the USDA.
To file a complaint of discrimination, complete the USDA Program Discrimination Complaint Form, which may be accessed online at
Send your completed complaint form or letter to USDA by mail, fax, or email:
Persons with disabilities who require alternative means for communication (Braille, large print, audiotape, etc.), should contact USDA's TARGET Center at (202) 720-2600 (voice and TDD).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (“the Department”) preliminarily determines that imports of ferrovanadium from the Republic of Korea (“Korea”) are being, or are likely to be, sold in the United States at less than fair value (“LTFV”). The period of investigation (“POI”) is January 1, 2015, through December 31, 2015. The estimated weighted-average dumping margins of sales at LTFV are shown in the “Preliminary Determination” section of this notice. Interested parties are invited to comment on this preliminary determination.
Effective November 1, 2016.
Karine Gziryan at (202) 482-4081 or Eli Lovely at (202) 482-1593; AD/CVD Operations, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230.
The Department published the notice of initiation of this investigation on April 18, 2016.
The product covered by this investigation is ferrovanadium from Korea. For a full description of the scope of this investigation,
The
The Department is conducting this investigation in accordance with section 731 of the Tariff Act of 1930 (“the Act”). For, Korvan, export prices have been calculated in accordance with section 772(a) of the Act. Normal value (“NV”) has been calculated in accordance with section 773 of the Act. The other two mandatory respondents in this investigation,
Section 735(c)(5)(A) of the Act provides that the estimated all-others rate shall be equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
The Department preliminarily determines that the following weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, we will direct U.S. Customs and Border Protection (“CBP”) to suspend liquidation of all entries of ferrovanadium from the Republic of Korea, as described in the scope of the investigation, that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Pursuant to section 733(d) of the Act and 19 CFR 351.205(d), we will instruct CBP to require cash deposits equal to the weighted-average amount by which the NV exceeds U.S. price, as indicated in the table above, as follows: (1) The cash deposit for the mandatory respondents listed above will be the respondent-specific weighted-average dumping margin listed for the respondent in the table above; (2) if the exporter is not a mandatory respondent identified above, but the producer is, the cash deposit rate will be the weighted-average dumping margin established for the producer of the subject merchandise; and (3) the rate for all other producers or exporters will be the all others rate listed in the table above.
We intend to disclose the calculations that we performed in this investigation to interested parties in this proceeding within five days after the date of public announcement of the preliminary determination in accordance with 19 CFR 351.224(b). Interested parties are invited to comment on this preliminary determination. Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the final verification report is issued in this proceeding, and rebuttal briefs, limited to issues raised in case briefs, may be submitted no later than five days after the deadline for case briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request for a hearing to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce. An electronically-filed request for a hearing must be received successfully in its entirety by ACCESS by 5:00 p.m. Eastern Time, within 30 days after the date of publication of this notice.
As provided in section 782(i) of the Act, we intend to verify the information that will be relied upon in making our final determination.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by petitioners. 19 CFR 351.210(e)(2) requires that requests by respondents for postponement of a final antidumping determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On September 23, 2016, pursuant to 19 CFR 351.210(e) and (e)(2), Korvan requested that the Department postpone the final determination and that provisional measures be extended to a period not to exceed six months.
In accordance with section 733(f) of the Act, we will notify the ITC of our affirmative preliminary determination of
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The product covered by this investigation is all ferrovanadium regardless of grade (
Enforcement and Compliance, International Trade Administration, Department of Commerce.
In accordance with section 751(c) of the Tariff Act of 1930, as amended (“the Act”), the Department of Commerce (“the Department”) is automatically initiating the five-year reviews (“Sunset Reviews”) of the antidumping and countervailing duty (“AD/CVD”) order(s) listed below. The International Trade Commission (“the Commission”) is publishing concurrently with this notice its notice of
The Department official identified in the
The Department's procedures for the conduct of Sunset Reviews are set forth in its
In accordance with 19 CFR 351.218(c), we are initiating Sunset Reviews of the following antidumping and countervailing duty order(s):
As a courtesy, we are making information related to sunset proceedings, including copies of the pertinent statute and Department's regulations, the Department's schedule for Sunset Reviews, a listing of past revocations and continuations, and current service lists, available to the public on the Department's Web site at the following address: “
This notice serves as a reminder that any party submitting factual information in an AD/CVD proceeding must certify to the accuracy and completeness of that information.
On April 10, 2013, the Department modified two regulations related to AD/CVD proceedings: The definition of factual information (19 CFR 351.102(b)(21)), and the time limits for the submission of factual information (19 CFR 351.301).
Pursuant to 19 CFR 351.103(d), the Department will maintain and make available a public service list for these proceedings. Parties wishing to participate in any of these five-year reviews must file letters of appearance as discussed at 19 CFR 351.103(d)). To facilitate the timely preparation of the public service list, it is requested that those seeking recognition as interested parties to a proceeding submit an entry of appearance within 10 days of the publication of the Notice of Initiation.
Because deadlines in Sunset Reviews can be very short, we urge interested parties who want access to proprietary information under administrative protective order (“APO”) to file an APO application immediately following publication in the
Domestic interested parties, as defined in section 771(9)(C), (D), (E), (F), and (G) of the Act and 19 CFR 351.102(b), wishing to participate in a Sunset Review must respond not later than 15 days after the date of publication in the
If we receive an order-specific notice of intent to participate from a domestic interested party, the Department's regulations provide that
This notice of initiation is being published in accordance with section 751(c) of the Act and 19 CFR 351.218(c).
Office of National Marine Sanctuaries (ONMS), National Ocean Service (NOS), National Oceanic and Atmospheric Administration (NOAA), Department of Commerce (DOC).
Notice and request for applications.
ONMS is seeking applications for vacant seats for seven of its 13 national marine sanctuary advisory councils and Northwestern Hawaiian Islands Coral Reef Ecosystem Reserve Advisory Council (advisory councils). Vacant seats, including positions (
Applications are due before or by Wednesday, November 30, 2016.
Application kits are specific to each advisory council. As such, application kits must be obtained from and returned to the council-specific addresses noted below.
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For further information on a particular national marine sanctuary advisory council, please contact the individual identified in the
ONMS serves as the trustee for a network of underwater parks encompassing more than 600,000 square miles of marine and Great Lakes waters from Washington state to the Florida Keys, and from Lake Huron to American Samoa. The network includes a system of 13 national marine sanctuaries and Papahānaumokuākea and Rose Atoll marine national monuments. National marine sanctuaries protect our nation's most vital coastal and marine natural and cultural resources, and through active research, management, and public engagement, sustain healthy environments that are the foundation for thriving communities and stable economies. One of the many ways ONMS ensures public participation in the designation and management of national marine sanctuaries is through the formation of advisory councils. National marine sanctuary advisory councils are community-based advisory groups established to provide advice and recommendations to the superintendents of the national marine sanctuaries on issues including management, science, service, and stewardship; and to serve as liaisons between their constituents in the community and the sanctuary. Additional information on ONMS and its advisory councils can be found at
The following is a list of the vacant seats, including positions (
Monitor
16 U.S.C. 1431
National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice.
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.
Written comments must be submitted on or before January 3, 2017.
Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, Room 6625, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at
Requests for additional information or copies of the information collection instrument and instructions should be directed to Stephen Manley, (301) 427-8476 or
This request is for revision and extension of a currently approved information collection. A Human Interaction Data Sheet will be added to this data collection, and the currently approved forms in this collection (the Stranding Report form and Rehabilitation Disposition data sheet) have been slightly modified.
The marine mammal stranding report provides information on strandings so that the National Marine Fisheries Service (NMFS) can compile and analyze, by region, the species, numbers, conditions, and causes of illnesses and deaths in stranded marine mammals. NMFS requires this information to fulfill its management responsibilities under the Marine Mammal Protection Act (16 U.S.C. 1421a). NMFS is also responsible for the welfare of marine mammals while in rehabilitation status. The data from the marine mammal rehabilitation disposition report are required for monitoring and tracking of marine mammals held at various NMFS-authorized facilities. This information is submitted primarily by members of the marine mammal stranding networks which are authorized by NMFS. A new human interaction data sheet will provide NMFS with consistent and detailed information on signs of human interaction in stranded marine mammals. This information will assist the Agency in tracking resource conflicts and will provide a solid scientific foundation for conservation and management of marine mammals. With a better understanding of interactions, appropriate measures can be taken to resolve conflicts and, stranding data are the best source of information regarding the occurrence of different types of human interaction.
Paper applications, electronic reports, and telephone calls are required from participants, and methods of submittal include Internet through the NMFS National Marine Mammal Stranding Database; facsimile transmission of paper forms; or mailed copies of forms.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed repository of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden and submission of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
10:00 a.m., Friday, November 4, 2016.
CFTC Headquarters Lobby-Level Hearing Room, Three Lafayette Centre, 1155 21st Street NW., Washington, DC.
Open.
The Commodity Futures Trading Commission (“Commission” or “CFTC”) will hold this meeting to consider a supplemental Notice of Proposed Rulemaking on Regulation Automated Trading (“Regulation AT”). The agenda for this meeting will be available to the public and posted on the Commission's Web site at
Christopher J. Kirkpatrick, Secretary of the Commission, 202-418-5964.
Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics), Department of Defense (DoD).
Federal advisory committee meeting notice.
The Department of Defense announces the following closed Federal advisory committee meeting of the Threat Reduction Advisory Committee (TRAC).
Wednesday, November 16, 2016, from 8:30 a.m. to 4:30 p.m. and Thursday, November 17, 2016, from 8:30 a.m. to 2:30 p.m.
United States Special Operation Command (USSOCOM) in Tampa, FL on both days.
Mr. William Hostyn, DoD, Defense Threat Reduction Agency (DTRA) J2/5/AC, 8725 John J. Kingman Road, MS 6201, Fort Belvoir, VA 22060-6201. Email:
The TRAC will continue meeting on Thursday, November 17, 2016. USSOCOM will provide intelligence briefings on the overlap of special operations and CWMD activities in the Western Pacific area of responsibility. USSOCOM representatives will then deliver a command brief, including an outline of USSOCOM's strategic direction in regards to CWMD, which will highlight potential avenues of coordination with the preexisting CWMD infrastructure. USSOCOM's Directorate of Plans will then give a more detailed picture of the UCP CWMD transition over a working lunch. Following the working lunch, AMB Lehman and LtGen Osterman will lead a group discussion on synergies between the Department of Defense's CWMD mission and USSOCOM. At the conclusion of the discussion, the Chair will adjourn the 39th Plenary.
Office of Elementary and Secondary Education (OESE), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before January 3, 2017.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Kimberly Smith, 202-453-6469.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Office of Electricity Delivery and Energy Reliability, DOE.
Notice of Application.
Castleton Commodities Merchant Trading L.P. (Applicant or Castleton) has applied for authority to transmit electric energy from the United States to Mexico pursuant to section 202(e) of the Federal Power Act.
Comments, protests, or motions to intervene must be submitted on or before December 1, 2016.
Comments, protests, motions to intervene, or requests for more information should be addressed to: Office of Electricity Delivery and Energy Reliability, Mail Code: OE-20, U.S. Department of Energy, 1000 Independence Avenue SW, Washington, DC 20585-0350. Because of delays in handling conventional mail, it is recommended that documents be transmitted by overnight mail, by electronic mail to
Exports of electricity from the United States to a foreign country are regulated by the Department of Energy (DOE) pursuant to sections 301(b) and 402(f) of the Department of Energy Organization Act (42 U.S.C. 7151(b), 7172(f)) and require authorization under section 202(e) of the Federal Power Act (16 U.S.C. 824a(e)).
On October 11, 2016, DOE received an application from Castleton for authority to transmit electric energy from the United States to Mexico as a power marketer for a five-year term using existing international transmission facilities.
In its application, Castleton states that it does not own or control any electric generation or transmission facilities, and it does not have a franchised service area. The electric energy that Castleton proposes to export to Mexico would be surplus energy purchased from third parties such as electric utilities and Federal power marketing agencies pursuant to voluntary agreements. The existing international transmission facilities to be utilized by the Applicant have previously been authorized by Presidential Permits issued pursuant to Executive Order 10485, as amended, and are appropriate for open access transmission by third parties.
Any person desiring to be heard in this proceeding should file a comment or protest to the application at the address provided above. Protests should be filed in accordance with Rule 211 of the Federal Energy Regulatory Commission's (FERC) Rules of Practice and Procedures (18 CFR 385.211). Any person desiring to become a party to these proceedings should file a motion to intervene at the above address in accordance with FERC Rule 214 (18 CFR 385.214). Five copies of such comments, protests, or motions to intervene should be sent to the address provided above on or before the date listed above.
Comments and other filings concerning Castleton's application to export electric energy to Mexico should be clearly marked with OE Docket No. EA-432. An additional copy is to be provided to both Castleton Commodities International LLC, 811 Main Street Suite 3500, Houston, TX 77002 and Daniel E. Frank, Sutherland Asbill & Brennan LLP, 700 Sixth Street, NW., Suite 700, Washington, DC 20001.
A final decision will be made on this application after the environmental impacts have been evaluated pursuant to DOE's National Environmental Policy Act Implementing Procedures (10 CFR part 1021) and after a determination is made by DOE that the proposed action will not have an adverse impact on the sufficiency of supply or reliability of the U.S. electric power supply system.
Copies of this application will be made available, upon request, for public inspection and copying at the address provided above, by accessing the program Web site at
Issued in Washington, DC, on October 26, 2016.
Southwestern Power Administration, DOE.
Notice of Proposed Change to Southwestern Power Administration Integrated System Non-Federal Transmission Service Rate Schedule and Opportunity for Public Review and Comment.
The Administrator, Southwestern Power Administration (Southwestern), has determined that an additional Section outlining a new methodology within Southwestern's existing Integrated System Non-Federal Transmission Service (NFTS-13) Rate Schedule is necessary to better align Southwestern's rate schedule with standard practices utilized by the Southwest Power Pool, Inc. (SPP) Regional Transmission Organization. A new section 2.3.6 is proposed that establishes a procedure for determining an Annual Revenue Requirement (ARR) for customers that choose to contract for Network Integration Transmission Service (NITS) on Southwestern's transmission system pursuant to the SPP Open Access Transmission Tariff (OATT).
The proposed Section 2.3.6 does not change Southwestern's NFTS ARR, as determined in its 2013 Integrated System Power Repayment Studies (2013 PRS), but rather replaces the current stated-rate for SPP NITS with a revenue-requirement based methodology that includes determining the SPP NITS ARR portion of Southwestern's NFTS ARR. Furthermore, the proposed Section 2.3.6 affects only those customers that choose to contract for SPP NITS on Southwestern's transmission system under the SPP OATT.
Southwestern has determined that Section 2.3.6 will provide a more appropriate methodology for revenue recovery from NFTS customers that choose to contract for SPP NITS on Southwestern's transmission system under the SPP OATT.
The consultation and comment period will begin on the date of publication of this
If requested, the Forum will be held in Southwestern's offices, Room 1460, Williams Center Tower I, One West Third Street, Tulsa, Oklahoma 74103. Comments should be submitted to Mr. Marshall Boyken, Senior Vice President and Chief Operating Officer (see
Mr. Marshall Boyken, Senior Vice President, Chief Operating Officer, Office of Corporate Operations, Southwestern Power Administration, U.S. Department of Energy, One West Third Street, Tulsa, Oklahoma 74103, (918) 595-6646,
Originally established by Secretarial Order No. 1865 dated August 31, 1943, Southwestern is an agency within the U.S. Department of Energy created by the Department of Energy Organization Act, Public Law 95-91, dated August 4, 1977. Guidelines for preparation of power repayment studies are included in DOE Order No. RA 6120.2 entitled Power Marketing Administration Financial Reporting. Procedures for public participation in power and transmission rate adjustments of the Power Marketing Administrations are found at title 10, part 903, subpart A of the Code of Federal Regulations (10 CFR part 903). Procedures for the confirmation and approval of rates for the Federal Power Marketing Administrations are found at title 18, part 300, subpart L of the Code of Federal Regulations (18 CFR part 300).
Southwestern markets power from 24 multi-purpose reservoir projects with hydroelectric power facilities constructed and operated by the U.S. Army Corps of Engineers (Corps). These projects are located in the states of Arkansas, Missouri, Oklahoma, and Texas. Southwestern's marketing area includes these states plus Kansas and Louisiana. The costs associated with the hydropower facilities of 22 of the 24 projects are repaid via revenues received under the Integrated System rates, as are those of Southwestern's transmission facilities, which consist of 1,380 miles of high-voltage transmission lines, 26 substations, and 46 communication sites. Costs associated with the Sam Rayburn and Robert D. Willis Dams, two Corps projects that are isolated hydraulically, electrically, and financially from the Integrated System, are repaid under separate rate schedules and are not addressed in this notice.
The current NFTS-13 Rate Schedule includes a stated rate for NITS that is calculated by dividing Southwestern's monthly revenue requirement, derived from Southwestern's NFTS ARR identified within the 2013 PRS, by the net transmission capacity available for NITS. Modifying Southwestern's rate schedule to include an ARR for SPP NITS, rather than applying a stated rate, is necessary to better align with standard practices utilized by SPP. Therefore, in place of applying the NITS stated rate for SPP NITS on Southwestern's transmission system, the proposed Section 2.3.6 includes a procedure for determining (and updating) an SPP NITS ARR, as a portion of Southwestern's NFTS ARR, based on the amount of revenue assumed to be recovered on an annual basis from NITS customers in each approved PRS. If additional customers choose to contract for SPP NITS on Southwestern's transmission system, the proposed Section 2.3.6 methodology updates the SPP NITS ARR and eliminates the need for Southwestern to revise its NFTS Rate Schedule each time additional customers contract for SPP NITS on Southwestern's transmission system.
The title of the NFTS-13 Rate Schedule was changed to NFTS-13A to reflect the addition of Section 2.3.6. A redlined version of the NFTS-13 Rate Schedule, which shows the revision proposed by rate schedule NFTS-13A, will be made available upon request. To request a copy, please contact Mr. Marshall Boyken, Senior Vice President and Chief Operating Officer, (see
Following review and consideration of written comments, the Administrator will determine whether to finalize and submit the proposed NFTS-13A Rate Schedule to the Deputy Secretary of Energy for confirmation and approval on an interim basis, and subsequently to the Federal Energy Regulatory Commission (FERC) for confirmation and approval on a final basis. The FERC will allow the public an opportunity to provide written comments on the proposed rate schedule change before making a final decision.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency is planning to submit an information collection request (ICR), “Implementation of Ambient Air Protocol Gas Verification Program” (EPA ICR No. 2375.03, OMB Control No. 2060-0648) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act (44 U.S.C. 3501
Comments must be submitted on or before January 3, 2017.
Submit your comments, referencing Docket ID No. EPA-HQ-OAR-2010-0050 online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Mrs. Laurie Trinca, Air Quality Assessment Division, Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, Mail Code C304-06, Research Triangle Park, NC 27711; telephone: 919-541-0520; fax: 919-541-1903; email:
Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
Pursuant to section 3506(c)(2)(A) of the PRA, EPA is soliciting comments and information to enable it to: (i) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (ii) evaluate the accuracy of the Agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (iii) enhance the quality, utility, and clarity of the information to be collected; and (iv) minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology,
The EPA Ambient Air Quality Monitoring Program's quality assurance requirements in 40 CFR part 58, Appendix A, require: “2.6 Gaseous and Flow Rate Audit Standards. Gaseous pollutant concentration standards (permeation devices or cylinders of compressed gas) used to obtain test concentrations for CO, SO
These requirements give assurance to end users that all specialty gas producers selling EPA Protocol Gases are participants in a program that provides an independent assessment of the accuracy of their gases' certified concentrations. In 2010, the EPA developed an Ambient Air Protocol Gas Verification Program (AA-PGVP) that provides end users with information about participating producers and verification results.
Each year, EPA will attempt to compare gas cylinders from every specialty gas producer being used by ambient air monitoring organizations. The EPA's Regions 2 and 7 have agreed to provide analytical services for verification of 40 cylinders/lab or 80 cylinders total/year. Cylinders will be Start Printed Page 30302verified at a pre-determined time each quarter.
In order to make the appropriate selection, the EPA needs to know what specialty gas producers are being used by the monitoring organizations. Therefore, the EPA needs to survey each primary quality assurance organization every year to collect information on specialty gas producers being used and whether the monitoring organization would like to participate in the verification for the upcoming calendar year.
Environmental Protection Agency (EPA).
Notice of final permit issuance.
This notice announces issuance by all ten Environmental Protection Agency (EPA) Regions of the final 2016 National Pollutant Discharge Elimination System (NPDES) pesticide general permit (PGP)—the “2016 PGP.” The 2016 PGP, which has an effective date of October 31, 2016, replaces the existing permit (“2011 PGP”) that expires at midnight on October 31, 2016, and authorizes certain point source discharges from the application of pesticides to waters of the United States in accordance with the terms and conditions described therein. EPA is issuing this permit for five (5) years in all areas of the country where EPA is the NPDES permitting authority.
The permit is effective on October 31, 2016, and will expire at midnight, October 31, 2021. In accordance with 40 CFR part 23, this permit shall be considered issued for the purpose of judicial review on November 15, 2016. Under Section 509(b) of the Clean Water Act, judicial review of this general permit can be requested by filing a petition for review in the United States Court of Appeals within 120 days after the permit is considered issued. Under Section 509(b) of the Clean Water Act, the requirements of this permit may not be challenged later in civil or criminal proceedings to enforce these requirements. In addition, this permit may not be challenged in other agency proceedings. Deadlines for submittal of a Notices of Intent to be covered, if required, are provided in Part 1.2.3, Table 1-2, of the 2016 PGP.
EPA Regional Office listed in Section I.C., or you can send an email to
This section is organized as follows:
You may be affected by this action if you apply pesticides, under the use patterns in Section III.B, that result in a discharge to waters of the United States in one of the geographic areas identified in Section III.A. Potentially affected entities, as categorized in the North American Industry Classification System (NAICS), may include, but are not limited to:
1.
2.
An electronic version of the public docket is available through the EPA's electronic public docket and comment system, EPA Dockets. You may use EPA Dockets at
Electronic versions of the 2016 PGP and Fact Sheet are also available on the EPA's NPDES Web site at
For EPA Region 1, contact George Papadopoulos at tel.: (617) 918-1579; or email at
For EPA Region 2, contact Maureen Krudner at tel.: (212) 637-3874; or email at
For EPA Region 3, contact Mark Smith at tel.: (215) 814-3105; or email at
For EPA Region 4, contact Sam Sampath at tel.: (404) 562-9229; or email at
For EPA Region 5, contact Jason Hewitt at tel.: (312) 353-3114; or email at
For EPA Region 6, contact Kilty Baskin at tel.: (214) 665-7500 or email at
For EPA Region 7, contact Kimberly Hill at tel.: (913) 551-7841 or email at:
For EPA Region 8, contact David Rise at tel.: (406) 457-5012 or email at:
For EPA Region 9, contact Pascal Mues at tel.: (415) 972-3768 or email at:
For EPA Region 10, contact Dirk Helder at tel.: (208) 378-5749 or email at:
Section 301(a) of the Clean Water Act (CWA) provides that “the discharge of any pollutant by any person shall be unlawful” unless the discharge is in compliance with certain other Sections of the Act. 33 U.S.C. 1311(a). The CWA defines “discharge of a pollutant” as “(A) any addition of any pollutant to navigable waters from any point source, (B) any addition of any pollutant to the waters of the contiguous zone or the ocean from any point source other than a vessel or other floating craft.” 33 U.S.C. 1362(12). A “point source” is any “discernible, confined and discrete conveyance” but does not include “agricultural stormwater discharges and return flows from irrigated agriculture.” 33 U.S.C. 1362(14).
The term “pollutant” includes, among other things, “garbage . . . chemical wastes, biological materials . . . and industrial, municipal, and agricultural waste discharged into water.” 33 U.S.C. 1362(6).
A person may discharge a pollutant without violating the Section 301 prohibition by obtaining authorization to discharge (referred to herein as “coverage”) under a Section 402 NPDES permit (33 U.S.C. 1342). Under Section 402(a), EPA may “issue a permit for the discharge of any pollutant, or combination of pollutants, notwithstanding Section 1311(a)” upon certain conditions required by the Act.
EPA issued the first Pesticide General Permit (“2011 PGP”) on October 31, 2011, in response to the United States Sixth Circuit Court of Appeals ruling vacating EPA's 2006 Final Rule on Aquatic Pesticides.
EPA published the draft 2016 PGP and accompanying Fact Sheet in the
EPA provides permit coverage for classes of point source discharges that occur in areas where EPA is the NPDES permitting authority. The geographic coverage of the 2016 PGP is listed in Appendix C of the permit and also listed below. This permit also applies in all areas of Indian Country that are not covered by an EPA-approved permitting program, for example, the areas of Indian Country described below:
This permit regulates discharges to waters of the United States from the application of (1) biological pesticides, and (2) chemical pesticides that leave a residue. These apply to the following pesticide use patterns:
• Mosquito and Other Flying Insect Pest Control—to control public health/nuisance and other flying insect pests that develop or are present during a portion of their life cycle in or above standing or flowing water. Public health/nuisance and other flying insect pests in this use category include mosquitoes and black flies.
• Weed and Algae Pest Control—to control weeds, algae, and pathogens that are pests in water and at water's edge, including ditches and/or canals.
• Animal Pest Control—to control animal pests in water and at water's edge. Animal pests in this use category include fish, lampreys, insects, mollusks, and pathogens.
• Forest Canopy Pest Control—application of a pesticide to a forest canopy to control the population of a pest species (
The scope of activities encompassed by these pesticide use patterns is described in greater detail in Part III.1.1 of the Fact Sheet for the 2016 PGP.
The 2016 PGP replaces the 2011 PGP, which was issued for a five-year term on October 31, 2011 (76 FR 68750) and expires October 31, 2016, at midnight. While the requirements of the 2016 PGP remain the same as those in the 2011 PGP, some minor updates have been added and are discussed in more detail in the 2016 PGP Fact Sheet, such as:
• Added electronic reporting requirements in Part 7.8 of the PGP to be consistent with EPA's Electronic Reporting Rule (78 FR 46005); and
• Updated the definition of National Marine Fisheries Service (NMFS) Listed Resources of Concern to include additional species as a result of consultation between EPA and NMFS, as required under Section 7 of the Endangered Species Act.
EPA published the draft 2016 PGP for public comment on January 26, 2016 (81 FR 4289). The following is a summary of permit modifications from the draft 2016 PGP:
• Changed the date when Notices Of Intent (NOIs) are required from October 31, 2016, to January 12, 2017, in order to allow Decision-makers enough time to read and understand the permit requirements and comply with the reporting and recordkeeping requirements of the permit; and
• Updated Part 9.0 of the 2016 PGP to reflect state and tribal CWA Section 401 certifications.
The 2016 PGP is similar to the 2011 PGP, and is structured in the same nine parts: (1) Coverage under the permit, (2) technology-based effluent limitations, (3) water quality-based effluent limitations, (4) monitoring, (5) pesticide discharge management plan, (6) corrective action, (7) recordkeeping and Annual Reporting, (8) EPA contact information and mailing addresses, and (9) permit conditions applicable to specific states, Indian Country, or territories. Additionally, as with the 2011 PGP, the 2016 PGP includes nine appendices with additional conditions and guidance for permittees: (A) Definitions, abbreviations, and acronyms, (B) standard permit conditions, (C) areas covered, (D) NOI form, (E) Notice of Termination (NOT) form, (F) Pesticide Discharge Evaluation worksheet (PDEW), (G) Annual Reporting template, (H) Adverse Incident template, and (I) endangered species procedures.
The following is a summary of the 2016 PGP's requirements:
• The PGP defines “Operator” (
• All Applicators are required to minimize pesticide discharges by using only the amount of pesticide and frequency of pesticide application necessary to control the target pest, maintain pesticide application equipment in proper operating condition, control discharges as necessary to meet applicable water quality standards, and monitor for and report any adverse incidents.
• All Decision-makers are required, to the extent not determined by the Applicator, to minimize pesticide discharges by using only the amount of pesticide and frequency of pesticide application necessary to control the target pest. All Decision-makers are also required to control discharges as necessary to meet applicable water quality standards and monitor for and report any adverse incidents.
• Coverage under this permit is available only for discharges and discharge-related activities that are not likely to adversely affect species that are federally-listed as endangered or threatened (“listed”) under the Endangered Species Act (ESA) or habitat that is federally-designated as critical under the ESA (“critical habitat”), except for certain cases specified in the permit involving prior consultation with the NMFS, and for Declared Pest Emergency Situations. The permit contains several provisions addressing listed species, including for certain listed species identified in the permit as NMFS Listed Resources of Concern, that Decision-makers whose discharges may affect these resources certify compliance with one of six criteria which together ensure that any potential adverse effects have been properly considered and addressed. These NMFS Listed Resources of Concern for the PGP are identified in detail on EPA's Web site at
• Certain Decision-makers [
• Permit conditions take effect as of October 31, 2016; however, Operators with eligible discharges are authorized for permit coverage (or automatically covered) through January 12, 2017 without submission of an NOI. Thus, for any discharges commencing on or before January 12, 2017 that will continue after this date, an NOI must be submitted no later than January 2, 2017 to ensure uninterrupted permit coverage, and for any discharge occurring after January 12, 2017, no later than 10 days before the first discharge occurring after January 12, 2017.
EPA expects the costs that covered entities, including small businesses, will bear to comply with this permit to be minimal. A copy of the EPA's cost impact analysis, titled, “
In compliance with Executive Order 13175, EPA consulted with tribal officials to gain an understanding of, and where necessary, to address tribal implications of the 2016 PGP. In the course of this consultation, EPA undertook the following activities:
• October 28, 2015—EPA mailed notification letters to tribal leaders initiating consultation and coordination on the renewal of the PGP. The initiation letter was posted on the tribal portal Web site at
• November 19, 2015—EPA held an informational teleconference open to all tribal representatives, and reserved the last part of the teleconference for official consultation comments. Seven tribal officials participated. EPA also invited tribes to submit written comments on the draft 2016 PGP. The presentation was posted on the tribal portal Web site at
EPA did not receive any comments during the formal tribal consultation period. EPA notes that as part of the finalization of this permit, the Agency completed Section 401 certification procedures with all applicable tribes where this permit will apply (see Part 9 and Appendix C of the PGP).
Clean Water Act, 33 U.S.C. 1251
Environmental Protection Agency (EPA).
Notice of approval and solicitation of requests for a public hearing.
The Environmental Protection Agency (EPA) is hereby giving notice that the State of Missouri is revising its approved Public Water Supply Supervision Program delegated to the Missouri Department of Natural Resources. EPA has reviewed the application and intends to approve these program revisions.
This determination to approve the Missouri program revision is made pursuant to 40 CFR 142.12(d) (3). This determination shall become final and effective on December 1, 2016, unless (1) a timely and appropriate request for a public hearing is received or (2) the Regional Administrator elects to hold a public hearing on his own motion. Any interested person, other than Federal Agencies, may request a public hearing.
A request for a public hearing must be submitted to the Regional Administrator at the address shown below by December 1, 2016. If a request for a public hearing is made within the requested thirty-day time frame, a public hearing will be held and a notice will be given in the
All interested parties may request a public hearing on the approval to the Regional Administrator at the EPA Region 7 address shown below.
Any request for a public hearing shall include the following information: (1) Name, address and telephone number of the individual, organization or other entity requesting a hearing; (2) a brief statement of the requesting person's interest in the Regional Administrator's determination and a brief statement on information that the requesting person intends to submit at such hearing; (3) the signature of the individual making the request or, if the request is made on behalf of an organization or other entity, the signature of a responsible official of the organization or other entity. Requests for Public Hearing shall be addressed to: Regional Administrator, Environmental Protection Agency, Region 7, 11201 Renner Boulevard, Lenexa, Kansas 66219.
All documents relating to this determination are available for inspection between the hours of 9:00 a.m. and 3:00 p.m., Monday through Friday at the following offices: (1) U.S. Environmental Protection Agency, Region 7, Water Wetlands and Pesticides Division, Drinking Water Management Branch, 11201 Renner Boulevard, Lenexa, Kansas 66219 and (2) the Missouri Department of Natural Resources, Lewis and Clark State Office Building, 1101 Riverside Drive, Jefferson City, Missouri 65102.
Submit your comments, identified by Docket ID No. EPA-R07-OW-2016-0602, to
Neftali Hernandez, Environmental Protection Agency, Region 7, Drinking Water Management Branch, (913) 551-7036, or by email at
The EPA is hereby giving notice that the State of Missouri is revising its approved Public Water Supply Supervision Program delegated to the Missouri Department of Natural Resources. The Missouri Department of Natural Resources revised their program by incorporating the following EPA National Primary Drinking Water Regulation: Ground Water Rule (November 8, 2006, 71 FR 65574). EPA has reviewed the application and determined that the revisions are no less stringent than the corresponding Federal regulations and that the State of Missouri continues to meet all requirements for primary enforcement responsibility as specified in 40 CFR 142.10. Therefore, EPA intends to approve these program revisions.
Environmental Protection Agency (EPA).
Notice of meeting.
Pursuant to the Federal Advisory Committee Act, Public Law 92-463, the U.S. Environmental Protection Agency, Office of Research and Development (ORD), gives notice of a meeting of the Board of Scientific Counselors (BOSC) Chemical Safety for Sustainability Subcommittee.
The meeting will be held on Wednesday, November 16, 2016, from 8:00 a.m. to 6:00 p.m., Thursday, November 17, 2016, from 8:30 a.m. to 6:00 p.m., and will continue on Friday, November 18, 2016, from 8:30 a.m. to 3:30 p.m. All times noted are Eastern Time. Attendees must register by November 10, 2016, online at:
The meeting will be held at the EPA's Main Campus Facility, 109 T.W. Alexander Drive, Research Triangle Park, North Carolina 27711.
Submit your comments, identified by Docket ID No. EPA-HQ-ORD-2015-0635, by one of the following methods:
•
•
•
•
•
Direct your comments to Docket ID No. EPA-HQ-ORD-2015-0635. The EPA's policy is that all comments received will be included in the public docket without change and may be made available online at
The Designated Federal Officer via mail at: Megan Fleming, Mail Code 8104R, Office of Science Policy, Office of Research and Development, U.S. Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; via phone/voice mail at: (202) 564-6604; or via email at:
For security purposes, all attendees must go through a metal detector, sign in with the security desk, and show government-issued photo identification to enter the building. Attendees are encouraged to arrive at least 15 minutes prior to the start of the meeting to allow sufficient time for security screening. Proposed agenda items for the meeting include, but are not limited to, the following: Overview of materials provided to the subcommittee; Overview of ORD's Chemical Safety for Sustainability Research Program; A short update from ORD's Human Health Risk Assessment Research Program; Poster session; and Subcommittee discussion.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) Science Advisory Board (SAB) Staff Office announces a public meeting of the chartered SAB to: (1) Conduct a quality review of the draft SAB review of the EPA's proposed methodology for mortality risk valuation estimates for policy analysis; (2) discuss information provided by the EPA on planned actions in the Spring 2016 semi-annual regulatory agenda and their supporting science; (3) discuss information about shipboard treatment efficacy in the SAB report, Efficacy of Ballast Water Treatment Systems: A Report by the Science Advisory Board, and (4) receive briefings on future topics from the EPA.
The public meeting will be held on Wednesday, November 30, 2016, from 1:30 p.m. to 5:00 p.m. and Thursday December 1, 2016, from 9:00 a.m. to 1:00 p.m.
The meeting will be held at the Westin Arlington Gateway Hotel, 801 North Glebe Road, Arlington, VA 22203.
Any member of the public who wants further information concerning the meeting may contact Mr. Thomas Carpenter, Designated Federal Officer (DFO), EPA Science Advisory Board (1400R), U.S. Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; via telephone/voice mail (202) 564-4885, or email at
The EPA's Office of Policy requested advice on proposed improvements to the Agency's methodology for estimating benefits associated with reduced risk of mortality. This methodology takes into account the amounts that individuals are willing to pay for reductions in mortality risk. The resulting values are combined into an estimate known as the value of statistical life (VSL) which is used in regulatory benefit-cost analysis. The EPA has also requested that the SAB review options for accounting for changes in the VSL over time as real income grows, known as income elasticity of willingness to pay.
The chartered SAB will conduct a quality review of the committee's draft report before it is transmitted to the EPA Administrator. The SAB quality review process ensures that all draft reports developed by SAB panels, committees or workgroups are reviewed and approved by the Chartered SAB before being finalized and transmitted to the EPA Administrator. These reviews are conducted in a public meeting as required by FACA.
Background on the current advisory activity, Valuing Mortality Risk Reductions for Policy: Proposed Updates to Valuation and Income Elasticity Estimates can be found on the SAB Web site at
As part of the EPA's effort to routinely inform the SAB about proposed and planned agency actions that have a scientific or technical basis, the agency provided notice to the SAB that the Office of Management and Budget published the “Unified (Regulatory) Agenda” on the Web on May 18, 2016 available at
The SAB convened a Work Group to review information provided in the agency's Spring 2016 regulatory agenda regarding EPA planned actions and their supporting science. The SAB will discuss recommendations and information developed by the Work Group regarding the adequacy of the science supporting the planned actions. Information about this advisory activity can be found on the Web at
The SAB will discuss recommendations and information developed by a Work Group regarding the conclusions about shipboard treatment efficacy in the SAB report, Efficacy of Ballast Water Treatment Systems: A Report by the Science Advisory Board (EPA-SAB-11-009). The SAB convened a Work Group to gather and review information on the report's underlying data and related conclusions. The SAB is not seeking new data regarding ballast water treatment system efficacy and will focus its discussion on the data and information available for the report. Information about this advisory activity can be found on the Web at
Federal advisory committees and panels, including scientific advisory committees, provide independent advice to the EPA. Members of the public can submit relevant comments pertaining to the EPA's charge, meeting materials, or the group providing advice. Input from the public to the SAB will have the most impact if it provides specific scientific or technical information or analysis for the SAB to consider or if it relates to the clarity or accuracy of the technical information. Members of the public wishing to provide comment should contact the DFO directly.
Appraisal Subcommittee of the Federal Financial Institutions Examination Council.
Notice of meeting.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than November 25, 2016.
1.
2.
This request will support an automated Annual Report form, streamlining State administrative information and incorporating Results Oriented Management and Accountability (ROMA) Next Generation as well as National Performance Indicators (NPI) for individual, family, and community measures as reported by eligible entities. The revised and automated form may impose an added first-use burden; however, this burden will lessen in subsequent years. Copies of the proposed collection of information can be obtained by visiting:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing an opportunity for public comment on the proposed collection of certain information by the Agency. Under the Paperwork Reduction Act of 1995 (the PRA), Federal Agencies are required to publish notice in the
Submit either electronic or written comments on the collection of information by January 3, 2017.
You may submit comments as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
FDA PRA Staff, Office of Operations, Food and Drug Administration, Three White Flint North, 11601 Landsdown Street, 10A63, North Bethesda, MD 20852,
Under the PRA (44 U.S.C. 3501-3520), Federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes Agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal Agencies to provide a 60-day notice in the
With respect to the following collection of information, FDA invites comments on these topics: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.
FDA's patent extension activities are conducted under the authority of the Drug Price Competition and Patent Term Restoration Act of 1984 (21 U.S.C. 355(j)) and the Generic Animal Drug and Patent Term Restoration Act of 1988 (35 U.S.C. 156). New human drug, animal drug, human biological, medical device, food additive, or color additive products regulated by the FDA must undergo FDA safety, or safety and effectiveness review before marketing is permitted. Where the product is covered by a patent, part of the patent's term may be consumed during this review, which diminishes the value of the patent. In enacting the Drug Price Competition and Patent Term Restoration Act of 1984 and the Generic Animal Drug and Patent Term Restoration Act of 1988, Congress sought to encourage development of new, safer, and more effective medical and food additive products. It did so by authorizing the U.S. Patent and Trademark Office (USPTO) to extend the patent term by a portion of the time during which FDA's safety and effectiveness review prevented marketing of the product. The length of the patent term extension is generally limited to a maximum of 5 years, and is calculated by USPTO based on a statutory formula. When a patent holder submits an application for patent term extension to USPTO, USPTO requests information from FDA, including the length of the regulatory review period for the patented product. If USPTO concludes that the product is eligible for patent term extension, FDA publishes a notice that describes the length of the regulatory review period and the dates used to calculate that period. Interested parties may request, under § 60.24 (21 CFR 60.24), revision of the length of the regulatory review period, or may petition under § 60.30 (21 CFR 60.30) to reduce the regulatory review period by any time where marketing approval was not pursued with “due diligence.”
The statute defines due diligence as “that degree of attention, continuous directed effort, and timeliness” as may
Since 1992, 20 requests for revision of the regulatory review period have been submitted under § 60.24(a). For 2013, 2014 and 2015, a total of 5 requests have been submitted under § 60.24(a). During that same time period, there have been no requests under §§ 60.30 and 60.40; however, for purposes of this information collection approval, we are estimating that we may receive one submission annually.
FDA estimates the burden of this collection of information as follows:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing an opportunity for public comment on the proposed collection of certain information by the Agency. Under the Paperwork Reduction Act of 1995 (the PRA), Federal Agencies are required to publish notice in the
Submit either electronic or written comments on the collection of information by January 3, 2017.
You may submit comments as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS
FDA PRA Staff, Office of Operations, Food and Drug Administration, Three White Flint North, 11601 Landsdown Street, 10A63, North Bethesda, MD 20852,
Under the PRA (44 U.S.C. 3501-3520), Federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes Agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal Agencies to provide a 60-day notice in the
With respect to the following collection of information, FDA invites comments on these topics: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.
When reviewing clinical research studies regulated by FDA, institutional review boards (IRBs) are required to create and maintain records describing their operations, and make the records available for FDA inspection when requested. These records include: Written procedures describing the structure and membership of the IRB and the methods that the IRB will use in performing its functions; the research protocols, informed consent documents, progress reports, and reports of injuries to subjects submitted by investigators to the IRB; minutes of meetings showing attendance, votes, and decisions made by the IRB; the number of votes on each decision for, against, and abstaining; the basis for requiring changes in or disapproving research; records of continuing review activities; copies of all correspondence between investigators and the IRB; statement of significant new findings provided to subjects of the research; a list of IRB members by name, showing each member's earned degrees, representative capacity, and experience in sufficient detail to describe each member's contributions to the IRB's deliberations; and any employment relationship between each member and the IRB's institution. This information is used by FDA in conducting audit inspections of IRBs to determine whether IRBs and clinical investigators are providing adequate protections to human subjects participating in clinical research.
The recordkeeping requirement burden is based on the following information; the burden for the paragraphs under 21 CFR 56.115 has been considered as one estimated burden. This burden estimate assumes that there are approximately 2,520 IRBs, that each IRB meets on an average of 14.6 times annually, and that approximately 100 hours of person-time per meeting are required to meet the requirements of the regulation.
FDA estimates the burden of this collection of information as follows:
Food and Drug Administration, HHS.
Notice of public meeting; extension of comment period.
The Food and Drug Administration (FDA) is extending the comment period for the Medical Device User Fee Amendments (MDUFA) reauthorization draft recommendations that were announced in the
FDA is extending the comment period on the MDUFA reauthorization draft recommendations published October 7, 2016 (81 FR 69829). Submit either electronic or written comments by November 28, 2016.
You may submit comments as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Aaron Josephson, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, rm. 5449, Silver Spring, MD 20993, 301-796-5178,
In the
Because the Agency was unable to post the draft recommendations until October 25, 2016, and the statute requires a period of 30 days be provided for the public to provide comments on the draft recommendations, FDA is extending the comment period for the MDUFA reauthorization draft recommendations until November 28, 2016.
Health Resources and Services Administration (HRSA), Department of Health and Human Services.
Notice.
In compliance with the requirement for opportunity for public comment on proposed data collection projects (Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995), HRSA announces plans to submit an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB). Prior to submitting the ICR to OMB, HRSA
Comments on this ICR must be received no later than January 3, 2017.
Submit your comments to
To request more information on the proposed project or to obtain a copy of the data collection plans and draft instruments, email
When submitting comments or requesting information, please include the information request collection title for reference.
Information Collection Request Title: Nurse Anesthetist Traineeship (NAT) Program Specific Data Forms (Application).
OMB No. 0915-0374—Revision.
Abstract: HRSA provides advanced education nursing training grants to educational institutions to increase the numbers of Nurse Anesthetists through the NAT Program. The NAT Program is authorized by Section 811 of the Public Health Service (PHS) Act (42 U.S.C. 296j). The NAT Tables request information on program participants such as the number of enrollees, number of enrollees/trainees supported, number of graduates, number of graduates supported, projected data on the number of enrollees/trainees and graduates for the previous fiscal year, the types of programs the Nurse Anesthesia student trainees are enrolling into and/or from which enrollees/trainees are graduating, and the distribution of Nurse Anesthetists who practice in underserved, rural, or public health practice settings.
Need and Proposed Use of the Information: Funds appropriated for the NAT Program are distributed among eligible institutions based on a formula, as permitted by PHS Act section 806(e)(1). HRSA uses the data from the NAT Tables to determine the award amount, to ensure compliance with programmatic and grant requirements, and to provide information to the public and Congress.
HRSA is streamlining the data collection forms from three tables to two tables by making the following changes:
• Table 1—NAT: Enrollment, Traineeship Support, Graduates, Graduates Supported and Projected Data will no longer capture data by students in first 12 months of study and students beyond first 12 months of study the program. Data will continue to be captured by Master's and Doctoral students.
• Table 2A—NAT: Graduate Data—Rural, Underserved, or Public Health is now Table 2 due to the elimination of Table 2B. There are no other changes to this form.
• Table 2B—NAT: Graduates Supported by Traineeship Data—Rural, Underserved, or Public Health (7/01/15-6/30/16) will be discontinued as of 07/01/18.
Rationale: The NAT Program Specific Data Forms will be revised to streamline the process and capture only essential data for use in the formula calculation, ensure grantee compliance, and measure and evaluate the program.
Likely Respondents: Eligible applicants are education programs that provide registered nurses with full-time nurse anesthesia education and are accredited by the Council on Accreditation (COA) of Nurse Anesthesia Educational Programs. Such programs may include schools of nursing, nursing centers, academic health centers, state or local governments, and other public or private nonprofit entities authorized by the Secretary to confer degrees to registered nurses for full-time nurse anesthesia education. Faith-based and community-based organizations, Tribes, and tribal organizations may apply for these funds if otherwise eligible. In addition to the 50 states, only the District of Columbia, Guam, the Commonwealth of Puerto Rico, the Northern Mariana Islands, American Samoa, the U.S. Virgin Islands, the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau may apply.
Burden Statement: Burden in this context means the time expended by persons to generate, maintain, retain, disclose or provide the information requested. This includes the time needed to review instructions; to develop, acquire, install and utilize technology and systems for the purpose of collecting, validating and verifying information, processing and maintaining information, and disclosing and providing information; to train personnel and to be able to respond to a collection of information; to search data sources; to complete and review the collection of information; and to transmit or otherwise disclose the information. The total annual burden hours estimated for this ICR are summarized in the table below.
HRSA specifically requests comments on (1) the necessity and utility of the proposed information collection for the proper performance of the agency's functions, (2) the accuracy of the estimated burden, (3) ways to enhance the quality, utility, and clarity of the information to be collected, and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
Health Resources and Services Administration (HRSA), Department of Health and Human Services.
Notice.
In compliance with the requirement for opportunity for public comment on proposed data collection projects (Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995), HRSA announces plans to submit an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB). Prior to submitting the ICR to OMB, HRSA seeks comments from the public regarding the burden estimate, below, or any other aspect of the ICR.
Comments on this ICR should be received no later than January 3, 2017.
Submit your comments to
To request more information on the proposed project or to obtain a copy of the data collection plans and draft instruments, email
When submitting comments or requesting information, please include the information request collection title for reference.
Information Collection Request Title: Maternal, Infant, and Early Childhood Home Visiting Program Fiscal Year (FY) 2015, FY 2016, FY 2017 Non-Competing Continuation Progress Report for Formula Grant.
OMB No. 0915-0355—Revision.
On March 23, 2010, the President signed into law the Patient Protection and Affordable Care Act (ACA). Section 2951 of the ACA amended Title V of the Social Security Act by adding a new section, 511, which authorized the creation of the Federal Home Visiting Program. A portion of funding under this program is awarded to participating states and eligible jurisdictions using a funding formula. Formula funding is the main funding mechanism used by HRSA to provide support to eligible entities for the provision of voluntary high-quality home visiting services to families living in at-risk communities.
The information collected will be used to review grantee progress on proposed project plans to assess whether the project is performing adequately to achieve the goals and objectives that were previously approved. This report will also provide implementation plans for the upcoming year that will result in a high-quality project. Non-competing continuation progress reports are submitted via HRSA's Electronic Handbook.
Failure to collect this information would impair federal monitoring and oversight of the use of grant funds. Grantees are required to provide a performance narrative in the following sections: Project Identifier Information; Accomplishments and Barriers, Home Visiting Program Goals and Objectives; Update on the Home Visiting Program Promising Approach (as applicable), Implementation of the Home Visiting Program in Targeted At-Risk Communities; Progress Towards Meeting Legislatively-Mandated Reporting on Benchmark Areas; Home Visiting Quality Improvement Efforts, and; Updates on the Administration of the Home Visiting Program.
The purpose of this revision is to include standardized tables and instructions to assist grantees in completing the required sections. Reporting progress, in part, by using these tables will assist federal staff to assess whether the grant activities align with statutory and programmatic requirements and objectives and will result in the implementation of a high-quality project. To account for the additional tables included in this revision request, the estimated annualized burden hours have been revised to reflect 80 hours per response. The previous estimate was 42 hours per response.
Likely Respondents: Eligible entities under the Social Security Act, Title V, Section 511(c) (42 U.S.C., Section 711(c)), as added by Section 2951 of the ACA (Pub. L. 111-148)
HRSA specifically requests comments on (1) the necessity and utility of the proposed information collection for the proper performance of the agency's functions, (2) the accuracy of the estimated burden, (3) ways to enhance the quality, utility, and clarity of the information to be collected, and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
Office of the Secretary, HHS
Notice
In compliance with section 3507(a)(1)(D) of the Paperwork Reduction Act of 1995, the Office of the Secretary (OS), Department of Health and Human Services, has submitted an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB) for review and approval. The ICR is for renewal of the approved information collection assigned OMB control number 0990-0323, scheduled to expire on January 31, 2017. Comments submitted during the first public review of this ICR will be provided to OMB. OMB will accept further comments from the public on this ICR during the review and approval period.
Comments on the ICR must be received on or before December 1, 2016.
Submit your comments to
Information Collection Clearance staff,
When submitting comments or requesting information, please include the OMB control number 0990-0323-30D for reference.
National Institutes of Health, HHS.
Notice.
The invention listed below is owned by an agency of the U.S. Government and is available for licensing in the U.S. in accordance with 35 U.S.C. 209 and 37 CFR part 404 to achieve expeditious commercialization of results of federally-funded research and development. Foreign patent applications are filed on selected inventions to extend market coverage for companies and may also be available for licensing.
Licensing information may be obtained by communicating with the indicated licensing contact at the Technology Transfer and Intellectual Property Office, National Institute of Allergy and Infectious Diseases, 5601 Fishers Lane, Rockville, MD 20852; tel. 301-496-2644. A signed Confidential Disclosure Agreement will be required to receive copies of unpublished scientific data.
Technology description follows.
Scientists at the National Institute of Allergy and Infectious Diseases (NIAID) have developed the HPS-1 proMastocyte (HPM) cell line, containing an HPS-1 mutation. This cell line resembles a progenitor mast cell with reduced granule formation, significant chemotactic ability, and is the first mast cell line shown to constitutively release cytokines, chemokines, and most importantly fibrotic proteins. This cell line serves as a model to study granule formation, early mast cell development, chemotaxis and mechanisms controlling synthesis of molecules contributing to fibrosis.
The cell line is available as live cells approximately 3-4 million cells per sample in a T25 Flask.
For collaboration opportunities, please contact Dr. Dianca Finch; 240-669-5503,
Notice is hereby given of a change in the meeting of the Frederick National Laboratory Advisory Committee to the National Cancer Institute, November 16, 2016, 01:00 p.m. to November 16, 2016, 05:30 p.m., National Cancer Institute Advanced Technology Research Facility (ATRF), 8560 Progress Drive, Auditorium Room E1600, Frederick, MD, 21702 which was published in the
This Notice has been amended to change the: Meeting date; start and end times; agenda and type of meeting. The meeting will now be held on November 16, 2016 from 8:00 a.m. to November 17, 2017, 12:00 p.m. to conduct a site visit of the Frederick National Laboratory for Cancer Research and the National Cancer Institute (NCI) RAS Initiative. The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The project/program and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the project/program, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
U.S. Customs and Border Protection, Department of Homeland Security.
Notice of accreditation and approval of Intertek USA, Inc., as a commercial gauger and laboratory.
Notice is hereby given, pursuant to CBP regulations, that Intertek USA, Inc., has been approved to gauge and accredited to test petroleum and petroleum products for customs purposes for the next three years as of July 14, 2015.
Approved Gauger and Accredited Laboratories Manager, Laboratories and Scientific Services Directorate, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue NW., Suite 1500N, Washington, DC 20229, tel. 202-344-1060.
Notice is hereby given pursuant to 19 CFR 151.12 and 19 CFR 151.13, that Intertek USA, Inc., 230 Crescent Ave, Chelsea, MA 02150, has been approved to gauge and accredited to test petroleum and petroleum products for customs purposes, in accordance with the provisions of 19 CFR 151.12 and 19 CFR 151.13. Intertek USA, Inc., is approved for the following gauging procedures for petroleum and certain petroleum products set forth by the American Petroleum Institute (API):
Intertek USA, Inc., is accredited for the following laboratory analysis procedures and methods for petroleum and certain petroleum products set forth by the U.S. Customs and Border Protection Laboratory Methods (CBPL) and American Society for Testing and Materials (ASTM):
Anyone wishing to employ this entity to conduct laboratory analyses and gauger services should request and receive written assurances from the entity that it is accredited or approved by the U.S. Customs and Border
U.S. Customs and Border Protection, Department of Homeland Security.
Notice of accreditation and approval of Inspectorate America Corporation as a commercial gauger and laboratory.
Notice is hereby given, pursuant to CBP regulations, that Inspectorate America Corporation has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes for the next three years as of February 17, 2016.
Approved Gauger and Accredited Laboratories Manager, Laboratories and Scientific Services Directorate, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue NW., Suite 1500N, Washington, DC 20229, tel. 202-344-1060.
Notice is hereby given pursuant to 19 CFR 151.12 and 19 CFR 151.13, that Inspectorate America Corporation, 3306 Loop 197 N., Texas City, TX 77590 has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes, in accordance with the provisions of 19 CFR 151.12 and 19 CFR 151.13. Inspectorate America Corporation is approved for the following gauging procedures for petroleum and certain petroleum products from the American Petroleum Institute (API):
Inspectorate America Corporation is accredited for the following laboratory analysis procedures and methods for petroleum and certain petroleum products set forth by the U.S. Customs and Border Protection Laboratory Methods (CBPL) and American Society for Testing and Materials (ASTM):
Anyone wishing to employ this entity to conduct laboratory analyses and gauger services should request and receive written assurances from the entity that it is accredited or approved by the U.S. Customs and Border Protection to conduct the specific test or gauger service requested. Alternatively, inquiries regarding the specific test or gauger service this entity is accredited or approved to perform may be directed to the U.S. Customs and Border Protection by calling (202) 344-1060. The inquiry may also be sent to
Privacy Office, DHS.
Committee Management; Notice of Federal Advisory Committee Meeting.
The DHS Data Privacy and Integrity Advisory Committee will meet on December 6, 2016, in Washington, DC The meeting will be open to the public.
The DHS Data Privacy and Integrity Advisory Committee will meet on Tuesday, December 6, 2016, from 9:00 a.m. to 12:30 p.m. Please note that the meeting may end early if the Committee has completed its business.
The meeting will be held both in person in Washington, DC at 650 Massachusetts Avenue NW., 4th Floor, and via online forum (URL will be posted on the Privacy Office Web site in advance of the meeting at
To facilitate public participation, we invite public comment on the issues to be considered by the Committee as listed in the
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If you wish to attend the meeting, please bring a government issued photo I.D. and plan to arrive at 650 Massachusetts Avenue NW., 4th Floor, Washington, DC, no later than 8:50 a.m. The DHS Privacy Office encourages you to register for the meeting in advance by contacting Sandra Taylor, Designated Federal Officer, DHS Data Privacy and Integrity Advisory Committee, at
Sandra Taylor, Designated Federal Officer, DHS Data Privacy and Integrity Advisory Committee, Department of Homeland Security, 245 Murray Lane SW., Mail Stop 0655, Washington, DC 20528, by telephone (202) 343-1717, by fax (202) 343-4010, or by email to
Notice of this meeting is given under the Federal Advisory Committee Act (FACA), Title 5, U.S.C., appendix. The DHS Data Privacy and Integrity Advisory Committee provides advice at the request of the Secretary of Homeland Security and the DHS Chief Privacy Officer on programmatic, policy, operational, administrative, and technological issues within DHS that relate to personally identifiable information, as well as data integrity and other privacy-related matters. The Committee was established by the Secretary of Homeland Security under the authority of 6 U.S.C. 451.
During the meeting, the Acting Chief Privacy Officer will provide an update on the activities of the Privacy Office. The Committee will also receive updates on the Biometric Framework, the Privacy Compliance Review program, and DHS social media use. Lastly, the Policy Subcommittee will provide a status on the data breach tasking issued during the February 2016 meeting. The final agenda will be posted on or before November 5, 2016, on the Committee's Web site at
Office of the Assistant Secretary for Public and Indian Housing, HUD.
Notice.
The Section 184 Indian Housing Loan Guarantee program (Section 184 program) is a home mortgage program specifically designed for American Indian and Alaska Native families, Alaska villages, tribes, or tribally designated housing entities. Over the last five years, the Section 184 program has doubled the number of loans and eligible families being assisted by the program. For HUD to continue to meet the increasing demand for participation in this program, HUD is exercising its authority to increase the annual premium to the borrower from 0.15 to 0.25 percent of the remaining loan balance. This annual premium will continue until the unpaid principal balance, excluding the upfront loan guarantee fee, reaches 78 percent of the lower of the initial sales price or appraised value based on the initial amortization schedule. Effective December 1, 2016 the new annual premium of 0.25 percent of the remaining loan balance will apply to all new loan guarantees, including refinances.
Heidi J. Frechette, Deputy Assistant Secretary for Native American Programs, Office of Public and Indian Housing, Department of Housing and Urban Development, 451 7th Street SW., Room 4126, Washington, DC 20410; telephone number 202-401-7914 (this is not a toll-free number). Persons with hearing or speech disabilities may access this number through TTY by calling the toll-free Federal Relay Service at 800-877-8339.
Section 184 of the Housing and Community Development Act of 1992 (Pub. L. 102-550, approved October 28, 1992), as amended by the Native American Housing Assistance and Self-Determination Act of 1996 (Pub. L. 104-330, approved October 26, 1996) and 2013 Consolidated and Further Continuing Appropriations Act (Pub. L. 113-6, approved March 26, 2013), established the Section 184 program to provide access to sources of private mortgage financing to Indian families, Indian housing authorities, and Indian tribes. Congress established this program in 1992 to facilitate homeownership and increase access to capital in Native American Communities. The Section 184 program addresses obstacles to mortgage financing on trust land and in other Indian and Alaska Native areas by giving HUD the authority to guarantee loans to eligible persons and entities to construct, acquire, refinance, or rehabilitate one- to four-family dwellings in these areas.
The Section 184 Loan Guarantee Fund (the Fund) is used to fulfill obligations of the Secretary with respect to the loans guaranteed under this program. The Fund receives annual appropriations to cover the cost of the program, and amounts for claims, notes, mortgages, contracts, and property acquired by the Secretary under the Section 184 program, which reduces the amount of appropriations needed to support the program. In recent years, rapidly growing demand has required HUD to increase the guarantee premium and implement a new annual upfront fee to support new loan guarantees. HUD issued loan guarantee commitments for $495.4 million in fiscal year (FY) 2011, $670.8 million in FY 2012, $672.3 million in FY 2013, $595 million in FY 2014, $738.1 million in FY 2015, and $756.3 million in FY 2016.
On October 7, 2014, HUD issued a notice exercising its new statutory authority to implement an annual premium to the borrower in the amount of 0.15 percent. (79 FR 60492). The notice also provided guidance on the cancellation of the annual premium when the loan reaches the 78 percent loan-to-value ratio. The new annual premium became effective on November 15, 2014 for all new loan guarantees, including refinances.
To meet projected demand for participation in the Section 184 program for FY 2017, HUD is increasing the annual premium from 0.15 to 0.25 percent of the remaining loan balance until the unpaid principal balance, excluding the upfront loan guarantee fee, reaches 78 percent of the lower of the initial sales price or appraised value based on the initial amortization schedule on all new loans, including refinances. This increase will apply to all new program applicants as of the effective date of this notice. It will not apply to existing mortgages guaranteed by this program. Without an increase in the annual premium, HUD will not have sufficient funding to the meet the anticipated demand for Section 184 mortgage loans in FY 2017. The decision to increase the annual loan guarantee premium provides a balanced approach that addresses the current demands for the program while focusing on the need to remain affordable.
By increasing the annual premium paid by borrowers, the credit subsidy rate
To reduce some of the impact accompanying the annual premium, the payment of the annual premium can be made through monthly payments, to spread out the cost for borrowers, or annual and lump sum payments, to keep a borrower's monthly payment lower.
This notice increases the Section 184 program annual premium to 0.25 percent of the remaining loan balance for all new case numbers assigned on or after December 1, 2016 until the unpaid principal balance, excluding the upfront loan guarantee fee, reaches 78 percent of the lower of the initial sales price or appraised value based on the initial amortization schedule.
This notice does not supersede HUD's guidance on the cancellation of the annual premium when the loan reaches the 78 percent loan-to-value ratio that was provided in the October 7, 2014 Notice (79 FR 60492).
HUD's policy is to consult with Indian tribes early in the process on matters that have tribal implications. Accordingly, on June 26, 2016, HUD sent letters to all tribal leaders participating in the Section 184 program, informing them of the nature of the forthcoming notice and soliciting comments. A summary of comments received and responses can be found on HUD's Web site at:
This notice involves the establishment of a rate or cost determination that does not constitute a development decision affecting the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this notice is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (U.S.C. 4321).
Fish and Wildlife Service, Interior.
Notice of availability and request for public comment.
We, the Fish and Wildlife Service (Service), announce the availability of the technical/agency draft recovery plan for the endangered chucky madtom, a fish. The draft recovery plan includes specific recovery objectives and criteria that must be met in order for us to reclassify this species to threatened status under the Endangered Species Act of 1973, as amended (Act). We request review and comment on this draft recovery plan from local, State, and Federal agencies, and the public.
In order to be considered, comments on the draft recovery plan must be received on or before January 3, 2017.
1. You may submit written comments and materials to us, at the above address.
2. You may hand-deliver written comments to our Tennessee Field Office, at the above address, or fax them to 931-528-7075.
3. You may send comments by email to
For additional information about submitting comments, see the “Request for Public Comments” section below.
Mary E. Jennings (see
We listed the chucky madtom (
Chucky madtoms are currently known from a single tributary to the Nolichucky River in stream sections 5 to 7 meters (16 to 23 feet) wide in riffle and swim through streams lined by water willow (
Approximately 20 river miles (32 river kilometers) of stream channels in Little Chucky Creek, Greene County, Tennessee, have been designated as critical habitat for the chucky madtom (77 FR 63604). This fish has a recovery priority number of 5 which indicates the species faces a high degree of threat, but has a low recovery potential.
Restoring an endangered or threatened animal or plant to the point where it is again a secure, self-sustaining member of its ecosystem is a primary goal of our endangered species program. To help guide the recovery effort, we prepare recovery plans for most listed species. Recovery plans describe actions considered necessary for conservation of the species, establish criteria for downlisting or delisting, and
The Act requires the development of recovery plans for listed species, unless such a plan would not promote the conservation of a particular species. Section 4(f) of the Act requires us to provide public notice and an opportunity for public review and comment during recovery plan development. We will consider all information presented during a public comment period prior to approval of each new or revised recovery plan. We and other Federal agencies will take these comments into account in the course of implementing approved recovery plans.
The recovery objectives are to work to reduce threats in order to downlist the chucky madtom to threatened status. Defining reasonable delisting criteria is not possible at this time given the current low number of individuals, extreme curtailment of the species' range, extensive modification and fragment of habitat with the species' historical range, lack of information about the species' biology, and magnitude of other existing threats. Therefore, this recovery plan establishes only downlisting criteria for this catfish. Criteria will be reevaluated as new information becomes available.
1. Suitable instream and riparian habitat, flows, and water quality for chucky madtom as defined by the best available science (to be refined by recovery actions), exist in occupied streams (addresses Factor A).
2. Population studies show that a viable chucky madtom population in Little Chucky Creek and at least 1 other stream (Dunn Creek, Jackson Branch;
We request written comments on the draft recovery plan. We will consider all comments we receive by the date specified in
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
The authority for this action is section 4(f) of the Endangered Species Act, 16 U.S.C. 1533(f).
Fish and Wildlife Service, Interior.
Notice; request for comments.
The U.S. Fish and Wildlife Service seeks information about potential objections to the public release of possibly confidential information regarding import and export activities tracked via the Service's Law Enforcement Management Information System. We issue this notice and solicit this information in response to a lawsuit under the Freedom of Information Act.
You must submit comments on or before November 22, 2016.
You may submit comments by one of the following methods:
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Michael Jenkins, Management Analyst Specialist, USFWS, Office of Law Enforcement, 5275 Leesburg Pike, Falls Church, VA 22041; telephone (703) 358-1949.
This notice is issued under part 2 of title 43 of the Code of Federal Regulations (CFR), which sets forth regulations for administration of the Freedom of Information Act (FOIA) by the U.S. Department of the Interior (“the Department”).
We, the U.S. Fish and Wildlife Service (“the Service”), hereby announce that information related to records for the import and export of all wildlife specimens to and from the United States may be disclosed under FOIA (43 CFR 2.27(b)).
Submitters of this type of information can contact the Service to review records subject to possible release. If you are a submitter of this information, the Service will presume that you do not object to the disclosure of your information if a response to this notice is not received by the date specified above in
The Department is soliciting views from submitters with respect to whether certain records constitute “trade secrets and commercial or financial information obtained from a person [that are] privileged or confidential” information under the FOIA, 5 U.S.C. 552(b)(4). The records at issue concern information in the Service's Law Enforcement Management Information System (LEMIS) relating to the import and export of all wildlife specimens to and from the United States:
a. For the years 2002 through 2010, 2013, and 2014;
b. of any taxonomic class, whether live, dead, parts, or products; and
c. with the following variables to be included in the records: Control Number, Species Code, Class, Genus, Species, Subspecies, Generic Name, Specific Name, Wildlife Description, Quantity, Unit, Value, Country of Origin, Country Import/Export, Purpose, Source, Act, Disposition Code, Disposition Date, Shipment Date, Import/Export, Port Code, U.S. Importer/Exporter, and Foreign Importer/Exporter.
This notice relates to FOIA requests by Humane Society International (HSI) of June 2, 2014; August 21, 2014; June 3, 2015; and November 3, 2015. In response to these FOIA requests, the Service withheld the “Declared Value of Wildlife” and “Foreign Importer/Exporter” columns in their entirety under FOIA Exemption 4. The Service withheld additional information under Exemptions 6 and 7(C). The Service's response to these FOIA requests is now the subject of a lawsuit,
The Department has been asked to release certain information in LEMIS for the years 2002 through 2010, 2013, and 2014 relating to the import and export of all wildlife specimens to and from the United States. This notice provides you with the opportunity to object to the public release of these records if they are exempt from disclosure under FOIA, 5 U.S.C. 552(b). Please reference
If you wish to object to the disclosure of these records, the Department's FOIA regulations (“regulations”) require you to submit a “detailed written statement” setting forth the justification for withholding any portion of the information under any exemption of the FOIA.
Under FOIA's Exemption 4, 5 U.S.C. 552(b)(4), “trade secrets and commercial or financial information obtained from a person and privileged or confidential” are exempt from disclosure under the FOIA. When the Department has reason to believe that information that is responsive to a FOIA request may be exempt from disclosure under FOIA's Exemption 4, the regulations require the Department to provide notice to the submitter(s) of the responsive material and advise the submitter(s) of the procedures for objecting to the release of the requested material. This publication serves as notice.
Further, if you object to the public disclosure of the records (or any portions of records) at issue in
(i) Whether the Government required the information to be submitted and, if so, how substantial competitive or other business harm would likely result from release; or
(ii) Whether you provided the information voluntarily and, if so, how the information in question fits into a category of information that you customarily do not release to the public.
(iii) Certification that the information is confidential, that you have not disclosed the information to the public, and that the information is not routinely available to the public from other sources.
In order for information to qualify for protection under Exemption 4 as a “trade secret,” the information must be “a secret, commercially valuable plan, formula, process, or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort.”
In order for information to qualify for protection under the aspect of Exemption 4 that protects privileged or confidential commercial or financial information, the first requirement is that the information must be either “commercial or financial.” In determining whether documents are “commercial or financial,” the D.C. Circuit has firmly held that these terms should be given their “ordinary meanings” and that records are commercial so long as you have “commercial interest” in them.
The specific and detailed discussion that you provide must explain how the information relates to your commercial interest and the commercial function the information serves or the commercial nature of the information.
The test to determine if information is “privileged” or “confidential” under Exemption 4 depends on whether the submitter was required to provide the information to the Government or whether the submitter voluntarily disclosed the information to the Government.
You must explain whether you voluntarily provided the information in question or whether the Government required the information to be submitted. Should you assert that you voluntarily submitted the information, you must also explain how the information in question fits into a category of information that you customarily do not release to the public. If you assert that the Government required you to submit the information in question (as is the case for the information at hand), then you must explain how substantial competitive or other business harm would likely result from release.
To demonstrate that disclosure is likely to cause substantial competitive harm, there must be evidence that: (1) You face actual competition; and (2) substantial competitive injury would likely result from disclosure.
In order for the Department to fully evaluate whether you are likely to suffer substantial competitive injury from disclosure of the withheld information, any objections on this basis must include a detailed explanation of who
As a final matter, please be aware that the FOIA requires that “any reasonably segregable portion of a record” must be released after appropriate application of the FOIA's nine exemptions.
Should you wish to object to disclosure of any of the requested records (or portions thereof), the Department must receive from you all of the information requested above by no later than the date specified above in
If you do not submit any objections to the disclosure of the information (or portions thereof) to HSI on or before the date specified above in
Please note that any comments you submit to the Department objecting to the disclosure of the documents may be subject to disclosure under the FOIA if the Department receives a FOIA request for them. In the event your comments contain commercial or financial information and a requester asks for the comments under the FOIA, the Department will notify you and give you an opportunity to comment on the disclosure of such information.
Department of the Interior.
Notice of availability; request for comments.
In accordance with the Oil Pollution Act of 1990 (OPA), the National Environmental Policy Act (NEPA), the Consent Decree, and the Final Programmatic Damage Assessment Restoration Plan and Final Programmatic Environmental Impact Statement (Final PDARP/PEIS), the Federal and State natural resource trustee agencies for the Louisiana Trustee Implementation Group (Trustees) have prepared a Draft Restoration Plan #1: Restoration of Wetlands, Coastal, and Nearshore Habitats; Habitat Projects on Federally Managed Lands; and Birds (Draft Restoration Plan 1) describing and proposing engineering and design activities for restoration projects intended to continue the process of restoring natural resources and services injured or lost as a result of the
Alternatively, you may request a CD of the Draft Restoration Plan 1 (see
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• Louisiana Coastal Protection & Restoration Authority, ATTN: Liz Williams, P.O. Box 44027, Baton Rouge, LA 70804.
Liz Williams at
On or about April 20, 2010, the mobile offshore drilling unit
The
• U.S. Department of the Interior (DOI), as represented by the National Park Service, U.S. Fish and Wildlife Service, and Bureau of Land Management;
• National Oceanic and Atmospheric Administration (NOAA), on behalf of the U.S. Department of Commerce;
• U.S. Department of Agriculture (USDA);
• U.S. Environmental Protection Agency (USEPA);
• State of Louisiana Coastal Protection and Restoration Authority (CPRA), Oil Spill Coordinator's Office (LOSCO), Department of Environmental Quality (LDEQ), Department of Wildlife and Fisheries (LDFW), and Department of Natural Resources (LDNR);
• State of Mississippi Department of Environmental Quality;
• State of Alabama Department of Conservation and Natural Resources and Geological Survey of Alabama;
• State of Florida Department of Environmental Protection and Fish and Wildlife Conservation Commission; and
• For the State of Texas: Texas Parks and Wildlife Department, Texas General Land Office, and Texas Commission on Environmental Quality.
Upon completion of the NRDA, the Trustees reached and finalized a settlement of their natural resource damage claims with BP in a Consent Decree approved by the United States District Court for the Eastern District of Louisiana. Pursuant to that Consent Decree, restoration projects in Louisiana are now chosen and managed by the Louisiana Trustee Implementation Group (TIG). The Louisiana TIG is composed of the following Trustees:
• U.S. Department of the Interior (DOI), as represented by the National Park Service,
U.S. Fish and Wildlife Service, and Bureau of Land Management;
• National Oceanic and Atmospheric Administration (NOAA), on behalf of the U.S. Department of Commerce;
• U.S. Department of Agriculture (USDA);
• U.S. Environmental Protection Agency (USEPA);
• Louisiana Coastal Protection and Restoration Authority (CPRA);
• Louisiana Department of Natural Resources (LDNR);
• Louisiana Department of Environmental Quality (LDEQ);
• Louisiana Oil Spill Coordinator's Office (LOSCO); and,
• Louisiana Department of Wildlife and Fisheries (LDWF)
The Draft Restoration Plan 1 is being released in accordance with the Oil Pollution Act (OPA), the Natural Resources Damage Assessment (NRDA) regulations found in the Code of Federal Regulations (CFR) at 15 CFR 990, the National Environmental Policy Act (42 U.S.C. 4321
The total estimated cost for the proposed engineering and design activities for the six proposed restoration projects is $22,300,000. Details on the proposed engineering and design activities for the restoration projects are provided in the draft restoration plan.
As described above, the Trustees will consider holding public meetings to facilitate the public review and comment process, if requested. After the public comment period ends, the Trustees will consider and address the comments received before issuing a final restoration plan.
Consistent with the PDARP/PEIS, in this Draft Restoration Plan 1 the Louisiana TIG is proposing a preliminary phase of restoration planning to perform engineering and design evaluation for restoration projects to develop information needed to fully consider the implementation phase which will be proposed in a subsequent restoration plan. Although information gathered may inform future projects, the outcome of the preliminary phases does not commit the Trustees to future actions.
The Trustees seek public review and comment on the proposed projects and supporting analysis included in the Draft Restoration Plan 1. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment, including your personal identifying information, may be made publicly available at any time.
The documents comprising the Administrative Record for this Draft Restoration Plan can be viewed electronically at
The authority of this action is the Oil Pollution Act of 1990 (33 U.S.C. 2701
National Park Service, Interior.
Meeting notice.
This notice sets forth the date of the 305th meeting of the Cape Cod National Seashore Advisory Commission.
The public meeting of the Cape Cod National Seashore Advisory Commission will be held on Monday, December 12, 2016, at 1:00 p.m. (Eastern).
The Commission members will meet in the meeting room at park headquarters, 99 Marconi Site Road, Wellfleet, Massachusetts 02667.
The 305th meeting of the Cape Cod National Seashore Advisory Commission will take place on Monday, December 12, 2016, at 1:00 p.m., in the conference room at park headquarters, 99 Marconi Station Road, in Wellfleet, Massachusetts, to discuss the following:
Further information concerning the meeting may be obtained from George E. Price, Jr., Superintendent, Cape Cod National Seashore, 99 Marconi Site, Wellfleet, Massachusetts 02667, or via telephone at (508) 771-2144 or by email at
The Commission was reestablished pursuant to Public Law 87-126, as amended by Public Law 105-280. The purpose of the Commission is to consult with the Secretary of the Interior, or her designee, with respect to matters relating to the development of Cape Cod National Seashore, and with respect to carrying out the provisions of sections 4 and 5 of the Act establishing the Seashore.
The meeting is open to the public. It is expected that 15 persons will be able to attend the meeting in addition to Commission members. Interested persons may make oral/written presentations to the Commission during the business meeting or file written statements. Such requests should be made to the park superintendent prior to the meeting. Before including your address, telephone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
National Park Service, Interior.
Cancellation of meeting.
Notice is hereby given in accordance with the Federal Advisory Committee Act (5 U.S.C. Appendix 1-16) that the November 9, 2016, meeting of the Wekiva River System Advisory Management Committee previously announced in the
Jaime Doubek-Racine, Community Planner and Designated Federal Official, Rivers, Trails, and Conservation Assistance Program, Florida Field Office, Southeast Region, 5342 Clark Road, PMB #123, Sarasota, Florida 34233, or via telephone (941) 685-5912.
The Wekiva River System Advisory Management Committee was established by Public Law 106-299 to assist in the development of the comprehensive management plan for the Wekiva River System and provide advice to the Secretary of the Interior in carrying out management responsibilities of the Secretary under the Wild and Scenic Rivers Act (16 U.S.C. 1274).
United States International Trade Commission.
November 3, 2016 at 2:00 p.m.
Room 101, 500 E Street SW., Washington, DC 20436, Telephone: (202) 205-2000.
Open to the public.
1.
2. Minutes.
3. Ratification List.
4. Vote in Inv. Nos. 701-TA-564 and 731-TA-1338-1340 (Preliminary) (Steel Concrete Reinforcing Bar (rebar) from Japan, Taiwan, and Turkey). The Commission is currently scheduled to complete and file its determinations on November 4, 2016; views of the Commission are currently scheduled to be completed and filed on November 14, 2016.
5.
In accordance with Commission policy, subject matter listed above, not disposed of at the scheduled meeting, may be carried over to the agenda of the following meeting. Earlier notification of this meeting was not possible.
By order of the Commission:
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted reviews pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty orders on solid urea from Russia and Ukraine would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Effective November 1, 2016. To be assured of consideration, the deadline for responses is December 1, 2016. Comments on the adequacy of responses may be filed with the Commission by January 13, 2017.
Mary Messer (202-205-3193), Office of Investigations, U.S. International Trade Commission, 500 E Street SW.,
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Carol McCue Verratti, Deputy Agency Ethics Official, at 202-205-3088.
No response to this request for information is required if a currently valid Office of Management and Budget (OMB) number is not displayed; the OMB number is 3117 0016/USITC No. 16-5-372, expiration date June 30, 2017. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436.
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty orders on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (
This proceeding is being conducted under authority of title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.61 of the Commission's rules.
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted reviews pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty orders on certain welded stainless steel pipe from Korea and Taiwan would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Effective November 1, 2016. To be assured of consideration, the deadline for responses is December 1, 2016. Comments on the adequacy of responses may be filed with the Commission by January 13, 2017.
Mary Messer (202-205-3193), Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
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(2) The
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Carol McCue Verratti, Deputy Agency Ethics Official, at 202-205-3088.
No response to this request for information is required if a currently valid Office of Management and Budget (OMB) number is not displayed; the OMB number is 3117 0016/USITC No. 16-5-373, expiration date June 30, 2017. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436.
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty orders on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (Optional) A statement of whether you agree with the above definitions of the
This proceeding is being conducted under authority of title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.61 of the Commission's rules.
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted a review pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty order on gray portland cement and cement clinker from Japan would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Effective November 1, 2016. To be assured of consideration, the deadline for responses is December 1, 2016. Comments on the adequacy of responses may be filed with the Commission by January 13, 2017.
Mary Messer (202-205-3193), Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Carol McCue Verratti, Deputy Agency Ethics Official, at 202-205-3088.
No response to this request for information is required if a currently valid Office of Management and Budget (OMB) number is not displayed; the OMB number is 3117 0016/USITC No. 16-5-369, expiration date June 30, 2017. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436.
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty order on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in each
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping duties) of U.S. imports into each
(b) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. commercial shipments into each
(c) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. internal consumption/company transfers into each
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (
This proceeding is being conducted under authority of title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.61 of the Commission's rules.
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted reviews pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty orders on helical spring lock washers from China and Taiwan would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Effective November 1, 2016. To be assured of consideration, the deadline for responses is December 1, 2016. Comments on the adequacy of responses may be filed with the Commission by January 13, 2017.
Mary Messer (202-205-3193), Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its Internet server (
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Carol McCue Verratti, Deputy Agency Ethics Official, at 202-205-3088.
No response to this request for information is required if a currently valid Office of Management and Budget (OMB) number is not displayed; the OMB number is 3117 0016/USITC No. 16-5-371, expiration date June 30, 2017. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436.
Information To Be Provided in Response to This Notice of Institution: If you are a domestic producer, union/worker group, or trade/business association; import/export
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty orders on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (
This proceeding is being conducted under authority of title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.61 of the Commission's rules.
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted reviews pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping and countervailing duty orders on multilayered wood flooring from China would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Effective November 1, 2016. To be assured of consideration, the deadline for responses is December 1, 2016. Comments on the adequacy of responses may be filed with the Commission by January 13, 2017.
Mary Messer (202-205-3193), Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of
No response to this request for information is required if a currently valid Office of Management and Budget (OMB) number is not displayed; the OMB number is 3117 0016/USITC No. 16-5-370, expiration date June 30, 2017. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436.
Information To Be Provided in Response to This Notice of Institution: As used below, the term “firm” includes any related firms.
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping and countervailing duty orders on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping or countervailing duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (OPTIONAL) A statement of whether you agree with the above definitions of the
This proceeding is being conducted under authority of Title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.61 of the Commission's rules.
By order of the Commission.
Notice.
The Department of Labor (DOL) is submitting the Employee Benefits Security Administration (EBSA) sponsored information collection request (ICR) titled, “Notice of Medical Necessity Criteria under the Mental Health Parity and Addiction Equity Act of 2008,” to the Office of Management and Budget (OMB) for review and approval for continued use, without change, in accordance with the Paperwork Reduction Act of 1995 (PRA), Public comments on the ICR are invited.
The OMB will consider all written comments that agency receives on or before December 1, 2016.
A copy of this ICR with applicable supporting documentation; including a description of the likely respondents, proposed frequency of
Submit comments about this request by mail or courier to the Office of Information and Regulatory Affairs, Attn: OMB Desk Officer for DOL-EBSA, Office of Management and Budget, Room 10235, 725 17th Street NW., Washington, DC 20503; by Fax: 202-395-5806 (this is not a toll-free number); or by email:
Michel Smyth by telephone at 202-693-4129, TTY 202-693-8064, (these are not toll-free numbers) or by email at
44 U.S.C. 3507(a)(1)(D).
This ICR seeks to extend PRA authority for the Notice of Medical Necessity Criteria under the Mental Health Parity and Addiction Equity Act of 2008 information collection requirements codified in regulations 29 CFR 2590.712(d)(2) that provides for a plan administrator to disclose the criteria for medical necessity determinations with respect to mental health and substance use disorder benefits. Internal Revenue Code of 1986 section 9812, Employee Retirement Income Security Act of 1974 section 712, and Public Health Service Act section 2705 authorize this information collection.
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by the OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid Control Number.
OMB authorization for an ICR cannot be for more than three (3) years without renewal, and the current approval for this collection is scheduled to expire on November 30, 2016. The DOL seeks to extend PRA authorization for this information collection for three (3) more years, without any change to existing requirements. The DOL notes that existing information collection requirements submitted to the OMB receive a month-to-month extension while they undergo review. For additional substantive information about this ICR, see the related notice published in the
Interested parties are encouraged to send comments to the OMB, Office of Information and Regulatory Affairs at the address shown in the
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Notice.
The Department of Labor (DOL) is submitting the information collection request (ICR) proposal titled, “Ready to Work Partnership Grants Evaluation 18-Month Follow-up Survey,” to the Office of Management and Budget (OMB) for review and approval for use in accordance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501
The OMB will consider all written comments that agency receives on or before December 1, 2016.
A copy of this ICR with applicable supporting documentation; including a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained free of charge from the
Submit comments about this request by mail or courier to the Office of Information and Regulatory Affairs, Attn: OMB Desk Officer for DOL-OASAM, Office of Management and Budget, Room 10235, 725 17th Street NW., Washington, DC 20503; by Fax: 202-395-5806 (this is not a toll-free number); or by email:
Michel Smyth by telephone at 202-693-4129 (this is not a toll-free number) or by email at
Authority: 44 U.S.C. 3507(a)(1)(D).
This ICR seeks PRA authority for the Ready to Work (RTW) Partnership Grants Evaluation 18-Month Follow-up Survey information collection. The DOL is conducting an evaluation of RTW Partnership Grants. The evaluation includes: (1) An implementation study that examines the operation of the programs and participation patterns of program enrollees in key program activities, and (2) an impact study that uses a random assignment research design to determine whether selected grantee programs increased participants' employment, earnings, and other outcomes. This submission seeks OMB approval for the impact evaluation 18-month follow-up survey of study participants. American Competitiveness and Workforce Improvement Act of 1998 section 414(c) authorizes this information collection.
This proposed information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by the OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information if the collection of information does not display a valid Control Number.
Interested parties are encouraged to send comments to the OMB, Office of Information and Regulatory Affairs at the address shown in the
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
National Science Foundation.
Notice.
The National Science Foundation published a notice on October 19, 2016, at 81 FR 72124, seeking comments on identifying issues to be analyzed in the Environmental Impact Statement for the proposed changes to Green Bank Observatory operations. The original comment date was to end on November 19, 2016.
Comments on this notice will now be accepted through November 25, 2016.
Submit comments electronically to
Elizabeth Pentecost, National Science Foundation, Division of Astronomical Sciences, 4201 Wilson Blvd., Suite 1045, Arlington, VA 22230; telephone: (703) 292-4907; email:
Comments on the scope of the preliminary proposed alternatives and resource areas to be studied may be submitted in writing through November 25, 2016. To be eligible for inclusion in the Draft EIS, all comments must be received prior to the close of the scoping period. NSF will provide additional opportunities for public participation upon publication of the Draft EIS. Information will be posted, throughout the EIS process, at
9:30 a.m., Tuesday, November 15, 2016
NTSB Conference Center, 429 L'Enfant Plaza SW., Washington, DC 20594.
The two items are open to the public.
The press and public may enter the NTSB Conference Center one hour prior to the meeting for set up and seating.
Individuals requesting specific accommodations should contact Rochelle Hall at (202) 314-6305 or by email at
The public may view the meeting via a live or archived webcast by accessing a link under “News & Events” on the NTSB home page at
Schedule updates, including weather-related cancellations, are also available at
Candi Bing at (202) 314-6403 or by email at
Terry Williams at (202) 314-6100 or by email at
Terry Williams at (202) 314-6100 or by email at
The ACRS Subcommittee on Fukushima will hold a meeting on November 16, 2016, Room T-2B1, 11545 Rockville Pike, Rockville, Maryland 20852.
The meeting will be open to public attendance.
The agenda for the subject meeting shall be as follows:
The Subcommittee will review the draft final Rulemaking Package for Mitigation of Beyond-Design-Basis Events (ML16292A018). The Subcommittee will hear presentations by and hold discussions with the NRC staff and other interested persons regarding this matter. The Subcommittee will gather information, analyze relevant issues and facts, and formulate proposed positions and actions, as appropriate, for deliberation by the Full Committee.
Members of the public desiring to provide oral statements and/or written comments should notify the Designated Federal Official (DFO), Mike Snodderly (Telephone: 301-415-2241 or Email:
Detailed meeting agendas and meeting transcripts are available on the NRC Web site at
If attending this meeting, please enter through the One White Flint North building, 11555 Rockville Pike, Rockville, Maryland 20852. After registering with Security, please contact Mr. Theron Brown (Telephone: 240-888-9835) to be escorted to the meeting room.
The ACRS Subcommittee on Metallurgy & Reactor Fuels will hold a meeting on November 16, 2016, Room T-2B1, 11545 Rockville Pike, Rockville, Maryland.
The meeting will be open to public attendance with the exception of portions that may be closed to protect information that is proprietary pursuant to 5 U.S.C. 552b(c)(4). The agenda for the subject meeting shall be as follows: Wednesday, November 16, 2016—8:30 a.m. until 12:00 p.m.
The Subcommittee will review and discuss the Baffle-Former Bolts Degradation issue. The Subcommittee will hear presentations by and hold discussions with the NRC staff and other interested persons regarding this matter. The Subcommittee will gather information, analyze relevant issues and facts, and formulate proposed positions and actions, as appropriate, for deliberation by the Full Committee.
Members of the public desiring to provide oral statements and/or written comments should notify the Designated Federal Official (DFO), Christopher Brown (Telephone 301-415-7111 or Email:
Detailed meeting agendas and meeting transcripts are available on the NRC Web site at
If attending this meeting, please enter through the One White Flint North building, 11555 Rockville Pike, Rockville, MD. After registering with security, please contact Mr. Theron Brown (Telephone 240-888-9835) to be escorted to the meeting room.
Pursuant to delegation by the Commission,
This appeal arises from an “Order Imposing Procedures for Access to [SUNSI] and Safeguards Information for Contention Preparation” that was included as part of a
The Board is comprised of the following Administrative Judges:
All correspondence, documents, and other materials shall be filed in accordance with the NRC E-Filing rule.
Rockville, Maryland.
The ACRS Subcommittee on Plant License Renewal will hold a meeting on November 17, 2016, Room T-2B1, 11545 Rockville Pike, Rockville, Maryland.
The meeting will be open to public attendance.
The agenda for the subject meeting shall be as follows: Thursday, November 17, 2016—8:30 a.m. until 12:00 p.m.
The Subcommittee will review the safety evaluation report with open items regarding the South Texas Project Units 1 and 2, License Renewal Application. The Subcommittee will hear presentations by and hold discussions with representatives of the NRC staff, South Texas Project Nuclear Operating Company, and other interested persons regarding this matter. The Subcommittee will gather information, analyze relevant issues and facts, and formulate proposed positions and actions, as appropriate, for deliberation by the Full Committee.
Members of the public desiring to provide oral statements and/or written comments should notify the Designated Federal Official (DFO), Kent Howard (Telephone 301-415-2989 or Email:
Detailed meeting agendas and meeting transcripts are available on the NRC Web site at
If attending this meeting, please enter through the One White Flint North building, 11555 Rockville Pike, Rockville, MD. After registering with security, please contact Mr. Theron Brown (Telephone 240-888-9835) to be escorted to the meeting room.
Postal Regulatory Commission.
Notice.
The Commission is noticing recent Postal Service filings for the Commission's consideration concerning negotiated service agreements. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's Web site (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3010, and 39 CFR part 3020, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II.
1.
2.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 25, 2016, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 25, 2016, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 25, 2016, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 25, 2016, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 25, 2016, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 25, 2016, it filed with the Postal Regulatory Commission a
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Rule 4702 (Order Types) [sic] adopt a New Retail Post-Only Order. The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of this filing is to amend Rule 4702 (Order Types) to adopt a new Retail Post-Only Order type. Although based on the Post-Only Order, the Retail Post-Only Order differs from the Post-Only Order in two ways. First, the Retail Post-Only Order can only be used in connection with orders sent on behalf of retail customers, whereas a Post-Only Order is available for use by any market participant. Second, if a Retail Post Only Order would remove liquidity or if posting the order would require an adjustment to the price of the order for any reason, the order will be cancelled. In contrast, a Post-Only Order is designed to have its price adjusted as needed, for example, in order to avoid locking or crossing a Protected Quotation. With the Retail Post-Only Order, Nasdaq is providing firms with another way of managing their retail customer order flow. Currently, if a firm does not want a retail customer order to remove liquidity from the Exchange upon entry, the firm can select the RTFY routing option, which routes the order to destinations in the System routing table instead of immediately removing liquidity from the Exchange order book.
As noted above, the first key feature of the Retail Post-Only Order is that it is designed for use by retail customers. Accordingly, a Retail Post-Only Order must meet the criteria of a Designated Retail Order, as defined in Rule 7018, in addition to the criteria set forth in Rule 4702(b)(14).
The second key feature of the Retail Post-Only Order is that it will cancel if the price of the Order would otherwise adjust for any reason. Rule 4702(b)(14) therefore states that when a new Retail Post-Only order is received, it will attempt to post on the Exchange Book. A Retail Post-Only order that cannot post to the Nasdaq Book at its limit price without having its price adjusted or removing liquidity will be cancelled.
The Retail Post-Only Order is based on the Post-Only Order, and will therefore share most of the attributes of a Post-Only Order.
With respect to Time-in-Force (the period of time that the Nasdaq Market Center will hold the Order for potential execution), the Retail Post-Only Order may be entered with all times permitted by Time-in-Force;
Unlike the Post-Only Order, Retail Post-Only Orders cannot be designated as Intermarket Sweep Orders (“ISO”). The purpose of the Order is to allow firms to utilize their own routing infrastructure in deciding how to execute a retail customer order. Retail Post Only orders will therefore not route and have no routing strategies used in conjunction with the order, and will also not support the ISO attribute. Unlike the Post-Only Order, the Retail Post-Only Order will also not utilize the “display” attribute, since a Retail Post-Only Order may be either displayed or non-displayed.
As with Post-Only Orders, Retail Post-Only Orders will support attribution, which permits a Participant to designate that the price and size of the Order will be displayed next to the Participant's MPID in market data disseminated by Nasdaq. A Retail Post-Only order may also participate in the Nasdaq Opening Cross and/or the Nasdaq Closing Cross.
As with Post-Only Orders, Retail Post Only Orders will not support pegging (the attribute by which the price of the Order is automatically set with
The Retail Post-Only Order will be available for entry through Nasdaq's RASH, FIX and QIX order entry protocols. Nasdaq notes that almost all Designated Retail Orders received by the Exchange are entered through the RASH and FIX protocols. A user may also enter a Retail Post-Only Order during Pre-Market and Post-Market Hours.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
Nasdaq believes that the attributes of the Retail Post-Only Order are also consistent with the Act. Nasdaq notes that some of the Order's attributes, such as size and attribution, are the same as the attributes of the Post-Only Order, upon which the Retail Post-Only Order is based. Nasdaq also notes that the Order's attributes reflect the functionality of the Retail Post-Only Order. For example, pegging will not be offered as an order attribute, given that the purpose of the Order is to cancel rather than have its price adjusted.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Retail Post-Only Order is an optional order type that will be available for entry through Nasdaq's order entry protocols that are most commonly used to submit retail customer orders. The Retail Post-Only Order will provide retail customers with an order type and a resulting functionality that is not currently available on the Exchange. Although the Retail Post-Only Order will be offered to retail customers only, Nasdaq believes that this does not impose a burden on competition that is not necessary or appropriate. In providing an alternative to the Exchange's current methods of handling retail customer orders, Nasdaq believes that the proposal could stimulate competition by attracting additional retail customer order flow to the Exchange, which would increase the diversity of order flow on the Exchange and enhance the Exchange's market quality.
No written comments were either solicited or received.
Within 45 days of the date of publication of this notice in the
A. By order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On August 25, 2016, The Depository Trust Company (“DTC”), Fixed Income Clearing Corporation (“FICC”), and National Securities Clearing Corporation (“NSCC”, and together with DTC and FICC, the “Clearing Agencies”) filed with the Securities and Exchange Commission (“Commission”) proposed rule changes SR-DTC-2016-007, SR-FICC-2016-005, and SR-NSCC-2016-003 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
Section 19(b)(2) of the Act
In order to provide the Commission with sufficient time to consider the proposed rule changes, the Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule changes. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
By letter dated October 26, 2016 (the “Letter”), as supplemented by conversations with the staff of the Division of Trading and Markets, counsel for ETF Series Solutions (the “Trust”), on behalf of the Trust, Premise Capital Frontier Advantage Diversified Tactical ETF (the “Fund”), any national securities exchange on or through which shares of the Fund (“Shares”) are listed and may subsequently trade, Quasar Distributors, LLC (the “Distributor”), and persons engaging in transactions in Shares (collectively, the “Requestors”), requested exemptions, or interpretive or no-action relief, from Rule 10b-17 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and Rules 101 and 102 of Regulation M, in connection with secondary market transactions in Shares and the creation or redemption of aggregations of Shares of 50,000 shares (“Creation Units”).
The Trust is registered with the Securities and Exchange Commission (“Commission”) under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Fund seeks to track the performance of an underlying index, the Premise Capital Frontier Advantage Diversified Tactical Index (the “Underlying Index”). The Underlying Index seeks to provide exposure to major U.S. and non-U.S. equity and fixed income asset classes.
The Fund will seek to track the performance of its Underlying Index by normally investing at least 80% of its total assets in the ETFs that comprise the Underlying Index.
The Requestors represent, among other things, the following:
• Shares of the Fund will be issued by the Trust, an open-end management investment company that is registered with the Commission;
• Creation Units will be continuously redeemable at the net asset value (“NAV”) next determined after receipt of a request for redemption by the Fund, and the secondary market price of the Shares should not vary substantially from the NAV of such Shares;
• Shares of the Fund will be listed and traded on BATS Exchange, Inc., or another exchange in accordance with exchange listing standards that are, or will become, effective pursuant to Section 19(b) of the Exchange Act (the “Listing Exchange”);
• All ETFs in which the Fund is invested will meet all conditions set forth in one or more class relief letters, will have received individual relief from the Commission, will be able to rely upon individual relief even though they are not named parties, or will be able to
• At least 70% of the Fund is comprised of component securities that will meet the minimum public float and minimum average daily trading volume thresholds under the “actively-traded securities” definition found in Regulation M for excepted securities during each of the previous two months of trading prior to formation of the Fund;
• The Fund seeks to track the performance of the Underlying Index, all of the components of which will have publicly available last sale trade information;
• The intraday proxy value of the Fund per share and the value of the Index will be publicly disseminated by a major market data vendor throughout the trading day;
• On each business day before the opening of business on the Listing Exchange, the Fund will cause to be published through the National Securities Clearing Corporation the list of the names and the quantities of securities and other assets of the Fund's portfolio that will be applicable that day to creation and redemption requests;
• The Listing Exchange will disseminate continuously every 15 seconds throughout the trading day, through the facilities of the Consolidated Tape Association, the market value of a Share;
• The Listing Exchange, market data vendors, or other information providers will disseminate, every 15 seconds throughout the trading day, a calculation of the intraday indicative value of a Share;
• The Fund will invest in securities that will facilitate an effective and efficient arbitrage mechanism and the ability to create workable hedges;
• The arbitrage mechanism will be facilitated by the transparency of the Fund's portfolio and the availability of the intraday indicative value, the liquidity of securities held by the Fund, the ability to acquire such securities, as well as arbitrageurs' ability to create workable hedges;
• The Fund will invest solely in liquid securities;
• The Trust believes that arbitrageurs are expected to take advantage of price variations between the Fund's market price and its NAV; and
• A close alignment between the market price of Shares and the Fund's NAV is expected.
While redeemable securities issued by an open-end management investment company are excepted from the provisions of Rules 101 and 102 of Regulation M, the Requestors may not rely upon those exceptions for the Shares.
Generally, Rule 101 of Regulation M is an anti-manipulation rule that, subject to certain exceptions, prohibits any “distribution participant” and its “affiliated purchasers” from bidding for, purchasing, or attempting to induce any person to bid for or purchase any security that is the subject of a distribution until after the applicable restricted period, except as specifically permitted in the Rule. Rule 100 of Regulation M defines “distribution” to mean any offering of securities that is distinguished from ordinary trading transactions by the magnitude of the offering and the presence of special selling efforts and selling methods. The provisions of Rule 101 of Regulation M apply to underwriters, prospective underwriters, brokers, dealers, or other persons who have agreed to participate or are participating in a distribution of securities. The Shares are in a continuous distribution, and, as such, the restricted period in which distribution participants and their affiliated purchasers are prohibited from bidding for, purchasing, or attempting to induce others to bid for or purchase extends indefinitely.
Based on the representations and facts presented in the Letter, particularly that the Trust is a registered open-end management investment company, that Creation Unit size aggregations of the Shares of the Fund will be continuously redeemable at the NAV next determined after receipt of a request for redemption by the Fund, and that a close alignment between the market price of Shares and the Fund's NAV is expected, the Commission finds that it is appropriate in the public interest and consistent with the protection of investors to grant the Trust an exemption under paragraph (d) of Rule 101 of Regulation M with respect to the Fund, thus permitting persons participating in a distribution of Shares of the Fund to bid for or purchase such Shares during their participation in such distribution.
Rule 102 of Regulation M prohibits issuers, selling security holders, and any affiliated purchaser of such person from bidding for, purchasing, or attempting to induce any person to bid for or purchase a covered security during the applicable restricted period in connection with a distribution of securities effected by or on behalf of an issuer or selling security holder.
Based on the representations and facts presented in the Letter, particularly that the Trust is a registered open-end management investment company, that Creation Unit size aggregations of the Shares of the Fund will be continuously redeemable at the NAV next determined after receipt of a request for redemption by the Fund, and that a close alignment between the market price of Shares and the Fund's NAV is expected, the Commission finds that it is appropriate in the public interest and consistent with the protection of investors to grant the Trust an exemption under paragraph (e) of Rule 102 of Regulation M with respect to the Fund, thus permitting the Fund to redeem Shares of the Fund during the continuous offering of such Shares.
Rule 10b-17, with certain exceptions, requires an issuer of a class of publicly traded securities to give notice of certain specified actions (for example, a dividend distribution) relating to such class of securities in accordance with Rule 10b-17(b). Based on the representations and facts in the Letter, and subject to the conditions below, the Commission finds that it is appropriate in the public interest and consistent with the protection of investors to grant the Trust a conditional exemption from Rule 10b-17 because market participants will receive timely notification of the existence and timing of a pending distribution, and thus the concerns that the Commission raised in adopting Rule 10b-17 will not be implicated.
This exemptive relief is subject to the following conditions:
• The Trust will comply with Rule 10b-17, except for Rule 10b-17(b)(1)(v)(a) and (b); and
• The Trust will provide the information required by Rule 10b-17(b)(1)(v)(a) and (b) to the Listing Exchange as soon as practicable before trading begins on the ex-dividend date, but in no event later than the time when the Listing Exchange last accepts information relating to distributions on the day before the ex-dividend date.
This exemptive relief is subject to modification or revocation at any time the Commission determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act. This exemption is based on the facts presented and the representations made in the Letter. Any different facts or representations may require a different response. Persons relying upon this exemptive relief shall discontinue transactions involving the Shares of the Fund, pending presentation of the facts for the Commission's consideration, in the event that any material change occurs with respect to any of the facts or representations made by the Requestors, and, as is the case with all preceding letters, particularly with respect to the close alignment between the market price of Shares and the Fund's NAV. In addition, persons relying on this exemption are directed to the anti-fraud and anti-manipulation provisions of the Exchange Act, particularly Sections 9(a), 10(b), and Rule 10b-5 thereunder.
Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the persons relying on this exemption. This Order should not be considered a view with respect to any other question that the proposed transactions may raise, including, but not limited to, the adequacy of the disclosure concerning, and the applicability of other federal or state laws to, the proposed transactions.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The purpose of this proposed rule change is to amend OCC's By-Laws and Rules to address the implementation of Section 871(m) of the Internal Revenue Code of 1986, as amended (“I.R.C.”),
In its filing with the Commission, OCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.
OCC is proposing to modify its By-Laws and Rules to address the application of I.R.C. Section 871(m) (“Section 871(m)”)
Section 871(m), which was enacted in 2010, imposes a 30% withholding tax on “dividend equivalent” payments that are made or deemed to be made to non-U.S. persons with respect to certain derivatives (such as total return swaps) that reference equity of a U.S. issuer. In enacting Section 871(m), Congress was attempting to address the ability of foreign persons to obtain the economics of owning dividend-paying stock through a derivative while avoiding the withholding tax that would apply to dividends paid on the stock if the foreign person owned the stock directly.
In September 2015, the Treasury Department adopted final regulations (the “Final Section 871(m)
Under the Final Section 871(m) Regulations, any equity option entered into by a non-U.S. person with an initial delta of .8 or above is considered a “Section 871(m) Transaction” and can potentially give rise to a dividend equivalent subject to withholding tax.
Two separate but overlapping U.S. withholding tax regimes will apply to dividend equivalents on listed options that are Section 871(m) Transactions. The first regime, sometimes referred to as “Chapter 3 Withholding,” is the basic U.S. income tax withholding regime under Chapter 3 subtitle A of the Internal Revenue Code (“Chapter 3”), which has existed for many years.
The two withholding tax regimes serve very different purposes. Chapter 3 Withholding requires a withholding agent to withhold 30% of a withholdable payment and remit it to the Internal Revenue Service (“IRS”).
FATCA, on the other hand, was enacted with the purpose of curbing tax evasion by U.S. citizens and residents through the use of offshore bank accounts. FATCA imposes a 30% withholding tax (“FATCA Withholding”) on U.S.-source dividends and other withholdable payments (including dividend equivalents)
The Treasury Department has provided alternative means of complying with FATCA for FFIs that are resident in foreign jurisdictions that enter into an intergovernmental agreement (“IGA”) with the United States (each such foreign jurisdiction being referred to as a “FATCA Partner”). An FFI resident in a FATCA Partner jurisdiction must either transmit the information required by FATCA to its local tax authority, which in turn would transmit the information to the IRS pursuant to a tax treaty or information exchange agreement (referred to as a “Model 1 IGA”), or the FFI must be authorized or required by FATCA Partner law to enter into an FFI agreement and to transmit FATCA reporting directly to the IRS (referred to as a “Model 2 IGA”). Under both IGA models, payments to such FFIs would not be subject to FATCA Withholding so long as the FFI complies with the FATCA Partner's laws as mandated in the IGA. OCC currently has eight non-U.S. Clearing Members, all of which are Canadian firms. Canada entered into a Model 1 IGA with the United States on February 5, 2014, as a result of which OCC's Canadian Clearing Members that comply with the Canadian laws mandated in such Model 1 IGA are “Reporting Model 1 FFIs” and are exempt from FATCA Withholding.
Because OCC does not make payments of U.S.-source interest and dividends to its Clearing Members, OCC's transactions with its Clearing Members have not to date given rise to payments subject to Chapter 3 Withholding or to FATCA Withholding. Both Chapter 3 Withholding and FATCA Withholding will become applicable to OCC and its Clearing Members, however, once Section 871(m) applies to listed options commencing January 1, 2017.
The application of Section 871(m) to listed options transactions that are Section 871(m) Transactions in combination with Chapter 3 Withholding and FATCA Withholding will have significant implications for OCC and its Clearing Members. These implications differ depending upon whether the Clearing Member involved in the transaction is a U.S. firm or a non-U.S. firm. When a U.S. Clearing Member is involved, Section 871(m) is relevant if the Clearing Member is acting (directly or indirectly) on behalf of a
OCC will not be obligated to withhold on any dividend equivalents associated with listed options that are Section 871(m) Transactions when the Clearing Member involved is a U.S. firm. Under the applicable Treasury Regulations, because OCC is treated as making such payments to a U.S. financial institution, OCC is not required to withhold. Rather, the withholding obligation falls on the U.S. Clearing Member if the member is acting directly for a non-U.S. person, or potentially on another broker or custodian with a closer connection to the non-U.S. person. Similarly, OCC will not have any tax reporting obligations. Those obligations will typically fall on the broker that has the obligation to withhold. In general terms, OCC is relieved of the obligation to withhold and to report dividend equivalents in this situation because the U.S. Clearing Member, and not OCC, is the last U.S. person with custody or control over the relevant payment or funds before they leave the United States. Without regard to the proposed rule change described herein, therefore, Section 871(m) will require OCC's U.S. Clearing Members with foreign customers to develop and maintain systems (i) to identify options transactions that are Section 871(m) Transactions (including under the Combination Rule),
The situation is very different when the Clearing Member involved is a non-U.S. firm. (As noted above, OCC currently has eight non-U.S. clearing members, all of which are Canadian firms.) Under the Final Section 871(m) Regulations, OCC itself is a withholding agent when a non-U.S. Clearing Member enters into a transaction on behalf of a customer or for its own account.
To address OCC's potential Chapter 3 Withholding and reporting obligations, the agreements that non-U.S. Clearing Members can enter into with the IRS to relieve OCC of these obligations are as follows:
• With respect to transactions that the Clearing Member enters into on behalf of customers (that is, as an intermediary), the Clearing Member can enter into a “qualified intermediary agreement” with the IRS under which the Clearing Member assumes primary withholding responsibility. If a Clearing Member has such an agreement in place (such member being a “Qualified Intermediary Assuming Primary Withholding Responsibility”), OCC is relieved of its obligation to withhold under Chapter 3 with respect to the Clearing Member's customer transactions.
• With respect to transactions the Clearing Member enters into for its own account (that is, as a principal), the Clearing Member will be able to enter into a qualified intermediary agreement with the IRS (as described above) in which it further agrees,
The Treasury Regulations regarding Qualified Derivatives Dealers are currently in temporary form and are subject to change. Treasury and the IRS recently issued Notice 2016-42, which has proposed changes to the “qualified intermediary agreement” necessary to expand the Qualified Derivatives Dealer exception to include all transactions in which a Qualified Derivatives Dealer acts as a principal for its own account, regardless of whether it does so in its dealer capacity.
With respect to FATCA Withholding, OCC would not be required to withhold if the non-U.S. Clearing Member has entered into an agreement with the IRS to provide information about its U.S. account holders or if the Clearing Member is a resident of a country that has entered into an IGA and the member complies with its reporting responsibilities under the local legislation implementing the IGA.
Even if OCC's non-U.S. Clearing Members enter into the agreements with the IRS described above (or with respect to FATCA are resident in a country with
Beginning on January 1, 2017, the Final Section 871(m) Regulations would treat OCC as paying dividend equivalents subject to both Chapter 3 Withholding and FATCA Withholding—even though no actual payments are made—when a non-U.S. Clearing Member enters into a listed equity option with an initial delta of .8 or higher. OCC has evaluated its existing systems and services to determine whether and how it may comply with such withholding obligations. As a result of this evaluation, OCC has determined that its existing systems are not capable of effectuating withholding with regard to the transactions processed by OCC. OCC does not have access to the necessary transaction-specific information to determine whether a particular transaction triggers withholding, nor the systems to obtain such information. For example, OCC cannot associate options transactions in a Clearing Member's customer account with any particular customer. Similarly, when an option contract in a Clearing Member's customer account is closed out, OCC cannot determine the specific contract that is closed out when there are multiple identical contracts in the Clearing Member's customer account.
Even if OCC had access to all necessary information, the daily net settlement process in which OCC engages would not permit OCC to effectuate withholding without introducing significant settlement and liquidity risk, particularly since dividend equivalents on listed options do not involve an actual cash payment to the Clearing Member from which amounts could be withheld. OCC nets credits and debits per Clearing Member for daily settlement. Given OCC's netting, effectuating withholding could require OCC in certain circumstances to apply its own funds in order to remit withholding taxes to the IRS whenever the net credit owed to a non-U.S. Clearing Member is less than the withholding tax. In addition, if a non-U.S. Clearing Member has dividend equivalent payments aggregating $50 million, but the member is in a net debit settlement position for that day because of OCC's daily net crediting and debiting, there would be no payment to this Clearing Member from which OCC could withhold. In this example, OCC would likely need to fund the $15 million withholding tax (30% of $50 million) until such time as the Clearing Member could reimburse OCC. Furthermore, the cost of implementing a withholding system for the small number of Clearing Members that are non-U.S. firms (currently eight out of 115 Clearing Members) would be substantial and disproportionate to the related benefit. Since the cost of developing and maintaining a complex withholding system would be passed on to OCC's Clearing Members at large, it would burden both U.S. Clearing Members and non-U.S. Clearing Members that have entered into the requisite agreements with the IRS and are FATCA Compliant.
Section 871(m) requires OCC's U.S. Clearing Members with foreign customers to build and maintain systems in order to carry out their withholding responsibilities under Chapter 3 and Chapter 4 for dividend equivalents in connection with transactions with their foreign customers. Absent the proposed rule change, OCC's non-U.S. Clearing Members could decide not to develop similarly appropriate systems. Such a decision would force OCC to be in a position to comply with withholding obligations on Section 871(m) Transactions under Chapter 3 and Chapter 4 with regard to its non-U.S. Clearing Members, which, as noted above, OCC cannot do based on the way its settlement process and systems work. If such a situation were to theoretically occur, the resulting compliance costs would be shifted from the non-U.S. Clearing Members to OCC, and would cause such costs to be borne indirectly by OCC's U.S. Clearing Members, which already would be bearing their own compliance costs with regard to Section 871(m) Transactions. Moreover, as noted, the non-U.S. Clearing Members are in a better position than OCC to comply with Chapter 3 and Chapter 4 reporting and withholding requirements for Section 871(m) Transactions because they have customer information that OCC lacks. Under the proposed rule change, the costs associated with developing and maintaining the required systems would be moved back to the non-U.S. Clearing Members, who would essentially be placed in the same position as U.S. Clearing Members in terms of having to incur their own U.S. tax compliance costs.
For the reasons explained above, OCC is proposing amendments to its Rules, as described below, to implement prudent, preventive measures that would require all of OCC's non-U.S. Clearing Members to enter into agreements with the IRS under which they assume primary withholding responsibility, to become Qualified Derivatives Dealers, and to be FATCA Compliant, so as to permit OCC to make payments (and deemed payments of dividend equivalents) to such Clearing Members free from U.S. withholding tax. In preparation for the proposed rule change and the implementation of Section 871(m) as applied to listed options, OCC has asked its non-U.S. Clearing Members to provide OCC with tax documentation certifying their tax status for purposes of both FATCA and Chapter 3 Withholding. All of these Clearing Members are Canadian firms and, in response to OCC's request, each of them has provided documentation certifying that it is a Reporting Model 1 FFI under the IGA with Canada, and therefore FATCA Compliant. Each has also certified that for Chapter 3 Withholding purposes, it is a Qualified Intermediary Assuming Primary Withholding Responsibility. None of these Clearing Members are currently Qualified Derivatives Dealers because the IRS has not yet finalized the relevant regulations and the associated agreement that must be entered into with the IRS. The IRS is expected to finalize the regulations and provide the agreement language before January 1, 2017. If the IRS does not take any further action before January 1, 2017, then the regulations will go into effect, as they are currently written, on January 1, 2017. In that case, FFI Clearing Members would become subject to withholding by OCC with respect to Section 871(m) Transactions in which the FFI Clearing Members are acting as a principal (
For the reasons discussed above, OCC is proposing a number of amendments to its By-Laws and Rules designed to require that, as a general requirement for membership, all existing and future Clearing Members that are treated as non-U.S. entities for U.S. federal income tax purposes must enter into appropriate agreements with the IRS and be FATCA Compliant, such that OCC will not be responsible for withholding on dividend equivalents under Section 871(m). Specifically, OCC proposes to amend Article I of its By-Laws to include the following defined terms. The term “FFI Clearing Member” would mean any Clearing Member that is treated as a non-U.S. entity for U.S. federal income tax purposes. The term “Dividend Equivalent” would be defined as having the meaning provided in Section 871(m) of the I.R.C. and related Treasury Regulations and other official interpretations thereof. The term “FATCA” would be defined as meaning: (i) the provisions of Sections 1471 through 1474 of the Internal Revenue Code of 1986, as amended, which were enacted as part of The Foreign Account Tax Compliance Act (or any amendment thereto or successor sections thereof), and related Treasury Regulations and other official interpretations thereof, as in effect from time to time, and (ii) the provisions of any intergovernmental agreement to implement The Foreign Account Tax Compliance Act as in effect from time to time between the United States and the jurisdiction of the FFI Clearing Member's residency. The term “FATCA Compliant” would mean, with respect to an FFI Clearing Member, that such FFI Clearing Member has qualified under such procedures promulgated by the IRS as are in effect from time to time to establish exemption from withholding under FATCA such that OCC will not be required to withhold any amount with respect to any payment or deemed payment to such FFI Clearing Member under FATCA. The term “Qualified Intermediary Assuming Primary Withholding Responsibility” would mean an FFI Clearing Member that has entered into an agreement with the IRS to be a qualified intermediary and to assume primary responsibility for reporting and for collecting and remitting withholding tax under Chapter 3 and Chapter 4 of subtitle A, and Chapter 61 and Section 3406, of the I.R.C. with respect to any income (including Dividend Equivalents) arising from transactions entered into by the Clearing Member with OCC as an intermediary, including transactions entered into on behalf of such Clearing Member's customers. The term “Qualified Derivatives Dealer” would be defined as an FFI Clearing Member that has entered into an agreement with IRS that permits OCC to make Dividend Equivalent payments to such clearing member free from U.S. withholding tax under Chapter 3 and Chapter 4 of subtitle A, and Chapter 61 and Section 3406, of the I.R.C. with respect to transactions entered into by such clearing member with OCC as a principal for such Clearing Member's own account. “Section 871(m) Effective Date” would be defined as meaning January 1, 2017, or, if later, the date on which Section 871(m) and related Treasury Regulations and other official interpretations thereof, first apply to listed options transactions. Finally, “Section 871(m) Implementation Date” would mean December 1, 2016, or, if later, the date that is 30 days before the Section 871(m) Effective Date.
The proposed rule change also would add Section 1(e) to Article V of OCC's By-Laws, which would require any applicant, that if admitted to membership would be an FFI Clearing Member, to be a Qualified Intermediary Assuming Primary Withholding Responsibility and to be FATCA Compliant beginning on the Section 871(m) Implementation Date. In addition, if the applicant intends to trade for its own account, the applicant would be required to be a Qualified Derivatives Dealer.
Furthermore, the proposed rule change would impose additional requirements on FFI Clearing Members. Specifically, proposed Rule 310(d)(1) would prohibit FFI Clearing Members from conducting any transaction or activity through OCC unless the Clearing Member is a Qualified Intermediary Assuming Primary Withholding Responsibility and FATCA Compliant, beginning on the Section 871(m) Effective Date. In addition, FFI Clearing Members would not be permitted to enter into a transaction for their own accounts unless such Clearing Member is a Qualified Derivatives Dealer and such transaction is within the scope of the exemption from withholding tax for Dividend Equivalents paid to Qualified Derivatives Dealers.
Proposed Rule 310(d)(2) would require each FFI Clearing Member to certify annually to OCC, beginning on the Section 871(m) Implementation Date, that it satisfies the above requirements and also to update its certification to OCC (
Additionally, proposed Rule 310(d)(4) would require each FFI Clearing Member to inform OCC promptly if it is not, or has reason to know that it will not be, in compliance with Rule 310(d) within 2 days of knowledge thereof This rule ensures that OCC will be notified in a timely manner in the event that an FFI Clearing Member no longer maintains the appropriate arrangements described above to ensure that all withholding and reporting obligations with respect to Dividend Equivalents under Section 871(m) and Chapter 3 and 4 are being fulfilled.
Finally, proposed Rule 310(d)(5) would require each FFI Clearing Member to indemnify OCC for any loss, liability, or expense sustained by OCC resulting from such member's failure to comply with proposed Rule 310(d). As discussed above, a Dividend Equivalent is deemed to arise if a dividend is paid on the underlying stock while an option is outstanding, even though no corresponding payment is made on the option. Due to the nature of OCC's settlement process, there may be no actual payments to the FFI Clearing Member from which OCC could withhold in order to address a liability or expense incurred by OCC arising from a member's failure to comply with the proposed rules. As a result, if OCC were required to satisfy any liability or expense caused by such member's failure to comply out of OCC's own funds, OCC would look to the FFI
OCC believes the proposed rule change is consistent with Section 17A of the Securities Exchange Act of 1934, as amended (“Act”),
The proposed rule change would implement prudent, preventive measures to protect OCC against the obligation for any such withholding (and any resulting liability) by requiring FFI Clearing Members to enter into certain agreements with the IRS under which the FFI Clearing Member assumes primary withholding responsibilities with respect to transactions that it enters into on behalf of customers (
Moreover, OCC believes that the proposed rule change does not unfairly discriminate among participants in the use of the clearing agency. While the proposed rule change would impose additional requirements and/or restrictions on FFI Clearing Members, the proposed rules are intended to address specific issues and potential risks to OCC arising from those FFI Clearing Members whose membership creates potential withholding obligations for OCC. Additionally, as described above, Section 871(m) will impose similar withholding and reporting obligations on OCC's U.S. Clearing Members with respect to their foreign customers. Once Section 871(m) withholding becomes effective, OCC's U.S. Clearing Members will be subject to similar withholding and reporting requirements under Chapters 3 and 4, and they would need to develop and maintain appropriate systems to effectuate the required withholdings. The proposed rule change by OCC would require OCC's non-U.S. Clearing Members to develop and maintain similar systems to effectuate the necessary U.S. tax withholding.
OCC believes it is appropriate to impose these additional requirements on FFI Clearing Members because providing clearing services for these FFI Clearing Members would subject OCC to the additional withholding obligations discussed above, which do not arise when OCC performs clearing services for its U.S. Clearing Members. In the absence of the proposed rules, OCC would need to be in a position to comply with withholding obligations on Section 871(m) Transactions under Chapter 3 and Chapter 4 with regard to its FFI Clearing Members, which as noted above OCC cannot do based on the way its settlement process and systems work. If such a situation were to theoretically occur, the resulting compliance costs would be shifted from the non-U.S. Clearing Members to OCC, and would cause such costs to be borne indirectly by OCC's U.S. Clearing Members, which already would be bearing their own compliance costs with regard to Section 871(m) Transactions. Since the cost of developing and maintaining a complex withholding system would be passed on to OCC's Clearing Members at large, OCC believes it would be an unfair burden on U.S. Clearing Members, as well as any non-U.S. Clearing Members that have entered into the requisite agreements with the IRS and are FATCA Compliant. Finally, OCC understands that its non-U.S. Clearing Members already have agreed to act as Qualified Intermediaries that accept primary withholding responsibility for Chapter 3 and Chapter 4 purposes more generally, which may limit to some degree the incremental burden they would be required to undertake as Qualified Derivatives Dealers once the Section 871(m) withholding rules take effect. Therefore, OCC believes that the proposed rule change is not unfairly discriminatory among participants in the use of the clearing agency and is therefore consistent with Section 17A(b)(3)(F) of the Act.
Section 17A(b)(3)(I) of the Act requires that the rules of a clearing agency not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
Furthermore, OCC does not believe the proposed rule change would impose a significant burden on competition for FFI Clearing Members as compared to OCC's U.S. Clearing Members. As described above, Section 871(m) imposes similar withholding and reporting obligations on OCC's U.S. Clearing Members with foreign customers. OCC's U.S. Clearing Members also will need to develop and maintain appropriate systems to identify Section 871(m) Transactions and to effectuate the required withholding. The proposed rule change by OCC would impose comparable requirements on OCC's non-U.S. Clearing Members.
The proposed rule change also is narrowly tailored. It addresses the specific issues and potential risks to OCC arising from those firms whose membership creates potential withholding obligations for OCC. The proposed requirements for FFI Clearing Members are designed to eliminate any uncertainty in funds settlement that would arise if OCC were subject to withholding obligations with respect to Dividend Equivalents under Section 871(m). As discussed further above, OCC believes that the proposed rule change is necessary to eliminate potential complications and risk to its clearance and settlement process that would be presented by OCC's potential withholding responsibilities under Chapter 3 and Chapter 4 (and which would be a direct consequence of providing its clearance and settlement services for these FFI Clearing Members). OCC believes the proposed rule change is necessary to promote the prompt and accurate clearance and settlement of securities and derivatives transactions, to assure the safeguarding of securities and funds in the custody or control of OCC or for which it is responsible, and in general, to protect investors and the public interest in accordance with Section 17A(b)(3)(F) of the Act.
OCC does not believe that the ongoing certification and reporting provisions of proposed Rules 310(d)(2)-(4) would have any impact on competition. As a matter of standard practice, Clearing Members are required to inform OCC of material changes in, for example, their formal organization, ownership structure, or financial condition
For the foregoing reasons, OCC believes that the proposed rule change is in the public interest, would be consistent with the requirements of the Act applicable to registered clearing agencies, and would not impose a burden on competition that is unnecessary or inappropriate in furtherance of the purposes of the Act.
Written comments on the proposed rule change were not and are not intended to be solicited with respect to the proposed rule change and none have been received.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.
All submissions should refer to File Number SR-OCC-2016-014 and should be submitted on or before November 22, 2016.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission will hold a closed meeting on Thursday, November 3, 2016 at 2 p.m.
Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present.
The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(7), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matter at the closed meeting.
Commissioner Stein, as duty officer, voted to consider the items listed for the closed meeting in closed session.
The subject matter of the closed meeting will be:
Institution and settlement of injunctive actions;
Institution and settlement of administrative proceedings;
Adjudicatory matters; and
Other matters relating to enforcement proceedings.
At times, changes in Commission priorities require alterations in the scheduling of meeting items.
For further information and to ascertain what, if any, matters have been added, deleted or postponed; please contact Brent J. Fields from the Office of the Secretary at (202) 551-5400.
Securities and Exchange Commission (“Commission”).
Notice of an application for an order pursuant to: (a) Section 6(c) of the Investment Company Act of 1940 (“Act”) granting an exemption from sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint arrangements and transactions. Applicants request an order that would permit certain registered open-end management investment companies to participate in a joint lending and borrowing facility.
Hearing requests should be received by the Commission by 5:30 p.m. on November 21, 2016 and should be accompanied by proof of service on the applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act, hearing requests should state the nature of the writer's interest, any facts bearing upon the desirability of a hearing on the matter, 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.
Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants: 5 Radnor Corporate Center, 100 Matsonford Road, Suite 300, Radnor, PA 19087.
Jessica Shin, Attorney-Adviser, at (202) 551-5921 or David J. Marcinkus, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
The following is a summary of the application. The complete application may be obtained via the Commission's Web site by searching for the file number, or an applicant using the Company name box, at
1. Applicants request an order that would permit the applicants to participate in an interfund lending facility where each Fund could lend money directly to and borrow money directly from other Funds to cover unanticipated cash shortfalls, such as unanticipated redemptions or trade fails.
2. Applicants anticipate that the proposed facility would provide a borrowing Fund with a source of liquidity at a rate lower than the bank borrowing rate at times when the cash position of the Fund is insufficient to meet temporary cash requirements. In addition, Funds making short-term cash loans directly to other Funds would earn interest at a rate higher than they otherwise could obtain from investing their cash in repurchase agreements or certain other short term money market instruments. Thus, applicants assert that the facility would benefit both borrowing and lending Funds.
3. Applicants agree that any order granting the requested relief will be subject to the terms and conditions stated in the application. Among others, the Adviser, through a designated committee, would administer the facility as a disinterested fiduciary as part of its duties under the investment management agreements with the Funds and would receive no additional fee as compensation for its services in connection with the administration of the facility. The facility would be subject to oversight and certain approvals by the Funds' Board, including, among others, approval of the interest rate formula and of the method for allocating loans across Funds, as well as review of the process in place to evaluate the liquidity implications for the Funds. A Fund's aggregate outstanding interfund loans will not exceed 15% of its net assets, and the Fund's loans to any one Fund will not exceed 5% of the lending Fund's net assets.
4. Applicants assert that the facility does not raise the concerns underlying section 12(d)(1) of the Act given that the Funds are part of the same group of investment companies and there will be no duplicative costs or fees to the Funds.
5. Applicants also believe that the limited relief from section 18(f)(1) of the Act that is necessary to implement the facility (because the lending Funds are not banks) is appropriate in light of the conditions and safeguards described in the application and because the Funds would remain subject to the requirement of section 18(f)(1) that all borrowings of a Fund, including combined interfund loans and bank borrowings, have at least 300% asset coverage.
6. Section 6(c) of the Act permits the Commission to exempt any persons or transactions from any provision of the Act if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (b) the proposed transaction is consistent with the policies of each registered investment company involved; and (c) the proposed transaction is consistent with the general purposes of the Act. Rule 17d-1(b) under the Act provides that in passing upon an application filed under the rule, the Commission will consider whether the participation of the registered investment company in a joint enterprise, joint arrangement or profit sharing plan on the basis proposed is consistent with the provisions, policies and purposes of the Act and the extent to which such participation is on a basis different from or less advantageous than that of the other participants.
For the Commission, by the Division of Investment Management, under delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to amend Exchange Rule 11.23, Auctions, to enhance the reopening auction process following a trading halt declared pursuant to the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS under the Act (the “Limit Up-Limit Down Plan” or “Plan”).
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend Exchange Rule 11.23, Auctions, to enhance the reopening auction process following a trading halt declared pursuant to the Limit Up-Limit Down Plan. The Exchange also proposes to amend Rule 11.17, Clearly Erroneous Executions, to exclude executions that are a result of a Halt Auction from being reviewed as clearly erroneous.
The Operating Committee for the Plan, with input from the Advisory Committee to the Plan and staff of the Commission, has identified a number of enhancements to the reopening process following a Trading Pause that will be addressed in a combination of a proposed amendment to the Plan and amendments to the rules of the Primary Listing Exchanges.
The Participants submitted to the Commission a proposal to amend the Plan to provide that a Trading Pause will continue until the Primary Listing Exchange has reopened trading using its established reopening procedures and reports a Reopening Price.
In connection with the proposed Plan amendments, the Participants have agreed on a standardized approach for how the Primary Listing Exchanges should conduct certain aspects of an automated reopening following a Trading Pause. Specifically, because trading centers would not be permitted to resume trading in an NMS Stock until there is a Reopening Price, the Participants believe it is appropriate for the Primary Listing Exchanges to adopt uniform standards for determining whether and when to conduct such automated reopenings, including what price collar thresholds would be applicable to such automated reopenings and how to provide for extensions of when a reopening auction would be conducted. The goal of such changes would be to ensure that all market order interest could be satisfied in an automated reopening auction.
More specifically, the Participants have agreed that if there is an imbalance of market orders, or if the Reopening Price would be outside of specified price collar thresholds, the Trading Pause would be extended an additional five minutes in order to provide additional time to attract offsetting liquidity. If at the end of such extension, market orders still cannot be satisfied within price collar thresholds or if the reopening auction would be priced outside of the applicable price collar thresholds, the Primary Listing Exchange would extend the Trading Pause an additional five minutes. With each such extension, the Participants have agreed that it would be appropriate to widen the price collar threshold on the side of the market on which there is buying or selling pressure.
With respect to price collar thresholds, the Participants have agreed that the reference price for calculating price collar thresholds would be the price of the limit state that preceded the Trading Pause,
Finally, the Participants have agreed that the proposed new procedures for reopening trading following a Trading Pause reduces the potential that an order or orders entered by one or more Members caused such execution to be clearly erroneous. Specifically, the Participants believe that the proposed standardized procedures for reopening trading following a Trading Pause incorporates a methodology that allows for widened collars, which may result in a reopening price away from prior trading prices, but which reopening price would be a result of a measured and transparent process that eliminates the potential that such trade would be considered erroneous.
As a Primary Listing Exchange, the Exchange proposes to amend Rule 11.23(d) to implement the proposed uniform trading practices with respect to reopening a security following a Trading Pause and amend Rule 11.17, Clearly Erroneous Executions, to preclude Members from requesting a review of a Trading Halt Auction as a clearly erroneous execution, as described below.
To effect the proposed enhancements that would be implemented by all Primary Listing Exchanges, the Exchange proposes to incorporate the
After the Initial Extension Period, the Quote-Only Period shall be extended for additional five (5) minute periods should a Halt Auction be unable to be performed due to an Impermissible Price (“Additional Extension Period”) until a Halt Auction occurs. The Exchange shall attempt to conduct a Halt Auction during the course of each Additional Extension Period. The Halt Auction will be cancelled at 3:50 p.m. eastern time, at which time the auction for the security shall be conducted pursuant to the Volatility Closing Auction process under section (e) of Exchange Rule 11.23. Renumbered paragraph (D) of Rule 11.23(d)(2) would also be amended to make clear that the Exchange will notify market participants of the circumstances and length of an extension of the Quote-Only Period as proposed herein.
Under proposed subparagraph (i) to Rule 11.23(d)(2)(C), the Halt Auction Reference Price shall equal the price of the Upper or Lower Price Band that triggered the halt. If the Halt Auction Reference Price is the Lower (Upper) Price Band, the initial lower (upper) Halt Auction Collar shall be five (5) percent less (greater) than the Halt Auction Reference Price, rounded to the nearest minimum price variation and the upper (lower) Halt Auction Collar shall be the Upper (Lower) Price Band. For securities with a Halt Auction Reference Price of $3.00 or less, the initial lower (upper) Halt Auction Collar shall be $0.15 less (greater) than the Halt Auction Reference Price, rounded to the nearest minimum price variation and the upper (lower) Halt Auction Collar shall be the Upper (Lower) Price Band.
Proposed subparagraph (ii) to Rule 11.23(d)(2)(C) would state that at the beginning of the Initial Extension Period, the upper (lower) Halt Auction Collar shall be increased (decreased) by five (5) percent in the direction of the Impermissible Price rounded to the nearest minimum price variation. For securities with a Halt Auction Reference Price of $3.00 or less, the Halt Auction Collar shall be increased (decreased) in $0.15 increments in the direction of Impermissible Price. At the beginning of each Additional Extension Period, the Halt Auction Collar shall be widened by the same amount as the Initial Extension Period.
In addition, the Exchange proposes to amend paragraph (d)(2)(A) of Rule 11.23 regarding the publication of BZX Auction information. Under Rule 11.23(d)(2)(A), coinciding with the beginning of the Quote-Only Period for a security and updated every five seconds thereafter, the Reference Price,
Renumbered paragraph (E) of Rule 11.23(d)(2) describes how the Exchange determines the price of an IPO and Halt Auction and states that orders will be executed at the price that maximizes the number of shares executed in the auction. The Exchange proposes to amend renumbered paragraph (E) of Rule 11.23(d)(2) to separately describe how the price of an IPO and Halt Auction are calculated. As amended, for IPO Auctions for ETPs, orders will continue to be executed at the price level within the Collar Price Range that maximizes the number of shares executed in the auction. For Halt Auctions for ETPs, orders will be executed at the price level within the Halt Auction Collars that maximizes the number of shares executed in the auction.
The Exchange also proposes to add new paragraph (F) under Exchange Rule 11.23(d)(2). Proposed paragraph (F) to Rule 11.23(d)(2) would state if a Trading Pause is triggered by the Exchange or if the Exchange is unable to reopen trading at the end of the Trading Pause due to a systems or technology issue, the Exchange will immediately notify the single plan processor responsible for consolidation of information for the security pursuant to Rule 603 of Regulation NMS under the Securities Exchange Act of 1934.
Lastly, the Exchange proposes to amend Rule 11.17, Clearly Erroneous Executions, to provide that Members may not request a review of a Trading Halt Auction under Rule 11.17(b), which specifies the procedures for a Member to request a review of an execution as clearly erroneous. The Exchange believes that this proposed rule text would implement the proposed standardized trading practice that reopening auctions would not be eligible for review by Members as a clearly erroneous execution.
The Exchange proposes to implement the proposed rule change following the Commission's approval of Amendment No. 12 to the Plan. The Exchange will announce the implementation date via a trading notice to be issued after the Commission's approval of this proposed rule change.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
The Exchange believes the proposed changes would remove impediments to and perfect the mechanism of a free and open market and a national market system, and in general, to protect investors and the public interest, because they are designed, together with the proposed amendments to the Plan, to address the issues experienced on August 24, 2015 by reducing the number of repeat Trading Pauses in a single NMS Stock. The proposed Plan amendments are an essential component to Participants' goal of more standardized processes across Primary Listing Exchanges in reopening trading following a Trading Pause, and facilitates the production of an equilibrium Reopening Price by centralizing the reopening process through the Primary Listing Exchange, which would also improve the accuracy of the reopening Price Bands. The proposed Plan amendments support this initiative by requiring trading centers to wait to resume trading following Trading Pause until there is a Reopening Price.
This proposed rule change further supports this initiative by proposing uniform trading practices for reopening trading following a Trading Pause. The Exchange believes that the proposed standardized approach for how the Primary Listing Exchanges would conduct certain aspects of an automated reopening following a Trading Pause would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide certainty for market participants regarding how a security would reopen following a Trading Pause, regardless of the listing exchange. The Exchange further believes that the proposed changes would remove impediments to and perfect the mechanism of a free and open market and a national market system and protect investors and the public interest because the goal of the proposed changes is to ensure that all Market Order interest could be satisfied in an automated reopening auction while at the same time reducing the potential for multiple Trading Pauses in a single security due to a large order imbalance.
The Exchange further believes that the standardized proposal to extend a Trading Pause an additional five minutes would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide additional time to attract offsetting liquidity. If at the end of such extension, Market Orders still cannot be satisfied within the applicable price collar thresholds or if the reopening auction would be priced outside of the applicable price collar thresholds, the Primary Listing Exchange would extend the Trading Pause an additional five minutes, which the Exchange believes would further protect investors and the public interest by reducing the potential for significant price disparity in post-auction trading, which could otherwise trigger another Trading Pause. With each such extension, the Exchange believes that widening the price collar threshold on the side of the market on which there is buying or selling pressure would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide additional time to attract offsetting interest while at the same time addressing that an imbalance may not be resolved within the prior auction collars.
With respect to price collar thresholds, the Exchange believes that using the price of the limit state that preceded the Trading Pause,
Finally, the Exchange believes that precluding Members from requesting review of a Halt Auction as a clearly erroneous execution would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed new procedures for reopening trading following a Trading Pause would reduce the possibility that an order(s) from a Member caused a Trading Halt Auction be clearly erroneous. Specifically, the Exchange believes that the proposed standardized procedures for reopening trading following a Trading Pause incorporates a methodology that allows for widened collars, which may result in a reopening price away from prior trading prices, but which reopening price would be a result of a measured and transparent process that eliminates the potential that such trade would be considered erroneous.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed rule change is not designed to address any competitive issues, but rather, to achieve the Participants' goal of more standardized processes across Primary Listing Exchanges in reopening trading following a Trading Pause, and facilitates the production of an equilibrium reopening price by centralizing the reopening process through the Primary Listing Exchange, which would also improve the accuracy of the reopening Price Bands. The Exchange believes that the proposed rule change reduces the burden on competition for market participants because it promotes a transparent and consistent process for reopening trading following a Trading Pause regardless of where a security may be listed. The Exchange further believes that the proposed rule change would not impose any burden on competition because they are designed to increase transparency regarding the Exchange's Trading Halt Auction process while at the same time increase the ability for offsetting interest to participate in an auction, which would assist in achieving pricing equilibrium for such an auction.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Rule 4120 to enhance the reopening auction process following a trading halt declared pursuant to the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS under the Act (the “Limit Up-Limit Down Plan” or “Plan”).
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange, together with the Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock Exchange, Inc., the Financial Industry Regulatory Authority, Inc. (“FINRA”), Investors Exchange LLC, National Stock Exchange, Inc., NASDAQ BX, Inc., NASDAQ PHLX LLC, New York Stock Exchange LLC (“NYSE”), NYSE Arca, Inc. (“NYSE Arca”), and NYSE MKT LLC (“NYSE MKT”) (collectively with the Exchange, the “Participants”) are parties to the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS under the Securities Exchange Act of 1934. The Participants initially filed the Plan with the Commission on April 5, 2011, which was published for notice and comment.
By letter dated September 16, 2016, the Participants filed a twelfth amendment to the Plan (“Amendment 12”) to provide that a Trading Pause
In conjunction with filing Amendment 12 to the Plan, each Primary Listing Exchange committed to file rule changes with the Commission under Section 19(b) of the Exchange Act to amend its respective trading practice for automated reopenings following a Trading Pause consistent with a standardized approach agreed to by Participants that would allow for extensions of a Trading Pause if equilibrium cannot be met for a Reopening Price within specified parameters. Accordingly, the Exchange is proposing to adopt changes to its rules, as described below, to implement the reopening procedures agreed upon by the Participants.
As a Primary Listing Exchange, Nasdaq is proposing to amend Rule 4120 to make the following changes: (i) Clarify that the Exchange has an obligation to notify the Processor immediately upon becoming aware that it is unable to reopen trading due to a systems or technology issue; (ii) delete rule text concerning phased implementation of the Plan, which has since been fully implemented; (iii) only resume trading after a Trading Pause initiated by another exchange upon receiving Price Bands from the Processor; (iv) adopt new procedures for reopening securities following a Trading Pause; and (v) amend Rule 11890, Clearly Erroneous Executions, to not allow a member to request a review of an execution arising from a Halt Auction as a clearly erroneous execution.
First, the Operating Committee has proposed in Amendment 12 to the Plan to require the Primary Listing Exchange to notify the Processor immediately upon becoming aware that it is unable to reopen trading due to a systems or technology issue. Pursuant to the proposal, trading centers may not resume trading in an NMS Stock following a Trading Pause without Price Bands in such NMS Stock. Thus, under the proposed Amendment 12, a trading center may resume trading only if there are Price Bands. Moreover, the Participants proposed in Amendment 12 to require that a Trading Pause will not end until the Primary Listing Exchange reports a Reopening Price. The Participants propose in Amendment 12 to allow trading centers to resume trading an NMS Stock in the absence of a Reopening Price only if: (i) The Primary Listing Exchange notifies the Processor that it is unable to reopen trading due to a systems or technology issue
Second, the Exchange is proposing to delete rule text concerning phased implementation of the Plan, which has since been fully implemented. Currently, Rule 4120(a)(12)(G) describes how different Tier NMS Stocks are handled during Phase 1 of the Plan. Given that the Plan is fully implemented, the Exchange is proposing to delete the text under Rule
Third, the Exchange is proposing to adopt the requirement of Amendment 12 of the Plan, as discussed above, to only resume trading after a Trading Pause initiated by another exchange upon receiving Price Bands from the Processor. As noted above, Amendment 12 proposes to prohibit trading centers from resuming trading in an NMS Stock following a Trading Pause without Price Bands in such NMS Stock. The Participants believe that if a Primary Listing Exchange is unable to reopen trading due to a systems or technology issue, trading should be permitted to resume in that NMS Stock.
Fourth, the Exchange is proposing to adopt new procedures for reopening securities following a Trading Pause. Each of the Participants that are Primary Listing Exchanges are adopting uniform processes for reopening NMS Stocks for which they are the Primary Listing Exchange following a Trading Pause. Currently, Rule 4120(a)(12)(H) provides the process by which the Exchange will resume trading after a Trading Pause. Specifically, the rule provides that at the end of a Trading Pause the Exchange shall reopen the security in a manner similar to the procedures set forth in Rule 4753. Rule 4753 provides the Nasdaq Halt Cross process by which a security that is subject to a trading halt is released from the halt to resume trading. Rule 4120(a)(12)(H) further provides that, following a Trading Pause that is triggered at or after 3:50 p.m. a stock shall reopen via a LULD Closing Cross pursuant to Rule 4754(b)(6),
The Exchange is proposing a new process for resuming trading after a Trading Pause under proposed Rule 4120(c)(10) that will provide for an initial auction period and two additional auction periods with widening collars should the security fail to conclude each auction period. For any such security listed on Nasdaq, prior to terminating the pause, there will be a 5-minute “Initial Display Only Period” during which market participants may enter quotations and orders in that security in Nasdaq systems, and during which Nasdaq will establish the “Auction Reference Price.” The Auction Reference Price is determined by, for a Limit Down triggered pause, the Lower Band price of the LULD Band in place at the time the trading pause was triggered; or for a Limit Up triggered pause, the Upper Band price of the LULD Band in place at the time the trading pause was triggered. During the Initial Display Only Period, Nasdaq will also determine the upper and lower “Auction Collar” prices, which are calculated in the following manner:
• For a Limit Down triggered pause, the lower Auction Collar price is derived by subtracting 5% of the Auction Reference Price, rounded to the nearest minimum price increment,
• For a Limit Up triggered pause, the upper Auction Collar price is derived by adding 5% of the Auction Reference Price, rounded to the nearest minimum price increment, or in the case of securities priced $3 or less, $0.15, from the Auction Reference Price, and the lower Auction Collar price is the Lower Band price of the LULD Band in place at the time the trading pause was triggered.
At the conclusion of the Initial Display Only Period, the security will be released for trading unless, at the end of an Initial Display Only Period, Nasdaq detects an order imbalance in the security. In that case, Nasdaq will extend the Display Only Period for an additional 5-minute period (“Extended Display Only Period”), and the Auction Collar prices will be adjusted as follows:
• If the Display Only Period is extended because the calculated price at which the security would be released for trading is below the lower Auction Collar price or all sell market orders would not be executed in the cross, then the new lower Auction Collar price is derived by subtracting 5% of the initial Auction Reference Price, which was rounded to the nearest minimum price increment, or in the case of securities priced $3 or less, $0.15, from the previous lower Auction Collar price, and the upper Auction Collar price will not be changed.
• If the Display Only Period is extended because the calculated price at which the security would be released for trading is above the upper Auction Collar price or all buy market orders would not be executed in the cross, then the new upper Auction Collar price is derived by adding 5% of the initial Auction Reference Price, which was rounded to the nearest minimum price increment, or in the case of securities priced $3 or less, $0.15, to the previous upper Auction Collar price, and the lower Auction Collar price will not be changed.
At the conclusion of the Extended Display Only Period, the security will be released for trading unless, at the end of the Extended Display Only Period, Nasdaq detects an order imbalance in the security. In that case, Nasdaq will further extend the Display Only Period, continuing to adjust the Auction Collar prices every five minutes in the manner described in the bullet above until the security is released for trading. Nasdaq shall release the security for trading at the first point there is no order imbalance.
For purposes of the process under Rule 4120(c)(10), upon completion of the cross calculation an order imbalance shall be established as follows:
• The calculated price at which the security would be released for trading is above (below) the upper (lower) Auction Collar price calculated under paragraphs (A), (B), or (C) of Rule 4120(c)(10); or
• All market orders would not be executed in the cross.
The Exchange is also amending Rule 4120(a)(12)(H) to harmonize rule text concerning Trading Pauses in the last ten minutes of regular trading hours. As noted above, following a Trading Pause that is triggered at or after 3:50 p.m. a stock shall reopen via a LULD Closing Cross pursuant to Rule 4754(b)(6). In Amendment 12, the Participants are adding clarifying text to Section VII(C) stating that the requirement to attempt to execute a closing transaction instead of reopening trading applies to Trading Pauses
The Exchange is proposing to add new Rule 4753(a)(3)(F) to make it clear that, for purposes of the reopening process after a Trading Pause pursuant to Rule 4120(a)(12), the Exchange will disseminate the Auction Reference Price and Auction Collar prices during the reopening process as part of the Order Imbalance Indicator described under Rule 4753(a)(3), which is a message disseminated by electronic means containing information about Eligible Interest
Last, the Participants have agreed that the proposed new procedures for reopening trading following a Trading Pause would eliminate the need to evaluate whether a transaction in such reopening auction would be clearly erroneous. Specifically, the Participants believe that the proposed standardized procedures for reopening trading following a Trading Pause incorporates a methodology that allows for widened collars, which may result in a reopening price away from prior trading prices, but which reopening price would be a result of a measured and transparent process that eliminates the potential that such trade would be considered erroneous. Accordingly, the Exchange proposes to amend Rule 11890 to preclude members from requesting a review of a Halt Auction conducted pursuant to Rule 4120(c)(10) as a clearly erroneous execution.
The Exchange proposes to implement the proposed rule change following the Commission's approval of Amendment 12. The Exchange will announce the implementation date via a notice to be issued after the Commission's approval of this proposed rule change.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange believes the proposed changes would remove impediments to and perfect the mechanism of a free and open market and a national market system, and in general, to protect investors and the public interest, because they are designed, together with the proposed amendments to the Plan, to address the issues experienced on August 24, 2015 by reducing the number of repeat Trading Pauses in a single NMS Stock. The proposed Plan amendments are an essential component to Participants' goal of more standardized processes across Primary Listing Exchanges in reopening trading following a Trading Pause, and facilitates the production of an equilibrium Reopening Price by centralizing the reopening process through the Primary Listing Exchange, which would also improve the accuracy of the reopening Price Bands. The proposed Plan amendments support this initiative by requiring trading centers to wait to resume trading following Trading Pause until there is a Reopening Price.
This proposed rule change further supports this initiative by proposing uniform trading practices for reopening trading following a Trading Pause. The Exchange believes that the proposed standardized approach for how the Primary Listing Exchanges would conduct certain aspects of an automated reopening following a Trading Pause would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide certainty for market participants regarding how a security would reopen following a Trading Pause, regardless of the listing exchange. The Exchange further believes that the proposed changes would remove impediments to and perfect the mechanism of a free and open market and a national market system and protect investors and the public interest because the goal of the proposed changes is to ensure that all market order interest could be satisfied in an automated reopening auction while at the same time reducing the potential for multiple Trading Pauses in a single security due to a large order imbalance.
The Exchange also believes that the standardized proposal to extend a Trading Pause an additional five minutes would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide additional time to attract offsetting liquidity. If at the end of such extension, market orders still cannot be satisfied within price collar thresholds or if the reopening auction would be priced outside of the applicable price collar thresholds, the Primary Listing Exchange would extend the Trading Pause an additional five minutes, which the Exchange believes would further protect investors and the public interest by reducing the potential for significant price disparity in post-auction trading, which could otherwise trigger another Trading Pause. With each such extension, the Exchange believes that widening the price collar threshold on the side of the market on which there is buying or selling pressure would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide additional time to attract offsetting interest while at the same time addressing that an imbalance may not be resolved within the prior auction collars.
With respect to price collar thresholds, the Exchange believes that using the price of the limit state that preceded the Trading Pause,
Finally, the Exchange believes that precluding a member from requesting a review of an execution arising from a Halt Auction as clearly erroneous execution would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed new procedures for reopening trading following a Trading Pause would obviate the need to evaluate whether a transaction in such reopening auction would be clearly erroneous. Specifically, the Exchange believes that the proposed standardized procedures for reopening trading following a Trading Pause incorporates a methodology that allows for widened collars, which may result in a reopening price away from prior trading prices, but which reopening price would be a result of a measured and transparent process that eliminates the potential that such trade would be considered erroneous.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issues, but rather, to achieve the Participants' goal of more standardized processes across Primary Listing Exchanges in reopening trading following a Trading Pause, and facilitates the production of an equilibrium reopening price by centralizing the reopening process through the Primary Listing Exchange, which would also improve the accuracy of the reopening Price Bands. The Exchange believes that the proposed rule change reduces the burden on competition for market participants because it promotes a transparent and consistent process for reopening trading following a Trading Pause regardless of where a security may be listed. The Exchange further believes that the proposed rule change would not impose any burden on competition because it is designed to increase transparency surrounding the Exchange's Trading Halt Auction process while also increasing the ability for offsetting interest to participate in an auction, which would assist in achieving pricing equilibrium in such an auction.
No written comments were either solicited or received.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On September 2, 2016, Fixed Income Clearing Corporation (“FICC”) and National Securities Clearing Corporation (“NSCC,” collectively “Clearing Agencies”) filed with the Securities and Exchange Commission (“Commission”) proposed rule changes SR-FICC-2016-006 and SR-NSCC-2016-004, respectively, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The proposed rule changes provide transparency in the FICC Government Securities Division (“GSD”) Rulebook (“GSD Rules”), the FICC Mortgage-Backed Securities Division (“MBSD”) Clearing Rules (“MBSD Rules”), and the NSCC Rules and Procedures (“NSCC Rules,” collectively “Clearing Agency Rules”)
A Clearing Agency may impose the Backtesting Charge on a Member when the Clearing Agency has observed deficiencies in the backtesting of such Member's Required Deposit over the prior 12-month period, such that the Clearing Agency determines the value-at-risk (“VaR”) margin charge being calculated for that Member may not fully address the projected liquidation losses estimated from that Member's settlement activity.
The Holiday Charge addresses the risk exposure that occurs on certain Holidays
The objective of the Backtesting Charge is to increase Required Deposits for Members that are likely to experience backtesting deficiencies by an amount sufficient to maintain such Member's backtesting coverage above the 99 percent confidence threshold. Because the settlement activity and size of the backtesting deficiencies varies among impacted Members, the Clearing Agencies must assess a Backtesting Charge that is specific to each impacted Member. To do so, the Clearing Agencies examine each impacted Member's historical backtesting deficiencies observed over the prior 12-month period to identify the three largest backtesting deficiencies that have occurred during that time. The presumptive Backtesting Charge amount equals that Member's third largest historical backtesting deficiency, subject to adjustment as further described below. The Clearing Agencies stated in the Notices that they believe that applying an additional margin charge equal to the third largest historical backtesting deficiency to a Member's Required Deposit would bring the Member's historically-observed backtesting coverage above the 99 percent target.
This charge is only applicable to those Members whose overall 12-month trailing backtesting coverage falls below the 99 percent coverage target.
Although the third largest historical backtesting deficiency for a Member is used as the Backtesting Charge in most cases, each Clearing Agency retains discretion to adjust the charge amount based on other circumstances that may be relevant for assessing whether an impacted Member is likely to experience future backtesting deficiencies and the estimated size of such deficiencies. Examples of relevant circumstances that would be considered in calculating the final, applicable Backtesting Charge amount include material differences in the three largest backtesting deficiencies observed over the prior 12-month period, variability in the net settlement activity after the collection of the Member's Required Deposit, seasonality in observed backtesting deficiencies and observed market price volatility in excess of the Member's historical VaR charge. Based on the Clearing Agencies' assessment of the impact of these circumstances on the likelihood of, and estimated size of, future backtesting deficiencies for a Member, the Clearing Agencies may, in their discretion, adjust the Backtesting Charge for such Member in an amount that the Clearing Agencies determine to be more appropriate for maintaining such Member's backtesting results above the 99 percent coverage threshold (including a reasonable buffer).
If the Clearing Agencies determine that a Backtesting Charge should apply to a Member that was not assessed a Backtesting Charge during the immediately preceding month or that the Backtesting Charge applied to a Member during the previous month should be increased, the Clearing Agencies will notify the Member on or around the 25th calendar day of the month prior to the assessment of the Backtesting Charge, or prior to the increase to the Backtesting Charge.
Each Clearing Agency imposes the Backtesting Charge as an additional charge applied to each impacted Member's Required Deposit on a daily basis for a one month period, and reviews each applied Backtesting Charge each month. If an impacted Member's trailing 12-month backtesting coverage exceeds 99 percent (without taking into account historically-imposed Backtesting Charges), the Backtesting Charge is removed.
As described above, the Clearing Agencies determine their Members' Required Deposit amounts in each Clearing Agency using a risk-based margin methodology that is intended to capture market price risk, assuming that a portfolio would take three days to liquidate or hedge in normal market conditions.
The Holiday Charge may be applied on the business day prior to any Holiday. This charge approximates the exposure that a Member's trading activity on the applicable Holiday could pose to the Clearing Agency. Because the Clearing Agencies cannot collect margin on the Holiday, the Holiday Charge is due on the business day prior to the applicable Holiday.
Each Clearing Agency would determine the appropriate methodology for calculating the Holiday Charge in advance of each applicable Holiday. Potential methodologies for calculating the Holiday Charge include, for example, time scaling of the VaR charge
Members would be notified of the applicable methodology by an Important Notice issued no later than 10 business days prior to the application the Holiday Charge, and the charge is collected on the business day prior to the applicable Holiday. The Holiday Charge is removed from the Required Deposit on the business day following the Holiday.
Section 19(b)(2)(C) of the Act
Section 17A(b)(3)(F) of the Act requires, in part, that the rules of a clearing agency be designed to assure the safeguarding of securities and funds that are within the custody or control of the clearing agency.
Rule 17Ad-22(b)(1) under the Act requires a clearing agency to establish, implement, maintain and enforce written policies and procedures reasonably designed to measure its credit exposures to its participants at least once a day and limit its exposures to potential losses from defaults by its participants under normal market conditions, so that the operations of the clearing agency would not be disrupted and non-defaulting participants would not be exposed to losses that they cannot anticipate or control.
Rule 17Ad-22(b)(2) under the Act requires a clearing agency to maintain and enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions.
On the basis of the foregoing, the Commission finds that the proposals are consistent with the requirements of the Act and in particular with the requirements of Section 17A of the Act
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that proposed rule changes SR-FICC-2016-006 and SR-NSCC-2016-004 be, and hereby are, APPROVED.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend the MIAX Options Fee Schedule (the “Fee Schedule”).
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend its Fee Schedule to adopt fees and credits for transactions involving complex orders. The Securities and Exchange Commission (“SEC” or “Commission”) recently approved Exchange rules
Section (1)(a)(i) of the Fee Schedule sets forth the Exchange's Market Maker Sliding Scale for Market Maker Transaction Fees (the “Sliding Scale”). The Sliding Scale assesses a per contract transaction fee on a Market Maker
The Exchange is proposing to use the same Sliding Scale structure to establish per contract transaction fees for executions in complex orders. More specifically, the Exchange is proposing to use the same tiers and percentage thresholds that it uses for the execution of simple orders for the execution of complex orders and quotes (collectively, “complex orders”), and will aggregate the volume executed by Market Makers in both simple orders and complex orders for purposes of determining the applicable tier and corresponding per contract transaction fee amount.
Since the Exchange will aggregate the number of contracts executed in both simple orders and complex orders in its calculation of the Market Maker's relevant tier, Market Maker transaction fees in both simple orders and complex orders will be incrementally reduced once the Market Maker reaches a higher tier. The Exchange believes that aggregating simple and complex volume will provide a direct benefit to Market Makers, because it provides Market Makers with enhanced potential to lower their incremental transaction fees on the Exchange. Furthermore, it should encourage Market Makers to provide complex order liquidity on the Exchange because their executed volume in complex orders will enhance their ability to achieve discounted transaction fees in simple orders.
Since the Exchange provides discounted transaction fees for Members and their qualified Affiliates that achieve certain volume thresholds through the submission of Priority Customer
The proposed Market Maker transaction fees are generally in line with the Market Maker transaction fees charged by other exchanges for executing complex orders.
For simple orders, the Sliding Scale assesses a per contract transaction fee, which is based upon whether the Market Maker is a “maker” or a “taker.”
All fees assessed under the Sliding Scale will be assessed on a per contract/per side basis. The fees will apply to complex orders when those complex orders are matched against other complex orders on the Strategy Book, and will also apply, to the complex side of the trade, when they leg into and match against simple orders in the simple order book. Additionally, for the avoidance of doubt, when legging into the simple order book, the contracts that were entered directly in to the simple order book will be subject to all standard transaction fees, marketing fees, rebates, and credits, as set forth in the Exchange's Fee Schedule and as applicable to simple orders.
The revised Market Maker Sliding Scale tables proposed by the Exchange will be as follows (with new text in italics):
Section (1)(a)(ii) of the Fee Schedule sets forth, in a single table format, transaction fees for Other Market Participants, including Priority Customers, Public Customers
The Exchange is proposing to use the same Fee Table structure to establish per contract transaction fees for executions in complex orders. The Exchange is also proposing to assess the same per-contract transaction fee amounts that are set forth in the Fee Table for execution of simple orders for the execution of complex orders. Thus, as proposed, a participant would be charged the same fee per contract for executing a complex order as it would for executing a simple order for the same option class for the same participant type. Accordingly, the Exchange would charge a Member: $0.00 per contract per complex order executed in both penny option classes and non-penny option classes for a Priority Customer; $0.47 per contract per complex order executed in a penny option class for a Public Customer that is not a Priority Customer, for a non-MIAX Market Maker, and for a non-Member Broker-Dealer (and $0.75 per contract per complex order executed in a non-penny option class for each of those participant types); $0.45 per contract per complex order executed in a penny option class for a Firm (and $0.75 per contract per complex order executed in a non-penny option class for a Firm). The Exchange believes that the proposed fees for complex orders are reasonable and appropriate because they apply to all similarly situated participants equally. The Exchange's proposal to assess the same fees for simple and complex orders to other market participants (listed in Section (1)(a)(ii) of the Fee Schedule) for complex orders is reasonable and not unfairly discriminatory because the fees apply equally to all similarly situated market participants. Just as with the current fees assessed for simple orders in Section (1)(a)(ii), the PCRP tier discounts will not apply to these participants because Market Makers, who qualify for the discounts, have quoting and other obligations that these other market participants do not have, and the Exchange believes that the PCRP tier discounts are thus equitable and not unfairly discriminatory.
The Exchange also proposes to assess the same $0.08 per contract surcharge that it assesses on Market Makers for removing liquidity against a resting Priority Customer on the Strategy Book on other market participants, specifically: (i) Public Customers that are not Priority Customers; (ii) non-MIAX Market Makers; (iii) non-Member Broker-Dealers; and (iv) Firms. The purpose of this proposed surcharge is to encourage Members to add liquidity to the Strategy Book, and to recoup costs associated with the execution of complex orders on the Strategy Book. Moreover, the Exchange believes that the proposed fee structure may also narrow the MIAX Bid and Offer (“MBBO”) on the Strategy Book because assessing the surcharge only on participants removing liquidity effectively subsidizes, and thus encourages, the posting of liquidity. The Exchange believes that this fee structure will also provide MIAX Market Makers with greater incentive to either match or improve upon the best price displayed on the Strategy Book, all to the benefit of investors and the public in the form of improved execution prices.
The revised Fee Table proposed by the Exchange will be as follows:
The Exchange currently offers a discount to the standard option transaction fees for simple orders for Members that qualify for the PCRP volume Tier 3 or higher. The Exchange is not proposing to offer that discount to the standard option transaction fees for complex orders. Thus, the Exchange is proposing to amend Footnotes 4, 5, and 8-13 in Section (1)(a)(ii) of the Fee Schedule to explicitly state that these discounts only apply for standard options in simple order executions. Additionally, pursuant to Footnote 8 of the Fee Schedule, the Exchange currently assesses Members a $0.48 per contract transaction fee (and a $0.50 per contract transaction fee for non-MIAX market makers) for transactions that occur on or after September 1, 2016 and extending through October 31, 2016 in options overlying EEM, GLD, IWM, QQQ, and SPY. The Exchange is not proposing to apply that transaction fee to complex orders. Thus, the Exchange is proposing to further amend Footnote 8 in Section (1)(a)(ii) of the Fee Schedule to explicitly state that such fees only apply for standard options in simple order executions.
The Exchange also proposes to amend the PCRP contained in Section 1)a)iii) of the Fee Schedule by adopting per contract credits for complex orders. Currently, with respect to simple orders, the Exchange credits each Member the per contract amount set forth in the table below resulting from each Priority Customer order transmitted by that Member which is executed electronically on the Exchange in all multiply-listed option classes (excluding QCC Orders, mini-options, Priority Customer-to-Priority Customer Orders, PRIME AOC Responses, PRIME Contra-side Orders, PRIME Orders for which both the Agency and Contra-side Order are Priority Customers, and executions related to contracts that are routed to one or more exchanges in connection with the Options Order Protection and Locked/Crossed Market Plan referenced in MIAX Rule 1400), provided the Member meets certain volume thresholds in a month as described below. The volume thresholds are calculated based on the customer average daily volume over the course of the month. Volume is recorded for and credits are delivered to the Member that submits the order to the Exchange. The Exchange proposes to extend this per contract credit to executions in complex orders.
The Exchange proposes to apply the same volume tier thresholds in the PCRP for complex orders that it
The Exchange proposes to distinguish the amount of the proposed per contract credits in the PCRP for complex orders from the credits currently available to simple orders, except for Tier 1 transactions, for which there would be a $0.00 per contract credit for both simple and complex orders. The proposed per contract credits for complex orders would be: $0.21 for PCRP Tier 2 transactions; $0.24 for PCRP Tier 3 transactions, and $0.25 for PCRP Tier 4 transactions, respectively. The proposed per contract credits for complex orders are greater than the current per contract credits for simple orders. As a new entrant in the complex order marketplace, the Exchange believes that it is appropriate to establish aggressive per contract credits in order to attract order flow in this new segment of the Exchange.
For simple orders, the Exchange currently assesses different PCRP credit amounts for executions in the MIAX Select Symbols
The Exchange is not proposing to establish at this time a price improvement mechanism for complex orders, such as the Exchange has for simple orders, known as MIAX PRIME.
The Exchange currently credits each MIAX “Qualifying Member”
The revised PCRP table proposed by the Exchange will be as follows:
Under the Professional Rebate Program (“PRP”), the Exchange credits each Member the per contract amount listed in the table below resulting from any contracts executed from an order submitted by a Member for the account(s) of a (i) Public Customer that is not a Priority Customer; (ii) non-MIAX Market Maker; (iii) non-Member Broker-Dealer; or (iv) Firm (for purposes of the Professional Rebate Program, “Professionals”). The Exchange proposes to amend Section 1)a)iv) of the Fee Schedule to include per contract credits for complex orders in the Exchange's PRP.
The PRP affords a per contract credit based upon the increase in the total volume submitted by a Member and executed for the account(s) of a Professional on MIAX (not including Excluded Contracts)
The revised PRP table proposed by the Exchange will be as follows:
Section 1)b) of the Fee Schedule describes Marketing Fees assessed on all Market Makers for contracts, including mini options, they execute in their assigned classes when the contra-party to the execution is a Priority Customer. The current Marketing Fees are: (i) $0.70 Per contract for transactions in standard option classes ($0.070 per contract for transactions in mini options) that are not penny option classes; and (ii) $0.25 per contract for transactions in standard option classes ($0.025 per contract for transactions in mini options) that are penny option classes. The Exchange proposes to amend Section 1)b) to state that the Marketing Fee applies to contracts in simple and complex order executions, and that the Marketing Fee in complex order executions will be assessed per contract whether the transaction executes in the Strategy Book, a Complex Auction, or by Legging into the simple order book (
The Exchange is not proposing to extend the Posted Liquidity Marketing Fee to contracts executed from complex orders. Currently, for transactions that occur on or after September 1, 2016 and extending through October 31, 2016, MIAX assesses an additional $0.12 per contract Posted Liquidity Marketing Fee to all Market Makers for any standard options overlying EEM, GLD, IWM, QQQ and SPY that Market Makers execute in their assigned class when the contra-party to the execution is a Priority Customer and the Priority Customer order was posted on the MIAX order book at the time of the execution. The Exchange proposes to amend Section 1)b) to state that the Posted Liquidity Marketing Fee applies only to contracts from simple order executions. The revised Marketing Fee table proposed by the Exchange will be as follows:
All other
MIAX believes that its proposed rule change is consistent with Section 6(b) of the Act
The proposed fee structure is equitable and not unfairly discriminatory because all similarly situated market participants are subject to the same fee and rebate structure for complex order transactions, and access to the Exchange is offered on terms that are not unfairly discriminatory. The inclusion of the number of contracts executed in both simple and complex orders in the calculation of the Market Maker's monthly percentage threshold in Section 1)a)i) is reasonable, equitable and not unfairly discriminatory because it provides a direct and equal fee benefit to Market Makers that trade complex orders. All complex order volume executed will count towards the monthly percentage thresholds required to receive the enumerated discounts in both simple and complex transactions, thus benefiting all Market Makers equally. Furthermore, it should encourage Market Makers to provide liquidity in complex orders on the Exchange because their executed volume in complex orders will enhance their ability to achieve discounted per contract transaction fees in transactions involving both simple and complex orders, thus functioning to remove impediments to and perfect the mechanisms of a free and open market and a national market system.
The Exchange's proposal to assess per contract transaction fees to MIAX Market Makers for complex orders in penny option classes and non-penny option classes is reasonable and not unfairly discriminatory because it enhances the ability of Market Makers to achieve volume levels that qualify them for fees in the higher tiers, and equally rewards all Market Makers that achieve the tiers that include even further discounted per contract transaction fees. The amount of the fees in the tiers for complex orders are very similar to the amount of the fees in the tiers for simple orders, therefore the Exchange believes that fee amounts are reasonable and appropriate.
The Exchange's proposal to assess the same fees for simple and complex orders to other market participants (listed in Section 1)a)ii of the Fee Schedule) for complex orders is reasonable and not unfairly discriminatory because the fees apply equally to all similarly situated market participants. Just as with the current fees assessed for simple orders in Section 1)a)ii, the PCRP tier discounts will not apply to these participants because Market Makers, who qualify for the discounts, have quoting and other obligations that the listed other market participants do not have and the Exchange believes that the PCRP tier discounts are thus equitable and not unfairly discriminatory.
The Exchange believes that it is reasonable and not unfairly discriminatory to offer discounted fees to Market Makers in simple orders if they fall within PCRP volume Tier 3 or higher, while not discounting the per contract fees for complex orders regardless of their PCRP Tier level. While the Exchange has the ability to justify and determine the level of incentives with respect to simple orders, the Exchange believes it would be premature to offer additional incentives and rewards to Market Makers above what the Exchange is offering until Market Makers actually use the new and value-added complex order functionality. The Exchange will better be able to determine if additional incentives or rewards are warranted, and if so at what level, once Market Makers begin using the new functionality and have established a performance baseline for complex orders.
The Exchange's proposal to offer certain credits for complex order transactions under the PCRP and the PRP and to include contracts executed from both simple and complex transactions in the calculation of the various percentage volume thresholds is intended to encourage participants to submit more orders to the Exchange, thus enhancing liquidity and removing impediments to and perfecting the mechanisms of a free and open market and a national market system.
The Exchange notes that the proposed per contract credits for the PCRP are higher for complex orders than they are for simple orders, and the per contract credits for the PRP are lower for complex orders than they are for simple orders. The Exchange believes that this is equitable and reasonable because the nature of the two rebate programs (PCRP and PRP) is fundamentally different in structure and purpose.
On the one hand, the PCRP rewards executed Priority Customer volume from “contract-one.”
On the other hand, the PRP credit is aimed at Professional volume executed on the Exchange on an incremental basis. The PRP credit is based on a volume increase above and beyond an established baseline. Because the trading of complex orders on the Exchange represents new functionality and new volume to the Exchange, all complex order volume executed on the Exchange is by its nature incremental. As such, the Exchange believes it is not necessary to provide rewards at the same level to Professional complex orders that it provides for Professional simple orders.
The Exchange's proposal to establish and assess a surcharge of $0.08 per contract for Market Makers and other participants for removing liquidity by trading against a Priority Customer order on the Strategy Book is consistent with Section 6(b)(4) of the Act
The Exchange's proposal to assess the $.08 surcharge is also consistent with Section 6(b)(5) of the Act
Non-Priority Customers, non-MIAX Market Makers, broker-dealers and Firms that use sophisticated trading systems will be able to remove liquidity quickly from the Strategy Book, and thus the Exchange believes that assessing the surcharge to participants who remove liquidity, and not assessing the surcharge to participants with complex orders resting on the Strategy Book is reasonable and not unfairly discriminatory. Moreover, the proposed surcharge is substantially similar to the surcharge on CBOE,
The proposed assessment of the Marketing Fee for all complex order transactions that are executed by a Market Maker in their assigned classes when the contra-party to the trade is a Priority Customer is equitable and not unfairly discriminatory because the fee will apply equally to all Market Makers in their assigned classes. Further, the assessment of a Marketing Fee for complex transactions is a common practice of other exchanges.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed fee structure for complex order transactions is intended to promote narrower spreads and greater liquidity at the best prices. The fee-based incentives for market participants to provide liquidity by submitting complex orders to the Exchange, and thereafter to improve the MBBO to ensure participation, should enable the Exchange to attract order flow and compete with other exchanges which also provide such incentives to their market participants for similar transactions.
The Exchange believes that increased complex order flow will bring greater volume and liquidity which in turn benefits all market participants by providing more trading opportunities and tighter spreads. Therefore, any potential effects that the adoption of the complex transaction fees may have on intra-market competition are justifiable due to the reasons stated above.
The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and to attract order flow. The Exchange believes that the proposed rule changes reflect this competitive environment because they modify the Exchange's fees in a manner that encourages market participants to provide liquidity and to send order flow to the Exchange.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
60-day notice and request for comments.
The Small Business Administration (SBA) intends to request approval, from the Office of Management and Budget (OMB) for the collection of information described below. The Paperwork Reduction Act (PRA) of 1995, 44 U.S.C. Chapter 35 requires federal agencies to publish a notice in the
Submit comments on or before January 3, 2017.
Send all comments to Mary Frias, Loan Specialist, Office of Financial Assistance, Small Business Administration, 409 3rd Street, 8th Floor, Washington, DC 20416.
Mary Frias, Loan Specialist, Office of Financial Assistance,
SBA regulations at 13 CFR, Section 120.830 requires CDCs to submit an annual report which contains financial statements, operational and management information. This information is used by SBA's district offices, Office of Credit Risk Management, and Office of Financial Assistance to obtain information from the CDCs that is used to evaluate whether CDCs are operating according to the statutes, regulations and policies governing the CDC loan program (504 program).
SBA is requesting comments on (a) Whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information.
U.S. Small Business Administration.
Notice.
This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of GEORGIA (FEMA-4284-DR), dated 10/20/2016.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
Notice is hereby given that as a result of the President's major disaster declaration on 10/20/2016, Private Non-Profit organizations that provide essential services of governmental nature may file disaster loan applications at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
Brantley; Bryan; Bulloch; Camden; Candler; Chatham; Effingham; Emanuel; Evans; Glynn; Jenkins; Liberty; Long; Mcintosh; Pierce; Screven; Tattnall; Toombs; Wayne
The Interest Rates are:
The number assigned to this disaster for physical damage is 149348 and for economic injury is 149358
U.S. Small Business Administration
Amendment 1.
This is an amendment of the Administrative declaration of a disaster for the State of California dated 09/06/2016.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
The notice of the Administrative disaster declaration for the State of California, dated 09/06/2016 is hereby amended to establish the incident period for this disaster as beginning 07/22/2016 and continuing through 10/12/2016.
All other information in the original declaration remains unchanged.
60 Day notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the Small Business Administration's intentions to request approval on a new and/or currently approved information collection.
Submit comments on or before January 3, 2017.
Send all comments regarding whether this information collection is necessary for the proper performance of the function of the agency, whether the burden estimates are accurate, and if there are ways to minimize the estimated burden and enhance the quality of the collection, to Kirk McElwain, Director, Office of Communications, Small Business Administration, 409 3rd Street SW., 7th Floor, Washington, DC 20416.
SBA.Direct is an optional feature of SBA.gov that helps bring customized, relevant SBA.gov information directly to the user which will help site visitors, including small business owners, the ability to quickly and efficiently locate content on
SBA is requesting comments on (a) Whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information.
U.S. Small Business Administration.
Notice.
This is a notice of an Economic Injury Disaster Loan (EIDL) declaration for the State of Washington, dated 10/24/2016.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
Notice is hereby given that as a result of the Administrator's EIDL declaration, applications for economic injury disaster loans may be filed at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for economic injury is 149310.
The State which received an EIDL Declaration # is Washington.
60-day notice and request for comments.
The Small Business Administration (SBA) intends to request approval, from the Office of Management and Budget (OMB) for the collection of information described below. The Paperwork Reduction Act (PRA) of 1995, 44 U.S.C. Chapter 35 requires federal agencies to publish a notice in the
Submit comments on or before January 3, 2017.
Send all comments to Mary Frias, Loan Specialist, Office of Financial Assistance, Small Business Administration, 409 3rd Street, 8th Floor, Washington, DC 20416.
Mary Frias, Loan Specialist, 202-401-8234,
Section 7(a) of the Small Business Act authorizes the Small Business Administration to guaranty loans in each of the 7(a) Programs. The regulations covering these and other loan programs at 13 CFR part 120 require certain information from loan applicants and lenders that is used to determine program eligibility and compliance.
SBA is requesting comments on (a) Whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information.
U.S. Small Business Administration.
Notice.
This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of FLORIDA (FEMA-4283-DR), dated 10/24/2016.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
Notice is hereby given that as a result of the President's major disaster declaration on 10/24/2016, Private Non-Profit organizations that provide essential services of governmental nature may file disaster loan applications at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 149368 and for economic injury is 149378
U.S. Small Business Administration.
Amendment 2.
This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of Florida (FEMA-4280-DR), dated 09/28/2016.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of Florida, dated 09/28/2016, is hereby amended to include the following areas as adversely affected by the disaster.
All other information in the original declaration remains unchanged.
60 day notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the Small Business Administration's intentions to request approval on a new and/or currently approved information collection.
Submit comments on or before January 3, 2017.
Send all comments regarding whether this information collection is necessary for the proper performance of the function of the agency, whether the burden estimates are accurate, and if there are ways to minimize the estimated burden and enhance the quality of the collections, to Louis Cupp, New Markets Policy Analyst, Office of Investment and Innovation, Small Business
Louis Cupp, New Markets Policy Analyst, 202-619-0511
Reporting and recordkeeping requirements, Investment companies, Finance, Business/Industry, Small Business. Conduct standards.
SBA is requesting comments on (a) Whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information.
U.S. Small Business Administration.
Notice.
This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of Wisconsin (FEMA-4288-DR), dated 10/20/2016.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
Notice is hereby given that as a result of the President's major disaster declaration on 10/20/2016, Private Non-Profit organizations that provide essential services of governmental nature may file disaster loan applications at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 14932B and for economic injury is 14933B.
Tennessee Valley Authority.
Notice of intent.
The Tennessee Valley Authority (TVA) intends to prepare an environmental impact statement (EIS) to address the potential environmental effects associated with ceasing operations at the special waste landfill and Ash Pond 2 and constructing, operating, and maintaining a new dry coal combustion residual (CCR) landfill at the Shawnee Fossil Plant (SHF) located near Paducah, Kentucky in McCracken County. The purpose of the proposed project is to foster TVA's compliance with present and future regulatory requirements related to CCR production and management, including the requirements of EPA's CCR Rule and Effluent Limitations Guidelines Rule.
In the environmental review, TVA will evaluate the potential environmental impacts of closure of the special waste landfill and Ash Pond 2 as well as the construction, operation, and maintenance of an onsite dry CCR landfill or disposal of CCR in an existing offsite permitted landfill. TVA will develop and evaluate various alternatives, including the No Action Alternative, in the EIS. Public comments are invited concerning both the scope of the review and environmental issues that should be addressed.
To ensure consideration, comments on the scope and environmental issues must be postmarked, emailed or submitted online no later than December 1, 2016.
Written comments should be sent to Ashley Pilakowski, NEPA Compliance Specialist, 400 West Summit Hill Dr., WT 11D, Knoxville, TN 37902-1499. Comments may also be submitted online at:
Ashley Pilakowski, 865-632-2256.
This notice of intent is provided in accordance with the Council on Environmental Quality's regulations (40 CFR parts 1500-1508) and TVA's procedures implementing the National Environmental Policy Act (NEPA).
TVA is a corporate agency of the United States that provides electricity for business customers and local power distributors serving more than 9 million people in parts of seven southeastern states. TVA receives no taxpayer funding, deriving virtually all of its revenues from sales of electricity. In addition to operating and investing its revenues in its electric system, TVA provides flood control, navigation and land management for the Tennessee River system and assists local power companies and state and local governments with economic development and job creation.
Historically, TVA has managed its CCRs in wet impoundments or dry landfills. Currently, SHF consumes an
In July 2009, the TVA Board of Directors passed a resolution for staff to review TVA practices for storing CCRs at its generating facilities, including SHF, which resulted in a recommendation to convert the wet ash management system at SHF to a dry storage system. On April 17, 2015, the U.S. Environmental Protection Agency (EPA) published the final Disposal of CCRs from Electric Utilities rule.
In June of 2016, TVA issued a Final Programmatic Environmental Impact Statement (PEIS) that analyzed methods for closing impoundments that hold CCR materials at TVA fossil plants and identified specific screening and evaluation factors to help frame its evaluation of closures at additional facilities. A Record of Decision was released in July of 2016 that would allow future environmental reviews of CCR impoundment closures to tier from the PEIS.
This EIS is intended to tier from the 2016 PEIS to evaluate the closure alternatives for the existing CCR Ash Pond 2 impoundment and additionally analyze the impacts of the closure of the existing special waste landfill, and construction, operation, and maintenance of a new on-site special waste landfill to accommodate future dry CCR disposal actions. This project supports TVA's goal to eliminate all wet CCR storage at SHF.
In addition to a No Action Alternative, this EIS will address alternatives that have reasonable prospects of providing a solution to the management and disposal of dry CCRs generated at SHF. TVA has determined that either the construction of a new CCR storage area or hauling CCR to an existing permitted landfill are the most reasonable alternatives to address the need for additional dry CCR disposal. TVA will consider closure alternatives for Ash Pond 2 in accordance with and consistent with TVA's PEIS and EPA's CCR Rule. TVA will also consider closure alternatives for the existing special waste landfill in accordance with EPA's CCR Rule.
No decision has been made about CCR management at SHF beyond the current operations and available onsite capacity. TVA is preparing this EIS to inform decision makers, other agencies and the public about the potential for environmental impacts associated with the decision on how to manage CCR generated at SHF.
This EIS will contain descriptions of the existing environmental and socioeconomic resources within the area that could be affected by the closure of the special waste landfill and Ash Pond 2 and by the construction, operation and maintenance of a new dry CCR landfill or disposal of CCR at an offsite landfill. Evaluation of potential environmental impacts to these resources will include, but not be limited to, the potential impacts on water quality, aquatic and terrestrial ecology, threatened and endangered species, wetlands, land use, historic and archaeological resources, solid and hazardous waste, safety, socioeconomic resources and environmental justice. The need and purpose of the project will be described. The range of issues to be addressed in the environmental review will be determined, in part, from scoping comments. The preliminary identification of reasonable alternatives and environmental issues in this notice is not meant to be exhaustive or final.
TVA is interested in an open process and wants to hear from the community, interested agencies and special interest groups about the scope of issues they would like to see addressed in this EIS.
The public is invited to submit comments on the scope of this EIS no later than the date identified in the “Dates” section of this notice. Federal, state and local agencies such as the U.S. Army Corps of Engineers, U.S. Fish and Wildlife Service, Kentucky Department of Environmental Protection, and the Kentucky State Historic Preservation Officer also are invited to provide comments. After consideration of scoping comments, TVA will post a summary of them and identify the issues and alternatives to be addressed in the EIS and the study's schedule.
The Draft EIS will be made available for public comment. In making its final decision, TVA will consider the analyses in this EIS and substantive comments that it receives. A final decision on proceeding with pond closure, existing landfill closure, and construction, operation, and maintenance of a new landfill will depend on a number of factors. These include requirements of the CCR Rule, the results of the EIS, engineering and risk evaluations, and financial considerations.
TVA anticipates holding a community meeting near the plant after releasing the Draft EIS. Meeting details will be posted on TVA's Web site. TVA expects to release the Draft EIS in summer of 2017.
Federal Aviation Administration (FAA), DOT.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FAA invites public comments about our intention to request the Office of Management and Budget (OMB) approval to renew a previously approved information collection. The requested information is included in air carriers applications for insurance when insurance is not available from private sources.
Written comments should be submitted by January 3, 2017.
Send comments to the FAA at the following address: Ronda Thompson, Federal Aviation Administration, ASP-110, 800 Independence Ave. SW., Washington, DC 20591.
You are asked to comment on any aspect of this information collection, including (a) Whether the proposed collection of information is necessary for FAA's performance; (b) the accuracy of the estimated burden; (c) ways for FAA to enhance the quality, utility and clarity of the information collection; and (d) ways that the burden could be minimized without reducing the quality of the collected information. The agency will summarize and/or include your comments in the request for OMB's clearance of this information collection.
Ronda Thompson by email at:
OMB Control Number: 2120-0514.
Federal Aviation Administration (FAA), DOT.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FAA invites public comments about our intention to request the Office of Management and Budget (OMB) approval to renew a previously approved information collection. Information is maintained by owners and operators of light-sport aircraft and is collected to be used by FAA safety inspectors in determining whether required maintenance actions have been accomplished on light-sport aircraft. The information is also used when investigating accidents.
Written comments should be submitted by January 3, 2017.
Send comments to the FAA at the following address: Ronda Thompson, Federal Aviation Administration, ASP-110, 800 Independence Ave. SW., Washington, DC 20591.
You are asked to comment on any aspect of this information collection, including (a) Whether the proposed collection of information is necessary for FAA's performance; (b) the accuracy of the estimated burden; (c) ways for FAA to enhance the quality, utility and clarity of the information collection; and (d) ways that the burden could be minimized without reducing the quality of the collected information. The agency will summarize and/or include your comments in the request for OMB's clearance of this information collection.
Ronda Thompson by email at:
Federal Aviation Administration (FAA), DOT.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FAA invites public comments about our intention to request the Office of Management and Budget (OMB) approval to renew an information collection. Information is collected to determine program compliance or non-compliance of regulated aviation employers, oversight planning, to determine who must provide annual Management Information System testing information, and to communicate with entities subject to the program regulations.
Written comments should be submitted by December 1, 2016.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the attention of the Desk Officer, Department of Transportation/FAA, and sent via electronic mail to
Ronda Thompson by email at:
Federal Highway Administration (FHWA), U.S. Department of Transportation (DOT).
Notice of proposed MOU and request for comments.
This notice announces that FHWA has received and reviewed an application from the Florida Department of Transportation (FDOT) requesting participation in the Surface Transportation Project Delivery Program (Program). This Program allows for FHWA to assign, and States to assume, responsibilities under the National Environmental Policy Act of 1969 (NEPA), and all or part of FHWA's responsibilities for environmental review, consultation, or other actions required under any Federal environmental law with respect to one or more Federal-aid highway projects within the State. The FHWA has determined that the application is complete, and developed a draft MOU with FDOT outlining how the State would implement the program with FHWA oversight. The FHWA invites the public to comment on FDOT's request, including its application, and the proposed MOU, which includes the proposed assignments and assumptions of environmental review, consultation, and other activities.
Please submit comments by December 1, 2016.
To ensure that you do not duplicate your docket submissions, please submit them by only one of the following means:
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•
•
•
Benito Cunill, Team Leader Environmental Program, Federal Highway Administration Florida Division, 3500 Financial Plaza, Suite 400, Tallahassee, FL 32312, 8:00 a.m.-4:00 p.m. e.t., (850) 553-2224,
Ken Morefield, Director, Office of Environmental Management, Florida Department of Transportation, 605 Suwannee Street, MS 37, Tallahassee, FL 32399-0450, 8:00 a.m.-4:00 p.m. e.t, (850) 414-4316,
An electronic copy of this notice may be downloaded from the
Section 327 of title 23, United States Code (23 U.S.C. 327), allows the Secretary of the Department of Transportation (Secretary), to assign, and a State to assume, responsibility for all or part of FHWA's responsibilities for environmental review, consultation, or other actions required under any Federal environmental law with respect to one or more Federal-aid highway projects within the State pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Under the proposed MOU, FHWA would assign to the State, through FDOT, the responsibility for making decisions on the following types of highway projects:
1. All Class I, or Environmental Impact Statement (EIS) projects, both on the State Highway System (SHS) and Local Agency Program (LAP) projects off the SHS that are funded by FHWA or require FHWA approvals.
2. All Class II, or Categorically Excluded (CE), projects, both on the SHS and LAP projects off the SHS, that are funded by FHWA or require FHWA approvals.
3. All Class III, or Environmental Assessment (EA) projects, both on the SHS and LAP projects off the SHS, that are funded by FHWA or require FHWA approvals.
4. The FDOT will not assume the NEPA responsibilities of other Federal agencies. However, FDOT may use or adopt other Federal agencies' NEPA analyses or documents consistent with 40 CFR parts 1500-1508, current law, and DOT and FHWA regulations, policies, and guidance.
Excluded from assignment are highway projects authorized under 23 U.S.C. 202, 203, and 204 unless the project will be designed and/or constructed by FDOT, projects that cross State boundaries, and projects that cross or are adjacent to international boundaries. This assignment also does not include the environmental review associated with the development and approval of the Draft EIS, FEIS, and ROD for the following projects.
a. I-4 Beyond the Ultimate (BTU) which consists of the three following project segments: Segment 2 FM # 242484-7 SR 400 (I-4) west of SR 528 (Beachline) to west of SR 435 Kirkman Rd; Segment 3 FM # 242592-4 SR 400 (I-4) 1 mile east of SR 434 to east of SR 15/600/US 17/92 Seminole/Volusia C/L; Segment 4 FM # 408464-2 SR 400 (I-4) east of SR 15/600/US 17/92 to
b. Tampa Interstate Study (TIS) which consists of the three following project sections: Section 4 FM # 412531-1 (Note Sections 4 and 5 have same Design FM #) I-275/SR 60 and Northwest/Veterans; Section 5 FM # 412531-1 (Note Sections 4 and 5 have same Design FM #) I-275 Lois to Hillsborough River; and Section 6 FM # 433821-1 I-275/I-4 Downtown Interchange.
The assignment also would give the State the responsibility to conduct the following environmental review, consultation, and other related activities for project delivery:
The MOU would allow FDOT to act in the place of FHWA in carrying out the environmental review-related functions described above, except with respect to government-to-government consultations with federally recognized Indian tribes. The FHWA will retain responsibility for conducting formal government-to-government consultation with federally recognized Indian tribes, which is required under some of the listed laws and executive orders. The FDOT will continue to handle routine consultations with the tribes and understands that a tribe has the right to direct consultation with the FHWA upon request. The FDOT also may assist FHWA with formal consultations, with consent of a tribe, but FHWA remains responsible for the consultation. The FDOT also will not assume FHWA's responsibilities for conformity determinations required under Section 176 of the Clean Air Act (42 U.S.C. 7506), or any responsibility under 23 U.S.C. 134 or 135, or under 49 U.S.C. 5303 or 5304.
A copy of the proposed MOU may be viewed on the DOT DMS Docket, as described above, or may be obtained by contacting FHWA or the State at the addresses provided above. A copy also may be viewed on FDOT's Web site at:
The FHWA Florida Division, in consultation with FHWA Headquarters, will consider the comments submitted when making its decision on the proposed MOU revision. Any final MOU approved by FHWA may include changes based on comments and consultations relating to the proposed MOU and will be made publicly available.
23 U.S.C. 327; 42 U.S.C. 4331, 4332; 23 CFR 771.101-139; 23 CFR 773.109; and 40 CFR 1507.3.
Federal Transit Administration, DOT.
Notice of meeting.
This notice announces a public meeting of the Transit Advisory Committee for Safety (TRACS). TRACS is a Federal Advisory Committee established to provide information, advice, and recommendations to the Secretary of the U.S. Department of Transportation and the Federal Transit Administrator on matters relating to the safety of public transportation systems.
The TRACS meeting will be held on November 29, 2016, from 9 a.m. to 5 p.m., and November 30, 2016, from 9 a.m. to 1 p.m. Contact Adrianne Malasky (see contact information below) by November 15, 2016, if you wish to be added to the visitors list to gain access to the meeting.
The meeting will be held at the National Association of Home Builders, 1201 15th Street NW., Washington, DC 20005.
Adrianne Malasky, Office of Transit Safety and Oversight, Federal Transit Administration, 1200 New Jersey Avenue SE., Washington, DC 20590-0001 (telephone: 202-366-5496; or email:
This notice is provided in accordance with the Federal Advisory Committee Act (Pub. L. 92-463, 5 U.S.C. App. 2). TRACS is composed of 29 members representing the broad base of expertise necessary to discharge its responsibilities. The tentative agenda for the November 29-30 meeting of TRACS is set forth below:
Members of the public wishing to attend and/or make an oral statement and participants seeking special accommodations at the meeting must contact Adrianne Malasky by November 15, 2016.
Members of the public may submit written comments or suggestions concerning the activities of TRACS at any time before or after the meeting at
Information from the meeting will be posted on FTA's public Web site at
Federal Transit Administration, DOT.
Notice of proposed Buy America waiver and request for comment.
The Federal Transit Administration (FTA) received a request from the Greater Dayton Regional Transit Authority (GDRTA) for a Buy America non-availability waiver for the procurement of radio consoles, which are a part of a voice and cellular data communications system (the “radio consoles”). GDRTA's current voice and data communications equipment is obsolete and malfunctioning. The new communication system will result in improved operational efficiency. GDRTA seeks a waiver for the procurement of radio consoles because there are no manufacturers that produce radio consoles that are compatible with GDRTA's communications system and comply with the Buy America requirements. 49 U.S.C. 5323(j)(2)(B) and 49 CFR 661.7(c). GDRTA is joining Montgomery County's radio system, and the radio consoles compatible with the new system must be original equipment manufacturer (OEM) Motorola devices. Motorola cannot provide Buy America-compliant radio consoles. In accordance with 49 U.S.C. 5323(j)(3)(A), FTA is providing notice of the non-availability waiver request and seeks public comment before deciding whether to grant the request. If granted, the waiver would apply to the radio consoles identified in the waiver request.
Comments must be received by November 15, 2016. Late-filed comments will be considered to the extent practicable.
Please submit your comments by one of the following means, identifying your submissions by docket number FTA-2016-0038:
1.
2.
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4.
Cecelia Comito, FTA Assistant Chief Counsel, at (202) 366-2217 or
The purpose of this notice is to provide notice and seek public comment on whether the FTA should grant a Buy America non-availability waiver for the Greater Dayton Regional Transportation Authority (GDRTA) to procure radio consoles, which would be a part of GDRTA's new communication system (the “radio consoles”). On May 24, 2016, GPMTD requested a Buy America waiver for the radio consoles because
GDRTA is a public transit agency that serves Montgomery and Western Green counties in Ohio. GDRTA provides more than 9 million passenger trips per year on 31 routes throughout the region. In January 2014, GDRTA conducted a technology scope development project to determine how technology enhancements could improve its operational efficiency; this included a voice and data communication alternatives analysis. GDRTA comprehensively examined various technologies available for its voice and data communication needs. GDRTA compared and evaluated the differences between radio and cellular-based communication, including a cost analysis, reliability assessment, and long-range maintenance and operational differences. On August 5, 2014, the GDRTA Board approved the adoption of a mixed communication system for the agency, which would employ both voice and cellular data systems. GDRTA would join Montgomery County's 800MHz analog trunked system, instead of continuing to own a 450 MHz radio system.
Montgomery County's analog system uses proprietary Motorola SmartNetTrunking, and all equipment must be original equipment manufacturer (OEM) Motorola devices. All equipment must also be programmed to use the County's 800MHz analog system and have the ability to work on the MARCS 800 MHz digital system without any additional hardware. In November 2014, GDRTA purchased Motorola mobile and portable radios for its supervisors and its diesel, trolly, paratransit, maintenance, and support vehicles. The procurement and installation of the radio consoles is the final step to move GDRTA's communication system to Montgomery County's system.
Motorola manufactures equipment both domestically and overseas. While the voice processing module portion of the radio consoles are currently manufactured in Illinois, the other components are manufactured in Mexico. Thus, GDRTA is seeking a Buy America non-availability waiver under 49 CFR 661.7(c)(1) for the radio consoles.
With certain exceptions, FTA's Buy America requirements prevent FTA from obligating an amount that may be appropriated to carry out its program for a project unless “the steel, iron, and manufactured goods used in the project are produced in the United States.” 49 U.S.C. 5323(j)(1). A manufactured product is considered produced in the United States if: (1) All of the manufacturing processes for the product take place in the United States; and (2) all of the components of the product are of U.S. origin. A component is considered of U.S. origin if it is manufactured in the United States, regardless of the origin of its subcomponents. 49 CFR 661.5(d). If, however, FTA determines that “the steel, iron, and goods produced in the United States are not produced in a sufficient and reasonably available amount or are not of a satisfactory quality,” then FTA may issue a waiver (non-availability waiver). 49 U.S.C. 5323(j)(2)(B); 49 CFR 661.7(c).
Finally, under 49 U.S.C. 5323(j)(6), FTA cannot deny an application for a waiver based on non-availability unless FTA can certify that (i) the steel, iron, or manufactured good (the “item”) is produced in the United States in a sufficient and reasonably available amount; and (ii) the item produced in the United States is of a satisfactory quality. Additionally, FTA must provide a list of known manufacturers in the United States from which the item can be obtained. FTA is not aware of any manufacturers who produce the required radio consoles in the United States.
The purpose of this notice is to publish GDRTA's request and seek public comment from all interested parties in accordance with 49 U.S.C. 5323(j)(3)(A). Comments will help FTA understand completely the facts surrounding the request, including the effects of a potential waiver and the merits of the request. After consideration of the comments, FTA will publish a second notice in the
Federal Transit Administration, DOT.
Notice of proposed Buy America waiver and request for comment.
The Federal Transit Administration (FTA) received a request from the Central Puget Sound Transit Authority (Sound Transit) for a Buy America non-availability waiver for the procurement of ultrastraight rail. Sound Transit seeks to procure ultrastraight rail for a portion of its Northgate Link light rail extension to avoid exceedance of contractually-mandated vibration thresholds. Sound Transit seeks a waiver because there is no domestic manufacturer available to produce rail that has passed the applicable vibration testing standards. In accordance with 49 U.S.C. 5323(j)(3)(A), FTA is providing notice of the waiver request and seeks public comment before deciding whether to grant the request. If granted, the waiver would apply to a one-time FTA-funded procurement by Sound Transit.
Comments must be received by November 8, 2016. Late-filed comments will be considered to the extent practicable.
Please submit your comments by one of the following means, identifying your submissions by docket number FTA-2016-0037.
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2.
3.
4.
Cecelia Comito, Assistant Chief Counsel, at (202) 366-2217 or
The purpose of this notice is to provide notice and seek comment on whether the FTA should grant a non-availability waiver for Sound Transit's purchase of approximately 15,100 feet of ultrastraight rail. On February 23, 2016, Sound Transit requested a Buy America waiver for the ultrastraight rail because the as-installed condition of ultrastraight rail, procured from a domestic manufacturer, failed to meet applicable vibration threshold requirements. Sound Transit estimates that the ultrastraight rail will cost approximately $300,000.
Sound Transit's Northgate Link extension is a $1.9 billion rail project that consists of 4.3 miles and 3 new stations, and runs through residential and employment areas, including the University of Washington. Approximately 15,100 feet of that extension will run under the University of Washington's Health Sciences and Physics-Astronomy buildings, which house precision-measurement laboratories and experiments conducted by Nobel Prize winning faculty. The project's potential impact on the University's buildings was considered as part of the environmental review process required by the National Environmental Policy Act (NEPA). In 2006, FTA issued a final Record of Decision (ROD) for the project, and required implementation of mitigation measures, including a measure that would minimize vibration under the University buildings. Sound Transit then executed a 2007 agreement with the University of Washington in which Sound Transit agreed to not exceed specified vibration thresholds, which could be met through use of ultrastraight rail, with parameters for that rail based on American Railway Engineers Maintenance-of-Way Association (“AREMA”) standards.
Sound Transit contacted domestic rail manufacturers regarding their ability to produce ultrastraight rail within the agreed upon AREMA specifications for the rail. Two leading manufacturers, Steel Dynamics, Inc. (SDI) and EVRAZ North America (EVRAZ), stated unequivocally that they are unable to fabricate rail that meets the specification. Sound Transit subsequently explored using domestically-sourced, milled rail. However, testing of the as-installed milled rail found that the rail failed to meet the applicable vibration thresholds. Due to its unsuccessful efforts to procure domestically-sourced ultrastraight rail within the vibration thresholds, Sound Transit seeks a non-availability waiver of the Buy America requirements for domestically-sourced steel.
With certain exceptions, FTA's Buy America requirements prevent FTA from obligating an amount that may be appropriated to carry out its program for a project unless “the steel, iron, and manufactured goods used in the project are produced in the United States.” 49 U.S.C. 5323(j)(1). The steel and iron requirements apply to all construction materials made primarily of steel or iron and used in infrastructure projects such as transit or maintenance facilities, rail lines, and bridges. These items include, but are not limited to, structural steel or iron, steel or iron beams and columns, running rail and contact rail. For steel or iron to be considered produced in the United States, all steel and iron manufacturing processes must take place in the United States, except metallurgical processes involving refinement of steel additives. 49 CFR 661.5.
If, however, FTA determines that “the steel, iron, and goods produced in the United States are not produced in a sufficient and reasonably available amount or are not of a satisfactory quality,” then FTA may issue a waiver (non-availability waiver). 49 U.S.C. 5323(j)(2)(B); 49 CFR 661.7(c). Any non-availability waiver granted would be effective for a one-time procurement of the rail and would expire upon completion of that procurement.
Finally, under 49 U.S.C. 5323(j)(6), FTA cannot deny an application for a waiver based on non-availability unless FTA can certify that (i) the steel, iron, or manufactured good (the “item”) is produced in the United States in a sufficient and reasonably available amount; and (ii) the item produced in the United States is of a satisfactory quality. Additionally, FTA must provide a list of known manufacturers in the United States from which the item can be obtained. FTA is not aware of any manufacturers who produce ultrastraight rail that would meet the required parameters in the United States.
Sound Transit conducted an extensive search for a domestic manufacturer of ultrastraight rail, including testing domestically-sourced, milled rail. Unfortunately, testing of the as-installed milled rail found that the rail failed to meet the applicable vibration thresholds. Due to its unsuccessful efforts to procure domestically-sourced ultrastraight rail within the vibration thresholds, FTA proposes to grant Sound Transit a non-availability waiver of the Buy America requirements for 15,100 feet of ultrastraight rail, as required in the 2007 agreement between Sound Transit and the University. This non-availability waiver would be effective for a one-time procurement of the rail and would expire upon completion of that procurement.
The purpose of this notice is to publish Sound Transit's request and seek public comment from all interested parties in accordance with 49 U.S.C. 5323(j)(3)(A). Comments will help FTA understand completely the facts surrounding the request, including the effects of a potential waiver and the merits of the request. After consideration of the comments, FTA will publish a second notice in the
Maritime Administration, Department of Transportation.
Notice and request for comments.
The Maritime Administration (MARAD) invites public comments about our intention to request the Office of Management and Budget (OMB) approval to renew an information collection. The information is needed in order for Maritime Administration officials to evaluate the underwriters and determine their suitability for providing marine hull insurance on Maritime Administration vessels. We are required to publish this notice in the
Written comments should be submitted by January 3, 2017.
You may submit comments [identified by Docket No. DOT-
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Mike Yarrington, 202-366-1915, Director, Office of Marine Insurance, Maritime Administration, U.S. Department of Transportation, 1200 New Jersey Avenue SE., Washington, DC 20590.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and 49 CFR 1:93.
By Order of the Maritime Administrator.
Maritime Administration, Department of Transportation.
Notice.
As authorized by 46 U.S.C. 12121, the Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirement of the coastwise laws under certain circumstances. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before December 1, 2016.
Comments should refer to docket number MARAD-2016-0113. Written comments may be submitted by hand or by mail to the Docket Clerk, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. You may also send comments electronically via the Internet at
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE., Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel ARC TIME is:
The complete application is given in DOT docket MARAD-2016-0113 at
Anyone is able to search the electronic form of all comments received into any of our 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
By Order of the Maritime Administrator.
Maritime Administration, Department of Transportation.
Notice.
As authorized by 46 U.S.C. 12121, the Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirement of the coastwise laws under certain circumstances. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before December 1, 2016.
Comments should refer to docket number MARAD-2016-0111. Written comments may be submitted by hand or by mail to the Docket Clerk, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. You may also send comments electronically via the Internet at
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE., Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel MANNA is:
The complete application is given in DOT docket MARAD-2016-0111 at
Anyone is able to search the electronic form of all comments received into any of our 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
By Order of the Maritime Administrator.
Maritime Administration, Department of Transportation.
Notice.
As authorized by 46 U.S.C. 12121, the Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirement of the coastwise laws under certain circumstances. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before December 1, 2016.
Comments should refer to docket number MARAD-2016-0112. Written comments may be submitted by hand or by mail to the Docket Clerk, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. You may also send comments electronically via the Internet at
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE., Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel GOTTA LOVE IT is:
The complete application is given in DOT docket MARAD-2016-0112 at
Anyone is able to search the electronic form of all comments received into any of our 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
By Order of the Maritime Administrator.
Maritime Administration, Department of Transportation.
Notice.
As authorized by 46 U.S.C. 12121, the Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized
Submit comments on or before December 1, 2016.
Comments should refer to docket number MARAD-2016-0114. Written comments may be submitted by hand or by mail to the Docket Clerk, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. You may also send comments electronically via the Internet at
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE., Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel SPELLBOUND is:
The complete application is given in DOT docket MARAD-2016-0114 at
Anyone is able to search the electronic form of all comments received into any of our 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
By Order of the Maritime Administrator.
National Highway Traffic Safety Administration (NHTSA).
Denial of Petition for a Defect Investigation.
This notice describes the reasons for denying a petition (DP12-004) submitted to NHTSA under 49 U.S.C. 30162, requesting that the agency conduct “a defect investigation into MY 2005-2010 Nissan Pathfinder, Frontier, and Xterra vehicles [the subject vehicles] for automatic transmission failures related to failed transmission coolers.”
Bob Young, Office of Defects Investigation (ODI), NHTSA; 1200 New Jersey Ave. SE., Washington, DC 20590. Telephone: 202-366-4806.
In support of his petition, received on February 29, 2012, Mr. Mathew Oliver, Director of Operations for the North Carolina Consumers Council, Inc. (NCCC); alleged the following:
(1) “During the past six months, five owners of 2005 Xterra vehicles, and one owner of a 2006 Frontier vehicle, reported that they experienced sudden jerking of their vehicle(s) at highway speeds. They report, in all instances, that dealers diagnosed the problem as a failed transmission fluid cooler located in the radiator that allowed coolant to mix with, and contaminate, the automatic transmission fluid resulting in damaged internal transmission components and a damaged internal transmission computer. The complaints report no warning signs leading up to or just prior to the failures”;
(2) “NCCC has learned from Web site searches, and through the NHTSA Web site, of many other similar complaints in the subject vehicles. Web site data and NHTSA reports usually [report] the same symptoms and lack of warning. Numerous complaints on the NHTSA Web site note repeat oil [sic] cooler and transmission failures”;
(3) Nissan extended its warranty coverage of subject vehicles' radiator/transmission fluid coolers from 3yrs/36,000 miles to 8yrs/80,000 miles and that this coverage applied only to the radiator/cooler but not to transmissions that may have been damaged as a consequence of cooler failures;
(4) Nissan extended its warranty coverage of subject vehicles' radiator/transmission fluid coolers from 3yrs/36,000 miles to 8yrs/80,000 miles and that this coverage applied only to the radiator/cooler but not to transmissions that may have been damaged as a consequence of cooler failures. Additionally, Nissan failed to conduct inspections that may have revealed a cooler failure was imminent thus helping consumers avoid a catastrophic transmission failure; and
(5) A class action lawsuit was filed in 2010 on behalf of clients relating to this alleged defect.
Mr. Oliver concluded his petition by stating, “through our limited investigation into the matter, all of the vehicles experiencing these [transmission] failures are within the 8 year period specified by the extended warranty but are often beyond the 80,000 mile limit. It also appears that the number of reported defects is increasing, which is concerning to say the least. Due to the nature of the reported defect, the severity of the reported failures, the repetitive nature of the failures and the limited or missing failure warning signs, we believe that an investigation is warranted.”
NHTSA has reviewed the material provided by the petitioner and other pertinent data. The results of this review and our analysis of the petition's merit is set forth in the DP12-004 Petition Analysis Report, published in its entirety as an appendix to this notice.
For the reasons presented in the petition analysis report, there is no reasonable possibility that an order concerning the notification and remedy of a safety-related defect would be issued as a result of granting Mr. Oliver's petition. Therefore, in view of the need to allocate and prioritize NHTSA's limited resources to best
49 U.S.C. 30162(d); delegations of authority at CFR 1.50 and 501.8.
On February 29, 2012 the National Highway Traffic Safety Administration (NHTSA) received a letter from Mr. Mathew Oliver, Director of Operations for the North Carolina Consumers Council, Inc. (NCCC); petitioning the agency to conduct “a defect investigation into MY 2005-2010 Nissan Pathfinder, Frontier, and Xterra vehicles [the subject vehicles] for automatic transmission failures related to failed transmission coolers.”
Mr. Oliver's letter included the following information:
(1) “During the past six months, five owners of 2005 Xterra vehicles, and one owner of a 2006 Frontier vehicle, reported that they experienced sudden jerking of their vehicle(s) at highway speeds. They report, in all instances, that dealers diagnosed the problem as a failed transmission fluid cooler located in the radiator that allowed coolant to mix with, and contaminate, the automatic transmission fluid resulting in damaged internal transmission components and a damaged internal transmission computer. The complaints report no warning signs leading up to or just prior to the failures”;
(2) “NCCC has learned from Web site searches, and through the NHTSA Web site, of many other similar complaints in the subject vehicles. Web site data and NHTSA reports usually [report] the same symptoms and lack of warning. Numerous complaints on the NHTSA Web site note repeat oil [sic] cooler and transmission failures”;
(3) Nissan extended its warranty coverage of subject vehicles' radiator/transmission fluid coolers from 3yrs/36,000 miles to 8yrs/80,000 miles and that this coverage applied only to the radiator/cooler but not to transmissions that may have been damaged as a consequence of cooler failures;
(4) Nissan extended its warranty coverage of subject vehicles' radiator/transmission fluid coolers from 3yrs/36,000 miles to 8yrs/80,000 miles and that this coverage applied only to the radiator/cooler but not to transmissions that may have been damaged as a consequence of cooler failures. Additionally, Nissan failed to conduct inspections that may have revealed a cooler failure was imminent thus allowing consumers avoid a catastrophic transmission failure; and
(5) A class action lawsuit was filed in 2010 on behalf of clients relating to this alleged defect.
Mr. Oliver concluded his petition by stating, “Through our limited investigation into the matter, all of the vehicles experiencing these [transmission] failures are within the 8 year period specified by the extended warranty but are often beyond the 80,000 mile limit. It also appears that the number of reported defects is increasing, which is concerning to say the least. Due to the nature of the reported defect, the severity of the reported failures, the repetitive nature of the failures and the limited or missing failure warning signs, we believe that an investigation is warranted.”
In analyzing the petitioner's allegations and preparing a response, we:
• Reviewed the petitioner's letter, received on February 29, 2012.
• Reviewed the NCCC Web site for additional information.
• Reviewed 2,505 individual complaints filed in our consumer complaint database through September 13, 2016.
• Reviewed individual vehicle Carfax information to determine ownership and service histories.
• Reviewed vehicle manufacturer information concerning relevant extended warranty programs.
• Reviewed vehicle manufacturer technical information concerning transmission operation.
• Reviewed vehicle manufacturer technical information concerning transmission control module (TCM) and engine control unit (ECU) functional relationship, including transmission related fault codes triggering an illuminated “malfunction indicator lamp.”
• Reviewed various ODI safety defect investigations related to engine stalling and loss of motive power (LOMP).
• Gathered and reviewed information related to the class action lawsuit cited by the petitioner.
• Reviewed vehicle production quantity information from Nissan.
• Interviewed owners, in person and by telephone, about their experience with related transmission failures.
• Test drove subject vehicles where transmission fluid and engine coolant were co-mingled and transmission problems were evident and unresolved.
• Interviewed Nissan dealer service staff about the subject issue.
• Interviewed independent transmission repair shop staff about the subject issue.
• In an effort to learn more about the transmission coolant tank failures, ODI secured the services of NHTSA's Vehicle Research and Test Center (VRTC). VRTC did the following:
A. Interviewed subject vehicle owners and test drove their vehicles; and
B. Conducted a root cause analysis to determine why subject fluid cooler tanks were failing.
Based on our analysis of the information gathered during this comprehensive effort, it does not appear there is a reasonable possibility that an order concerning the notification and remedy of a safety-related defect would be issued as a result of granting Mr. Oliver's petition. Therefore, in view of the need to allocate and prioritize NHTSA's limited resources to best accomplish the agency's safety mission, the petition is denied.
The subject vehicles are all MY 2005-10 Nissan Pathfinder, Frontier, and Xterra vehicles equipped with a RE5R05A 5-spd, electronically controlled, automatic transmission. Nissan produced 857,432 subject vehicles for sale in the United States.
The subject vehicles are equipped with a transmission fluid cooler. The cooler, a cylindrical tank located within the radiator and submerged in engine coolant, acts as a heat exchanger. Hot transmission fluid flows from the transmission to, and through, the tank where it is “cooled” before returning to the transmission. The tank is not visible unless the radiator is disassembled.
The petitioner alleges that consumers are experiencing a subject transmission performance issue due to co-mingling of engine coolant and automatic transmission fluid (ATF) occurring when the ATF cooling tank fails.
NHTSA's Vehicle Research and Test Center (VRTC) in East Liberty, OH was tasked with conducting an assessment to determine why ATF and engine coolant were co-mingling. VRTC's final report, documenting this work, was filed on May 30, 2013.
The owner of a 2005 Nissan Pathfinder filed VOQ #10415028, including the following summary:
“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”
In a follow-up phone interview, he reported the transmission and radiator were original equipment and that he had the radiator flushed once but was still having problems. He knew about the extended warranty, but his vehicle mileage was beyond the mileage limit. The owner reported that he had not been driving the vehicle for approximately one year.
The owner accepted VRTC's offer of a cost-free tow and free vehicle inspection at his local Nissan dealer. If co-mingled fluid was found, his radiator would be removed and taken to the Center's lab.
However, on the day of the inspection (August 28, 2012), he drove it to the dealership. The vehicle appeared to be in good condition with 126,495 miles on the odometer. At the dealership, the owner discussed his situation. He had replaced the engine coolant and the ATF approximately 12months/40 miles ago. He described transmission slipping, jerking, the tires making chirping noises, and lack of acceleration when needed, such as pulling out onto a highway. He reiterated his concern about the $6,000.00 estimated repair cost.
VRTC staff removed the radiator cap and found the fluids co-mingled. The radiator was removed and replaced with a new one. Before leaving with the subject radiator, the dealership service manager reported that they find co-mingled fluid in subject vehicles about once or twice per month.
At VRTC, the radiator was pressurized and submerged in a tank of water. The radiator bubbled slowly and steadily from the open ATF ports indicating a crossover leak, as shown in Figure 2.
Co-mingled ATF and engine coolant may affect transmission performance and may cause an engine stall.
Exposure to co-mingled ATF and engine coolant will have an adverse effect on transmission performance and longevity. Engine coolant (
The subject transmission is electronically controlled by the Transmission Control Module (TCM) located internally. By design, the TCM should never come in contact with engine coolant. The TCM communicates with the Engine Control Module through the vehicle's Controller Area Network (CAN). The TCM is capable of diagnosing transmission malfunctions and the ECM stores the resulting diagnostic trouble codes (DTCs) in memory. In some instances, a TCM malfunction (due to contamination by engine coolant, for example), can result in an engine stall, poor shift performance, and an engine no-start condition. Typically a TCM malfunction will trigger the illumination of a MIL (malfunction indicator lamp), which, on the subject vehicles' instrument cluster, is displayed as “Service Engine Soon.”
Typically “fault codes” are stored within the ECM when the MIL is illuminated due to a TCM anomaly. These codes are later used by technicians to diagnose the problem. For example, a “U1000” code is stored when the TCM cannot communicate with the ECM.
As of September 13, 2016 we received 2,505 complaints concerning subject vehicle transmission performance. Of these, 2,081 were submitted since the petition was filed on February 29, 2012.
After reviewing the complaints, they broadly fall into two categories: Customer Satisfaction and Potential Hazard.
Of the 2,505 complaints received by ODI, 1,867 pertained to customer satisfaction issues such as cost of repair, vehicle shudder and shake, no engine start, engine overheat, no cabin heat, no reverse, and check engine light on. Fully fifty percent of these complaints (944) mention cost of repair, the single most reported concern. Vehicle shudder and shake was identified in 798 VOQs, the most reported vehicle-related customer satisfaction issue.
Six hundred and thirty-eight VOQs reported the following potential hazards: unable to maintain vehicle speed, loss of motive power, and engine stalling. As in the customer satisfaction- related VOQs discussed previously, cost of repair was the single most identified issue, with fifty-four percent (344) voicing the concern. Allegations of “unable to maintain speed” and “no motive power” were found in 573 complaints (299 and 274, respectively). Engine stalling was identified in 65 VOQs. Average vehicle mileage when these complaints were filed is approximately 106,482.
Four crashes are alleged; two due to loss of motive power, one due to an engine stall, and the fourth due to vehicle shudder.
This VOQ was filed with us on December 12, 2013 by the second owner of a MY2008 Nissan Xterra. No VIN was provided. It includes this summary:
“WHILE DRIVING THROUGH THE INTERSECTION, MY VEHICLE SUDDENLY LOST POWER CAUSING ME TO GET REAR ENDED. VERY MINIMAL DAMAGE TO MY VEHICLE BUT MY DAUGHTER WAS IN THE CAR WITH ME. UPON FURTHER INSPECTION AT A SHOP IT WAS CONCLUDED THAT THE CAUSE OF THE LOSS OF POWER WAS DUE TO A FAILURE IN THE TEAMS FLUID COOLER CAUSING RADIATOR FLUID TO ENTER THE TRANSMISSION. “
In a subsequent telephone conversation, complainant stated that he had purchased the vehicle, with 112,098 miles, from a private owner on December 6, 2013. No transmission or radiator issues were disclosed. However some sluggishness in transmission up- and down- shifting was noted about a day before the crash.
The owner reported that he was driving the Xterra, with his 12 y.o. daughter as a passenger, on December 9, 2013 as they approached an intersection at about 40 mph. The vehicle suddenly lost motive power, slowed, and was rear-ended resulting in damage to the rear bumper and no personal injury. No police report was filed. Later that day, he drove the Xterra to his local Nissan dealer where co-mingled fluids were found. He was given a repair estimate of $4500 to replace the radiator and transmission. He was also told that, based on vehicle age and mileage, he was not eligible of either Nissan's extended warranty or the class action settlement terms (which are, in fact, identical). So, unable to afford this repair, the vehicle has been parked near his home since.
We attempted to gather service and owner history information but without a VIN have been unable to do this. The owner agreed to provide the VIN by email. To date he has not done so.
This VOQ was filed with ODI on January 28, 2014 by the second owner of a MY2007 Nissan Pathfinder. The alleged crash occurred on January 10, 2014, at about 90,000 miles which he summarized as follows:
“I REQUEST THAT THE DOT NHTSA INVESTIGATE MANUFACTURER DEFECTS IN 2007 NISSAN PATHFINDERS COOLING SYSTEM AND TRANSMISSION AS UNEXPECTED FAILURE RELATES TO DRIVER SAFETY. MY 2007 PATHFINDER WITH 90,000 MILES CAUSED A MAJOR COLLISION WITH A DEER AS THE TRANSMISSION BEGAN TO FAIL. DRIVING HOME, AT AROUND 40MPH, UP A HILL (ENGINE UNDER LOAD @2,200-2,500 RPM) THE WHOLE CAR BEGAN SUDDENLY TO “SHUDDER”- SIMILAR TO THE FEELING/SOUND OF RIDING OVER HIGHWAY RUMBLE STRIPS. THIS RESULTED IN A LOSS OF CONTROL OVER THE SPEED OF THE VEHICLE AND A NOTICEABLE DISTRACTION LEAVING ME UNPREPARED AS A LARGE BUCK RAN OUT FROM THE TREE LINE ATTEMPTING TO CROSS THE ROAD- THE BUCK DID NOT MAKE IT ACROSS. AS I HAVE FOUND IN MY RESEARCH AFTERWARDS, THERE IS A WIDELY KNOWN MANUFACTURER DEFECT IN WHICH ENGINE COOLANT MIXES WITH TRANSMISSION FLUID. THE RESULTING “GOOP” SHREDS THE INTERNAL PARTS OF THE TRANSMISSION RENDERING IT (ALONG WITH THE RADIATOR AND COMPONENTS) COMPLETELY USELESS. THESE VEHICLES ARE UNSAFE FOR THE ROADWAYS AS THIS PROBLEM OCCURS SUDDENLY AND UNEXPECTEDLY WITHOUT WARNING. I CONSIDER MYSELF LUCKY FOR BEING ALIVE- NOW, BUT SINCE NISSAN NOR ANY OTHER ORGANIZATION IS WILLING TO RECALL OR REPLACE THIS VEHICLE/AFFECTED PARTS, I AM STUCK,
Numerous attempts to contact this filer, by mail, email, and telephone have been unsuccessful.
According to the VOQ, the incident was not reported to police.
A Carfax vehicle history report reveals that the subject owner, the vehicle's second, purchased it on February 21, 2009 at 29,526 miles. The detailed service history includes 11 service visits prior to the alleged crash . . . none related to either the transmission or radiator nor are any crash-related repairs identified either before or after the alleged crash date. We recognize, however, that not all service attempts may be documented in the report.
This VOQ was filed on November 9, 2015 by the owner of a MY2008 Nissan Pathfinder. It contains the following summary:
“ ON NOVEMBER 6, 2015 AROUND OR ABOUT 7:00PM MY V6 2008 NISSAN PATHFINDER SERVICE ENGINE LIGHT TURNED ON WHILE IN FIRST GEAR IN MOSTION; THE SUV ENGINE AND TRANSMISSION TURNED OFF HAD NO BRAKES AND HAD A FENDER BENDER WHILE IN MOTION, HAD THE SUV TOWED HOME AND CHECKED THE CODE ON THE OBD AND IT READ CODE: U1000 CONTROLLER AREA NETWORK (CAN) COMMUNCATION LINE SIGAL MALFUNCTION.DID A VISUAL CHECK INSIDE RADIATOR FILLER PORT, ELECTRICAL FUSE (10AMP FUSE TO THE TRANSMISSION BLEW WHICH ATOMCTICLY TOLD ME A COMMUNICATION HARNESS IS OPEN OR SHORTED; OR A FAULTY ENGINE CONTROL MODULE(ECM))AND ALSO CHECKED THE RESIVOR FILLER PORT, FOUND RED TRANSMISSION FLUID AND GREEN ENGINE COOLENT FLUID INCORPORATED IN RADIATOR (CONTAMINATION), ALSO CHECKED TRANSMISSION DIP STICK TO SEE IF TRANSMISSON FLUIDS LOW BUT INSTEAD FOUND RUST AT THE END PART OF THE DIPSTICK INSIDE THE TRANSMISSON INDICATING ENGINE COOLENT CONTAMINATION (WATER) ALL INSIDE THE TRANSMISSION.WHO KNOW HOW MUCH RUST IS INSIDE THE TRANSMISSION UNTIL A FULL TEAR DOWN AND THOROUGH INSPECTION IS PERFORMED.....CAR IS STATIONARY AND WILL NOT START”
We have been unable to contact the owner to confirm the details related in his complaint.
This vehicle, with 105,985 miles, was bought at auction in July, 2015 by a used car dealer in Texas before being sold, on September 9th to the current owner (and VOQ filer). Fifty-seven days later the alleged crash occurred due to an engine stall. No police report was filed. The Carfax service history shows no transmission/radiator-related repairs and indicates that the only service work done on the vehicle since September 9, 2015 was a “maintenance inspection” at 111,916 miles.
This VOQ was filed with us on April 10, 2016 alleging that a crash occurred on September 15, 2015 involving a
“I BOUGHT MY 06 NISSAN FRONTIER WITH 95000 MILES GREAT TRUCK LOVED IT WHEN IT GOT TO 118000 MILES THE RADIATOR MESSED UP CAUSING ME TO REPLACE THE RAD AND TRANS FLUSH 500$ TWO WEEKS LATER NO REVERSE ONE DAY HEADED HOME FROM WORK GOING UP LICK HILL SECOND GEAR GOS OUT CAUSING ME TO GET REARENED THEN THERE'S 200$ FOR TOWING AND A SMASHED UP TRUCK JUST SPENT 8000 ON THE TRUCK AND CAN NOT AFFORD TO PUT 4000 MORE IN IT WHAT THE HELL THIS IS A JOKE MY TRUCK WILL ROT TO THE GROUND BEFORE I SPEND 4000 MORE I HOPE THIS IS TAKEN CARE OF NOBODY SHOULD HAVE TO DEAL WITH THIS NOW I A PIECE OF JUST THAT'S NOT WORTH 2500 NISSAN U SUCK”
In a subsequent telephone conversation with us, the owner said, after finding co-mingled ATF/engine coolant, he replaced the radiator and then had an independent repair shop perform a transmission fluid flush. The transmission still would not shift into reverse. No further repair attempts were made. Two weeks later the September 15th crash occurred. No police accident report was filed and the vehicle has been parked since.
ODI met with two local owners for an interview and vehicle inspection. The second prompted the discovery, and inspection, of a third vehicle.
On June 28, 2016, we met with the original owner of the MY 2007 Nissan Pathfinder at his home in the Baltimore, MD suburbs. We focused on this owner because his vehicle was involved in a loss of motive power incident; the dealer confirmed the fluid was co-mingled; and it had not been repaired. His VOQ (10695005), filed on March 18, 2015, included the following summary:
“PURCHASED 2007 NISSAN PATHFINDER BRAND NEW. BROUGHT TO NISSAN DEALER DUE TO CHECK ENGINE LIGHT ON DASHBOARD. DIAGNOSIS PERFORMED AND DETERMINED RADIATOR/TRANSMISSION FLUID/COOLANT LEAKING INTO TRANSMISSION. ESTIMATED REPAIR $6000 TO REPLACE RADIATOR/THERMOSTAT/TRANSMISSION. AT 140000 MILES, NISSAN STATES NO LONGER UNDER POWERTRAIN WARRANTY. DECLINED SERVICE.”
While meeting with the owner, he told us that about a week after filing his VOQ, he drove the Pathfinder, with his family, to a birthday party about 20 miles away. He noted that the vehicle seemed to shudder when shifting and that engaging “Drive” occurred sluggishly when shifting out of “Park”. While driving home from the party, it suddenly became difficult to keep up with traffic on the Baltimore beltway. Soon he was driving in the far right lane with his flashers on. They finally made it home but the vehicle was unable to negotiate the ramp onto his driveway so he just parked it on the ramp. The following day he was able to move the vehicle in reverse and he parked it, on the street in front of his house, where it remained until our visit.
The owner advised he had made no attempt to have the vehicle repaired due to the estimated $6,000.00 repair cost. He was aware of both Nissan's extended warranty and the class action settlement but neither would cover his repair due to both age (now 11 years) and mileage (greater than 100,000).
During our visit, we removed the radiator cap and found co-mingled ATF/coolant.
We then drove the vehicle, accompanied by the owner, around his neighborhood. The engine started easily as the owner had charged the battery in anticipation of our meeting. Initially, no transmission shift anomalies were noted but the check engine light was illuminated as described over a year earlier in the subject VOQ. However, as the engine warmed up, we began to notice sluggish engagement whenever the transmission would up-, and down-, shift. After about 10 minutes, we parked in front of his house. No other transmission anomalies were noted.
When asked why, after being told by the dealer that he needed a new transmission, he elected to drive to the birthday party in the Pathfinder with his wife and three children, he told us he did not realize that the transmission might fail in a way that would make it impossible to maintain highway speed. He further advised that he did not want to spend $6,000.00 to repair the vehicle and was awaiting the outcome of this investigation before deciding whether to sell the vehicle or have it repaired.
On May 27, 2015 we received a VOQ from the owner of a MY2006 Nissan Pathfinder located in the northern Baltimore suburbs. She is the vehicle's second owner, having purchased it on October 8, 2011. Vehicle mileage was 53,887 at that time. The VOQ summary reads:
“TRANSMISSION IS SHAKY AND JERKS WHEN SHIFTING, APPARENTLY NISSAN KNEW ABOUT RADIATOR COOLANT LEAKING INTO THE TRANSMISSION LINE!!!”
We decided to meet with this owner because the dealer installed an aftermarket ATF cooler in addition to replacing the radiator and transmission. On June 30, 2016 we met at her work and inspected her vehicle.
She advised that the radiator and transmission were replaced by her local Nissan dealer on December 15, 2015 and provided a copy of the repair order. At the time her vehicle was less than 10 years old and had fewer than 90,000 miles (87,110), thus she was eligible for the $3,000.00 deductible extended warranty coverage. We confirmed that an external ATF cooler had been installed. After discussing the repair, we removed the radiator cap and found apparent co-mingled fluid:
Further inspection found that the aftermarket cooler had been installed “in series” so that ATF still flowed through the OE ATF cooler. Thus, a failure of the OE cooler could still result in co-mingled ATF and engine coolant.
Following our visit with owner two (VOQ 10721809), we cold-called a local Nissan dealer service department to learn about its perspective concerning subject transmission failures due to ATF/engine coolant co-mingling.
The service manager advised that his department had replaced “about 30” subject transmissions due to ATF cooler failures. “In fact, he said, we have one in right now.” He then led us out to the lot where we found this 2005 Xterra:
Upon removing the radiator cap, we found evidence of fluid co-mingling:
When asked for this vehicle owner's contact information, the service manager was reluctant to provide it without first contacting the customer. He said would have them call us. As of September 21, 2016 we have not heard from the customer.
According to a Carfax report, run on September 21, 2016, this vehicle has had three owners. The first sold the vehicle on December 18, 2010 with 38, 353 miles. The second owner traded in the vehicle on July 15, 2016 (16 days after we inspected it) with 102, 816 miles. On September 5, 2016 the vehicle was sold at auction to an unidentified buyer as a “dealer vehicle.” The last service noted occurred on June 27, 2016 as “recommended maintenance performed/Oil and filter changed.” No transmission or radiator-related work is identified.
The single most commonly reported concern, expressed by 1,288 of the 2,505 owners filing related VOQs with us, is repair cost. Once an automatic transmission has been exposed to engine coolant due to a radiator failure, vehicle owners are faced with an expensive repair. With subject vehicles, a radiator replacement and fluid flush costs between $500.00 and $1,000.00. However, fluid flushes do nothing to reverse damage done to transmission clutch material. Thus, replacing a subject transmission (to effectively repair the vehicle) will cost an additional $3,200.00 to $6,500.00 for a total repair cost (radiator and transmission replacement) of $4,200.00-$7,500.00. Since these failures occur on some vehicles greater than ten years old, such an expense may be more than 50% of vehicle re-sale value. Finally, despite two warranty extensions by Nissan and a class action settlement, owners are still faced with a steep repair bill to correct a manufacturing issue.
In October, 2010, Nissan extended its warranty coverage of subject radiators to 8 years/80,000 miles from the original 3 years/36,000 miles. Nissan claims it did this to “demonstrate our commitment to stand behind our products and our customers, by addressing an issue that had been identified with a limited number of vehicles. Specifically, in a small number of vehicles equipped with automatic transmissions, a crack in the radiator assembly might occur at higher mileages leading to internal leakage of engine coolant.” No direct notice of this warranty extension was sent to the affected customers. Nissan later claimed such coverage extended to “other affected components” (such as the transmission). However, affected Nissan customers report that the company would refuse to cover replacement of automatic transmissions damaged by such “internal leakage of engine coolant” resulting from a “crack in the radiator assembly.” Here is one such report:
VOQ 10310194—“I OWN A 2005 NISSAN PATHFINDER AND I HAVE BEEN HAVING PROBLEMS WITH THE HEAT STAYING CONSISTENT (DOES NOT BLOW HOT AIR WHEN IDLE) AS WELL A VIBRATION WHEN DRIVING AT CERTAIN SPEEDS. I ALSO BEGIN TO NOTICE THAT TRANSMISSION BEGAN TO SLIP. I WOULD STOP AT A RED LIGHT AND GO TO TAKE OFF AND WOULD NOT BE ABLE TO PICK UP SPEED WHICH CAN BE DANGEROUS WHEN ENTERING THE HIGHWAY. I RESEARCHED THIS ONLINE AND FOUND MANY OTHERS HAVING THE SAME PROBLEMS. I TOOK THE TRUCK TO A NISSAN DEALERSHIP AND THEY TOLD ME EXACTLY WHAT I ALREADY KNEW, THE RADIATOR WAS NOW NO GOOD AND LEAKING ANTIFREEZE INTO THE TRANSMISSION WHICH HAS CAUSED BOTH OF THEM TO BE RUINED AND THEY WANT TO CHARGE ME 5K TO REPLACE. I ASKED IF THE DEALERSHIP HAS SEEN THIS BEFORE AND IT WAS CONFIRMED THAT SEVERAL OF THE SAME VEHICLES HAVE BEEN IN FOR THIS VERY REASON. HE ADVISED THAT NISSAN HAS NOT PAID FOR THESE SERVICES AS THE VEHICLES ARE ALWAYS OUT OF WARRANTY ON THE RADIATOR. I STILL HAVE 2000 MILES LEFT ON MY POWERTRAIN AND ADVISED THAT I WOULD BE CONTACTING NISSAN FOR “GOODWILL” ASSISTANCE. NISSAN FINALLY CONTACTED ME AND ADVISED THAT SINCE THE PROBLEM WAS INITIALLY CAUSED BY THE RADIATOR, THEY WOULD NOT HONOR THE POWERTRAIN WARRANTY...”
On September 30, 2010, shortly before Nissan's first extension of subject radiator warranty terms, a class action lawsuit was filed against the company alleging cross-contamination (co-mingling) of coolant and transmission fluid in MY 2005 Nissan Pathfinders. Nissan asserts it was already in the process of extending the warranty before the lawsuit was filed.
On July 23, 2012, Nissan and the plaintiffs agreed to settlement terms and formal settlement papers were executed in August, 2012. On October 9, 2012 the court preliminarily approved the following settlement and granted the plaintiff attorneys application for an award of attorneys' fees in the amount of $1,620,000.00.
“Nissan agrees to make repairs through authorized [Nis-san] Dealers, if and as needed, on the radiator assembly and other damaged components (including the trans-mission) in Class Vehicles owned or leased by Settlement Class Members because of cross-contamination of engine coolant and transmission fluid (and inclusive of towing costs, if any) as a result of a defect in the radiator up to a maximum of 10 years or 100,000 miles, which-ever is less, subject to the following customer co-pay:
(a) All repairs on vehicles that exceed eight years or 80,000 miles, whichever is less, but fewer than nine years or 90,000 miles, whichever is less, are subject to a customer co-pay in the amount of $2500 which is the responsibility of the Settlement Class Member.
(b) All repairs on vehicles that exceed nine years or 90,000 miles, whichever is less, but fewer than 10 years or 100,000 miles, whichever is less, are subject to a customer co-pay in the amount of $3000 which is the responsibility of the Settlement Class Member.
Nissan also agreed to reimburse Class Members who have paid for repairs to their radiators and other damaged components (including the transmission) because of cross-contamination of engine coolant and transmission fluid as a result of a defect in the radiator between 8 years/80,000 miles, whichever occurs first, and 10 years/100,000 miles, whichever occurs first, subject to the mileage-related co-payments described above. Reimbursement is inclusive of towing costs, if any, incurred as a result of this problem.”
On January 7, 2013, settlement notices were sent to the subject vehicle owners.
On October 12, 2012, three days after the court approved the class action lawsuit settlement, Nissan released the
The terms described in this bulletin are identical to those found in the lawsuit settlement, including the specific reference to coverage of transmissions damaged as a result of radiator failure and the reimbursement provision. And, as in the class settlement, there would be no assistance for owners of subject vehicles older than 10 years or with more than 100,000 miles.
Automatic transmission failures as a result of clutch degradation (which, in this case occurs due to contamination by engine coolant) are progressive. Prior to a complete breakdown, vehicle performance will exhibit hesitation when shifting from Park to D/R, harsh shifting, intermittent slippage and/or vehicle shudder before a loss of motive force occurs. In many instances drivers report they had no idea that vehicle shift shudder would ultimately result in a loss of motive power and leave them stranded if they ignored an apparent problem with their vehicle's transmission. Those that do have the vehicle inspected for “shift shudder,” for example, many times refuse the service due to cost and continue driving it instead. Others, faced with the expense of replacing the transmission and radiator (frequently without the benefit of the extended warranty or class action settlement since their vehicle is either too old or has too many miles), simply sell it to an unsuspecting buyer. Indeed, the four crashes alleged to have occurred due to the subject issue involved vehicles that had been purchased, used, less than two months earlier at an average of 109,000 miles. The petitioner (NCCC) recognized this latter scenario in a May 18, 2016 consumer advisory against purchasing a subject vehicle.
The United States Code for Motor Vehicle Safety (Title 49, Chapter 301) defines motor vehicle safety as “the performance of a motor vehicle or motor vehicle equipment in a way that protects the public against unreasonable risk of accidents occurring because of the design, construction, or performance of a motor vehicle, and against unreasonable risk of death or injury in an accident, and includes nonoperational safety of a motor vehicle.”
The Office of Defects Investigations (ODI) has opened many defect investigations into engine stalling and/or loss of motive power. The majority of investigations resulting in safety recalls involved a complete loss of motive power, frequently accompanied by loss of power-assist to steering and brake systems (the latter conditions not present here). Factors that support recalls to remedy these conditions include a lack of warning or precursor symptoms to the driver; stalling during power-demand situations such as accelerating or to maintain highway speeds/uphill grades; and an inability to immediately “restart” or restore mobility to a stranded vehicle. Absent very high failure rates in new vehicles, NHTSA has not successfully pursued hesitation, reduced engine power modes, or stalling outside the conditions listed above, primarily because these conditions have not been found to demonstrate an unreasonable risk to motor vehicle safety. Experience of harsh shifting and transmission degradation over time would typically fall into this category, even if it leads to an eventual loss of motive power condition.
Based on the foregoing analysis, there is no reasonable possibility that an order concerning the notification and remedy of a safety-related defect would be issued as a result of granting Mr. Oliver's petition. Therefore, in view of the need to allocate and prioritize NHTSA's limited resources to best accomplish the agency's safety mission, the petition is denied.
Office of the Secretary, U.S. Department of Transportation (DOT).
Notice—Correction to Establishment of the Advisory Committee on Automation in Transportation (ACAT) and Solicitation of Nominations for Membership.
This notice corrects an October 20, 2016,
The deadline for nominations for Committee members must be received on or before November 16, 2016.
All nomination materials should be emailed to
John Augustine, U.S. Department of Transportation, Office of the Secretary, Office of Policy, Room W84-306, 1200 New Jersey Avenue SE., Washington, DC 20590; phone (202) 366-0353; email:
In a
In the prior notice, the Department of Transportation stated that individuals already serving on a Federal advisory committee will be ineligible for nomination. After further consideration, the Department finds it appropriate to consider applicants already serving on a Federal advisory committee. As a result, interested parties may self-nominate or submit a nomination for a candidate who already serves on another Federal advisory committee.
(1) Name, title, and relevant contact information (including phone, fax, and email address) of the individual requesting consideration;
(2) A letter of support from a company, union, trade association, academic or non-profit organization on letterhead containing a brief description why the nominee should be considered for membership;
(3) Short biography of nominee including professional and academic credentials;
(4) An affirmative statement that the nominee meets all Committee eligibility requirements.
Please do not send company, trade association, or organization brochures or
Nominations may be emailed to
Office of Foreign Assets Control, Treasury.
Notice.
The Treasury Department's Office of Foreign Assets Control (OFAC) is removing the names of five individuals, whose property and interests in property were blocked pursuant to Executive Order 13224 of September 23, 2001, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism,” from the list of Specially Designated Nationals and Blocked Persons (SDN List).
OFAC's action described in this notice was effective on October 27, 2016.
Associate Director for Global Targeting, tel.: 202/622-2420, Assistant Director for Sanctions Compliance & Evaluation, tel.: 202/622-2490, Assistant Director for Licensing, tel.: 202/622-2480, Office of Foreign Assets Control, or Chief Counsel (Foreign Assets Control), tel.: 202/622-2410, Office of the General Counsel, Department of the Treasury (not toll free numbers).
The SDN List and additional information concerning OFAC sanctions programs are available from OFAC's Web site (
The following individuals were removed from the SDN List, effective as of October 27, 2016.
1. AL-LIBY, Anas (a.k.a. AL-LIBI, Anas; a.k.a. AL-RAGHIE, Nazih; a.k.a. AL-RAGHIE, Nazih Abdul Hamed; a.k.a. AL-SABAI, Anas), Afghanistan; DOB 30 Mar 1964; alt. DOB 14 May 1964; POB Tripoli, Libya; citizen Libya (individual) [SDGT].
2. HUSAYN ALAYWAH, Al-Sayyid Ahmad Fathi; DOB 30 Jul 1964; POB Suez, Egypt; nationality Egypt (individual) [SDGT].
3. SHAWEESH, Yasser Abu (a.k.a. ABOU SHAWEESH, Yasser Mohamed; a.k.a. ABU SHAWEESH, Yasser Mohamed Ismail), Meckennheimer Str. 74a, Bonn 53179, Germany; Wuppertal Prison, Germany; DOB 20 Nov 1973; POB Benghazi, Libya; Passport 981358 (Egypt); alt. Passport 0003213 (Egypt); Travel Document Number C00071659 (Germany); alt. Travel Document Number 939254 (Egypt) (individual) [SDGT].
4. AIDER, Farid (a.k.a. ACHOUR, Ali), Via Milanese, 5, 20099 Sesto San Giovanni, Milan, Italy; DOB 12 Oct 1964; POB Algiers, Algeria; Italian Fiscal Code DRAFRD64R12Z301C (individual) [SDGT].
5. ABD AL HAFIZ, Abd Al Wahab (a.k.a. FERDJANI, Mouloud; a.k.a. “MOURAD”; a.k.a. “RABAH DI ROMA”), Via Lungotevere Dante, Rome, Italy; DOB 07 Sep 1967; POB Algiers, Algeria (individual) [SDGT].
Office of Foreign Assets Control, Treasury.
Notice.
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing the names of nine individuals whose property and interests in property have been blocked pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act), 21 U.S.C. 1901-1908, 8 U.S.C. 1182.
OFAC's actions described in this notice were effective on October 27, 2016.
Assistant Director, Sanctions Compliance & Evaluation, Office of Foreign Assets Control, U.S. Department of the Treasury, Washington, DC 20220, Tel: (202) 622-2490.
The SDN List and additional information concerning OFAC sanctions programs are available from OFAC's Web site (
On October 27, 2016, OFAC blocked the property and interests in property of the following nine individuals pursuant to section 805(b) of the Kingpin Act and placed them on the SDN List.
Individuals:
1. CASTILLO RODRIGUEZ, Julio Alberto, Mexico; DOB 11 Oct 1976; POB Apatzingan, Michoacan de Ocampo, Mexico; C.U.R.P. CARJ761011HMNSDL06 (Mexico) (individual) [SDNTK] (Linked To: CARTEL DE JALISCO NUEVA GENERACION; Linked To: LOS CUINIS; Linked To: J & P ADVERTISING, S.A. DE C.V.; Linked To: W&G ARQUITECTOS, S.A. DE C.V.). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of, CARTEL DE JALISCO NUEVA GENERACION and/or is directed by, or acting for or on behalf of CARTEL DE JALISCO NUEVA GENERACION and/or the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and thus meets the criteria for designation pursuant to § 805(b)(2) and/or (3) of the Kingpin Act, 21 U.S.C. 1904(b)(2) and/or (3).
2. GONZALEZ VALENCIA, Arnulfo, Mexico; DOB 22 Jun 1968; POB Aguililla, Michoacan de Ocampo, Mexico; C.U.R.P. GOVA680622HMNNLR02 (Mexico) (individual) [SDNTK] (Linked To: LOS CUINIS). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of, the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and/or is directed by, or acting for or on behalf of the LOS CUINIS DRUG
3. GONZALEZ VALENCIA, Edgar Eden, Mexico; DOB 08 Oct 1984; POB Aguililla, Michoacan de Ocampo, Mexico; C.U.R.P. GOVE841008HMNNLD01 (Mexico) (individual) [SDNTK] (Linked To: LOS CUINIS). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of, the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and/or is directed by, or acting for or on behalf of the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and thus meets the criteria for designation pursuant to § 805(b)(2) and/or (3) of the Kingpin Act, 21 U.S.C. 1904(b)(2) and/or (3).
4. GONZALEZ VALENCIA, Elvis (a.k.a. TAPIA CASTRO, Alejandro), Mexico; DOB 12 Oct 1980; alt. DOB 18 Mar 1979; POB Aguililla, Michoacan de Ocampo, Mexico; C.U.R.P. GOVE801012HMNNLL03 (Mexico); alt. C.U.R.P. TACA790318HJCPSL08 (Mexico); I.F.E. TPCSAL79031814H401 (Mexico) (individual) [SDNTK] (Linked To: CARTEL DE JALISCO NUEVA GENERACION; Linked To: LOS CUINIS). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of, CARTEL DE JALISCO NUEVA GENERACION and/or the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and/or is directed by, or acting for or on behalf of CARTEL DE JALISCO NUEVA GENERACION and/or the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and thus meets the criteria for designation pursuant to § 805(b)(2) and/or (3) of the Kingpin Act, 21 U.S.C. 1904(b)(2) and/or (3).
5. GONZALEZ VALENCIA, Marisa Ivette, Mexico; DOB 27 Jul 1988; POB Apatzingan, Michoacan de Ocampo, Mexico; C.U.R.P. GOVM880727MMNNLR08 (Mexico) (individual) [SDNTK] (Linked To: LOS CUINIS). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of, the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and/or is directed by, or acting for or on behalf of the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and thus meets the criteria for designation pursuant to § 805(b)(2) and/or (3) of the Kingpin Act, 21 U.S.C. 1904(b)(2) and/or (3).
6. GONZALEZ VALENCIA, Noemi (a.k.a. GONZALEV VALENCIA, Noemi), Mexico; DOB 05 Dec 1983; POB Aguililla, Michoacan de Ocampo, Mexico; C.U.R.P. GOVN831205MMNNLM07 (Mexico) (individual) [SDNTK] (Linked To: LOS CUINIS). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of, the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and/or is directed by, or acting for or on behalf of the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and thus meets the criteria for designation pursuant to § 805(b)(2) and/or (3) of the Kingpin Act, 21 U.S.C. 1904(b)(2) and/or (3).
7. OSEGUERA CERVANTES, Antonio (a.k.a. MORA GARIBAY, Joel; a.k.a. “Tony Montana”), Priv Linda Vista 3986, Fracc El Soler, Tijuana, B.C. 22110, Mexico; DOB 20 Aug 1958; POB Aguililla, Michoacan de Ocampo, Mexico; C.U.R.P. OECA580820HMNSRN04 (Mexico); I.F.E. OSCRAN58082016H800 (Mexico) (individual) [SDNTK] (Linked To: CARTEL DE JALISCO NUEVA GENERACION). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of CARTEL DE JALISCO NUEVA GENERACION and/or Nemesio OSEGUERA CERVANTES, and/or directed by, or acting for or on behalf of, CARTEL DE JALISCO NUEVA GENERACION and/or Nemesio OSEGUERA CERVANTES and therefore meets the criteria for designation pursuant to sections 805(b)(2) and/or (3) of the Kingpin Act, 21 U.S.C. 1904(b)(2) and/or (3).
8. QUINTANA NAVARRO, Maria Teresa, C. Jose Vasconcelos 556, Col. Colinas De La Normal, Guadalajara, Jalisco, Mexico; Efrain Gonzalez Luna 2481, Guadalajara, Jalisco 44140, Mexico; Efrain Gonzalez Luna 302, Guadalajara, Jalisco CP 44200, Mexico; DOB 05 Mar 1971; POB Guadalajara, Jalisco, Mexico; C.U.R.P. QUNT710305MJCNVR02 (Mexico) (individual) [SDNTK] (Linked To: CARTEL DE JALISCO NUEVA GENERACION; Linked To: LOS CUINIS). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of, CARTEL DE JALISCO NUEVA GENERACION, the LOS CUINIS DRUG TRAFFICKING ORGANIZATION, Nemesio OSEGUERA CERVANTES, and/or Abigael GONZALEZ VALENCIA and/or is directed by, or acting for or on behalf of CARTEL DE JALISCO NUEVA GENERACION, the LOS CUINIS DRUG TRAFFICKING ORGANIZATION, Nemseio OSEGUERA CERVANTES, and/or Abigael GONZALEZ VALENCIA and thus meets the criteria for designation pursuant to § 805(b)(2) and/or (3) of the Kingpin Act, 21 U.S.C. 1904(b)(2) and/or (3).
9. VERA LOPEZ, Fabian Felipe (a.k.a. LOPEZ, Favian Felipe; a.k.a. VARELLA LOPEZ, Ton; a.k.a. VERA LOPEZ, Felipe), Mexico; DOB 28 Oct 1967; POB Guadalajara, Jalisco, Mexico; C.U.R.P. VELF671028HJCRPL08 (Mexico) (individual) [SDNTK] (Linked To: LOS CUINIS). Materially assisting in, or providing financial support for or to, or providing services in support of, the international narcotics trafficking activities of, the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and/or Abigael GONZALEZ VALENCIA and/or is directed by, or acting for or on behalf of, the LOS CUINIS DRUG TRAFFICKING ORGANIZATION and/or Abigael GONZALEZ VALENCIA and thus meets the criteria for designation pursuant to § 805(b)(2) and/or (3) of the Kingpin Act, 21 U.S.C. 1904(b)(2) and/or (3).
United States Mint, Department of the Treasury.
Notice with request for comment.
For many years, the United States Mint has administered a program by which people and businesses could exchange bent and partial coins (commonly referred to as “mutilated coins”) for reimbursement. On November 2, 2015, the Mint suspended the exchange program to assess the security of the program and develop additional safeguards to enhance the integrity of the acceptance and processing of mutilated coinage. Since that time, the Mint has made significant progress in evaluating risks and identifying potential remedial measures. This notice and request for comment is to supplement the information that the Mint has collected to date.
Submit either electronic or written comments by November 15, 2016.
Submit electronic comments to
Sheila Barnett, Legal Counsel, Office of the Chief Counsel, United States Mint, at (202) 354-7624 or
For many years, the United States Mint has administered a program by which people and businesses could exchange bent and partial coins (commonly referred to as “mutilated coins”) for reimbursement. Regulations governing the program appear at 31 CFR part 100, subpart C. Bent coins are defined as U.S. coins which are bent or deformed so as to preclude normal machine counting but which are readily and clearly identifiable as to genuineness and denomination. Partial coins are defined as U.S. coins which are not whole; partial coins must be readily and clearly identifiable as to genuineness and denomination. This notice is not seeking comments on changing the definitions of bent or partial coins.
On November 2, 2015, the Mint suspended its exchange of bent and partial coins to assess the security of the program and develop additional safeguards to enhance the integrity of the acceptance and processing of mutilated coinage. On May 2, 2016, the Mint extended the suspension. The program will resume at such time as the new regulations are finalized and published. Some of the safeguards the Mint is considering include requiring participant certification, coinage material authentication, chain of custody information, and annual submission limitations. The Mint is now seeking input on the effects of such measures on stakeholders, as well as other factors that should be considered to enhance the integrity of the acceptance and processing of mutilated coinage.
The redemption of uncurrent coins, as defined by 31 CFR 100.10(a), is not being considered by the Mint. Uncurrent coins may be redeemed only at Federal Reserve banks and branches in accordance with the criteria and procedures set forth in 31 CFR 100.10.
Office of Postsecondary Education, Department of Education.
Final regulations.
The Secretary establishes new regulations governing the William D. Ford Federal Direct Loan (Direct Loan) Program to establish a new Federal standard and a process for determining whether a borrower has a defense to repayment on a loan based on an act or omission of a school. We also amend the Direct Loan Program regulations to prohibit participating schools from using certain contractual provisions regarding dispute resolution processes, such as predispute arbitration agreements or class action waivers, and to require certain notifications and disclosures by schools regarding their use of arbitration. We amend the Direct Loan Program regulations to codify our current policy regarding the impact that discharges have on the 150 percent Direct Subsidized Loan Limit. We amend the Student Assistance General Provisions regulations to revise the financial responsibility standards and add disclosure requirements for schools. Finally, we amend the discharge provisions in the Federal Perkins Loan (Perkins Loan), Direct Loan, Federal Family Education Loan (FFEL), and Teacher Education Assistance for College and Higher Education (TEACH) Grant programs. The changes will provide transparency, clarity, and ease of administration to current and new regulations and protect students, the Federal government, and taxpayers against potential school liabilities resulting from borrower defenses.
These regulations are effective July 1, 2017. Implementation date: For the implementation dates of the included regulatory provisions, see the
For further information related to borrower defenses, Barbara Hoblitzell at (202) 453-7583 or by email at:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-800-877-8339.
The final regulations give students access to consistent, clear, fair, and transparent processes to seek debt relief; protect taxpayers by requiring that financially risky institutions are prepared to take responsibility for losses to the government for discharges of and repayments for Federal student loans; provide due process for students and institutions; and warn students in advertising and promotional materials, using plain language issued by the Department, about proprietary schools at which the typical student experiences poor loan repayment outcomes—defined in these final regulations as a proprietary school at which the median borrower has not repaid in full, or made loan payments sufficient to reduce by at least one dollar the outstanding balance of, the borrower's loans received at the institution—so that students can make more informed enrollment and financing decisions.
Section 455(h) of the Higher Education Act of 1965, as amended (HEA), 20 U.S.C. 1087e(h), authorizes the Secretary to specify in regulation which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a Direct Loan. Section 685.206(c), governing defenses to repayment, has been in place since 1995 but, until recently, has rarely been used. Those final regulations specify that a borrower may assert as a defense to repayment any “act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable State law.”
In response to the collapse of Corinthian Colleges (Corinthian) and the flood of borrower defense claims submitted by Corinthian students stemming from the school's misconduct, the Secretary announced in June 2015 that the Department would develop new regulations to establish a more accessible and consistent borrower defense standard and clarify and streamline the borrower defense process to protect borrowers and improve the Department's ability to hold schools accountable for actions and omissions that result in loan discharges.
These final regulations specify the conditions and processes under which a borrower may assert a defense to repayment of a Direct Loan, also referred to as a “borrower defense.” The current standard allows borrowers to assert a borrower defense if a cause of action would have arisen under applicable State law. In contrast, these final regulations establish a new Federal standard that will allow a borrower to assert a borrower defense on the basis of a substantial misrepresentation, a breach of contract, or a favorable, nondefault contested judgment against the school, for its act or omission relating to the making of the borrower's Direct Loan or the provision of educational services for which the loan was provided. The new standard will apply to loans made after the effective date of the proposed regulations. The final regulations establish a process for borrowers to assert a borrower defense that will be implemented both for claims that fall under the existing standard and for later claims that fall under the new, proposed standard. In addition, the final regulations establish the conditions or events upon which an institution is or may be required to provide to the Department financial protection, such as a letter of credit, to help protect students, the Federal government, and taxpayers against potential institutional liabilities.
These final regulations also prohibit a school participating in the Direct Loan Program from obtaining, through the use of contractual provisions or other agreements, a predispute agreement for
Summary of the Major Provisions of This Regulatory Action: For the Direct Loan Program, the final regulations—
• Clarify that borrowers with loans first disbursed prior to July 1, 2017, may assert a defense to repayment under the current borrower defense State law standard;
• Establish a new Federal standard for borrower defenses, and limitation periods applicable to the claims asserted under that standard, for borrowers with loans first disbursed on or after July 1, 2017;
• Establish a process for the assertion and resolution of borrower defense claims made by individuals;
• Establish a process for group borrower defense claims with respect to both open and closed schools, including the conditions under which the Secretary may allow a claim to proceed without receiving an application;
• Provide for remedial actions the Secretary may take to collect losses arising out of successful borrower defense claims for which an institution is liable; and
• Add provisions to schools' Direct Loan Program participation agreements (PPAs) that, for claims that may form the basis for borrower defenses—
Prevent schools from requiring that students first engage in a school's internal complaint process before contacting accrediting and government agencies about the complaint;
Prohibit the use of predispute arbitration agreements by schools;
Prohibit the use of class action lawsuit waivers;
To the extent schools and borrowers engage in arbitration in a manner consistent with applicable law and regulation, require schools to disclose to and notify the Secretary of arbitration filings and awards; and
Require schools to disclose to and notify the Secretary of certain judicial filings and dispositions.
The final regulations also revise the Student Assistance General Provisions regulations to—
• Amend the definition of a misrepresentation to include omissions of information and statements with a likelihood or tendency to mislead under the circumstances. The definition would be amended for misrepresentations for which the Secretary may impose a fine, or limit, suspend, or terminate an institution's participation in title IV, HEA programs. This definition is also adopted as a basis for alleging borrower defense claims for Direct Loans first disbursed after July 1, 2017;
• Clarify that a limitation may include a change in an institution's participation status in title IV, HEA programs from fully certified to provisionally certified;
• Amend the financial responsibility standards to include actions and events that would trigger a requirement that a school provide financial protection, such as a letter of credit, to insure against future borrower defense claims and other liabilities to the Department;
• Require proprietary schools at which the median borrower has not repaid in full, or paid down by at least one dollar the outstanding balance of, the borrower's loans to provide a Department-issued plain language warning in promotional materials and advertisements; and
• Require a school to disclose on its Web site and to prospective and enrolled students if it is required to provide financial protection, such as a letter of credit, to the Department.
The final regulations also—
• Expand the types of documentation that may be used for the granting of a discharge based on the death of the borrower (“death discharge”) in the Perkins, FFEL, Direct Loan, and TEACH Grant programs;
• Revise the Perkins, FFEL, and Direct Loan closed school discharge regulations to ensure borrowers are aware of and able to benefit from their ability to receive the discharge;
• Expand the conditions under which a FFEL or Direct Loan borrower may qualify for a false certification discharge;
• Codify the Department's current policy regarding the impact that a discharge of a Direct Subsidized Loan has on the 150 percent Direct Subsidized Loan limit; and
• Make technical corrections to other provisions in the FFEL and Direct Loan program regulations and to the regulations governing the Secretary's debt compromise authority.
Costs and Benefits: As noted in the NPRM, the primary potential benefits of these regulations are: (1) An updated and clarified process and a Federal standard to improve the borrower defense process and usage of the borrower defense process to increase protections for students; (2) increased financial protections for taxpayers and the Federal government; (3) additional information to help students, prospective students, and their families make informed decisions based on information about an institution's financial soundness and its borrowers' loan repayment outcomes; (4) improved conduct of schools by holding individual institutions accountable and thereby deterring misconduct by other schools; (5) improved awareness and usage, where appropriate, of closed school and false certification discharges; and (6) technical changes to improve the administration of the title IV, HEA programs. Costs associated with the regulations will fall on a number of affected entities including institutions, guaranty agencies, the Federal government, and taxpayers. These costs include changes to business practices, review of marketing materials, additional employee training, and unreimbursed claims covered by taxpayers. The largest quantified impact of the regulations is the transfer of funds from the Federal government to borrowers who succeed in a borrower defense claim, a significant share of which will be offset by the recovery of funds from institutions whose conduct gave rise to the claims.
On June 16, 2016, the Secretary published a notice of proposed rulemaking (NPRM) for these parts in the
The Secretary is exercising his authority under section 482(c) to designate the following new regulations included in this document for early implementation beginning on November
(1) Section 682.211(i)(7).
(2) Section 682.410(b)(6)(viii).
Additionally, the Secretary intends to exercise his authority under section 482(c) of the HEA to permit the Secretary and guaranty agencies to implement the new and amended regulations specific to automatic closed school discharges in §§ 674.33(g)(3)(ii), 682.402(d)(8)(ii) and 685.214(c)(2)(ii) as soon as operationally possible after the publication date of these final regulations. We will publish a separate
The Secretary has not designated any of the remaining provisions in these final regulations for early implementation. Therefore, the remaining final regulations included in this document are effective July 1, 2017.
We discuss substantive issues under the sections of the proposed regulations to which they pertain. Generally, we do not address technical or other minor changes or recommendations that are out of the scope of this regulatory action or that would require statutory changes in this preamble.
An analysis of the comments and of any changes in the regulations since publication of the NPRM follows.
Other commenters expressed support for the proposed regulations, but felt that the Department should further strengthen them. For example, these commenters believed that the final regulations should provide full loan relief to all defrauded students, eliminate the six-year time limit to recover amounts that borrowers have already paid on loans for which they have a borrower defense based on a breach of contract or substantial misrepresentation, and allow automatic group discharges without an application in cases where there is sufficient evidence of a school's wrongdoing.
Many commenters agreed with the Department's proposed objectives, but believed that the proposed regulations would have the unintended consequences of creating a “cottage industry” of opportunistic attorneys and agents attempting to capitalize on students who have been, or believe they have been, victims of wrongdoing by schools and unleashing a torrent of frivolous and costly lawsuits, which would tarnish the reputation of many institutions. The commenters also believed that the proposed Federal standard is so broad that borrowers will have nothing to lose by claiming a borrower defense even if they are employed and happy with their college experience.
Many commenters did not support the proposed regulations and stated that the Department should completely revise them and issue another NPRM and 30-day comment period, or that the proposed regulations should be withdrawn completely. The commenters were concerned that the projected net budget impact provided in the NPRM would undermine the integrity of the Direct Loan Program and that neither American taxpayers, nor schools that have successfully educated students, could cover these costs if thousands of students or graduates start requesting discharges of their loans. Other commenters stated that the proposed regulations would create unneeded administrative and financial burdens for institutions that work hard to comply with the Department's regulations and establish new substantive standards of liability, new procedural issues, new burdens of proof, widespread and unwarranted “triggering” of the financial responsibility requirements, and the abolition of a “Congressionally favored” arbitration remedy, that are unnecessary or counterproductive.
The commenter contended that the proposed regulations do not ensure Constitutional due process because they do not ensure that schools would have the right to receive notice of all the evidence presented by a borrower in the new borrower defense proceedings. The commenter stated that the lack of due process also affects the process for deciding claims, under which the Department is effectively the prosecutor, the judge, the only source of appeal, and the entity tasked with executing judgment.
The commenter also contended that a breach of contract or a misrepresentation determination are determinations that normally arise in common law claims and defenses and are subject to the expertise of the courts, rather than a particular government agency. The commenter believes that these determinations are not matters of public right, but are instead matters of “private right, that is, of the liability of one individual to another under the law as defined,” which cannot be delegated outside the judiciary.
Even if these common law rights of the borrower and the school were to be considered simply private rights, Congress could properly consign their adjudication to the Department, as it did in committing purely private rights of the investor and broker asserted in its reparations program to the Commodity Futures Trading Commission for adjudication.
As to the assertion that committing adjudication of these claims to the Department deprives a party of the right to trial by jury, the Court has long rejected that argument, as it stated in
We address the comment with respect to ensuring due process in the sections of this preamble specific to the framework for the borrower defense claims process.
Another commenter questioned whether the Department would have a valid right to enforce a collection against an institution in the absence of what the commenter called a “third-party adjudication” of the loan discharge.
A commenter stated that the Department could not recover from the institution losses incurred from
Applicable law gives the Department the right to recover from the school losses incurred on Direct Loans for several reasons. First, section 437(c) of the HEA gives the Department explicit authority to recover certain losses on Direct and FFEL loans. Section 437(c) provides that, upon discharge of a FFEL Loan for a closed school discharge, false certification discharge, or unpaid refund, the Secretary is authorized to pursue any claim of the borrower against the school, its principals, or other source, and the borrower is deemed to have assigned his or her claim against the school to the Secretary. 20 U.S.C. 1087(c). Section 487(c)(3)(ii) authorizes the Secretary to deduct the amount of any civil penalty, or fine, imposed under that section from any amounts owed to the institution, but any claim for recovery is not based on authority to fine under that section. Section 432(a)(6) authorizes the Secretary to enforce any claim, however acquired, but does not describe what those claims may be. 20 U.S.C. 1082(a)(6) (applicable to Direct Loan claims by virtue of section 455(a)(1), 20 U.S.C. 1078e(a)(1)). In addition, section 498(c)(1)(C) of the HEA, 20 U.S.C. 1099c(c)(1)(C), implies that the Secretary has claims that the Secretary is expected to enforce and recover against the institution for “liabilities and debts”—the “liabilities of such institution to the Secretary for funds under this title,
There are two distinct, and overlapping, lines of authority that empower the Secretary to recover from the school the amount of losses incurred due to borrower defense claims. The first relies on the Secretary's longstanding interpretation of the HEA as authorizing such recovery. The second relies on the government's rights under common law.
In both the Direct Loan and FFEL programs, the institution plays a central role in determining which individuals receive loans, the amount of loan an individual receives, and the Federal interest subsidy, if any, that an individual qualifies to receive on the loan, a determination based on assessment of financial need. In the Direct Loan Program, the institution determines whether and to whom the Department makes a loan; in the FFEL Program, the institution determines whether and to whom a private lender may make a loan that will be federally reinsured.
In
Similarly, the Department is authorized under the HEA to administer the Direct Loan Program. The HEA directs that, generally, Direct Loans are made under the same “terms, conditions, and benefits” as FFEL Loans. 20 U.S.C. 1087a(b)(2), 1087e(a)(1). In 1994 and 1995, the Department interpreted that Direct Loan authority as giving the Department authority to hold schools liable for borrower defenses under both the FFEL and Direct Loan programs, and stated that, for this reason, it was not pursuing more explicit regulatory authority to govern the borrower defense process.
Thus, in Dear Colleague Letter Gen 95-8 (Jan. 1995), the Department stated (emphasis in original):
Finally, some parties warn that Direct Loan schools will face potential liability from claims raised by borrowers that FFEL schools will not face. . . . The liability of any school—whether a Direct Loan or FFEL participant—for conduct that breaches a duty owed to its students is already established under law other than the HEA—usually state law. In fact, borrowers will have no legal claims against Direct Loan schools that FFEL borrowers do not already have against FFEL schools. The potential legal liability of schools under both programs for those claims is the same, and the Department proposes to develop procedures and standards to ensure that in the future schools in both programs will face identical actual responsibility for borrower claims based on grievances against schools.
The Direct Loan statute creates NO NEW LIABILITIES for schools; the statute permits the Department to recognize particular claims students have against schools as defenses to the repayment of Direct Loans held by the Department. Current Direct Loan regulations allow a borrower to assert as a defense any claim that would stand as a valid claim against the school under State law.
. . . Congress intended that schools participating in either FFEL or Direct Loan programs should receive parallel treatment on important issues, and the Department has already committed during negotiated rulemaking to apply the same borrower defense provisions to BOTH the Direct Loan and FFEL programs. Therefore, schools that cause injury to student borrowers that give rise to legitimate claims should and, under these proposals, will bear the risk of loss, regardless of whether the loans are from the Direct Loan or FFEL Program.
The Department reiterated this position in a notice published in the
Some members of the FFEL industry have asserted that there will be greater liabilities for institutions participating in the Direct Loan Program than for institutions participating in the FFEL Program as a consequence of differences in borrower
The Department has consistently stated that the potential legal liability resulting from borrower defenses for institutions participating in the Direct Loan Program will not be significantly different from the potential liability for institutions participating in the FFEL Program. (59 FR 61671, December 1, 1994, and Dear Colleague Letter GEN 95-8 January 1995) That potential liability usually results from causes of action allowed to borrowers under various State laws, not from the HEA or any of its implementing regulations. Institutions have expressed some concern that there is a potential for greater liability for institutions in the Direct Loan Program than in the FFEL Program under 34 CFR 685.206. The Secretary believes that this concern is based on a misunderstanding of current law and the intention of the Direct Loan regulations. The Direct Loan regulations are intended to ensure that institutions participating in the FFEL and Direct Loan programs have a similar potential liability. Since 1992, the FFEL Program regulations have provided that an institution may be liable if a FFEL Program loan is legally unenforceable. (34 CFR 682.609) The Secretary intended to establish a similar standard in the Direct Loan Program by issuing 34 CFR 685.206(c). Consistent with that intent, the Secretary does not plan to initiate any proceedings against schools in the Direct Loan Program unless an institution participating in the FFEL Program would also face potential liability. . . .
Thus, the Secretary will initiate proceedings to establish school liability for borrower defenses in the same manner and based on the same reasons for a school that participates in the Direct Loan Program or the FFEL Program. . . .
Thus, applying the
Alternatively, common law provides the Department a legal right to recover from the school the losses it incurs due to recognition of borrower defenses on Direct Loans. Courts have long recognized that the government has the same rights under common law as any other party.
The school enters into a PPA with the Department in order to participate in the Direct Loan Program. 20 U.S.C. 1087(a). The PPA is a contract.
Specifically, under the Direct Loan Program, the HEA describes the institution pursuant to its agreement with the Department as “originating” Direct Loans, 20 U.S.C. 1087c(a), 1087d(b), and accepting “responsibility and financial liability stemming from its failure to perform its functions pursuant to the agreement.” 20 U.S.C. 1087d(a)(3), 34 CFR 685.300(b)(8). The regulations describe the role of the institution as “originating” Direct Loans. 34 CFR 685.300(c), 685.301.
As a loan “originator” for the Department, the school is the authorized agent of the Department: The school acts pursuant to Department direction, the school manifests its intent to act as agent by entering into the PPA, and most importantly, the school has power to alter the legal relationships between the principal (the Department) and third parties (the students). But for the school's act in originating the loan, there would be no lender-borrower relationship.
The interests of the Department as lender and principal in this Direct Loan Program relationship with the institution are simple: To enable students and parents to obtain Federal loans to pay for postsecondary education. 20 U.S.C. 1087a. Congress selected the vehicle—a loan, not a grant—under which the borrower repays the loan, made with public funds, which in turn enables the making of new loans to future borrowers. Acts or omissions by an agent of the Department that frustrate repayment by the borrower of the amount the Department lends are contrary to the Department's benefit and interest. Acts or omissions by the institution, as the Department's loan-making agent, that harm the Department's interests in achieving the objectives of the loan program violate the duty of loyalty owed by the institution as the Department's loan originator, or agent. The Department made clear at the inception of the Direct Loan relationship with the institution that the institution would be liable for losses caused by its acts and omissions, in 1994 and 1995, when the Department publicly and unequivocally adopted the “borrower defense to repayment” regulation, 34 CFR 685.206, and, in the
The government has the same protections against breach of fiduciary duty that extend under common law to any principal against its agent.
Applying this common law analysis to the relationship between the Department and the Direct Loan participating institution as it bears on the Department's right to recover, we note, first, that the Department has the rights available under common law to any other party, without regard to whether any statute explicitly confers such rights. Second, the institution enters into a contract with the Department pursuant to which the institution acts as the Department's agent in the making of Direct Loans. The school is the loan “originator” for the Department. Third, under common law, an agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected with the agency. Fourth, under common law, an agent's
The commenter who argued that the Secretary incurs the loss by honoring the borrower defense “voluntarily,” and is barred by that fact from recovery against the institution, misconceives the nature of the claim. As early as
In addition, section 410 of the General Education Provisions Act (GEPA) provides the Secretary with authority to make, promulgate, issue, rescind, and amend rules and regulations governing the manner of operations of, and governing the applicable programs administered by, the Department. 20 U.S.C. 1221e-3. Further, under section 414 of the Department of Education Organization Act, the Secretary is authorized to prescribe such rules and regulations as the Secretary determines necessary or appropriate to administer and manage the functions of the Secretary or the Department. 20 U.S.C. 3474. These general provisions, together with the provisions in the HEA and common law explained earlier, noted above, authorize the Department to promulgate regulations that govern defense to repayment standards, process, and institutional liability.
With regard to the commenters who believe that the Department's proposals are so substantive and commit such an
One commenter stated that input from representatives of publicly held proprietary institutions was not included in the public comment process prior to the establishment of a negotiated rulemaking committee. This commenter also stated that only representatives from private, proprietary institutions were represented on the negotiated rulemaking committee and that those representatives had no expertise in the active management of an institution. The commenter also stated that the NPRM 45-day public comment process was too short.
Several commenters contended that the Department failed to provide adequate notice to the public of the scope of issues to be discussed at the negotiated rulemaking. The commenters stated that the issues of financial responsibility and arbitration clauses were not included in the
We note that the Department received several nominations to seat representatives from proprietary schools on the committee after publication of our October 20, 2015,
This process did not result in proprietary sector nominees with the requisite qualifications, so we published a second
We disagree with the commenters who contended that the Department failed to provide adequate public notice and failed to engage and receive input from the public on the scope of issues to be discussed at the negotiated rulemaking, in particular the issues of financial responsibility and arbitration clauses. On August 20, 2015, the Department published a notice in the
Questions to be considered by the negotiating committee include:
1. Should the Department take additional steps to protect students and taxpayers from (a) potential borrower defense to repayment (DTR) claims, (b) liabilities stemming from closed school discharges, and (c) other conditions that may be detrimental to students?
If so, what conditions, triggering events, metric-based standards, or other risk factors should the Department consider indicative of failing financial responsibility, administrative capability, or other standards?
What should the consequences be for a violation? Letter of credit or other financial guarantee? Disclosure requirements and student warnings? Other consequences?
• If a letter of credit or other financial guarantee is required, how should the amount be determined?
We received written testimony from other parties that supported both holding institutions financially accountable for the costs associated with borrower defenses and limiting a school's use of certain dispute resolution procedures.
We disagree with the commenter who contended that the Department's timetable for developing borrower defense regulations was rushed and that the comment period did not give the public enough time to fully consider the proposals. We believe that the 45-day public comment period provided sufficient time for interested parties to submit comments, particularly given that prior to issuing the proposed regulations, the Department conducted two public hearings and three negotiated rulemaking sessions, where stakeholders and members of the public had an opportunity to weigh in on the development of much of the language reflected in the proposed regulations. In addition, the Department also posted the NPRM on its Web site several days before publication in the
Several commenters urged the Department to reconsider the changes to the financial responsibility standards to include actions and events that would trigger a requirement that a school provide financial protection, such as a letter of credit, to insure against future borrower defense claims and other liabilities, given their sweeping scope and potentially damaging financial impact on historically black colleges and universities (HBCUs). The commenters contended that these provisions could lead to the closure of HBCUs that are not financially robust but provide quality educational opportunities to students and noted that HBCUs have not been the focus of Federal and State investigations nor have they defrauded students or had false claims lawsuits filed against them. These commenters expressed concern about a number of the specific financial protection triggers, including, but not limited to, the triggers relating to lawsuits, actions by accrediting agencies, and cohort default rate.
We note that we address commenters' arguments with respect to specific provisions of the regulations in the sections of this preamble specific to those provisions.
We also note that HBCUs play a vital role in the Nation's higher education system. We recognize the concerns commenters raised regarding the financial protection provisions of the proposed regulations, which they argue would have a damaging financial impact on HBCUs. We note that the triggers are designed to identify signs, and to augment the Department's tools for detection, of impending financial difficulties. If an institution is subject to material actions or events that are likely to have an adverse impact on the financial condition or operations of an institution, we believe that the Federal government and taxpayers should be protected from any resulting losses incurred by requiring a letter or credit, regardless of the institution's sector. As commenters mentioned, our recent experience suggests that HBCUs have not been the subject of government agency suits or other litigation by students or others, or of administrative enforcement actions. Institutions that do not experience these kinds of claims,
Finally, we have made a number of changes to the proposed triggers that address the commenters' specific objections to particular triggers, to more sharply focus the automatic triggers on actions and events that are likely to affect a school's financial stability. For instance, as we stated in other sections of this preamble, in light of the significant comments received regarding the potential for serious unintended consequences if the accreditation action triggers were automatic, we are revising the accreditation trigger so that accreditation actions such as show cause and probation or equivalent actions are discretionary. We note that we address commenters' arguments with respect to additional specific financial protection triggers, and any changes we have made in the final regulations, in the sections of this preamble specific to those provisions.
Another group of commenters noted that the proposed Federal standard is a positive complement to consumer protections already provided by State law. Another group of commenters
One commenter explicitly endorsed our position that general HEA eligibility or compliance violations by schools could not be used a basis for a borrower defense.
Another group of commenters noted that the proposed Federal standard provides an efficient, transparent, and fair process for borrowers to pursue relief. According to these commenters, the Federal standard eliminates the potential for disparate application of this borrower benefit inherent with the current rule's State-based standard, and enables those who are providing training and support to multiple institutions to develop standardized guidance.
A different group of commenters expressed support for the Federal standard, noting that it would be challenging for us to adjudicate claims based on 50 States' laws. Yet another group of commenters requested that the new Federal standard be applied retroactively when a borrower makes a successful borrower defense claim and has loans that were disbursed both before and after July 1, 2017.
However, we do not agree with the commenters' contention that we are engaging in overreach to expand our enforcement options, nor have we disregarded existing consumer protection remedies. The HEA provides specific authority to the Secretary to conduct institutional oversight and enforcement of the title IV regulations. The borrower defense regulations do not supplant consumer protections available to borrowers. Rather, the borrower defense regulations describe the circumstances under which the Secretary exercises his or her long-standing authority to relieve a borrower of the obligation to repay a loan on the basis of an act or omission of the borrower's school. The Department's borrower defense process is distinct from borrowers' rights under State law. State consumer protection laws establish causes of action an individual may bring in a State's courts; nothing in the Department's regulation prevents borrowers from seeking relief through State law in State courts. As noted in the NPRM, 81 FR 39338, the limitations of the borrower defense process should not be taken to represent any view regarding other issues and causes of action under other laws and regulations that are not within the Department's authority.
As to the request to make the new Federal standard available to all Direct Loan borrowers, we cannot apply the new Federal standard retroactively when a borrower makes a successful borrower defense claim and has loans that were disbursed both before and after July 1, 2017. Loans made before July 1, 2017 are governed by the contractual rights expressed in the existing Direct Loan promissory notes. These promissory notes incorporate the current borrower defense standard, which is based on an act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable State law. Promissory notes for loans made after July 1, 2017 will include a discussion of the new Federal standard for borrower defense claims.
Another commenter expanded on this position, asserting that the evidentiary standard in most States for fraudulent misrepresentation is clear and convincing evidence. A few commenters echoed these viewpoints and suggested that the perceived minimal burden of proof may encourage bad actors to entice borrowers into filing false claims.
A couple of other commenters wrote that the standard is not clear enough to preclude students from asserting claims of misrepresentation without supporting evidence. These commenters suggested that the proposed regulations presume that all proprietary schools engage in deliberate misrepresentation.
The Department is aware of unscrupulous businesses that prey upon distressed borrowers, charging exorbitant fees to enroll them in Federal loan repayment plans that are freely available. On January 28, 2016, the Department sent cease and desist letters to two third-party “debt relief” companies that were using the Department's official seal without authorization. The misuse of the Department's Seal is part of a worrying trend. Some of these companies are charging large up-front or monthly fees for Federal student aid services offered by the Department of Education and its student loan servicers for free. In April of 2016, the Department launched several informational efforts to direct borrowers to the Department's free support resources, as well as to share information regarding State and Federal entities that have the authority to act against companies that engage in deceptive or unfair practices. Although these or similar opportunists may seek to profit from filing false claims, the Department will be aggressive in curtailing this activity, and will remain vigilant to help ensure that bad actors do not profit from this process.
We do not agree that the Federal standard will incent borrowers to assert claims of misrepresentation without sufficient evidence to substantiate their claims. As explained in more detail under “Process for Individual Borrowers,” under § 685.222(a)(2), a borrower in the individual process in § 685.222(e) bears the burden of proof in establishing that the elements of his or her claim have been met. In a group process under § 685.222(f) to (h), this burden falls on the designated Department official. Borrower defense claims that do not meet the evidentiary standard will be denied. We also disagree with the commenters' interpretation of the borrower defense regulations as based on a presumption that all proprietary institutions engage in deliberate misrepresentation. These borrower defense regulations are applicable to and designed to address all institutions of postsecondary education participating in the Direct Loan Program; further, they contain no presumption regarding the activities of any institution, but instead provide a fair process for determining whether
As explained in more detail under “Substantial Misrepresentation,” we do not believe it is necessary to incorporate an element of intent or knowledge into the substantial misrepresentation standard. This reflects the Department's longstanding position that a misrepresentation does not require knowledge or intent on the part of the institution. The Department will continue to operate within a rule of reasonableness and will evaluate available evidence of extenuating, mitigating, and aggravating factors prior to issuing any sanctions pursuant to 34 CFR part 668, subpart F. We will also consider the totality of the circumstances surrounding any misrepresentation for borrower defense determinations. However, an institution will generally be responsible for harm to borrowers caused by its misrepresentations, even if they are not intentional. We continue to believe that this is more reasonable and fair than having the borrower (or taxpayers) bear the cost of such injuries. It also reflects the consumer protection laws of many States.
Similarly, we do not believe it is necessary or appropriate to adopt an intent element for the breach of contract standard. Generally, intent is not a required element for breach of contract, and we do not see a need to depart from that general legal principle here.
Regardless of the point in time within the statute of limitations at which a borrower defense claim is made, the borrower will be required to present a case that meets or exceeds the preponderance of the evidence standard.
Several commenters suggested that the proposed Federal standard effectively reduces, preempts, or repeals borrowers' current rights under the current, State law-based standard.
According to another commenter, the proposed acceptance of favorable, nondefault, contested judgments based on State law suggests that allegations of State law violations should provide sufficient basis for a borrower defense claim. Another group of commenters contended that, when a Federal law or regulation intends to provide broad consumer protections, it generally does not supplant all State laws, but rather, replaces only those that provide less protection to consumers.
A group of commenters noted that the HEA's State authorization regulations require States to regulate institutions and protect students from abusive conduct. According to these commenters, the laws States enact under this authority would not be covered by the Federal standard unless the borrower obtained a favorable, nondefault, contested judgment.
Additionally, one commenter believed that providing a path to borrower defense based on act or omission of the school attended by the student that would give rise to a cause of action under applicable State law would preserve the relationship between borrower defense, defense to repayment, and the “Holder in Due Course” rule of the Federal Trade Commission (FTC).
These commenters stated that the Department has not provided sufficient evidence to support its assertions that borrower defense determinations based on a cause of action under applicable State law results or would result in inequitable treatment for borrowers, or that the complexity of adjudicating State-based claims has increased due to the expansion of distance education. Further, these commenters also stated that the Department has not provided any examples of cases that would meet the standard required to base a borrower defense claim on a nondefault, contested judgement based on State law.
A group of commenters contended that State law provides the most comprehensive consumer protections to borrowers. Other commenters contended that State law provides clarity to borrowers and schools, as precedents have been established that elucidate what these laws mean with respect to the rights and responsibilities of the parties.
Another commenter suggested that providing borrowers comprehensive options to claim a borrower defense, including claims based on violation of State law, should be an essential precept of borrower relief.
One commenter contended that the elimination of the State standard is at odds with the proposed ban on mandatory arbitration, as this ban will clear the way for borrowers to pursue claims against their schools in State court.
Several commenters noted that the Department will continue to apply State law standards to borrower defense claims for loans disbursed prior to July 2017, necessitating the continued understanding and application of State laws regardless of whether or not they remain a basis for borrower defense claims for loans disbursed after July 2017.
A group of commenters expressed concern that borrowers with loans disbursed before July 2017 can access the Federal standard by consolidating their loans; however, borrowers with loans disbursed after July 2017 can only avail themselves of the State standard by obtaining a nondefault, contested judgment. They contended that Department should not introduce this inequity into the Federal student loan programs.
Another group of commenters asserted that defining bases for future borrower defense claims based on past institutional misconduct may limit the prosecution of future forms of misconduct that are unforeseeable.
Several commenters noted that many borrowers lack the resources necessary to obtain a nondefault, contested judgment based on State law. Moreover, these borrowers would not have access to the breadth of data and evidence available to the Department.
Several commenters contended that borrowers whose schools have violated State law should not have to rely upon their State's Attorney General (AG) to access Federal loan relief.
One commenter wrote that creating multiple paths a borrower may use to pursue a borrower defense claim is unnecessarily complex.
A group of commenters remarked that the proposed Federal standard is both too complex and the evidentiary standard too low, suggesting that the prior State standard was more appropriate for borrower defense claims.
We agree, as proposed in the NPRM and reflected in these final regulations, that the acceptance of favorable, nondefault, contested judgments based on State or Federal law violations may serve as a sufficient basis for a borrower defense claim. We believe it is important to enable borrowers to bring borrower defense claims based on those judgments, but we do not think this means that we should maintain the State-based standard.
We acknowledge that the HEA's State authorization regulations require States to regulate institutions and protect students from abusive conduct and that the laws States have enacted in this role would only be covered by the Federal standard where the borrower obtained a favorable, nondefault, contested judgment. However, we do not view this as a compelling reason to maintain an exclusively State-based standard, or a standard that also incorporates State law in addition to the Federal standard, for borrower defense.
We disagree that the Federal standard for borrower defense should incorporate the FTC's Holder Rule. We acknowledge that the current borrower defense regulation's basis in applicable State law has its roots in the Department's history with borrower defense.
We have acknowledged that potential disparities may exist as students in one State may receive different relief than students in another State, despite having common facts and claims. This concern is substantiated, in part, by comments made by non-Federal negotiators and members of the public in response to the NPRM, asserting that consumer protections laws vary greatly from State to State.
We have also described how the complexity of adjudicating State-based claims for borrower defense has increased due to the expansion of distance education. As noted in the NPRM (81 FR 39335 to 39336), while a determination might be made as to which State's laws would provide protection from school misconduct for borrowers who reside in one State but are enrolled via distance education in a program based in another State, some States have extended their rules to protect these students, while others have not.
Additionally, we have discussed the administrative burden to the Department and difficulties Department has experienced in determining which States' laws apply to any borrower defense claim and the inherent uncertainties in interpreting another authorities' laws. 81 FR 39339.
We agree that borrower relief should include comprehensive options, including claims based on violations of State law. While we believe that the proposed standards will capture much of the behavior that can and should be recognized as the basis for borrower defenses, it is possible that some State laws may offer borrowers important protections that do not fall within the scope of the Department's Federal standard. To account for these situations, the final regulations provide that nondefault, contested judgments obtained against a school based on any State or Federal law, may be a basis for a borrower defense claim, whether obtained in a court or an administrative tribunal of competent jurisdiction. Under these regulations, a borrower may use such a judgment as the basis for a borrower defense if the borrower was personally affected by the judgment, that is, the borrower was a party to the case in which the judgment was entered, either individually or as a member of a class. To support a borrower defense claim, the judgment would be required to pertain to the making of a Direct Loan or the provision of educational services to the borrower.
While State law may provide clarity to borrowers and schools regarding the rights and responsibilities of the parties under established precedents, we believe that the Federal standard for borrower defenses more clearly and efficiently captures the full scope of acts and omissions that may result in a borrower defense claim.
We disagree that the elimination of the State standard is at odds with the ban on predispute arbitration clauses. Rather, we assert that prohibiting predispute arbitration clauses will enable more borrowers to seek redress in court and, as appropriate, to submit a nondefault, contested judgment in support of their borrower defense claim, including a claim based on State law.
We concur that the Department's continued application of State law standards to borrower defense claims for loans disbursed prior to July 2017, will require the continued interpretation of State law. However, the number of loans subject to the State standard will diminish over time, enabling the Department to transition to a more effective and efficient borrower defense standard and process.
We understand the commenters' concern that borrowers may be treated inequitably based on when their loans were disbursed. However, while it is true that borrowers with loans disbursed prior to July 2017 may consolidate those loans, as discussed in the NPRM (81 FR 39357), the standard that would apply would depend upon the date on which the first Direct Loan to which a claim is asserted was made. Therefore, the standard applied to these loans does not change by virtue of their consolidation.
We do not agree that the Federal standard supplants all State consumer protection laws, as borrowers may still pursue relief based on these laws by obtaining a nondefault, contested judgment by a court or administrative tribunal of competent jurisdiction.
We do not agree that the three bases for borrower defenses under the Federal standard limit the prosecution of future unforeseeable forms of misconduct. We expect that many of the borrower defense claims that the Department anticipates receiving will be addressed through the categories of substantial misrepresentation, breach of contract, or violations of State or Federal law that are confirmed through a nondefault, contested judgment by a court or administrative tribunal of competent jurisdiction. Additionally, the Department's borrower defense process is distinct from borrowers' rights or other Federal, State, or oversight agencies' authorities to prosecute or initiate claims against schools for wrongful conduct in State or other Federal tribunals. We recognize that, while the attainment of a favorable judgment can be an effective and efficient means of adjudicating a borrower's claim of wrongdoing by an institution, it can also be prohibitively time-consuming or expensive for some borrowers. The regulation includes a provision that enables a borrower to show that a judgment obtained by a governmental agency, such as a State AG or a Federal agency, that relates to the making of the borrower's Direct Loan or the provision of educational services to the borrower, may also serve as a basis for a borrower defense under the standard, whether the judgment is obtained in court or in an administrative tribunal. We do not agree that borrowers whose schools have violated State law will have to rely upon their State's AG to access Federal loan relief. These borrowers are still able to file borrower defense claims under the substantial misrepresentation or breach of contract standards, even if a nondefault, contested judgment is not obtained by the government entity. Moreover, the prohibition against predispute arbitration clauses and class action waivers will enable more borrowers to pursue a determination of wrongdoing on the part of an institution individually or as part of a class.
We do not agree that the State standard is less complex than the new Federal standard. As discussed, the current State law-based standard necessarily involves complicated questions relating to which State's laws apply to a specific case and to the proper and accurate interpretation of those laws. We believe the elements of the Federal standard and the bases for borrower defense claims provide sufficient clarity as to what may or may not constitute an actionable act or omission on the part of an institution. As discussed earlier, we also disagree that the State standard provides a higher evidentiary standard. Preponderance of the evidence is the typical standard in most civil proceedings. Additionally, the Department uses a preponderance of the evidence standard in other processes regarding borrower debt issues.
Another commenter opined that a strong Federal standard as a more robust minimum requirement,
Moreover, many of the borrower defense claims the Department has addressed or is considering have involved misrepresentations by schools. We believe that the standard established in these regulations will address much of the behavior arising in the borrower defense context, and that this standard appropriately addresses the Department's goals of accurately identifying and providing relief to borrowers for misconduct by schools; providing clear standards for borrowers, schools, and the Department to use in resolving claims; and avoiding for all parties the burden of interpreting other Federal agencies' and States' authorities in the borrower defense context. As a result, we decline to adopt standards for relief based on UDAP.
As discussed earlier, we also disagree that the Federal standard for borrower defense should incorporate the FTC's Holder Rule, 16 CFR part 433, and believe that it is appropriate for the reasons discussed that the Department exercise its authority to establish a Federal standard that is not based in State law.
Notwithstanding the foregoing discussion, we appreciate that State law provides important protections for students and borrowers. Nothing in the borrower defense regulations prevents a borrower from seeking relief under State law in State court. Moreover, § 685.222(b) provides that if a borrower has obtained a nondefault, favorable contested judgment against the school under State or other Federal law, the judgment may serve as a basis for borrower defense. As explained further under “Claims Based on Non-Default, Contested Judgments,” we believe this strikes the appropriate balance between providing relief to borrowers and the Department's administrative burden in accurately evaluating the merits of such claims.
The Department always welcomes cooperation and input from other Federal and State enforcement entities, as well as legal assistance organizations and advocacy groups. In our experience, such cooperation is more effective when it is conducted through informal communication and contact. Accordingly, we have not incorporated a provision requiring formal written responses from the Secretary, but plan to create a point of contact for State AGs to allow for active communication channels. We also reiterate that we welcome a continuation of cooperation and communication with other interested groups and parties. As indicated above, the Department is fully prepared to receive and make use of evidence and input from other stakeholders, including advocates and State and Federal agencies. We also discuss this issue in more detail under “Group Process for Borrower Defense.”
One group of commenters opined that UDAP laws, which include prohibitions against misrepresentation, along with unfair, fraudulent, and unlawful business acts, have been refined by decades of judicial decisions, while the proposed substantial misrepresentation basis for borrower defense claims remains untested.
Another group of commenters argued that State UDAP laws incorporate the prohibitions and deterrents that the Department seeks to achieve and offer the flexibility needed to deter and rectify institutional acts or omissions that would be presented as borrower defenses under the Department's substantial misrepresentation and breach of contract standards. Another group of commenters noted that some acts that may violate State laws intended to protect borrowers may not constitute a breach of contract or misrepresentation.
Another commenter noted that multiple State AGs have investigated schools and provided the Department with their findings of wrongdoing based on their States' UDAP laws.
One group of commenters suggested that, if the Department did not opt to restore the State standard, the inclusion of a similar UDAP law provision would become even more important. These commenters assert that the additional factors that would favor a finding of a substantial misrepresentation would not close the gap between the Federal standard and States' UDAP laws. They recommend using State UDAP laws as the additional factors that would elevate a misrepresentation to substantial misrepresentation.
We believe that the Federal standard appropriately addresses the Department's interests in accurately identifying and providing relief to borrowers for misconduct by schools; providing clear standards for borrowers, schools, and the Department to use in resolving claims; and avoiding for all parties the burden of interpreting other Federal agencies' and States' authorities in the borrower defense context. While UDAP laws may play an important role in State consumer protection and in State AGs' enforcement actions, we believe the Federal standard addresses much of the same conduct, while being more appropriately tailored and readily administrable in the borrower defense context. As a result, we decline to include UDAP violations as a basis for borrower defense claims.
Another commenter believed the current regulations would allow borrowers to base a claim for a borrower defense on an institution's violations of the HEA where those violations also constitute violations under State UDAP law. The commenter viewed the Department's position in the NPRM that a violation of the HEA is not, in itself, a basis for a borrower defense as a retroactive change to the standard applicable to loans made before July 2017. The commenter rejected the Department's assertion that this limitation is in fact based on a longstanding interpretation of the bases for borrower defense claims.
[The Department] considers the loss of institutional eligibility to affect directly only the liability of the institution for Federal subsidies and reinsurance paid on those loans. . . . [T]he borrower retains all the rights with respect to loan repayment that are contained in the terms of the loan agreements, and [the Department] does not suggest that these loans, whether held by the institution or the lender, are legally unenforceable merely because they were made after the effective date of the loss of institutional eligibility.
58 FR 13,337. See,
A school's act or omission that violates the HEA may, of course, give rise to a cause of action under other law, and that cause of action may also independently constitute a borrower defense claim under § 685.206(c) or § 685.222. For example, advertising that makes untruthful statements about placement rates violates section 487(a)(8) of the HEA, but may also give rise to a cause of action under common law based on misrepresentation or constitute a substantial misrepresentation under the Federal standard and, therefore, constitute a basis for a borrower defense claim. However, this has always been the case, and is not a retroactive change to the current borrower defense standard under § 685.206(c).
As explained in more detail under “Federal Standard,” it has been the Department's longstanding position that sexual and racial harassment claims do not directly relate to the making of a loan or provision of educational services and are not within the scope of borrower defense. 60 FR 37769. We also note, moreover, that sexual and racial harassment are explicitly excluded as bases for borrower defense claims in recognition of other entities, both within and outside of the Department, with the authority to investigate and resolve these complaints, and not in an effort to protect public and non-profit schools.
Several commenters suggested that a borrower should be required to obtain a favorable judgment under State law in order to obtain a loan discharge. One commenter suggested that borrowers pursuing State law judgments receive forbearance on their Direct Loans while their cases are proceeding.
Although we expect that the prohibition against certain mandatory arbitration clauses will enable more borrowers to pursue a determination of wrongdoing on the part of an institution, we do not agree that it is appropriate to require borrowers to obtain a favorable judgment in order to obtain a loan discharge.
While the attainment of a favorable judgment can be an effective and efficient means of adjudicating a borrower's claim of wrongdoing by an institution, it can also be prohibitively time-consuming or expensive for some borrowers. We have included a provision under which a judgment obtained by a governmental agency, such as a State AG or a Federal agency, that relates to the making of the borrower's Direct Loan or the provision of educational services to the borrower, may also serve as a basis for a borrower defense under the standard, whether the judgment is obtained in court or in an administrative tribunal.
We agree that borrowers should receive forbearance on their Direct Loans while their cases are proceeding. Borrowers may use the General Forbearance Request form to apply for forbearance in these circumstances; we would grant the borrower's request, and the final regulations also will require FFEL Program loan holders to do the same upon notification by the Secretary. In addition, a borrower defense loan discharge based on a nondefault, contested judgment may provide relief for remaining payments due on the loan and recovery of payments already made.
If a borrower, a class of consumers, or a government agency made a claim against a school regarding the provision of educational services and receives a favorable judgment that entitles the borrower to restitution or damages, but the borrower only obtained a partial recovery from the school on this judgment, under § 685.222(i)(8), we would recognize any unpaid amount of the judgment in calculating the total amount of relief that could be provided on the Direct Loan. If the borrower, a class of consumers, or a government agency obtained a judgment holding that the school engaged in wrongful acts or omissions regarding the provision of private loans, the borrower could demonstrate to the Department whether the findings of fact on which the judgment rested also established acts or omissions relating to the educational services provided to the borrower or the making of the borrower's Direct Loan that could be the basis of a borrower defense claim under these regulations. This borrower defense claim would be a basis for relief independent of the judgment that related exclusively to the private loans, and such relief would be calculated without reference to any relief obtained through that private loan judgment.
We disagree that the substantial misrepresentation standard would not necessarily capture institutional misconduct that did not involve untrue statements. As revised in these final regulations, § 668.71(c) defines a “misrepresentation” as including not only false or erroneous statements, but also misleading statements that have the likelihood or tendency to mislead under the circumstances. The definition also notes that omissions of information are also considered misrepresentations. Thus, a statement may still be misleading, even if it is true on its face. As explained in the NPRM, 81 FR 39342, we revised the definition of “misrepresentation” to add the words “under the circumstances” to clarify that the Department will consider the totality of the circumstances in which a statement occurred, to determine whether it constitutes a substantial misrepresentation. We believe the Department has the ability to properly evaluate whether a statement is misleading, but otherwise truthful, to a degree that it becomes an actionable borrower defense claim.
Other commenters stated that by limiting the subject matter covered by the substantial misrepresentation standard to just those related to loans, in their view, the standard would target only proprietary schools and exclude issues facing students at traditional colleges, such as campus safety or sexual discrimination in violation of title IX of the HEA.
As discussed under the “Making of a Loan and Provision of Educational Services” section of this document, the Department's long-standing interpretation has been that a borrower defense must be related to the making of a loan or to the educational services for which the loan was provided. As a result, the Department has stated consistently since 1995 that it does not does not recognize as a defense against repayment of the loan a cause of action that is not directly related to the loan or to the provision of educational services, such as personal injury tort claims or actions based on allegations of sexual or racial harassment. 60 FR 37768, 37769. Such issues are outside of the scope of these regulations, and we note that other avenues and processes exist to process such claims. We also disagree with commenters that such issues are the only types of issues that may be faced by students at public and private non-profit institutions. While the Department acknowledges that the majority of claims presently before it are in relation to misconduct by Corinthian, we believe that scope of claims that may be brought as substantial misrepresentations that relate to either the making of a borrower's loan, or to the provision of educational services, is objectively broad in a way that will capture borrower defense claims from any type of institution.
Other commenters stated that the substantial misrepresentation standard was in violation of the Congressional intent in the HEA, as proposed. One commenter said that, in its view, Congress' intent in Section 455(h) was that borrower defenses should be allowed only for acts or omissions that are fundamental to the student's ability to benefit from the educational program and at a level of materiality that would justify the rescission of the borrower's loan obligation. In discussing the use of § 668.71 for borrower defense purposes, another commenter acknowledged that, while misrepresentation is not defined in the HEA, the penalties assigned to misrepresentation by statute are severe. From its perspective, the commenter stated that this indicates that Congress did not intend for the misrepresentation standard to be as low as negligence and suggested keeping the original language of § 668.71.
A few commenters argued that the Department lacks justification for the proposed changes to § 668.71, given that the Department last changed the definition in a previous rulemaking.
We do not agree that the Department lacks authority to similarly specify the scope of the acts or omissions that may form the basis of a borrower defense. The Department understands that, generally, the rescission of a contract refers to the reversal of a transaction whereby the parties restore all of the property received from the other,
We also disagree that the HEA does not give the Department the discretion to define “substantial misrepresentation,” whether for the Department's enforcement purposes in § 668.71 or for use for the borrower defense process. As noted, the HEA does not define “substantial misrepresentation,” thus giving the Secretary discretion to define the term. With regard to the commenter who expressed concern that the proposed revisions to the definition of “misrepresentation” constitute a lessening of the standard to negligence,
We disagree that there is no justification for the changes to 34 CFR part 668, subpart F. Since the Department's last negotiated rulemaking in 2010 on 34 CFR part 668, subpart F, the Department utilized its authority in 2015 under the substantial misrepresentation enforcement regulations to issue a finding that Corinthian had misrepresented its job placement rates. The subsequent closure of Corinthian led to thousands of claims relating to the misrepresentations at issue by Corinthian borrowers under borrower defense. These claims prompted, in part, this effort by the Department to establish rules and procedures for borrower defense, which in turn led to a review of and the proposed changes to the Department's regulations at 34 CFR part 668, subpart F. These changes were discussed extensively as part of the negotiated rulemaking process for borrower defense where reasons for each specific change to § 668.71 were explained and discussed.
Other commenters stated that students' own misunderstandings may lead to claims, even for schools that provide training and inspections to ensure compliance with pertinent guidelines, regulations, and standards. One commenter expressed concern that unavoidable changes to instructional policies and practices could lead to borrower defense claims for substantial misrepresentation. Another commenter expressed concern that the proposed standard would lead to allegations of substantial misrepresentation by students, even where a variety of reasons unrelated to the alleged misrepresentation may have contributed to a student outcome, which may not yet be apparent.
Several commenters supported using § 668.71 as a basis for borrower defense, but objected to the proposed changes to the definition in § 668.71(c), that would change the word “deceive” in the sentence, “A misleading statement includes any statement that has the likelihood or tendency to deceive,” to “mislead under the circumstances.” These commenters stated that the proposed change would give the same weight to inadvertent or unintentional misrepresentations as to a willful deception by a school. Some such commenters appeared to believe that, without the revisions reflected in proposed subpart F of part 668, the standard for substantial misrepresentation is a standard for fraud and requires proof of intentional deception.
One commenter stated that the borrower defense process does not provide for a contextualized analysis of whether a statement is misleading in the same manner as the FTC, and argued that this would lead to significant consequences for schools and would undercut FTC precedent.
Several commenters agreed with the Department that the standard should not require an element of institutional intent generally, stating that the Department's approach is consistent with existing State and other Federal law, citing the FTC's definition of deception as an example. One commenter stated that institutions should be responsible for the harm to borrowers caused by misrepresentations, even absent intent, and that proving intent would be very difficult for borrowers.
Other commenters supported the specific amendment of the definition to include “mislead under the circumstances.” One commenter stated that the amendment was appropriate to provide more context as to whether a statement is misleading. Another commenter stated that the Department's amendments are consistent with State consumer protection law and cited examples of States where courts consider an individual's or the target audience's circumstances in assessing whether an act is deceptive or unfair. The commenter also noted that the amendments are in keeping with the approaches used by other Federal agencies, such as the FTC, the CFPB, and the Office of the Comptroller of the Currency. The commenter noted that in its experience working with student loan borrowers, consideration of the circumstances of a misrepresentation is important, because many schools target borrowers in specific circumstances who may be more likely to trust a school's representations and rely upon promises tailored to such students. Another commenter noted that the Department's proposed rule is in keeping with well-established consumer protection legal precedent under State law, which is that schools are liable for deceptive and unfair trade practices, including a failure to deliver educational services of the nature and quality claimed. This commenter supported the Department's preamble statement, 81 FR 39337 to 39338, that educational malpractice is not a tort recognized by State law, but also stated that educational malpractice is to be narrowly construed.
One commenter supported the Department's reasoning for including omissions among misrepresentations for borrower defense purposes, but stated that intent should be a factor for the Department's enforcement actions based upon § 668.71. The commenter agreed that a school should be responsible for even an unintentional error that harms borrowers, but believed that that intent or knowledge of the school should be a required factor for the purposes of institutional eligibility and penalties.
One commenter stated that substantial misrepresentation should be limited to false and erroneous statements, and not include true but misleading statements. The commenter raised concerns about the adequacy of the Department's process for gathering evidence and the Department's experience and expertise in making such determinations.
There appears to be some confusion as to whether the definition for misrepresentation in part 668, subpart F, requires a demonstration of intent, as would be required in common law fraud. In proposing to replace the word “deceive” with “mislead under the circumstances” in § 668.71(c), the Department is not seeking to remove any intent element, but rather to clarify the definition to more accurately reflect the position it expressed in 2010 as to part 668, subpart F. As noted in the NPRM, 81 FR 39342, the word “deceive” may be viewed as implying knowledge or intent. However, in the Department's 2010 rulemaking on part 668, subpart F, we explicitly declined to require that a substantial misrepresentation under the regulation require knowledge or intent by the school. 75 FR 66915. We believe that an institution is responsible for the harm to borrowers caused by its misrepresentations, even if such misrepresentations cannot be attributed to institutional intent or knowledge and are the result of inadvertent or innocent mistakes. Similarly, we believe this is the case even for statements that are true, but misleading. We believe this is more reasonable and fair than having the borrower, or the Federal government and taxpayers, bear the cost of such injuries. As noted by some commenters, this approach is in accord with other
In 2010, the Department stated that, in deciding to bring an enforcement action under part 668, subpart F, it would operate within a rule of reasonableness and consider the circumstances surrounding any misrepresentation before determining an appropriate response. 75 FR 66914. In response to the comment that the proposed standard does not view the misrepresentation in context, the Department's addition of the words “under the circumstances” is intended to clarify and make explicit the Department's long-standing position that misrepresentations should be viewed in light of all of the available underlying facts. As explained in the NPRM, 81 FR 39342 to 39343, this also echoes the approach taken by the FTC with regard to deceptive acts and practices.
Other commenters disagreed with the inclusion of omissions of information as part of the definition of substantial misrepresentation. One commenter stated that such language provides assistance to students attending career colleges, but not students attending traditional schools. One commenter stated that amending the standard to include omissions would create a strict liability standard that would not account for a school's actions or intent, and that the standard should distinguish minor and unintentional claims from material and purposeful misrepresentations.
Other commenters stated that the inclusion of omissions would not benefit students. One commenter stated that amending the definition of misrepresentation to include omissions could cause schools to provide students with numerous and confusing qualifications or to provide students with minimal information to avoid making misrepresentations. Another commenter stated that the inclusion of omissions would hinder the flow of advice to students and cause schools to expend time and money reviewing materials for misrepresentations.
One commenter stated that the Department's proposal to amend the definition to include omissions runs counter to the position the Department expressed in its 2010 rulemaking on 34 CFR part 668, subpart F, when it rejected commenters' suggestions that omissions be included in the definition.
One commenter stated that the Department's proposed amendment to include omissions, absent an intent element, runs counter to the limit established by the D.C. Circuit in the case
One commenter requested clarification regarding the effect of disclosures posted on the school's Web site or in printed materials. The commenter inquired about whether the school needed to disclose information about investigations, pending civil rights or legal matters; information about the qualifications and availability of faculty to teach certain courses or levels of students; and how a school's compliance with a State's required disclosures would be evaluated. This commenter also asked whether the Department would consider limiting the application of the new standard to only schools governed by States without a reasonable oversight mechanism. This commenter also asked for clarification as to what constitutes “information,” and asked whether information would include aspirational goals or speculative plans; subjective beliefs or internal questions about the school's educational programs, financial charges, or the employability of its graduates; concerns about, the possibility, or existence of an upcoming audit; items listed in a title IV Audit Corrective Action Plan; items identified by the institution or an accreditor for improvement; or an institution's efforts to seek voluntary accreditation.
One commenter expressed concern that the inclusion of omissions in the standard would place schools with high default rates at risk. The commenter cited news articles calling for schools with default rates higher than graduation rates, which would include some HBCUs and community colleges, to lose their title IV eligibility. The commenter stated that students could argue that a failure to disclose such a measure constitutes a substantial misrepresentation under the proposed standard.
As discussed earlier in this section, the commenters who stated that the revision to § 668.71 would apply only to proprietary institutions are incorrect. The final regulation applies to all schools. We also discuss our reasons for not including an intent element earlier in this section and our reasons for not including a materiality element later in this section.
We disagree that the revision is contrary to the Department's purpose in revising part 668, subpart F, in its 2010 rulemaking. We believe that amending the definition to include “any statement that omits information in such a way as to make the statement false, erroneous, or misleading” merely clarifies the Department's original intent, aligns the definition of misrepresentation used for the Department's enforcement actions with the standard to be used in evaluating borrower defense claims, and is appropriate given the Department's experiences since 2010.
In 2010, the Department declined to include omissions in the definition of misrepresentation during its rulemaking on part 668, subpart F, on the basis that the Department's regulations require schools to provide accurate disclosures of certain information. 75 FR 66917 to 66918. The Department emphasized that the purpose of the regulations was to ensure that all statements made by an institution are truthful,
We disagree with the commenter that the inclusion of omissions in the definition, absent an intent element, runs counter to the limit established by the D.C. Circuit in
With respect to the commenters who expressed concern about how these regulations may affect schools' behaviors in their provision of certain types of information to students and prospective students, including information regarding investigations, pending civil rights or legal matters, faculty qualifications or availability, the school's compliance with State law, or a school's default rates, among others, the final regulation explicitly states that the Department will consider whether the statement omitting any such information is misleading “under the circumstances.” As noted earlier, the Department will consider the totality of the circumstances to determine whether a statement is misleading—including whether the school is or is not under an affirmative legal obligation to disclose such information, or whether concerns such as privacy requirements prevent the disclosure or disclosure in full of such information. For borrower defense, § 685.222(d) also requires that the Department consider the reasonableness of the borrower's detrimental reliance on the misrepresentation.
We note, however, that it should not matter where or how a misrepresentation, whether as an omission or an affirmative statement, takes place, particularly as it pertains to the nature of a school's educational program, its financial charges, or the employability of its graduates. As we stated in 2010, 75 FR 66918, what is important is to curb the practice of misleading students regarding an eligible institution. We continue to strongly believe that institutions should be able to find a way to operate in compliance with these regulations. As discussed later in this section, disclosures made by a school in publications or on the Internet may be probative evidence as to the reasonableness of a borrower's reliance on an alleged misrepresentation, depending on the totality of the circumstances.
One commenter stated that the Department should incorporate an express materiality requirement, emphasizing that the lack of such a standard is of particular concern because the standard does not incorporate an element of intent. The
Several commenters stated that the inclusion of omissions, related to the provision of any educational service, is too broad without an accompanying materiality requirement in the regulation. These commenters expressed concern that students would be able to present claims for substantial misrepresentation by claiming that schools had failed to provide contextual information, such as how faculty-student ratio information works.
As also noted in the NPRM, 81 FR 39344, we believe that by requiring that students demonstrate actual, reasonable reliance to the borrower's detriment under § 685.222(d), the borrower defense regulations incorporate similar concepts to materiality. As discussed, materiality refers to whether the information in question was information to which a reasonable person would attach importance in making the decision at issue. By requiring reasonable reliance to the borrower's detriment, the Department would consider whether the misrepresentation related to information to which the borrower would reasonably attach importance in making the decision to enroll or continue enrollment at the school and whether this reliance was to the borrower's detriment. This would be the case both for individual claims, and for the presumption of reliance applied in the process for group claims under § 685.222(f)(3). We discuss the rebuttable presumption of reasonable reliance in greater detail in the “Group Process” section of this document. As a result, we disagree it should include a materiality element in the standard.
One commenter supported the use of a reasonable reliance standard, given that the standard may allow claims for statements, particularly unintentional statements, that are not accurate or complete.
A couple of commenters suggested that the Department should not require that borrowers actually and reasonably rely upon misrepresentations to obtain relief for borrower defense purposes, but rather that borrowers should be entitled to relief so long as actual reliance is demonstrated without regard for the reasonableness of that reliance. Alternatively, one commenter suggested that if a reasonable reliance standard were maintained, then the reasonableness of the reliance should be judged according to the circumstances of the misrepresentation and the characteristics of the audience targeted by the misrepresentation, which the commenter stated would be in keeping with State consumer protection law.
One group of commenters suggested that the Department use the same standard for reliance for the Department's enforcement activities under § 668.71, as for borrower defenses under § 685.222(d), so that a borrower may assert a claim for borrower defense without having to show that he or she actually relied on the misrepresentation at issue. These commenters stated that neither State nor Federal consumer protection law typically requires actual reliance and that requiring actual reliance would increase the burden on both the borrower and the trier of fact without serving the purpose of deterring misrepresentations. The commenters also stated that actual reliance is not needed to protect schools from frivolous claims given the fact-finding process and separate proceedings that would be initiated by the Department to recover from schools under the proposed rule.
Another commenter also supported using a standard that did not require actual reliance, as opposed to showing that a borrower could have reasonably relied upon the misrepresentation. However, the commenter stated that in the alternative, borrowers should only be required to certify that they relied upon the misrepresentation, without any further proof, to satisfy the reliance requirement of the standard.
We disagree that the purpose of the borrower defense regulations would be served if an actual reliance standard (without a reasonableness component) or a standard that did not require actual reliance was adopted. As explained in the NPRM, 81 FR 39343, a standard that does not require actual reliance serves the Department's interest in the public enforcement of its regulations: The Department requires title IV-participating institutions not to make false statements on which borrowers could reasonably rely to their detriment, and the Department appropriately will impose consequences where an institution fails to meet that standard. However, the Department will grant borrower defenses to provide relief to borrowers who have been harmed by an institution's misrepresentation, not borrowers who could have been harmed but were not; and an actual, reasonable reliance requirement is the mechanism by which borrowers demonstrate that they were indeed actually reasonably relied upon the misrepresentation to their detriment. The requirement also allows the Department to consider the context and facts surrounding the misrepresentation to determine whether other similar students and prospective students would have acted similarly.
The Department understands that, generally, “detriment” refers to any loss, harm, or injury suffered by a person or property.
In contrast to detriment, “damages” refers to money claimed by, or ordered to be paid to, a person as compensation for loss or injury.
There is no quantum or minimum amount of detriment required to have a borrower defense claim, and the denial of any identifiable element or quality of a program that is promised but not delivered due to a misrepresentation can constitute such a detriment. In contrast, proposed § 685.222(i) provides that the trier-of-fact, who may be a designated Department official for borrower defenses determined through the process in § 685.222(i) or a hearing official for borrower defenses decided through the processes in § 685.222(f) to (h), will determine the appropriate amount of relief that should be afforded the borrower under any of the standards described in § 685.222 and § 685.206(c), including substantial misrepresentation. We explain the considerations for triers-of-fact for relief determinations under the “Borrower Relief” section of this document.
A couple of commenters disagreed with specific factors listed in proposed § 685.222(d)(2). One commenter stated that the factor pertaining to failure to respond to information was unnecessary, because passive and requested disclosures are already enforceable through existing consumer compliance requirements. Another
One commenter expressed support for the factors listed in § 685.222(d)(2), stating that it agreed with the Department that misrepresentations should be viewed in the context of circumstances, including the possible use of high pressure enrollment tactics.
One commenter expressed concern that decision makers would expect to see one or more of the newly added factors before finding that a substantial misrepresentation exists. This commenter suggested that the Department clarify that a borrower need not show the factors to have a claim for substantial misrepresentation under borrower defense.
Several commenters stated that the factors listed in proposed § 685.222(d)(2) were insufficient as part of the standard for substantial misrepresentation, as many problematic practices relating to high pressure and abusive sales practices do not necessarily involve misrepresentations as opposed to puffery or abusive or unfair practices.
We understand the concern raised by commenters that a failure to respond to a borrower's requests for more information, including regarding the cost of the program and the nature of any financial aid, 34 CFR 685.222(d)(iv), may be due to unintentional and routine events such as an employee's oversight and vacation schedule. However, as discussed earlier in this section, we disagree that the substantial misrepresentation standard should include an element of intent. We also disagree that the factor is unnecessary, as different States and oversight entities may have differing disclosure standards and institutions' compliance with such standards may vary.
Section 685.222(d)(2)(ii) notes that in considering whether a borrower's reliance was reasonable, that an “unreasonable” emphasis on the unfavorable consequence of a delay may be considered. Generally, we do not believe that routine and truthful provisions of information such as timelines and fees to a borrower are unreasonable. However, as discussed, the standard requires that a consideration of any of the factors listed in § 685.222(d)(2) also include consideration of whether a statement is a misrepresentation under the circumstances or, in other words, in the context of the situation.
We also disagree that further modification of the regulations is needed to clarify that the factors do not need to exist for a borrower to have a borrower defense under § 685.222(d). We believe that in stating that the Secretary “may consider, if warranted” whether any of the factors listed in § 685.222(d)(2) were present, that the Department's intent is clear that the factors do not need to be alleged for a substantial misrepresentation to be established.
One commenter requested clarification regarding the reasonable reliance and the preponderance of evidence standard for the purposes of the substantial misrepresentation, raising as an example, that an error or oversight in one publication should not satisfy the preponderance of the evidence standard for substantial misrepresentation, if the statement was otherwise correct and complete in all of the school's other publications.
We understand that some commenters have concerns about baseless charges and frivolous claims that may be brought by borrowers as borrower defenses and lead to liabilities for schools. However, as established in § 685.222(e)(7) and (h), in determining whether a school may face liability for a borrower defense claim or a group of borrower defense claims, the school will have the opportunity to present evidence and arguments in a fact-finding process in accordance with due process. If, for example, during the course of such a fact-finding process, the school provides proof that a misstatement or oversight in one publication was otherwise correct and complete in the school's other
Another commenter stated that schools should be provided with defenses in the form of proof that the misrepresentation had been subsequently corrected by the school or that the institution had policies, procedures, or training in place to prevent the misrepresentation at issue.
Similarly, other factors noted by commenters, such as a showing that a student has already been made whole by the school may, depending on the specific circumstances, be important considerations for the Department in its determination of whether a borrower may be entitled to relief or to the determination of the amount of relief under § 685.222(i), which in turn will affect the amount of liability a school may face in either the separate proceeding for recovery under § 685.222(e)(7) or in the group process described in § 685.222(h). Given that the importance of such factors will vary depending on the circumstances of each case, we also do not believe that the inclusion of such factors is appropriate for the regulations.
Section 668.71 defines a “misrepresentation” as any false, erroneous, or misleading statement. If an alleged misstatement can be proven to be true statement of fact when made, not false or erroneous, and it is not misleading when made, then such statements would not be actionable misrepresentations under the standard. However, as explained previously in this section, to determine whether a statement that was true at the time of its making was misleading, the Department will consider the totality of the situation to determine whether the statement had “the likelihood or tendency to mislead under the circumstances” or whether it “omit[ted] information in a way as to make the statement false, erroneous, or misleading.” The Department will also look to whether the reliance by the borrower was reasonable. This would include a consideration of whether a misrepresentation has been corrected by the school in such a way or in a timeframe so that the borrower's reliance was not reasonable. This would also mean that, generally, claims based only on the speaker's opinion would not form the basis of a borrower defense claim under the standard, if it can be determined that under the circumstances borrowers would understand the source and limitations of the opinion.
We do not believe that the existence of policies, procedures, or training to be a defense to the existence of a substantial misrepresentation. As discussed earlier in this section, the Department does not consider intent in determining whether a substantial misrepresentation was made and believes that a borrower should receive relief if the borrower reasonably relied upon a misrepresentation to his or her detriment.
Another commenter asked whether statements about topics such as cafeteria menu items, speakers hosted by a school, or opponents on a team's athletic schedule would be considered substantial misrepresentations.
One commenter supported using 34 CFR part 668, subpart F, as the basis for borrower defense claims, including limiting substantial misrepresentation claims to the categories listed in subpart F.
As also discussed earlier in this section, we disagree that the substantial misrepresentation standard targets proprietary institutions and excludes issues facing public and private non-profit schools.
In response to questions about whether misrepresentations on specific topics may form the basis of a borrower defense, we note such determinations will necessarily be fact and situation specific-dependent inquiries. As proposed, the substantial misrepresentation standard considers a number of factors in determining whether a borrower defense claim may be sustained. Proposed § 685.222(d) specifies that the borrower defense asserted by the borrower must be a substantial misrepresentation in accordance with 34 CFR part 668, subpart F, that the borrower reasonably relied on when the borrower decided to attend, or to continue attending, the school. 34 CFR part 668, subpart F, specifically limits the scope of substantial misrepresentation to misrepresentations concerning the nature of an eligible institution's educational program, 34 CFR 668.72; the nature of an eligible institution's financial charges,
Several commenters argued that it would be unduly burdensome and expensive for institutions to retain records beyond the mandatory three-year record retention period. These commenters also argued that it would be unfair for an institution to have to defend itself if it no longer has records from the time period in question. One commenter also noted that it would be difficult for the Department to assess claims in the absence of records. One commenter disagreed with the Department's statements in the NPRM that institutions have not previously
Some commenters stated that schools have tied their general record retention policies to the three-year student aid record retention regulation. Other commenters contended that the proposal would place an unfair, and unnecessary burden on schools by requiring them to retain records indefinitely, even though a borrower would reasonably be expected to know within a few years after attendance whether the student had a claim regarding the training he or she had received. Some commenters argued that due process requires a defined limitations period so that borrowers and schools would know how long to retain relevant records. These commenters also suggested that a defined limitation period would promote early awareness of claims, and proposed a six-year period for recovery actions on both misrepresentation and contract claims.
A commenter asserted that periods of limitation are enacted not merely to reduce the risk of failing memories and stale evidence, but to promote finality of transactions and an understanding of the possible risks that may arise from transactions. This proposed change, the commenter asserts, frustrates these objectives served by periods of limitation. One commenter contended that an unlimited record retention period would increase the risk that data security lapses could occur.
One commenter suggested that the limitation period for recovery actions should be tied to the rule adopted by the school's accreditor, or to the statute of limitations in the State, as even non-student specific records, such as catalogs (which the Department noted are likely be the basis of borrower defense claims), are likely to be destroyed at the end of these retention periods. Another commenter viewed the proposal as an impermissible retroactive regulation, by converting what was enacted as defense to repayment into an affirmative recovery claim, available to the Department for recovery for losses from actions of the school that occurred before the new regulation took effect.
Whether a school actually retains records relevant to the borrower's claim does not determine the outcome of any claim, because the borrower—and in group claims, the Department—bears the burden of proving that the claim is valid. The borrower, or the Department, must therefore have evidence to establish the merit of the claim, a prospect that becomes more unlikely as time passes. If the borrower or the Department were to assert a claim against the school, the school has the opportunity to challenge the evidence proffered to support the claim, whether or not the school itself retains contradictory records.
We acknowledge, however, that institutions might well have considered their potential exposure to direct suits by students in devising their record retention policies for records that may in fact be relevant to borrower defense type claims. Although we consider applicable law to support collection of claims by offset without regard to any previously applicable limitation period, we recognize that the burden of doing so may be unwarranted after the limitation period otherwise applicable had expired and the institution had no reason to expect that claims would arise later. Under current regulations, there is no limit on the time in which the Department could take recovery action if the institution received notice of a claim within the three-year period. Under the current regulation, an institution must have “actual notice of a claim” to toll the three-year period. An institution would in fact have ample warning that the claims may arise from other events besides receipt of a claim from an individual, such as lawsuits
We recognize that the retention of records containing personally identifiable information poses data security risks. However, the school already faces the need to secure such information, and we expect the school to have already adopted steps needed to do so. The regulation does not impose any new record retention requirement.
We have also revised § 685.222(h)(5) and (e)(7) to provide that the Department may bring a recovery action against the school for recovery of claims brought under § 685.222(b) at any time, and may bring a recovery action for recovery of claims brought under § 685.222(c) or (d) within the limitation period that would apply to the cause of action on which the borrower defense is brought, unless within that period the school received notice of the borrower's claim. The Department further modifies § 685.222(h)(5) to include the same description of events that constitute notice as described above.
We also disagree that the revisions to § 685.206(c) expand any timeframe for a borrower to assert a borrower defense. As explained above, the Department's borrower defense regulation at § 685.206(c) was based upon the right of FFEL borrowers to bring claims and defenses, which in turn was adopted from the FTC's Holder Rule provision. The FTC has stated that applicable State law principles, such as statutes of limitations as well as any principles that would permit otherwise time-barred claims or defenses against the loan holder, apply to claims and defenses brought pursuant to a Holder Rule provision.
Several commenters criticized the Federal standard as being too broad and vague to provide sufficient predictability to institutions. One of these commenters asserted that the proposed regulations could encourage borrowers to file unsubstantiated claims. Many commenters noted that borrowers have existing avenues to resolve issues with their schools, using the complaint systems provided by institutions, accrediting agencies, and States, as well as judicial remedies.
One commenter suggested that the implementation of the proposed regulations would hamper interactions between school employees and students by creating an environment where any interaction could be misconstrued and used as a basis for borrower defense. The commenter concluded that this dynamic would increase the burden on schools as they seek to implement means of communicating to and interacting with borrowers that mitigate risk.
Several commenters recommend that the Federal standard describe the specific acts and omissions that would and would not substantiate a borrower defense claim. Another commenter suggested that the final rule include examples of serious and egregious misconduct that would violate the Federal standard.
We agree with commenters that the Federal standard does not provide significant predictability to institutions regarding the number or type of borrower defense claims that may be filed or the number of those claims that will be granted. However, the purpose of the Federal standard is not to provide predictability, but rather, to streamline the administration of the borrower defense regulations and to increase protections for students as well as taxpayers and the Federal government. That being said, the bases for borrower defense claims under the new Federal standard—substantial misrepresentation, breach of contracts, and nondefault, contested judgments by a court or administrative tribunal of competent jurisdiction for relief—do provide specific and sufficient information to guide institutions regarding acts or omissions pertaining to the provision of Direct Loan or educational services that could result in a borrower defense claim against the institution.
We do not agree that implementation of the Federal standard will hamper interactions between school personnel and students. Institutions that are providing clear, complete, and accurate information to prospective and enrolled students are exceedingly unlikely to generate successful borrower defense claims. While individuals may continue to misunderstand or misconstrue the information they are provided, a successful borrower defense claim requires the borrower to demonstrate by a preponderance of the evidence that a substantial misrepresentation or breach of contract has occurred.
We decline to describe the specific acts and omissions that would and would not substantiate a borrower defense claim, as each claim will be evaluated according to the specific circumstances of the case, making any such description illustrative, at best. We believe the elements of the Federal standard and the bases for borrower defense claims provide sufficient clarity as to what may or may not constitute an actionable act or omission on the part of an institution.
Two commenters suggested that the proposed regulations have exceeded the Department's authority to promulgate regulations for borrowers' defenses to repayment on their Federal student loans when advanced collection activity has been initiated. One of these commenters suggested that loan discharges based on institutional misconduct should be pursued only when the Department has court judgments against a school, final Department program review and audit determinations, or final actions taken by other State or Federal regulatory agencies, after the school has been afforded its due process opportunities.
Support for regulating in particular areas is also found in Section 432(a) of the HEA, which authorizes the Secretary to issue regulations for the FFEL program, enforce or compromise a claim under the FFEL Program; section 451(b) provides that Direct Loans are made under the same terms and conditions as FFEL Loans; and section 468(2) authorizes the Secretary to enforce or compromise a claim on a Perkins Loan.
Section 452(j) of the GEPA authorizes certain compromises under Department programs, and the Administrative Dispute Resolution Act, 31 U.S.C. 3711, authorizes a Federal agency to compromise or terminate collection of a debt, subject to certain conditions.
The increased debt resolution authority is provided in Public Law 101-552 and authorizes the Department to resolve debts up to $100,000 without approval from the Department of Justice (DOJ).
The HEA vests the Department with the sole authority to determine and
A number of commenters requested that the clarification included in the preamble to the NPRM, explaining that claims pertaining to personal injury, allegations of harassment, educational malpractice, and academic or disciplinary actions are not related to the making of a borrower's Direct loan or the provision of educational services be included in the regulatory text, as they viewed these specific examples as particularly helpful clarifications.
Two commenters listed a number of specific circumstances that may or may not fall within the scope of providing educational services, and requested that the Department provide an analysis of these acts and omissions.
Another commenter remarked that the Department's efforts to limit the scope of borrower defense claims by focusing the proposed regulations on acts or omissions that pertain to the provision of educational services fell short of its objective. Similar to other commenters, this commenter requested that the Department provide explicit descriptions of the claims that would and would not meet the proposed standard.
Another commenter who shared this view suggested the Department include in the final regulations a discussion of the factors that would be considered in determining whether a borrower defense claim pertained to the provision of educational services.
For example, while it may appear to be a relatively straightforward clarifying change to amend the regulatory language to read, “provision of educational services related to the program of study,” such a change could be interpreted to mean that claims related to more general concerns associated with the institution's provision of educational services would not be considered. That is not our intent, and we believe the regulatory language as proposed best captures the intended scope of borrower defense claims.
Similarly, we do not believe that including in the regulatory language specific examples of acts or omissions that would not be considered in a borrower defense is appropriate at this time. These circumstances may evolve over time, necessitating a re-evaluation of their relevance. The Department can provide additional clarification, as needed, through other documents, such as a Dear Colleague Letter, Electronic Announcement, or the FSA Handbook.
Another commenter expressed concern that the limitation of scope would create of discrepancy between loan proceeds that were used to pay for tuition and loan proceeds used to pay for other elements of the institution's cost of attendance.
The regulatory language in § 685.222(a)(5) refers to the making of a Direct Loan that was obtained in conjunction with enrollment at the school. This would include all eligible elements of the school's cost of attendance for which a Direct Loan can be obtained. The language in § 685.222 does not restrict potential borrower relief to the portion of a Direct Loan used to pay for tuition.
Some of these commenters acknowledged the value of not establishing a purely adversarial process, but emphasized the need to balance the interests of providing relief to students who were treated unfairly with the rights of schools to defend themselves, especially in light of the possible financial and legal exposure to institutions and potentially taxpayers.
Several commenters also contended that the exclusion of school participation in the individual process is especially problematic because of the fact-specific nature of such claims. These commenters expressed their belief that most individual cases cannot be thoroughly investigated without school input. Some commenters suggested that the proposed regulations flip the presumption of innocence that applies in many processes on its head and unfairly burdens institutions without an adequate process to vindicate their claims.
While many commenters emphasized that the proposed process tilts too favorably toward claimants, a few commenters asserted that it may not always fully protect the rights of adversely affected borrowers. Additionally, they noted that the Department's proposal removed not only the option of arbitration, but also the borrower's choice in the makeup of and the representation for the group. These commenters asserted that the rights of an individual claimant could be adversely affected because of some defect in a group claim that the Department interprets will cover the affected individual. They further stated that borrowers have no recourse to challenge the Department official's determination, who they allege will be acting under a set of obtuse and poorly defined rules, resulting in determinations benefitting borrowers who were not wronged and possibly denying relief to deserving claimants.
We disagree that moving a claimant from the individual process into the group process negatively impacts the borrower. In fact, we believe the borrower may receive a faster decision using the group process. Additionally, the borrower maintains the ability to request reconsideration if there is new evidence that was not previously considered. Finally, the borrower retains the right to “opt-out” of the group process.
The Department will outline specific procedures, including other details requested by the commenters, in a separate procedural rule. We believe this is the most appropriate place for such detail.
Several commenters claimed that the Department official would be subject to political influence and not necessarily the unbiased, independent, and impartial party needed in this role.
As discussed during negotiated rulemaking, the Department also plans to outline more specific details about the process for schools and borrowers in forthcoming procedural rules.
Many of these commenters expressed concern that the entire process created conditions that would inevitably lead to unfair treatment of schools. This argument is based on the hypothesis that the inherent conflicts in the proposed investigative and adjudication processes will result in a high number of vindicated claims and the cost associated with high levels of loan forgiveness will force the Department to seek indemnification from schools regardless of the legitimacy of the claims.
Numerous commenters also expressed concerns that some of the Department officials hearing cases may not have the requisite experience to properly and dispassionately evaluate and decide these cases. Several commenters specifically offered alternatives to the Department's officials, including using independent hearing officials, administrative law judges, or a third party such as a member of the American Arbitration Association to decide cases. Some commenters specifically suggested this separation to ensure the decision maker would be more insolated form political pressures.
One commenter also noted that the proposed rule does not provide for review of determinations by the Secretary, which specifically limits the Secretary's authority.
Additionally, an individual borrower may only request reconsideration of an application when he or she introduces new information not previously considered. The borrower defense application form includes a certification statement that the borrower must sign indicating that the information contained on the application is true and that making false or misleading statements subjects the borrower to penalties of perjury. We believe these protections against false or frivolous claims are sufficient.
These commenters also noted inequities in relief for FFEL borrowers, which includes no mechanism to seek refund of amounts already paid by the borrower. Thus, the commenters asked the Department to stop all collection activities upon receipt of a FFEL borrower's application to at least reduce the amount the borrower pays on the loan.
While expressing a strong preference for identical treatment of Direct Loan and FFEL borrowers, one commenter also recognized that this might not be possible, and suggested that the Department could lessen the imbalance by specifying that a referral relationship existed between lenders and institutions when a large number of borrowers at a school had the same lender. Another commenter suggested that the Department make findings of groups of borrowers entitled to discharge of their loans and require FFEL lenders to comply with them.
One commenter articulated that the Department could take additional steps to assist FFEL borrowers in multiple ways. First, the commenter suggested that the Department could compel a lender or guaranty agency to discharge a loan. This commenter further suggested that borrowers who dispute a FFEL Loan who are denied can appeal a lender or guaranty agency's decision to the Secretary, giving the Department final authority in each case. Finally, the commenter indicated that the Department could move groups of loans under the Department's responsibility as it would in cases where a guaranty agency closes. The commenter claimed that the Department previously took such action for false certification and closed school discharges.
Current regulations do not require a FFEL lender to grant forbearance under these circumstances except with regard to a FFEL borrower who seeks to pay off that FFEL Loan with a Consolidation Loan, and that requirement provides a time-limited option. 34 CFR 682.211(f)(11). Because the Secretary has designated that section of the final regulations for early implementation, lenders may implement this provision before it becomes a requirement on July 1, 2017. Thus, when these borrower defense regulations take effect on July 1, 2017, FFEL Program lenders must grant administrative forbearance when the Department makes a request on behalf of a borrower defense claimant, pursuant to § 682.211(i)(7).
We also do not believe we have adequate data to identify those lenders and schools that established a referral relationship.
We believe we have outlined the best possible path to relief for the remaining FFEL borrowers within our legal abilities. We appreciate the commenters' suggestions for other ways to assist FFEL borrowers in pursuing borrower defenses, but do not believe those suggestions are practicable. We recognize that this process requires additional steps for FFEL borrowers. To mitigate this, as described in the preamble to the NPRM, we will provide FFEL borrowers with a preliminary determination as to whether they would be eligible for relief on their borrower defense claims under the Direct Loan regulations, were they to consolidate their FFEL Loans into a Direct Consolidation Loan. FFEL borrowers may receive such a determination without having to establish a referral relationship between the lender of the underlying FFEL Program Loan and the school. The notice of preliminary determination will provide information on the Loan Consolidation process and instructions on how to begin the process. As described in § 685.212(k), after the borrower consolidates into the Direct Loan program, he or she may receive an appropriate amount of relief on the principal balance.
The same commenters who asserted that the Department exceeded its authority with recoupment of successful borrower defense claims stated that the Department should outline the details of its process if it proves it has such authority. Several commenters requested more information about the recovery process from schools, focusing on the institution's involvement in the process. Furthermore, some commenters requested a specific appeal process for attempts to recover funds from schools.
One commenter suggested that, when documents are not available because of the school's failure to provide the borrower with proper documentation, the burden should shift to the school to disprove the claims from the borrower's attestation.
Another commenter suggested that the Department specify that it will accept a student's sworn testimony, absent independent corroborating evidence contradicting it, as fulfilling the preponderance of the evidence standard (which requires the borrower to persuade the decision maker that it is more likely than not that events happened or did not happen as claimed). In other words, the commenter suggested that, when a borrower submits sworn testimony but does not submit corroborating evidence, the Department should not take this to mean that there was no substantial misrepresentation or breach of contract. Another group of commenters suggested that the Department track similar claims and consider those claims as evidence when reviewing applications.
Another group of commenters recommended that the Department accept information on the application form as sufficient for the claim, requesting additional information only when necessary. This group of commenters pointed out that misrepresentations were often from oral statements made to the borrower that did not include any written evidence. Furthermore, this group of commenters requested that the Department fully use all available information it and other Federal agencies possess, rather than requesting it from borrowers.
While generally supportive of the Department's process, another group of commenters expressed concern for the potentially overwhelming number of applications that would be filed in connection with potential borrower defense claims and questioned the Department's capacity to employ enough capable staff to handle the large workload. The same group noted the benefits of specifying timeframes for actions within the process, despite recognizing the difficulty in doing so.
As we discussed in the NPRM, the Department may incur administrative costs and may need to reallocate resources depending on the volume of applications and whether a hearing is required.
After having received only a few borrower defense claims in over 20 years, the Department has now received more than 80,000 claims in just over two years. We responded by building an entirely new process and hiring a new team to resolve these claims. Our ability to resolve claims quickly and efficiently has grown and will continue to grow. Particularly because we are still growing our capacity, we are unable to establish specific timeframes at this point for processing claims. Additionally, processing time is considerably affected by the varied types and complexities of claims.
Multiple commenters and groups of commenters expressed concern with the borrower's ability to introduce new evidence for reconsideration in proposed § 685.222(e)(5). Specifically, these commenters noted concerns that individual claims could continue indefinitely. These commenters indicated that the Department should include reasonable time limitations for reconsideration of claims.
Another commenter suggested that the Department official who made the determination of the original claim should not be permitted to review a request for reconsideration and suggested using a panel or board for such claims.
We believe the limitations periods for borrower defense claims adequately address the concern about time limits and do not agree with imposing an artificial limitation on borrower applications for reconsideration for new evidence based on a specific number or time period.
We see no basis for requiring this evaluation of new evidence to be made by an individual other than the original decision maker. This is a reconsideration, not an appeal, and the original decision maker is in a position to efficiently make that decision.
We note that we expect that consideration of individual borrower defense claims will lead to information gathering as part of enforcement investigations. When such an investigation is ongoing, we may defer release of records obtained in that investigation to individual claimants to protect the integrity of the investigation. If requested, records will be made available to individual claimants after the investigation is complete and prior to the borrower defense decision. We may defer consideration of individual claims where we determine that releasing potentially relevant records prior to the completion of the investigation would be undesirable.
We have also determined that the parallel identification of records to schools, which under the proposed regulations was permissive, would also cause unnecessary administrative delay, given that the fact-finding process described in § 685.222(e) will not decide any amounts schools must pay the Secretary for losses due to the borrower defense at issue. The school will have the right and opportunity to obtain such evidence, and present evidence and arguments, in the separate proceeding initiated by the Secretary under § 685.222(e)(7) to collect the amount of relief resulting from the individually filed borrower defense claim.
Although the fact-finding process described in § 685.222(e) provides schools with an opportunity to submit information and a response, as discussed in the NPRM, 81 FR 39347, the fact-finding process for individually filed applications do not determine the merits of any resulting claim by the Department for recovery from the school. Rather, § 685.222(e)(7) provides that the Secretary may bring a separate proceeding for recovery, in which the school will be afforded due process similar to what schools receive in the Department's other administrative adjudications for schools. Given that the institution's potential liability for the Department's recovery is to be adjudicated in this separate process, the Department does not believe that an appeal right for schools should be included in the § 685.222(e) fact-finding process. As discussed earlier in this section, the Department is developing rules of agency practice and procedure for borrower defenses that will be informed by the Department's rules and protections for its other administrative adjudications.
One commenter stated a recent recommendation from the Administrative Conference of the United States found that, while the APA does not specifically provide for aggregate adjudication, it does not foreclose the possibility of such procedures. The recommendation also stated that agencies generally have broad discretion in formal and informal adjudications to aggregate claims.
We believe that this discretion afforded the Secretary under the statute not only allows it to determine borrower defense claims on a group basis and to establish such processes and procedures, but also authorizes the Department to proactively identify and contact borrowers who may qualify for relief under the borrower defense regulations based upon information in its possession. As described in § 685.222(f), the Department would notify such borrowers of the opportunity to participate in the group process, and inform such borrowers that by opting out, the borrower may choose to not assert a borrower defense. By such notice and opt-out, borrowers who had not previously filed an application for borrower relief may assert a borrower defense for resolution in the group borrower defense process.
In response to comments that the Department is not authorized to act as a class action attorney, we note that, in bringing cases before a hearing official in the processes described in § 685.222(f), (g), and (h), the Department would not be bringing claims as the representative of the borrowers. Although the Department would be presenting borrower defense claims for borrowers, with their consent as described above, the Department official would be bringing claims on its own behalf as the administrator of the Direct Loan Program, or alternatively as a beneficiary of the fiduciary relationship between the school and the Department as explained earlier in “Borrower Defenses—General.”
One commenter stated that determinations in the group process should be made by a representative who is not affiliated with the Department. Another commenter stated that the office responsible for presenting the claim on behalf of a group in a group borrower defense proceeding should not be the same office that decides the group claim. Several commenters suggested specifically that determinations be made by administrative law judges or their equivalent, who have a level of expertise and independence from the Department. One commenter stated that the regulations should provide for determinations in group borrower defense processes to be made by an administrative judge.
One commenter stated that the Department should seek and use independent hearing officials with experience in handling complex disputes, given the large numbers of students that may be impacted by such proceedings.
One commenter stated that the Department's proposed group borrower defense process violates both the separation of powers doctrine in Article III and the jury trial requirement of the Seventh Amendment of the Constitution, by vesting in the Department exclusive judicial power to determine private causes of action without a jury.
We disagree that the regulations should specify that the hearing official presiding over the fact-finding processes in § 685.222(f) to (h) must be an administrative law judge or an administrative judge. As explained in the NPRM, 81 FR 39340, the Department uses the term “hearing official” in its other regulations, such as those at 34 CFR part 668, subparts G and H. In those contexts, hearing officials make decisions and determinations independent of the Department employees initiating and presenting evidence and arguments in such proceedings. Similarly, the Department would structure the group borrower defense fact-finding processes so that they are presided over by hearing officials that are independent of the employees performing investigative and prosecutorial functions for the Department.
As stated in the NPRM, 81 FR 39349, the group borrower defense process involving an open school
As explained under “General,” we also disagree that the proposed regulations violate Article III and the Seventh Amendment of the Constitution. The rights at issue in the proposed borrower defense proceedings have the character of public rights, which may be consigned by Congress to the Department for adjudication.
A group of commenters stated that the Department should not engage in a single fact-finding process for group claims. These commenters suggested that the Department should gather and consider evidence regarding borrower defenses, render a decision on borrower relief, and then initiate a separate proceeding for recovery from schools. The commenters stated that this approach would be similar to the Department's proceedings for group borrower defense claims against closed schools and for individually filed applications, as well as the Department's proposed processes for closed school and false certification discharges.
Other commenters stated that the Department should provide clear guidelines, triggers, or conditions for requiring the initiation of a group process, particularly for groups of borrowers who have not filed applications with the Department (also referred to as automatic group discharges). A group of commenters suggested that such conditions should include petitions presenting plausible prima facie cases, evidence found by the Department that might present plausible
One commenter stated that borrowers should be allowed to initiate group borrower defense claims, either for themselves or through representation by consumer advocates, legal aid organizations, or other entities, in addition to the Secretary. This commenter stated that possible concerns that allowing independent representation would give rise to an industry seeking to take advantage of borrowers, do not apply if claims are submitted by entities such as legal aid organizations, consumer advocates, and law enforcement agencies.
A few commenters stated that borrowers should be allowed to access borrower defense discharges as a group on the bases of actions by local, State, and Federal entities.
One commenter stated that to protect taxpayers, group claims should be initiated only in extreme cases, and should only come after a final, non-appealable decision has been made by a Federal or State agency or court in a contested proceeding.
We explain our reasoning as to the different standards that may form the basis of a borrower defense in the respective sections for those standards. We believe it is appropriate that group proceedings should be initiated for claims based upon any of the allowed standards, as opposed to just one of the standards or standards outside of those described in the regulations.
A group of commenters argued that a right for such outside entities should be included given that group determinations will result in the most widespread relief, will be the easiest way for borrowers to access relief, and are the only proposed method by which borrowers who have not filed applications may access relief.
In response to the Department's reasoning in the NPRM, 81 FR 39348, that informal communication facilitates cooperation with such entities, one commenter stated that providing such third parties with a formal petition in the regulation would not preclude informal contact and communication, but would rather increase transparency and efficiency. The commenter also
We also reiterate our position that the determinations arising from the borrower defense process should not viewed as having any binding effect on issues, such as causes of actions that borrowers may have against schools under State or other Federal law, that are not properly within the purview of the Department. We also encourage borrowers and their representatives to weigh all available avenues for relief, whether it is through the borrower defense process or through avenues outside of the Department.
One commenter stated that by not providing a review of the Department's initiation or group certification decision by the hearing official or allowing a challenge by the school, and by proposing that the Department's decision to initiate a group process may consider the factor of “compliance by the school or other Title IV participants,” that the purpose of the group borrower defense process is to hold schools accountable and make them examples to the industry, and not to efficiently handle claims before the Department.
We believe that it is appropriate that § 685.222(f) notes that the Department may generally consider a nonexhaustive list of factors in deciding to initiate a group claim. As described earlier, we believe it is important for the Department to retain discretion in deciding whether to initiate a proceeding to adjudicate its right of recovery from a school, as a contingent claim to a hearing official's relief determination for the borrower defense claims of a group of borrowers in the same process. Similarly, we believe that it is important for the Department to retain the flexibility to bring groups of varying sizes or types before a hearing official in a group process, including groups that are formed in a manner more akin to a joinder of parties under Federal Rule of Civil Procedure 20 than to a class action under Federal Rule of Civil Procedure 23.
Regarding the sources of information the Department will use to identify borrowers for inclusion in a group process, as explained in the NPRM, in addition to applications submitted through the process in § 685.222(e), the Department also may identify borrowers from records within its possession or from information that may be provided to the Department by outside sources. We do not believe further clarification as to such sources of the information is necessary.
We disagree that consideration of the compliance impact of a group borrower defense claim is inappropriate for the initiation of a group process and also disagree that this factor lends an appearance of bias or unfairness to the fact-finding processes described in § 685.222(f), (g), and (h). As discussed above, the procedure we will use for the group process will provide the institution with due process protections very similar to those that the Department now uses when it fines an institution or terminates the eligibility of an institution to participate in the title IV, HEA programs, which are found in current subpart G of part 668. These rules do not preclude motion practice, nor will the rules we develop. Moreover, given that such proceedings will involve the Department's right of recovery against schools, we believe that is appropriate for the regulations to reflect that the Department will consider a number of factors in its decision whether to initiate a process for the adjudication of such recovery by the Department. As stated in the NPRM, the group borrower defense process is intended to provide simple, accessible, and fair avenues to relief for borrowers, and to promote greater efficiency and expediency in the resolution of borrower defense claims, and we believe this structure furthers that goal.
A number of other commenters opposed the proposal and suggested that only borrowers who have filed an individual claim be included in the group process. These commenters stated that limiting group members to applicants would ensure that only borrowers who have actually been harmed would receive relief. Other commenters also argued that non-applicants should not be included in the group process, due to concerns about the use of borrowers' personal information and consent.
Other commenters stated that borrowers should only be allowed to participate in the group process if they affirmatively opt-in to the process. Several of these commenters also cited concerns about the use of borrowers' personal information and consent if an opt-out method is used.
We disagree with the commenters that suggested that the group processes described in § 685.222(f), (g), and (h) should only include borrower defense applicants or that we should require borrowers to affirmatively opt-in to the process. We believe that, where the Department has decided to bring a group borrower defense proceeding and non-applicant borrowers with common facts and claims can be identified, such borrowers should also be entitled to the benefits of the designated Department official's advocacy and the opportunity to obtain relief and findings in such proceedings. Additionally, providing such borrowers with an opportunity to opt-out of the proceedings, given sufficiency of the notice to be provided by the Department to such borrowers, follows well-established precedent in class action law.
The Department will continue to safeguard borrowers' personal information in this process, according to its established procedures.
Other commenters stated that allowing borrowers to opt-out of a denial of a group claim, to file an individual claim, would place an undue burden on schools to defend the same claim multiple times. Some of these commenters stated that this situation would deprive schools of protection from double jeopardy. These commenters expressed concern that the financial resources schools would have to expend to defend such claims would lead to tuition increases for students. Several commenters stated that allowing such an opt-out would allow students to file multiple, unjustified claims for the purpose of delaying repayment.
One commenter also suggested that a time limit be imposed upon the Secretary's ability to reopen a borrower's application is bound by any applicable limitation periods. Several commenters stated that relief in the group process should be opt-out only.
We disagree that a time limit should be placed on the Secretary's ability to reopen a borrower's application. We believe that if the Department becomes aware of new evidence that would entitle a borrower to relief under the regulations, then the borrower is entitled to relief regardless of the passage of time.
One commenter stated that the limited protections in the proposed group borrower defense process does not provide schools with an opportunity to confront and cross-examine adverse witnesses and thus does not satisfy the due process requirements established in
Commenters expressed concern about institutions' opportunities to receive notice and evidence in the proposed group borrower defense process. Many of these commenters expressed concern and requested clarification regarding the Department's proposal in § 685.222(f)(2)(iii) that notice to the school of the group process would occur “as practicable.” One commenter suggested that we include language specifying that no notice will be provided if notice is impossible or irrelevant due to a school's closure. Other commenters expressed concern that the proposed regulations do not specify whether the scope of a group will be disclosed to schools and stated that schools must be aware of the members of the group in order to be able to raise a defense. Another commenter expressed concern that the proposed regulations do not require the Department to notify the school as to the basis of the group; the initiation of the borrower defense process; of any procedure or timeline for requesting records, providing information to the Department, or making responses; or provide schools with an opportunity to appear at a hearing.
Several commenters stated that institutions should be provided with notice and copies of all the evidence presented underlying the borrower defense claims in a group process. Another commenter stated that the proposed regulation gives the Department complete discretion as to what evidence the trier of fact will use to make decisions. This commenter stated that, when combined with the proposal that the persons advocating for students, as well as the persons making decisions, in the group borrower defense process are all chosen by the Department, this discretion appears to favor students over schools in the group process.
Several commenters also stated that institutions should be given an opportunity to provide a written response to the substance of the group borrower defense claim within a certain number of days (45 or 60) after the resolution of any appeal on the Department's basis for a group claim or of the notification to the school of the group process if no challenge to the group is filed, provided with copies of any evidence and records to be considered or deemed relevant by the hearing official, be allowed to present oral argument before the hearing official, and provided with a copy of the hearing official's decision in the group process. One commenter emphasized that the decision should identify the calculation used by the hearing official for the amount of relief given by the decision. These commenters also stated that institutions should be provided with a right of appeal to the hearing official's decision in both the closed and open school group processes. One commenter expressed concern that the proposed process does not include any process for how an appeal may be filed.
Several commenters expressed concerns that the process does not appear to provide to any opportunities for schools to conduct discovery or to cross-examine witnesses. Some of these commenters expressed the view that, in cases where the rebuttable presumption proposed in § 685.222(f)(3) applies, schools will need to be able to question borrowers in order to rebut the presumption.
One commenter stated that the group borrower defense process should allow for both students to present their own claims and institutions to have the same opportunity to present a defense, including any affirmative defenses, and to appeal adverse decisions. The commenter stated that both the school and the borrower should have such opportunities to present evidence and arguments in any proceeding or process to determine claims, not just proceedings where recovery against the school is determined. The commenter emphasized that permitting school participation would lead to correct results, since schools often have information as to any alleged wrongdoing.
We appreciate the concern that § 685.222(f)(2)(iii) is not clear as to the Department's intent that notice of a group proceeding will occur unless there is no party available to receive such notice—in other words, as would be the case under the closed school group borrower defense process described in § 685.222(g). We are revising § 685.222(f)(2)(iii) to clarify that no notice will be provided if notice is impossible or irrelevant due to a school's closure.
One commenter stated that the presumption would set up a system by which omissions by school employees or agents or misunderstandings by students may be considered substantial misrepresentations, without the Department needing to show reliance or that the misconduct caused the harm at issue. The commenter expressed general concern that the Department has proposed a negligence standard that is not contemplated by the HEA, and that this expansion in the standard has not been justified by the Department. The commenter argued that the presumption would allow claims based on accusations of omissions or misunderstandings on which the borrower did not rely.
One commenter stated that the presumption would threaten institutions with high liability and impose high costs on taxpayers. A couple commenters stated that the presumption is unfair, absent an intent or materiality requirement.
One commenter stated that it objected to the establishment of the rebuttable presumption generally, but requested clarification as to what the Department means by “widely disseminated,” specifically the size of the audience that would be required for a statement to be considered to have been widely disseminated and methods of dissemination that would trigger the presumption.
Several commenters supported the inclusion of a presumption of reasonable reliance on a widely disseminated misrepresentation is consistent with existing consumer protection law. One commenter stated that the presumption recognizes that it is unfair and inefficient to require cohorts of borrowers to individually assert claims against an actor engage in a well-documented pattern of misconduct.
We disagree that the rebuttable presumption establishes a different standard than what is required under the current regulations. As explained under “Substantial Misrepresentation,” the Department's standard at part 668, subpart F, has never required intent or knowledge as an element of the substantial misrepresentation standard. Additionally, the current standard for borrower defense allows “any act or omission of the school . . . that would give rise to a cause of action under applicable State law.” 34 CFR 685.206(c)(1). As explained under “Federal Standard” and “Substantial Misrepresentation,” under many States' consumer protection laws, knowledge or intent is not a required element of proof for relief as to an unfair or deceptive trade practice or act. Moreover, we disagree with any characterization that the rebuttable presumption would remove the reliance requirement for substantial misrepresentation in group proceedings. The rebuttable presumption does not change the burden of persuasion, which would still be on the Department. As § 685.222(f)(3) states, the Department would initially have to demonstrate that the substantial misrepresentation had been “widely disseminated.” Only upon such a demonstration and finding would the rebuttable presumption act to shift the evidentiary burden to the school, requiring the school to demonstrate that individuals in the identified group did not in fact rely on the misrepresentation at issue. This echoes the operation of the similar presumption of reliance for widely disseminated misrepresentations under Federal consumer law described above.
There appears to be confusion as to whether schools would be required to rebut the presumption of reliance as to “unknown” or “unidentified” members of the group. Under § 685.222(f)(1)(ii), the Department will identify all members of the group. Although the group may include borrowers who did not file an application through the process in § 685.222(e), the members of the group will be known in the group process.
We appreciate the support of commenters supporting the establishment of a rebuttable presumption. As discussed earlier, one of the reasons we are establishing a rebuttable presumption in cases of a widely disseminated substantial misrepresentation is that we believe that there is a rational nexus between a well-documented pattern of misconduct in the instance of a wide dissemination of the misrepresentation and the likelihood of reliance by the audience.
We also disagree that a materiality or intent element is necessary, as explained earlier under “Claims Based on Substantial Misrepresentation.”
One commenter stated that borrowers should be allowed to have their own representatives in the group borrower defense process, either at their own expense or pro bono. This commenter stated that borrowers should at least be allowed to act as “intervenors” in a group borrower defense process, with separate representation, to protect their interests.
One commenter suggested that the Department establish procedures for individual borrowers and their legal representatives to petition the Department to initiate a group proceeding or, in the alternative, establish a point of contact for borrowers to notify the Department of potential candidates for group claims. The commenter also suggested that borrowers be allowed to file appeals to the Secretary in group proceedings, given borrowers' vested interest in obtaining favorable adjudications that will make obtaining relief easier for borrowers.
As discussed earlier in this section, in consideration of borrowers' desire for timely and efficient adjudications, we disagree that borrowers should be provided with a right of appeal to the Secretary. However, we note that borrowers may also seek judicial review in Federal court of the Department's final decisions or request a reconsideration of their claims by the Department upon the identification of new evidence under § 685.222(e)(5).
One commenter requested clarification as to claims filed by borrowers who have attended a school that has since closed, but where the school has posted a letter of credit or other surety with the Department.
Another commenter supported the distinction between the open school and closed school group processes.
One commenter also stated that the Department should develop a publicly available information infrastructure, such as a docketing system, to allow users to identify and track cases that may be candidates for group proceedings or informal aggregation and to allow users to learn from Departmental decisions.
Further, we do not agree that the Department's adjudications on borrower defense claims will involve an “exercise [of] any direction, supervision, or control over the curriculum, program of instruction, administration, or personnel of any educational institution, school, or school system . . . or over the selection or content of library resources, textbooks, or other instructional materials by any educational institution or school system, except to the extent authorized by law.” 20 U.S.C. 3403(b). As described above earlier, the Department's adjudications will determine whether a school's alleged misconduct constitutes an “act[] or omission[] of an institution of higher education a borrower may assert as a defense to repayment of a loan . . .”, 20 U.S.C. 1087e(h), and provide relief to borrowers and a right of recovery to the Department from schools, in a manner that is explicitly authorized by statute. Notwithstanding, we believe that the provision of relief, as the result of and after any conduct by the school, through the borrower defense process is not the same as the active “exercise [of] any direction, supervision, or control” over any of the prohibited areas.
Multiple commenters argued that calculating partial relief would be excessively complicated, expensive, and time consuming. According to these commenters, the process of calculating relief would lead to the waste of Department resources and cause unnecessary delays in the provision of relief to borrowers. Additionally, commenters were concerned about the possibility that this process would be confusing and difficult for borrowers to navigate.
Some commenters argued that the proposed partial relief calculation process would unfairly subject borrowers who had already succeeded on the merits of their claims to a burdensome secondary review process. Commenters noted that, in the case of a claim based on a school's substantial misrepresentation, borrowers would have already demonstrated entitlement to relief by meeting the substantial misrepresentation standard. Consequently, these commenters suggested that the relief calculation process would create an unnecessary hurdle to the appropriate relief for these borrowers. The commenters argued that, after being defrauded by their schools, student borrowers should not be required to undergo an extensive process of calculating the value of their education. Further, these commenters argued that the partial relief system would be unfair because it affords a culpable school the presumption that its education was of some value to the borrower.
Other commenters suggested that it would be unfair for the borrower to bear the burden of demonstrating eligibility for full relief. Instead, these commenters proposed that the Secretary should bear the burden of demonstrating why full relief is not warranted. The commenters proposed that full relief be automatic for borrowers when there is evidence of wrongdoing by the school. These commenters suggested either eliminating partial relief or limiting it to cases in which compelling evidence exists that the borrower's harm was limited to some clearly delimited part of their education.
Commenters suggested that, in addition to being difficult to calculate, partial relief would be insufficient to make victimized borrowers whole. To support the argument in favor of a presumption of full relief, these commenters asserted that many Corinthian students never would have enrolled had the institution truthfully represented its job placement rates.
Some commenters raised concerns about the subjectivity of the process for calculating partial relief for borrowers. These commenters were concerned that the methods proposed in Appendix A for calculating relief are too vague, afford excessive discretion to officials, and could lead to potential inconsistencies in the treatment of borrowers. Some commenters suggested that Appendix A should prescribe one particular method for calculating relief, rather than providing multiple options in order to increase certainty and consistency.
Some commenters raised concerns about the potential impact of resource inequities between schools and borrowers on the partial relief calculation process. Specifically, these commenters argued that because schools will be able to afford expensive legal representation, schools would likely be able to find technicalities in the relief calculation process, potentially resulting in the denial of relief to deserving borrowers. These commenters were particularly concerned about disadvantages faced by borrowers who cannot afford legal representation. Commenters also noted that borrowers may feel pressure to retain legal counsel, which they contended would frustrate the Department's intent to design a process under which borrowers do not need legal representation, and are shielded from predatory third-party debt relief companies.
One commenter suggested that the provision of partial relief would lead to an excessive number of claims, particularly when implemented in conjunction with what was described as a low threshold for qualified claims.
Several commenters also supported the presumption of full relief by stating that this approach would be consistent with existing legal approaches to relief for fraudulent inducement or deceptive practices. Some commenters urged the Department to adopt the approach used for false certification and closed school discharges—providing full discharges for all meritorious claims, including cancellation of outstanding balances and refunds of amounts already paid.
As an alternative to fully eliminating partial relief, some commenters suggested limiting the availability of partial relief to claims based on breach of contract, based on the proposition that when a school breaches a contractual provision, it is possible that a borrower nevertheless received at least a partial benefit from his or her education.
Several commenters argued that Appendix A should be fully removed because it adds confusion to the process and it is not clear when or how it should be applied. Some commenters argued that we should remove Appendix A and revise proposed § 685.222(i) so that full relief is provided upon approval of a borrower defense, except where the Department explains its reasoning and affords the borrower the opportunity to respond.
We acknowledge commenters' concerns that references to “calculations” or “methods” in the regulations may be confusing. As a result, we are revising § 685.222(i) to remove such references. Additionally, to address concerns that the proposed relief determination requirements appear complicated, we are also revising § 685.222(i) to directly establish the factors to be considered by the trier-of-fact: The COA paid by the borrower to attend the school; and the value of the education. The Department will incorporate these factors in a reasonable and practicable manner. In addition, the Department may consider any other relevant factors. In response to concerns that the proposed methods in Appendix A are confusing, we have also replaced the methods with conceptual examples intended to serve as guidance to borrowers, schools, and Department employees as to what types of situations may lead to different types of relief determinations. As it receives and evaluates borrower defense cases under the Federal standard, the Department may issue further guidance as to relief as necessary.
The Department emphasizes that in some cases the value of the education may be sufficiently modest that full relief is warranted, while in other cases, partial relief will be appropriate. In certain instances of full or substantial value, no relief will be provided. Thus, it is possible a borrower may be subject to a substantial misrepresentation, but because the education provided full or substantial value, no relief may be appropriate. As revised, § 685.222(i) states that the starting point for any relief determination for a substantial misrepresentation claim is the full amount of the borrower's COA incurred to attend the institution. As explained later, the COA includes all expenses on which the loan amount was based under section 472 of the HEA, 20 U.S.C. 1087ll. Taken alone, these costs would lead to a full discharge and refund of amounts paid to the Secretary. Section 685.222(i) then provides that the Department will consider the value of the education in the determination of relief and how it compares to the value the borrower could have reasonably expected based on the information provided by the school. In some cases, the Department expects that this analysis will not result in reduction of the amount of relief awarded. This could be because the evidence shows that the school provided value that was sufficiently modest to warrant full relief or what the school provided was substantially different from what was promised such that the value would not be substantially related to the value the school represented it would provide. The presence of some modest value does not mean full relief is inappropriate.
We also note that the revised regulations require value to be factored in to determinations for relief, but do not prescribe any particular approach to that process. Because there will be cases where the determination of value will be fact-specific to an individual or group of individuals—and the determination of value may pose more significant difficulties in certain situations than in others—the Department believes that the official needs substantial flexibility and discretion in determining how to incorporate established factors into the assessment of value. The fact that the case has reached the phase of relief determination necessarily means that a borrower has experienced some detriment and that a school has engaged in substantial misrepresentation or breached a contract, or was found culpable in court of some legal wrong. At that point in the process, we intend that the Official be able to employ a practicable and efficient approach to assessing value and determining whether the borrower should be granted relief and if so how much. Relief will be determined in a reasonable and practicable manner to ensure harmed borrowers receive relief in a timely and efficient manner.
We have also revised § 685.222(i) to provide that in a group borrower defense proceeding based on a substantial misrepresentation brought against an open school under § 685.222(h), the school has the burden of proof as to showing any value or benefit of the education. The Department will promulgate a procedural rule that will explain how evidence will be presented and considered in such proceedings, taking full account of due process rights of any parties. We believe that these revisions address many of the concerns that borrower defense relief determinations may be confusing or complicated.
We also note that the process for determining relief in a borrower defense claim has no bearing on the Department's authority or processes in enforcing the prohibition against misrepresentation under 34 CFR 668.71. Schools may face an enforcement action by the Department for making a substantial misrepresentation under part 668, subpart F. As described under “Substantial Misrepresentation,” for the purposes of borrower defense, absent the presumption of reliance in a group claim, actual, reasonable, detrimental reliance is required to establish a substantial misrepresentation under § 685.222(d). However, for the purposes of the Department's enforcement authority under part 668, subpart F, the scope of substantial misrepresentation is broader in that it includes misrepresentations that could have reasonably been relied upon by any person, as opposed to misrepresentations that were actually reasonably relied upon by a borrower. It is also conceivable that there could be a case in which a borrower did experience detriment through reasonably relying on a misrepresentation—for example, by having been induced to attend a school he or she would not have otherwise—yet the school provided sufficient value to the borrower or would have provided sufficient value to a reasonable student in the position of the borrower so as to merit less than full, or no, relief. Nevertheless, the school in such a case may still face fines or other enforcement consequences by the Department under its enforcement authority in part 668, subpart F, because a borrower reasonably relied on the school's misrepresentation to his or her detriment.
We disagree that the relief determination process would be subjective. Agency tribunals and State and Federal courts commonly make determinations on relief. We do not believe the process proposed provides a presiding designated Department official or hearing official presiding, as applicable, with more discretion than afforded triers-of-fact in other adjudicative forums.
We also disagree with commenters who expressed concerns that borrowers may be disadvantaged due to resource inequities between students and schools. As discussed under “Process for Individual Borrowers (§ 685.222(e)),” under the individual application process, a borrower will not be involved in an adversarial process against a school. In the group processes described in § 685.222(f) to (h), the Department will designate a Department official to present borrower claims, including through any relief phase of the fact-finding process. If a borrower does not wish to have the Department official
We note that, in determining relief for a borrower defense based on a judgment against the school, where the judgment awards specific financial relief, the relief will be the amount of the judgment that remains unsatisfied, subject to the limitation provided for in § 685.222(i)(8) and any other reasonable considerations. Where the judgment does not award specific financial relief, the Department will rely on the holding of the case and applicable law to monetize the judgment, subject to the limitation provided for in § 685.222(i)(8) and any other reasonable considerations. In determining relief for a borrower defense based on a breach of contract, relief in such a case will be determined according to the common law of contract subject to the limitation provided for in § 685.222(i)(8) and any other reasonable considerations.
We have revised § 685.222(i) to clarify how relief is determined for a borrower defense based upon a judgment against the school or a breach of contract by the school.
We include that for group borrower defense claims under § 685.222(h), the school has the burden of proof as to any value or benefit of the education.
We have also revised Appendix A to describe conceptual examples for relief.
Some commenters were concerned about the reliability of the proposed methods for calculating relief in Appendix A. Specifically, commenters raised concerns about the method for calculating relief in paragraph (A). Under this method, relief would be provided in an amount equivalent to the difference between what the borrower paid, and what a reasonable borrower would have paid absent the misrepresentation. These commenters suggested that this assessment would be unreliable because it would involve speculation by the official tasked with valuing a counterfactual.
In addition, some commenters disapproved of the method in paragraph (C), which would cap the amount of economic loss at the COA. These commenters suggested that legally cognizable losses often exceed the COA. Some commenters also disapproved of the proposal to discount relief when a borrower acquires transferrable credits or secures a job in a related field. According to these commenters, the discounted relief would not reflect the true harm experienced by the borrowers. These commenters stated that transferrable credits often lose their value because they are either not used, or used at another predatory or low-value school. These commenters also argued that discounting relief based on transferrable credits could penalize borrowers with otherwise meritorious defenses who opt to take a teach out. Some commenters also argued that discounting relief when a borrower obtains a job in the field with typical wages may penalize borrowers who succeed at finding work despite the failings of their programs. One commenter was concerned that the method in paragraph (C) may be read to place a burden on the borrower to produce evidence that the education he or she received lacks value.
One commenter suggested minimizing the potential for subjectivity by replacing the proposed methods of calculation with a system for scheduling relief based on the nature of the claim. This commenter recommended providing a table outlining the percentage of loan principal to be relieved for each of a series of specific enumerated claims. Another commenter suggested that the Department specify a single theory for calculating damages that would apply in each class of borrower defense cases.
Some commenters requested additional information about the circumstances that may impact partial relief determinations.
Commenters also stressed the importance of ensuring the independence of the officials involved in making relief determinations. Similarly, some commenters requested more specificity and transparency regarding who will be calculating relief and how they will be conducting those calculations.
As discussed under “General” and “Group Process for Borrower Defense,”
We disagree with commenters that the regulation should specify that relief should be based upon a statistically valid sample of students at this time. While a statistically valid sample may be appropriate for some cases, we believe the determination of what may be the criteria for an appropriate sample for group borrower defense cases should be developed on a case by case basis.
We discuss our reasons for including fiscal impact as a factor for consideration in the initiation of group processes under “Group Process for Borrower Defense.” Section 685.222(i), which pertains to the relief awarded for either a group or individual borrower defense claim, does not include a consideration of fiscal impact.
Some commenters argued that relief should include updates to consumer reporting agencies to remove adverse credit reports. Citing the impact of negative credit reports on borrowers' ability to find employment, own a home, etc., commenters urged the Department to adopt language clarifying that any adverse credit history pertaining to any loan discharged through a borrower defense will be deleted. Some commenters suggested that the language in proposed § 685.222(i)(4)(ii) conform to the language in proposed § 685.206(c)(2)(iii), which requires the Department to fix adverse credit reports when it grants discharges. Additionally, some commenters argued that relief should include a determination that the borrower is not in default on the loan and is eligible to receive assistance under title IV.
One commenter requested simplification of the language describing available relief, specifically, removal of the portion of § 685.222(i)(5) describing the unavailability of non-pecuniary relief on the basis that the provision would cause confusion.
Additionally, § 685.222(i)(8) also clarifies that a borrower may not receive non-pecuniary damages such as damages for inconvenience, aggravation, emotional distress, or punitive damages. We recognize that, in certain civil lawsuits, plaintiffs may be awarded such damages by a court. However, such damages are not easily calculable and may be highly subjective. We believe that excluding non-pecuniary damages from relief under the regulations would help produce more consistent and fair results for borrowers.
The Department official or the hearing official deciding the claim would afford the borrower such further relief as the Department official or the hearing official determines is appropriate under the circumstances. As specifically noted in § 685.222(i)(7), that relief would include, but not be limited to, determining that the borrower is not in default on the loan and is eligible to receive assistance under title IV of the HEA, and updating reports to consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to the borrower's Direct Loan. We do not
Compensation of such loss by an award of damages is a remedy different in kind from rescission and restitution, but the remedies are not necessarily inconsistent when the claimant's basic entitlement is to be restored to the status quo ante. Damages measured by the claimant's expenditure can be included in the accounting that accompanies rescission, in order to do complete justice in a single proceeding. Recovery of what are commonly called “incidental damages” may thus be allowed in connection with rescission, consistent with the remedial objective of restoring the claimant to the precontractual position.
Restatement (Third) of Restitution and Unjust Enrichment, § 54 note (i).
Others objected that proposed § 668.171(c)(1)(i)(A) is also impermissibly retroactive by providing that a school that, currently or during the three most recently completed award years, is or was required to pay a debt or liability arising from a Federal, State, or other oversight entity audit or investigation, based on claims related to the making of a Federal loan or the provision of educational services, or that settles or resolves such an amount that exceeds the stated threshold, is not financially responsible. Under proposed § 668.175(f)(1)(i), an institution affected by either § 668.171(c)(1)(i)(A) or (c)(3) could continue to participate in the title IV, HEA programs only under provisional certification and by providing financial protection in an amount not less than 10 percent of the amount of Direct Loan funds or title IV,
Regulated parties have repeatedly challenged Department rules that attached particular new consequences to actions that have already occurred. Courts have regularly rejected claims that regulations that operate like the regulations adopted here are impermissibly retroactive. A regulation is unconstitutionally retroactive if it “alter[s] the
Moreover, we have clarified that the regulations apply to any triggering events that occur on or after July 1, 2017. We have also removed the two triggers highlighted by these commenters as looking to certain past events in a way that mitigates almost all of the commenters' concerns. First, we modified the accrediting agency actions trigger substantially, to assess as an automatic trigger
Similarly, some commenters stated that requiring financial protection by reason of the occurrence of a single triggering event was contrary to the requirement in section 498(c)(1) of the HEA that the Department assess the financial responsibility of the institution in light of the total financial circumstances of the institution.
Other commenters stated that section 498(c) of the HEA requires the Department to assess financial responsibility based solely on the audited financial statements provided by the institution under section 487(c) of the HEA.
Thus, as the commenters state, the statute directs the Secretary to take into account “an institution's total financial circumstances in making a determination of its ability to meet the standards herein required.” 20 U.S.C. 1099c(c)(2). Far from precluding the Secretary from giving controlling weight to a single significant occurrence in making this determination, the statute recognizes that the Secretary may do so if certain enumerated single adverse events have occurred in the past two to five years (
Section 668.90(a) affords the school the opportunity to demonstrate, in the administrative proceeding, that a proposed limitation or termination is “unwarranted.” That same regulation, however, includes some 14 specific circumstances in which the hearing official has no discretion but to find that the proposed action is “warranted” if certain predicate facts are proven. Among these restrictions is a provision that, in a proposed enforcement action based on failure to provide “surety” in an amount demanded, the hearing official must find the action warranted unless the hearing official concludes that the amount demanded is “unreasonable.” In addition, § 668.174 provides explicit, detailed, curative or exculpatory conditions that must be met for a school subject to a past performance issue to participate. However, these substantive requirements are not incorporated in subpart G of part 668, the regulations regarding the conduct of limitation or termination proceedings. This may have created the impression that an institution subject to the requirements of § 668.174 could raise a challenge to those requirements in an administrative action to terminate or limit the institution that does not meet the requirements of § 668.174. This was never the intent of the Department. We therefore revise the regulations in § 668.90 governing hearing procedures to make clear that the requirements in current § 668.174 that limit the type and amount of permitted curative or exculpatory matters apply in any administrative proceeding brought to enforce those requirements. As for the restriction in the final regulations on challenges to a requirement that the school provide the “surety” or other protection, the Department is updating and expanding one of the existing 14 provisions in which an action must be found warranted if a predicate fact is proven—in this case, the occurrence of certain triggering events, established through notice-and-comment rulemaking, that pose significant risk warranting the provision of adequate financial protection, in a minimum amount also established as sufficient through this same notice-and-comment rulemaking, with any added amount demanded and justified on a case-by-case basis. The Department is significantly revising the triggers proposed in the NPRM to simplify and reduce the number of conditions or occurrences that qualify as automatic triggers. As we discuss in adopting the composite score methodology, we measure the effect of most of the triggering events not in isolation, but only as each may affect the overall financial strength of the institution, as that strength was most recently assessed under the financial ratio analysis adopted in current regulations. § 668.172. And, for all discretionary triggers, the Department undertakes to assert a demand for protection only on a case-by-case basis, with full articulation of the reasons for the requirement.
Similarly, other commenters contrasted the process used to develop these financial responsibility amendments with the process used by the Department to develop the subpart L standards. The commenters noted that, in developing the subpart L standards, the Department engaged in systematic, sustained efforts to study the issue and develop its methodology through the formal engagement and aid of KPMG, an expert auditing firm, with significant community involvement. That process took approximately two years, and began with empirical studies by KPMG into the potential impact of the rule over a year before the issuance of any proposed language. The commenters stated that, in this case, the Department is rushing out these revisions without the necessary and appropriate analysis. Commenters noted that the Department produced draft language on the triggers and letter of credit requirements in the second negotiated rulemaking session, but with no significant accompanying analysis or basis for its proposal, and did not consult effectively or sufficiently with affected parties or prepare sufficient information and documentation to convey, or for the negotiated rulemaking panel to understand, the impact of this portion of the proposed regulations.
Some commenters were concerned that the Department did not harmonize the proposed financial responsibility provisions with the current composite score requirements and questioned whether it was reasonable for the Department to require an institution with the highest composite score of 3.0 to secure one or more letters of credit based on triggering events. The commenters further questioned why the Department proposed numerous and overlapping requirements, if the Department believes that the current composite score is a valid indicator of an institution's financial health.
Some commenters argued that it would be unnecessarily punitive to list as separate triggering events, and thereby impose stacking letter of credit requirements for, items that may be connected to the same underlying facts or allegations. For example, a lawsuit or
As another example, commenters noted that an institution could be subject to a lawsuit or multiple lawsuits about the same underlying allegations, an accrediting agency may take action against the institution in connection with the same allegations, and a State agency may cite the institution for failing State requirements that relate to those same allegations. The commenters stated that multiple triggering events did not necessarily warrant additional financial protection and believed that this “stacking” of triggers is especially punitive to publicly traded institutions, which may be required to or voluntarily elect to disclose certain triggering events, such as lawsuits in reports to the SEC where making such disclosures is then itself an independent trigger. In this case, the commenters believed it was unfair to penalize a publicly traded institution twice, while any other institution with fewer shareholders or one that opts to raise capital privately would be subject to only one letter of credit requirement.
Commenters objected that it would be theoretically possible that a school could be required to post letters of credit exceeding 100 percent of the title IV, HEA funds the school receives, effectively crippling the school. The commenters cautioned that the Department should not require multiple letters of credit stemming from the same underlying facts or allegations—rather, the rules should reflect a more refined approach for setting an appropriate level of financial protection for each unique set of facts or allegations. The commenters suggested that to ensure that an institution provides the amount of financial protection that relates specifically to its ability to satisfy its obligations, the Department should evaluate each triggering event that occurs to determine whether any additional financial protection is needed.
A few commenters suggested that, rather than applying the proposed triggering events in a one-size-fits-all manner, the Department should consider other institutional metrics that serve to mitigate concerns about institutional viability and title IV, HEA program risks. For example, the commenters suggested that the Department could presumptively exclude from many of the new triggers those institutions that have low and stable cohort default rates, consistently low 90/10 ratios, a general lack of accrediting or State agency actions, or any combination of these items. The commenters reasoned that, in the context of the NPRM, these attributes would generally indicate strong student outcomes and less likelihood of borrower defense claims arising from the institution. Or, the Department could provide that institutions with cohort default rates and 90/10 ratios below specified thresholds would not be required to post cumulative letters of credit under the new general standards of financial responsibility. Similarly, the commenters urged the Department to assess the circumstances of each triggering event to determine whether any additional protection is needed rather than requiring cumulative letters of credit for each of the triggering events. The commenters believed that by taking these alternate approaches, the financial responsibility regulations could be tailored to assess institutional risk profiles on a more holistic basis, rather than in the generally non-discerning manner reflected by the NPRM.
Other commenters requested that the Department specify in the final regulations the duration of each letter of credit for each triggering event, noting that in the preamble to the NPRM, the Department stated that schools subject to an automatic trigger would not be financially responsible for at least one year based on that trigger, and in some instances, for as long as three years after the event.
A commenter asserted that the institution should be provided the opportunity to demonstrate by audited financial statements that it had the resources to ensure against precipitous closure pursuant to section 498(c)(3)(C) of the HEA.
The composite score methodology in subpart L used under current regulations is the product of a comprehensive study of the issue and of numerous financial statements of affected institutions, as well as substantial industry involvement. The 1997 rulemaking that adopted this method established a basic model for evaluating financial responsibility that was intended to serve as the core of the Department's evaluation process for proprietary and private non-profit institutions, replacing a piecemeal approach still reflected in § 668.15(b)(7), (8), and (9). The regulations in subpart L were adopted to replace the prior structure, in which an institution was required to satisfy a minimum standard in each of three independent tests. The Department replaced that with “a ratio methodology under which an institution need only satisfy a single standard—the composite score standard. This new approach is more informative and allows a relative strength in one measure to mitigate a relative weakness in another measure.” 62 FR 62831 (Nov. 25, 1997).
Although the 1997 regulations replaced the three independent financial ratio tests with the new composite score methodology as the core measure of financial responsibility,
In these final regulations the Department addresses the significance of new events that occur after the close of an audited period, or that are not recognized, or not fully recognized, and reflected in audited financial statements, to assess whether the school, regardless of its composite score, “is able to provide the services described in its publications and statements, to provide the administrative resources necessary to comply with the requirements of this title [title IV of the HEA], and to meet all its financial obligations. . . .” 20 U.S.C. 1099c(c)(1). In doing so, we are expanding the consideration of events that would make a school not financially responsible in the near term—from the single example in current regulations (commercial creditor lawsuits) to other major lawsuits and other events that pose a potential material adverse risk to the financial viability of the school. In the negotiated rulemaking meetings, and in the NPRM, we articulated the adverse events that recent history indicates pose a significant risk to the continued ability of an institution to meet these several obligations. We address elsewhere in this preamble comments directed at events that pose particular risks, but discuss here the manner in which these events will be evaluated.
The composite score methodology, as commenters stressed and as we acknowledge, is designed to measure the viability of an institution from three different aspects and develop a score that assigns relative weight to each aspect to produce a score showing the relative financial health and viability of the institution. In general, institutions with a composite score of 1.5 or more are financially responsible; those with a score between 1.0 and 1.5 are in the “zone” and subject to increased reporting and monitoring; those with a score below 1.0 are not financially responsible, and may participate only on conditions that include providing financial protection to the Department. However, the limitations of the existing composite score methodology are two-fold: The score is calculated based on the audited financial statements for the most recent fiscal year of the institution, and the audited financial statements recognize threatened risks only if accounting rules require the institution to recognize those events. If those events are recognized, however, the composite score can readily assess their effect on the viability of the institution, with due regard for the actual financial resources of the institution, including its ability to meet exigencies with internal resources and to borrow to meet them. The institution's composite score in each instance has already been calculated; to assess the effect of a threat or event identified in these regulations, the institution's financial statements on which that composite score was calculated will be adjusted to reflect the amount of loss attributed to, and other impacts of, that threat, and based on the adjusted statements, the Department will recalculate the institution's composite score. This recalculation will occur regularly as threats or events identified in these regulations are identified. By adopting this approach, the final regulations provide an individualized assessment rather than the one-size-fits-all method proposed in the NPRM that commenters found unrealistic. Unless other conditions apply, under the current regulations, an institution that undergoes a routine assessment of financial responsibility and achieves a composite score of 1.5 or greater may continue to participate without providing financial protection; an institution with a score between 1.0 and 1.5 may participate subject to heightened reporting and scrutiny; and an institution with a composite score below 1.0 is not financially responsible and may participate only with financial protection.
For the purpose of recalculating an institution's composite score, as detailed in Appendix C to these regulations, the Department will make the following adjusting entries to the financial statements used to calculate an institution's most recent composite score. For clarity, the adjusting entries refer to the line items in the balance sheet and income statements illustrated in Appendix A for proprietary institutions and Appendix B for non-profit institutions.
For a proprietary institution, for events relating to borrower-defense lawsuits, other litigation, or debts incurred as a result of a judicial or administrative proceeding or determination, or for a withdrawal of owner's equity, the Department will debit Total Expenses, line item #32, and credit Total Assets, line item #13, for the amount of the loss—the amount of relief claimed, the debt incurred, the amount withdrawn, or other amount as determined under § 668.171(c)(2). Except for the withdrawal of owner's equity, the corresponding entries for a non-profit institution are a debit to Total Expenses, line item 38b (unrestricted), and a credit to Total Assets, line item #12, for the amount of the loss.
For a proprietary institution, for events relating to a closed location or institution or the potential loss of eligibility for GE programs, the Department will debit Total Income, line item #27, and credit Total Assets, line item #13, for the amount of the loss. The loss is the amount of title IV, HEA funds the institution received in the most recently completed fiscal year for the location or institution that is closing or for the GE programs that are in jeopardy of losing their eligibility for title IV, HEA funds in the next year. In addition, the Department will debit Total Assets, line #13, and credit Total Expenses, line #32, for an amount that approximates the educational costs that the institution would not have incurred if the programs at the closing location or the affected GE programs were not offered. We believe it is reasonable that this reduction in costs is proportional to the ratio of Cost of Goods Sold (line item #28) to Operating Income (line item #25)—that is, the amount it cost the institution to provide all of its
The corresponding entries for a non-profit institution are, for the loss, a debit to Total Revenue, line item #31b, and a credit to Total Assets, line item #12. The reduction in costs is calculated by dividing Operating Expenses, line item #32, by Tuition and Fees, line item #27, and multiplying the result by the amount of the loss, the amount of title IV, HEA funds received by the location or affected GE programs. To account for the reduction in costs, the Department will debit Total Assets, line item #12, and credit Total Expenses, line item 38b.
Recognition of recent or threatened events can be appropriately measured under the composite score methodology if the event causes or is likely to cause a loss that can be quantified. All but two of the events that we retain as automatic triggers pose risks that we can quantify in order to assess their impact on the institution's composite score. Lawsuits, new debts of any kind, borrower defense discharge claims, closure of a location, loss of eligibility of gainful employment programs, and withdrawal of owner equity all have effects that may be quantified so that their effects can be assessed using the composite score methodology.
In at least two instances, there is no need to attempt to quantify the loss, because the loss is self-evident. An institution that fails the requirement to derive at least 10 percent of its revenues from non-title IV sources is so dependent on title IV, HEA funds as to make the loss of those funds almost certainly fatal, and we see no need to quantify that amount through the composite score methodology. That risk requires financial protection regardless of the most recent composite score achieved by the institution. Similarly, an institution whose cohort default rate exceeds 30 percent in two consecutive years is at risk of losing title IV, HEA eligibility the following year and requires no composite score calculation. These risks require financial protection regardless of the most recent composite score achieved by the institution.
An action taken by the SEC to suspend trading in, or delist, an institution's stock directly impairs an institution's ability to raise funds—creditors may call in loans or the institution's credit rating may by downgraded. However, unlike lawsuits and other threats, it is difficult to quantify readily the amount of risk caused by that action and assess that new risk using the prior year's financials and the composite score derived from those statements. Nevertheless, because the impaired ability to raise funds caused by these actions is potentially significant, that risk warrants financial protection without the reassessment of financial health that can be readily performed for more quantifiable risks. Nevertheless, because the impaired ability to raise funds caused by these actions is potentially significant, that risk warrants financial protection without the reassessment of financial health that can be readily performed for more quantifiable risks.
We recognize that the institution's current year financial strength may differ from that reported and analyzed for the prior fiscal year. That difference, however, can be favorable or unfavorable, and would be difficult to reliably determine in real time. Given that uncertainty, we consider it a reasonable path to use as the baseline the data in the most recent audited financials for which we have computed a composite score, and adjust that data to reflect the new debt or pending threat. Any disadvantage this may cause an institution will be temporary, because the baseline will be corrected with submission, evaluation, and scoring of the current year's audited financial statements. In assessing the composite score of the new financial statements for purposes of these standards, we will continue to recognize, for purposes of requiring financial protection, any threats from triggering events that would not yet be fully recognized under accounting standards. However, improvements in positions demonstrated in the new audited financials may offset the losses recognized under these regulations. If those improved positions produce a composite score of 1.0 or more, despite the loss recognized under these regulations, the institution may no longer be required to provide financial protection.
With regard to the suggestion by the commenters that the Department allow an institution to submit new month-end or partial-year audited financial statements from which the composite score would be recalculated, we believe that doing so would be costly and unworkable, because those financial statements do not reflect a full year's transactions, and would potentially recognize only new debts, or partially recognize new litigation or other claims for which the institution determines that a loss is probable. We note that the composite score methodology was designed to measure the financial performance of an institution over an entire 12-month operating cycle, the institution's fiscal year, and believe that attempting to calculate a composite score for a partial year would produce anomalous results. In addition, it is not clear how an institution could produce audited financial statements by the end of the month in which a triggering event occurred. Further, the suggestion does not appear to offer a realistic approach because separate actual or threatened losses may occur throughout the year, and for each event, this proposal would require a new set of financial statements.
This approach will affect only institutions that have a recalculated composite score of less than 1.0. If recognition of the event produces a recalculated composite score of between 1.0 and 1.5 for an institution that had a routine composite score of 1.5 or more, the recalculated score does not change the existing score to a zone score, so the institution is not required to comply with the zone requirements. § 668.175(d). For some institutions, a single event or threat may produce a failing composite score, while for others, a series of actions or events may together place the institution at substantial risk. Using the composite score methodology to assess new or threatened risks, instead of using a dollar- or percentage-based materiality threshold for individual triggering events, allows the Department to assess the cumulative effect on the institution of individual threats or events regardless. Thus, we will require financial protection only when the recalculated composite score is failing and the cumulative effect produces a failing score.
In response to the commenters who objected that the proposed triggering scheme would arbitrarily “stack” protection requirements, the composite score methodology distinguishes among levels of financial strength, and as we explain below, permits the Department to align the amount of protection required with the relative risk or weakness posed by successive triggering events or conditions. We agree with the commenters that an institution should not be required to provide financial protection for every automatic triggering event for which the underlying facts or circumstances are the same or where a direct causal relationship exists between two or more events, like the circumstance noted by the commenters where a 90/10 violation causes a loan agreement violation, or a settlement generates an accreditor sanction.
In response to the objection that these regulations could require financial protection equal to all of the title IV, HEA funds received in the prior year,
The requirement to provide at least a 10 percent letter of credit is rooted in the 1994 regulations regarding provisional certification of institutions that did not meet generally applicable financial responsibility standards. 34 CFR 668.13(d)(1)(ii)(1994). We adopt here this 10 percent as a minimum requirement because we consider financial protection in the amount of 10 percent of prior year title IV, HEA funding to be the minimum amount needed to protect the taxpayer from losses reasonably expected from an institution's closing. These losses include, at a minimum, costs of closed school discharges. Closed school discharges can affect all loans—including PLUS loans—obtained to finance attendance at the closing institution. This includes any loans obtained for enrollment in years before the year in which the institution closes, not merely those loans received by students for attendance at the institution in the year in which it closes. Thus, a closure could, in some instances, generate closed school discharge losses in amounts exceeding the total amount of Direct Loan funds that the institution received in the year preceding the year of that closure.
Liabilities of an institution could also include liabilities for funds unaccounted for by audit, because the institution as a fiduciary is liable for the costs of title IV, HEA funds it received unless it affirmatively demonstrates by the required compliance audit that it spent those funds properly. An institution that closes may have neither the resources nor the incentive to secure an audit of its expenditures of these funds. The liability of an institution that fails to account for those funds includes the full amount of Pell Grant funds received, and, for loans that are received for that period and are not discharged, the subsidy costs for those loans, which varies from year to year among loan types.
We have already experienced closed school discharge claim losses in one of the most recent and significant school closures, that of Corinthian, that permits development of estimates of liabilities. Corinthian was composed of three chains of some 37 separate institutions, operating at 107 campuses, with 65,000 students enrolled in 2014. It received $1.439 billion in title IV, HEA funding in FY 2013, the last full fiscal year preceding its closure. During the year preceding its closure, Corinthian sold 50 campuses, with some 30,000 students enrolled, to a new entity, a transaction that allowed a major portion of Corinthian students to complete their training. In addition, under agreement with the Department, Corinthian continued training at the campuses it retained until its closure in April 2015.
The Department has to date granted closed school discharges of some $103.1 million for some 7,858 Corinthian borrowers, with the average discharge some $13,114.
From this history, we estimate that an institution that closes in an orderly wind down, under which the majority of the students are able to continue their education by transfer or otherwise, will generate closed school discharge claims of at least 10 percent of the amount of all title IV, HEA funding received in the last complete fiscal year prior to the year in which the institution finally closes. Therefore, we adopt 10 percent of prior year title IV, HEA funding as the minimum amount of financial protection required of an institution that achieves a recalculated composite score of less than 1, or otherwise faces the risks (90/10, cohort default rates, SEC action) for which we do not recalculate a composite score. This is consistent with many years of Department practice.
Obviously, not all closures will arise in such fortuitous situations. It is realistic to expect that for other closures, including those that are more precipitous, a far greater percentage of borrowers will qualify for closed school discharges. Moreover, these regulations are expected to increase the number of instances in which we will give a closed school discharge by providing relief without an application where we have sufficient information to determine eligibility. In addition, based on the Corinthian experience, we expect that
Similarly, section 498(c)(1)(C) of the HEA specifically directs the Secretary to consider whether the institution is able to meet its refund obligations to students and the Department. 20 U.S.C. 1099c(c)(1)(C). The Department has implemented this provision by requiring an institution that has a performance rate of less than 95 percent in either of the two most recently completed fiscal years to provide surety in an amount of 25 percent of the amount of refunds owed during the most recently completed fiscal year. § 668.173(d). We intend to apply these long-standing and statutorily sanctioned predictors of potential liabilities in determining the amount of financial protection that we may require over and above that minimum amount to cover the costs of closed school discharges. Thus, we may determine that the potential loss to the taxpayer of the closure or substantial reduction in operations of an institution that has failed the 95 percent refund performance standard to be 25 percent of refund obligations in the prior year, in addition to the 10 percent of prior year title IV, HEA funding needed to cover closed school discharges. We may determine that the potential loss to the taxpayer of the closure or substantial reduction in operations of an institution that has had audit or program liabilities in either of the two preceding fiscal years of five percent or more of its title IV, HEA funds to present a potential loss of that same percent of its most recent title IV, HEA funding, in addition to the 10 percent of funding needed to defray closed school discharge losses. We may determine that the closure or substantial reduction in operations of an institution that has been cited in any of the preceding five years for failure to submit in a timely fashion required acceptable compliance and financial statement audits presents a potential loss of the full amount of title IV, HEA funds for which an audit is required but not provided, in addition to any other potential loss identified using these predictors.
Relying on the composite score methodology also helps clarify how long financial protection for risks or conditions should be maintained, because some events have already occurred, and will necessarily be assessed in the next audited financial statements and the composite score, which is routinely calculated. Others, such as pending suits or borrower defense claims, will not be reflected in the new financial statements, and those risks may still warrant continuing the financial protection already in place. Along these lines, we will maintain the full amount of the financial protection provided by the institution until the Department determines that the institution has (1) a composite score of 1.0 or greater based on the review of the audited financial statements for the fiscal year in which all losses from any triggering event on which the financial protection was required have been fully recognized, or (2) a recalculated composite score of 1.0 or greater, and that any triggering event or condition that gave rise to the financial protection no longer applies.
We believe it is reasonable to require an institution to maintain its financial protection to the Department as noted above until the consequences of those events are reflected in the institution's audited financial statements or until the institution is no longer subject to those events or conditions. If the institution is not financially responsible based on those audited statements, or the triggering events continue to apply, then the financial protection on hand can be used to cover all or part of the amount of protection that would otherwise be required. Doing so minimizes the risks to the Federal interests by having financial protection in place in the event that an institution does not sufficiently recover from the impact of a triggering event—any cash or letter of credit on hand would be retained and any funds under a set-aside arrangement would reduce or eliminate the need to offset current draws of the title IV, HEA funds.
With regard to the comment that a letter of credit could exceed 100 percent of the title IV, HEA funds received by an institution, we note that the regulations adopted here set 10 percent of prior year title IV, HEA funding as the minimum financial protection required for an institution that achieves a recalculated score below a 1, or fails the 90/10, cohort default rate, or SEC triggers, and permit the Department to demand greater protection when the Department demonstrates that the risk to the Department is greater.
Some commenters objected that requiring financial protection based on suits by private parties was unreasonable because the commenters considered those suits to have no bearing on the financial responsibility and administrative capability of the institution. Others considered reliance on the filing of suits that had not yet resulted in judgments against the institution to constitute an unreasonable standard that deprived the institution of its due process rights to contest the lawsuits. A commenter objected to the inclusion of government suits because the commenter considered proprietary institutions to often be the target of ill-planned and discriminatory suits by State and Federal agencies. A commenter stated that suits filed by State AGs have been shown in some cases to be politically motivated and argued that such suits should not be the basis for a letter of credit as they may unfairly target unpopular members of the higher education industry, depending on the party affiliation of the AG. The commenter stated that the suits are not required to be based in fact and rarely lead to a finding, that the judicial process should be allowed to follow its usual course, and that requiring schools to post letters of credit prior to a judicial ruling in the case amounts to finding a school guilty and requiring the school to prove innocence. The commenter stated that the risk posed by the filing of a suit cannot be determined simply from the complaint filed in the suit, and the actual risk posed by such suits, some commenters urged, could be reasonably determined only after determining the merits of the suit.
Commenters objected that these triggering events would require a school to submit a letter of credit before there was any determination of merit or wrongdoing by an independent arbiter, and stated that such suits should not be taken into account until judgment. The commenters stated that they believed that, contrary to the Department's statement in the preamble that suits by State and Federal agencies are likely to be successful, most cases settle due to the outsized leverage of the government, despite their merits. In addition, the commenters believed that suits filed by State AGs should not be the basis for a letter of credit because these suits have been shown in some cases to be politically motivated and to unfairly target institutions.
Another commenter urged the Department to remove the lawsuit triggers, arguing that the mere filing of an enforcement action by a State, Federal, or other oversight entity based on the provision of educational services should not be considered a trigger. The commenter stated that lawsuits are easy to file, allegations are not facts, and, even assuming good faith on the part of State and Federal regulatory agencies, sometimes mistakes are made. The commenter contended that the litigation process creates the incentive for sweeping allegations that may or may not be verifiable, or there may be cases filed by an agency in the hope of making new law or establishing a new standard for liability or mode of recovery beyond that applied by courts in ruling on such claims. A commenter was concerned that an “other oversight agency” could refer to a town or county zoning board or land use agency that could threaten to file a multi-million dollar suit for pollution, or a nuisance suit like a violation of a local sign ordinance, or failure to recycle soda cans, as a way to leverage concession from the institution for other reasons. These suits would be covered under proposed § 668.171(c)(1)(ii) even though they have nothing to do with the educational mission of the school. The commenter contended that giving such unbridled power to non-State, non-Federal, non-education-related oversight entities would effectively place the “sword of Damocles” over the head of every college president who needs to negotiate a dorm or a new parking facility.
Many commenters objected to consideration of settlements with government agencies under proposed § 668.171(c)(1). As proposed, the regulation might make a school not financially responsible if during the current or three most recently completed award years it was required to pay a debt to a government agency, including a debt incurred under a settlement. Commenters viewed this provision as overly broad and punitive, and suggested that settlements be excluded from this provision. A commenter believed that an institution under investigation will have a strong incentive to avoid a settlement that would precipitate the triggering event in proposed § 668.171(c)(1)(i)(A), which would require it to provide the Department a potentially expensive or unobtainable letter of credit. A commenter noted that bringing suit can be an important tool in facilitating settlement, and cited a case where a State AG filed a consumer fraud suit against an institution. The parties were able to negotiate a settlement that provided $2.1 million in loan forgiveness and $500,000 in refunds for students. Imposing a letter of credit in such situations would deter such favorable settlements. Commenters asserted that many businesses settle claims with the government due to the cost of litigation and the outsized leverage of the government, regardless of the merits of the underlying claims.
Commenters objected to consideration of debts already paid, asserting that if a school pays a liability as a result of an agency action, the school has already paid an amount that was deemed appropriate by the agency and should not be subject to the additional punitive requirement of posting a letter of credit. The commenters argued that this is especially true if the school's payment resulted in repayments to students such that a letter of credit is no longer necessary to provide for possible student claims.
Similarly, other commenters claimed that lawsuit triggers would create every incentive for borrowers who get behind in their loan payments to file claims or suits against an institution, regardless of how frivolous those suits or claims may be, and therefore these triggers should not be part of the borrower defense rulemaking.
A commenter urged the Department to make the lawsuit and investigation triggers in § 668.171(c)(1) evaluative instead of automatic, so that the Department would evaluate the type of suit, the merit of the claims, the amount of money at stake, and the likelihood of success. With this system in place, only institutions with a serious financial risk would be required to obtain a letter of credit, leaving other institutions room to negotiate with State AGs or other enforcement entities.
Other commenters objected to assessing the value of the lawsuits (in proposed § 668.171(c)(v)) by using “the tuition and fees the institution received from every student who was enrolled at the institution during the period for which the relief is sought” as wrongly presuming that every student in the period (or three years if none is stated) would receive a full refund, and may have no relation to the event on which suit was brought. While the commenters do not suggest using the damages proposed in any complaint, which they claim are often speculative and designed to grab media attention rather than reflect a true damage calculation, a better way to assess value would be an analysis of the merits of the specific litigation at issue, guided by past recoveries and settlements for similar actions. Some commenters objected that State AGs and private litigants will likely include demands for relief in pleadings that equal or exceed the thresholds set by the Department in order to gain additional leverage over an institution. Other commenters objected that State AG suits will also exceed the thresholds because they will state no dollar amount of relief, and thus be deemed to seek restitution in the amount of all tuition received for a period.
Some commenters believed that an institution should be afforded the opportunity to demonstrate, by an independent analysis, that the actual amount at issue is below the thresholds set for the applicable action and therefore the action is not material. Some commenters suggested that the Department allow an institution to seek an independent appraisal from a law firm, accounting firm, or economist that would state the actual amount at issue in the lawsuit. Others stated that this analysis could be accomplished as part of an appeal process with a hearing official deciding the amount based on evidence from the institution and the Department.
Some commenters stated that it is common for plaintiffs suing colleges and universities to allege damages far exceeding any amount that could feasibly be obtained in either a settlement or final judgment, as a tactic to maximize any final settlement amount and contingency fees to the attorney. For this reason, the commenters argued that requiring a letter of credit based solely on a claim exceeding 10 percent of an institution's assets is arbitrary and unwarranted, as the claimed amounts often have little factual basis or legal support. Further, the commenters were concerned that enacting this new standard would lead to plaintiffs' attorneys stating claims in excess of the 10 percent threshold to create negotiating leverage.
Other commenters believed that the $750,000 and 10 percent of current assets thresholds were arbitrary because they do not take into account that the size of schools varies significantly and, as such, their exposure may vary significantly. The commenters reasoned that a larger school that serves a greater number of students may be subject to a larger liability, but may also be able to adequately withstand that liability. For these reasons, the commenters suggested that the triggering events in § 668.171(c)(1) should be removed entirely, but if they are not removed, the commenters urged the Department to exclude the settlement provisions and the $750,000 threshold because debts of that size are not indicative of the financial stability of the school.
Some commenters noted that Federal and State settlements are often very small, and therefore believed those settlement amounts would not likely reach or exceed the proposed threshold of 10 percent of current assets. The commenters urged the Department to eliminate the 10 percent threshold in the final regulations, arguing that a settlement, in and of itself, should be sufficient to trigger a letter of credit. Other commenters believed that the threshold of $750,000 for the lawsuit triggers was so low that an auditor would not consider that amount to be material and therefore would not include the lawsuit in the footnotes of an institution's financial statements. They suggested that the Department set the materiality threshold as the higher, rather than the lesser, of $750,000 or 10 percent of current assets. The commenters reasoned that the lesser amount would almost always be the audit threshold ($750,000) which, in the case of any large school, will not be material. Alternatively, the commenters suggested that the Department remove the audit-based threshold and simply rely on the 10 percent of current assets threshold.
Objecting to the method of calculating a claim in a suit in which the plaintiff does not state a dollar amount of relief, a commenter noted that in a number of
Second, the commenter argued that a pending private lawsuit seeking large damages should not be considered a trigger event, as proposed in § 688.171(c)(1)(iii). The commenter cautioned that considering filed-but-not-decided litigation to impair the financial responsibility of an institution would overly empower opportunistic or idealistic members of the plaintiff's bar. The commenter asserted that the proposed position would give every lawyer with a draft lawsuit containing enormous damage claims a chokehold on any school. The commenter noted that although proposed § 688.171(c)(1)(iii)(A) is intended to restrict this triggering event to only those claims that survive summary judgment, the commenter asserted that in some States, this restriction would be ineffective. The commenter asserted that, for example, in New York State courts, a plaintiff can file a “Motion For Summary Judgment in Lieu of Complaint,” under CPLR Section 3213, to initiate the case. A plaintiff can demand a response on the date an answer would otherwise be due; if the defendant were to file a cross-motion for summary judgment as a response, the court ostensibly would deny both and treat the cross-motions as an answer and complaint, and the case would go forward. But the case would have “survived a motion for summary judgment by the institution,” and would then constitute a trigger event at its outset.
The commenter further asserted that California State courts permit not only summary judgment, but also a separate procedure for resolution of entire claims by “summary disposition.” Cal. Code of Civ. Pro. Section 437c. The grant of judgment to the institution on any relevant claim by summary disposition would not seem to affect whether a trigger event has occurred, even if the only relevant claim was disposed of. The commenter asserted as well that in Virginia, summary judgment is technically available, but, as a practical matter, the commenter states that it is never granted because a motion for summary judgment cannot procedurally be supported by documents, affidavits, depositions, or other similar evidence. Moreover, the real effect of this provision would be to deter institutions from ever moving for summary judgment, fearing that the motion would be denied therefore generating a triggering event.
For these reasons, the commenter concluded that institutions would have to bring every covered private case to trial, at much greater financial and emotional expense not only to the school but also to the opposing parties. The commenter expressed concern that the proprietary school sector was a target for enterprising trial lawyers, and that because of the heightened scrutiny faced by financial institutions making lending decisions, it would be impossible for many institutions facing one of these triggering events to obtain a sufficient letter of credit to comply with the regulations. The commenter cautioned that an institution in such a circumstance would have little choice but to cease operations, even if its financial basis remained fundamentally sound—and even if the claims represented by the proposed triggering events were insubstantial or frivolous.
Similarly, another commenter stated that in litigation, plaintiffs are able to survive a motion for summary judgment due to a variety of factors. The commenter said that judges may decline to dispose of a case on summary judgment because there remains an issue of material fact that may have little to do with the underlying false claim or provision of educational services. The commenter offered that a final judgment requires a higher level of proof than a motion for summary judgment and would therefore be a fairer threshold. In addition, the commenter noted that private rights of action are fundamentally different than agency or government actions that are subject to well-established policies and procedures. Further, the commenter anticipated that private parties will likely request relief in excess of the proposed thresholds of $750,000 or 10 percent of current assets to gain additional leverage in seeking a settlement.
With regard to proposed § 668.171(c)(1)(iii), some commenters asked the Department to clarify whether the mere filing of a False Claims Act case is a triggering event or if paragraphs (A) and (B) apply to that case (as well as private litigation). The commenters offered that the mere filing of a False Claims Act case should not subject an institution to a letter of credit. While the commenters recognized the seriousness of a False Claims Act case, they stated that these cases do not garner intervention from the Federal government and are typically settled for amounts that are dramatically less than the stated damages in the complaint. Further, while the commenters appreciated the Department's attempt to ensure it was only capturing meritorious private litigation under § 668.171(c)(1), they believed that the provision would penalize an institution for settling a case for nuisance value or harming a school for filing a motion for summary judgment which it ultimately loses.
Responding to the objection that we should consider only claims reduced to judgment, we stress that ignoring the threat until judgment is entered would produce a seriously deficient assessment of ability to meet financial obligations, and worse, would delay any attempt by the Department to secure financial protection against losses until a point at which the institution, by reason of the judgment debt, may be far less able to supply or borrow the funds needed to provide that protection. We reject this suggestion as contrary to the discharge of the duty imposed on the Department by section 498 of the HEA. Similarly, we see no basis for the contention that taking into account risk posed by pending suits somehow deprives an institution of its due process right to contest the suit. If the risk posed is within the statutory mandate to assess, as we show above, taking that risk into account in determining whether an institution qualifies to participate in the title IV, HEA programs cannot deprive the institution of any constitutionally protected right. The institution remains free to respond to the suit in any way it chooses; it is frivolous to contend that we are barred from considering whether that risk warrants financial protection for the taxpayer as a condition for the continued participation by that institution in this Federal program.
Besides these general objections to the consideration of pending suits, the comments we received addressed several distinct aspects of the proposed consideration. These included comments addressed to the inclusion of suits by an oversight entity, which may include a local government component, in the category of government suits; the proposal that suits be evaluated on their merits by a third party, by Department officials, or by a Department hearing official; objections to inclusion of debts arising from settlements; objections that the thresholds in the proposed rule were unrealistic or arbitrary; objections to the proposed method of calculating the amount claimed where the institution contends that the amount claimed exceeds the amount that applicable law would support; objections to the proposed calculation of the amount in actions that did not seek a stated amount of relief; objections to the proposed use of summary judgment as a test of the potential risk posed by the suit; and objections to consideration of debts already incurred and paid in prior years. We discuss each in turn and, as discussed earlier explaining the use of an adapted composite score methodology, we are modifying the proposed regulations in several regards that we intend and expect to assess the risk posed by pending suits in a manner that alleviates several of major concerns raised by commenters.
We address first the changes to the proposed thresholds, because adoption of the composite score methodology of assessing risk affects the response to those objections and other concerns as well. Each institution is well aware of its most recent composite score, and as explained above, the amount of risk posed by each suit considered under the regulations will be assessed by recognizing that loss in the financial statements on which that composite score was based, and determining whether that recognition will produce a failing composite score. Any institution can readily evaluate that effect and take that result into account in responding to the suit. A pending suit that produces a failing score will be recognized as a threat until the suit is resolved and that result produces a score of 1.0 or more, whether by favorable judgment or settlement. Second, we include an opportunity for an institution to demonstrate that loss from any pending suit is covered by insurance. Commenters advised that we should not treat lawsuits as potential triggering events because the risks posed by these suits are commonly covered by insurance. If the institution demonstrates that insurance fully covers the risk, the suit is simply not considered under these financial responsibility standards. The institution can demonstrate that insurance fully or partially covers risk by presenting the Department with a statement from the insurer that the institution is covered for the full or partial amount of the liability in question.
In response to the proposal that the regulations should provide for an evaluation of the merit of a suit by a third party, by a Department official, or by a Department hearing official, we see no practical way to implement such a procedure. Litigants already have the ability to engage in court-sponsored or independent mediation, in which both parties can adequately present their positions; if both parties are amenable to such a two-party assessment, the parties can readily pursue that course through mediation, and we see no need for the Department to undertake that role. We see little or no value in entertaining and evaluating a presentation solely from a defendant institution, whether that evaluation were to be performed by a Department official or an administrative hearing official in a Department proceeding. As noted, a party whose defense is financed by insurance may find the insurer conducting precisely such an evaluation in conducting the litigation, and that assessment will influence the conduct of the litigation.
In addition, the proposal that the Department or a third party assess the merit of an action by a government agency would require the Department or a third party to interpret the statutes and regulations on which that agency based its actions as well as assess whether the action was a reasonable exercise of the agency's authority. We have no authority to second guess the actions of another agency in the exercise of its authority, and we would neither presume to do so nor adopt a procedure in which we would credit such second-guessing by a third party.
The proposed regulation would treat “oversight authority” actions like actions of Federal or State agencies. By this term, we include local government entities with power to assert and recover on financial claims. This consideration applies only to affirmative government financial claims against the institution, not to government actions that deny approvals or suits that seek only injunctive or other curative relief but make no demand for payment. Local authorities can take enforcement actions that can pose a serious financial risk to the institution, and we see no basis for disregarding that risk or undertaking any internal or third-party assessment of
For suits by a Federal or State agency not directly implicating borrower defenses, and suits by other government agencies, we consider the summary judgment test applicable to private party lawsuits—not a motion to dismiss test—to provide a reasonable basis for testing the degree of risk posed.
We recognize that settlements may well achieve highly desirable outcomes, and that regulations should not create a disincentive to settlements. Regardless of the position taken in these regulations, a debt actually incurred under a settlement entered into in the current fiscal year will be recognized in the financial statements of the institution eventually submitted for the current year, and will be part of the financial information on which the institution's composite score will be calculated for the current year. The concerns raised about treatment of settlement obligations are therefore concerns only about how the regulations treat during the current fiscal year those settlement debts incurred during the current year, not their subsequent treatment. A settlement debt that the institution can meet will likely not jeopardize its financial score when actually evaluated, and we approach such debts from the same perspective by assessing their effect when incurred using the composite score method as adopted here. We do not expect that an institution will enter into a settlement that jeopardizes its viability, and by removing the thresholds and assessing that debt in a holistic manner, we believe that the regulation will remove any disincentive to enter into settlement. If an adjusted composite score includes a potential liability from a suit or oversight action that eventually results in a settlement, the previously recorded risk will be accordingly adjusted downward to the settlement amount.
We are retaining the summary judgment test for all non-governmental suits, because awaiting a final judgment that may cripple the institution would substantially frustrate our objective to acquire financial protection at a time when a significant threat is posed and while the institution is far more likely to be able to afford to provide that coverage. That alternative is unacceptable for those reasons, and those who object to use of a summary judgment standard pose no alternative judicial test that avoids these problems. We recognize that a complaint that lacks substantive merit may avoid dismissal if sufficiently well pled, but that such a suit survives summary judgment only with a showing of some evidence sufficient to support recovery.
In response to the commenters who raised concerns about assessing the potential recovery sought in an action that articulates no specific financial recovery, we cannot ignore the threats posed by such suits. The fact that a particular suit may avoid stating a dollar amount of damages in the complaint in no way affects whether the suit poses a significant risk to the school. The potential recovery in such suits may not be obvious from a complaint, but will ordinarily be articulated in a number of different ways, at least one of which would be routinely available. For example, the plaintiff may have articulated a specific financial demand in a written demand made prior to suit. Second, a plaintiff may have offered to settle the claim for a specific amount.
Together, these changes are expected and designed to enable a school faced with the kinds of suits the commenters describe to either vigorously contest the suits as the school sees fit or to settle them. In either case, even a suit or settlement that might warrant financial protection in one year, that protection would be required only until the institution later may achieve a passing composite score despite recognition of the settlement obligation.
Some commenters suggested making the submission of a teach-out plan under 34 CFR 602.24(c) a separate, automatic trigger. The commenters argued that, unlike accreditor sanctions, the teach-out provisions are clearer circumstances that suggest the institution may imminently close.
Commenters argued that a letter of credit for institutions that trigger the teach-out provision is unnecessary and duplicative of existing protections in the regulations. The commenters stated that in the scenario of a closing institution, it is highly unlikely that the school will be able to obtain a letter of credit, and argued that, as a result, requiring the closing school to submit a letter of credit could convert a planned, orderly closing into a sudden shut down, thus leaving students stranded and harming taxpayers.
Some commenters warned that including the voluntary closure as a trigger would have unwanted effects. The commenters argued that this trigger would incent schools to keep locations open, despite the fact that the locations may no longer be serving its purpose and its continued presence may constitute a drain on institutional resources. Forced to choose between a location that is running slightly in the red and a letter of credit calculated against the entire institution's title IV expenditures, the commenters believed institutions may have no choice but to keep the doors open.
Moreover, the commenters argued that requiring a letter of credit makes little sense in the circumstance in which a school closes one or more locations, but the institution remains open. The commenters offered that in any scenario involving the closure of a location but not the main campus, the Department may pursue derivative student claims against an institution when those students receive a loan discharge pursuant to proposed § 685.214.
Some commenters also contended that the closure of locations is typically designed to increase the financial soundness of an institution and believed that the Department's records would show that most individual locations are closed only after an orderly teach-out and without triggering many (or any) closed school discharges. They argued that the closing of one or more locations of a school does not necessarily signal financial instability of a school; it may signal prudent fiscal controls. Closing locations that are not profitable or that cannot effectively serve students makes the institution as a whole more financially responsible and better able
Similarly, other commenters suggested that the Department adopt a materiality threshold, such as the number of students enrolled or affected or the title IV dollar amount associated with those students, because the closure of an additional location may have no adverse effect on an institution.
In response to the Department's request for comment on whether a threshold should be established below which the closure of a branch or additional location would not trigger the letter of credit requirement, as noted previously, commenters urged the Department to eliminate the closure of a branch or additional location as a triggering event, or at minimum, make the trigger discretionary rather than mandatory. If the Department does not do so, the commenters asserted that a threshold is then both necessary and appropriate, but the commenters believed that a letter of credit should be required only if the closure of a branch or additional location would have a material financial impact on the school as a whole. The commenters offered that the Department could request a letter of credit if the closure of a branch or additional location:
• Would reduce total school enrollment by 30 percent or more;
• Would reduce total school title IV receipts by 30 percent or more; or
• Would reduce total school tuition revenues by 30 percent.
Other commenters suggested that the Department extend the 10 percent materiality concept to this situation and apply the letter of credit requirement only if the closure of a location involves more than 10 percent of the school's population.
Some commenters noted that locations are often part of campus models that, among other things, bring postsecondary education to areas that might otherwise have none, and believed that institutions may elect to forgo these innovative efforts if they are unable to close a location without incurring a significant financial penalty.
Other commenters suggested that the Department clarify whether the letter of credit provisions would be applied based on the title IV, HEA funds received by the main or branch campus, and how the letter of credit provisions would apply to teach-out plans that might be submitted for a branch campus instead of the entire main campus.
Some commenters were concerned that the scope of the proposed accrediting agency triggering events is too broad because it includes matters that do not necessarily pose any existential threat to the viability of an institution. The commenters stated that an institution placed on probation or show-cause status does not, in all cases, signal an imminent threat to the continued viability of the institution that should automatically require a letter of credit; in the tradition of accreditation, while these designations are meant to identify and make public areas of concern at an institution, the goal remains that of self-improvement and correction.
Other commenters agreed that an institution placed on show cause by most accrediting agencies is typically at substantial risk of losing its accreditation, and loss of accreditation would likely have some impact on its finances and operations. However, the commenters noted that, in many cases, the agency placed the institution on show cause because it had demonstrated significant financial and operational deficiencies that were already having an impact on its business and educational outcomes. Therefore, the commenters cautioned that in many cases, it is the reason behind the show cause order (
Some commenters stated that in many cases, an accrediting agency places an
The commenters believed that if the Department intends to rely on accrediting actions to determine financial responsibility, then the Department must review the content of the accrediting actions and act based on the reasons for those actions. As a matter of due process, each accrediting agency action imposing probation makes highly individualized findings of non-compliance that provide clear indicators regarding the institution's risk, as determined by the agency. For these reasons, the commenters suggested that the Department revise the show cause and probation provisions to refer specifically to agency standards related to finances, operations, or institutional ethics or integrity or related areas.
Other commenters supported tying accrediting agency actions to financial or operational issues but, in the alternative, would also support the Department's suggestion during the negotiated rulemaking process that there be a way for an accrediting agency to inform the Department as to why its probation or show-cause action will not have an adverse effect on the institution's financial or operating condition (see 81 FR 39364). Along somewhat similar lines, other commenters believed that, if an accrediting agency takes an action against a school based on financial responsibility concerns, that action should not supplant the Department's own analysis under subpart L of the regulations.
Other commenters stated that accreditors do not consider a show-cause order a negative action—to the contrary, accreditors routinely use it as a mechanism to promote institutional change and compliance. The commenters argued the Department itself has not previously taken the view that a show-cause order or probation was a significant threat to an institution's financial health by noting that a recent report listing the institutions the Department required to submit letters of credit did not identify an accrediting agency action as the basis for requiring any of those letters of credit. The commenters also noted that the Department's recent spreadsheet listing the institutions on heightened cash monitoring indicates that 13 of the 513 institutions were placed there for Accreditation Problems, which the Department defined as “accreditation actions such as the school's accreditation has been revoked and is under appeal, or the school has been placed on probation.” The commenters asserted the spreadsheet establishes (1) that the Department already has a mechanism for seeking financial protection from institutions experiencing accreditation problems, and (2) that a mere show cause order historically has not been viewed as posing the same risk as revocation or probation. In addition, the regulations governing recognized accreditors permit an accreditor to afford an institution up to two years to remedy a show-cause before it must take action, and the commenters believe that this allowable timeframe effectively codifies the notion that a show-cause order is neither a sign of impending financial failure, nor a matter than an institution would expect to resolve in six months' time. See 34 CFR 602.20.
Other commenters agreed with the Department that actions taken by an accreditor could be a sign that the institution may imminently lose access to Federal financial aid. In those cases, the commenters believed that asking for additional funds upfront would be a sensible step as an advance protection for taxpayers. However, the commenters point to recent review of accreditor actions over the last five years showing that the current sanctions system is highly inconsistent. The commenters stated this inconsistency was true with respect to terminology, the frequency with which actions happen, and how long an institution stays on a negative status. (Antoinette Flores's “Watching the Watchdogs,” published in June 2016). Given this inconsistency, the commenters recommend making the following changes to the proposed accrediting triggering events.
Commenters suggested that the Department make accreditor actions a discretionary trigger because, given the inconsistency among accreditors, establishing an automatic trigger tied to negative sanctions may be difficult. They stated that accreditors do not interpret what it means to be on probation or show cause in the same way. In addition, the commenters stated that making sanctions by accreditors an automatic trigger also risks making them unlikely to take action when they should.
The commenters note that a clear finding from the research, “Watching the Watchdogs,” is that many accreditors put institutions on a negative status for a very short period of time, while other accreditors required institutions facing a sanction to stay in that status for at least a year. The commenters were concerned that setting a clear threshold of six months would give an institution too much leverage to argue that its accreditor should withdraw the sanctions sooner than the accreditor otherwise would.
Some commenters noted that many institutions subject to the GE regulations have limited program offerings, and in some cases offer only one program. For those institutions, a single program scoring in the zone will result in more than 50 percent of its students being enrolled in zone-scoring programs. The commenters further noted that the GE regulations provide for a runway for institutions to bring programs into compliance, and institutions do so through cost reductions that are passed along to students. The commenters reasoned that imposing a letter of credit requirement on such an institution would deprive it of curative resources and ultimately lead to a closure of the program, rather than its remediation.
In response to the Department's request for comment on whether the majority of students who enroll in zone or failing GE programs is an appropriate threshold, commenters offered several observations and recommendations.
First, the commenters believed that a simple tally of the number of GE programs that may be failing or in the zone at a given point in time will not produce a consistently accurate assessment of an institution's current or future financial stability. The first set of debt-to-earnings rates, for example, are based on debt and earnings information for students who graduated between the 2008-09 and 2011-12 award years (assuming an expanded cohort). See generally 34 CFR 668.404. By the time the associated debt-to-earnings ratio for these programs are released (likely early 2017), many institutions will be offering new or different programs that are designed to perform favorably under the GE framework. Though, as of 2017, a significant number of the students may still be enrolled in the institution's older GE programs, these programs will no longer be integral to the institution's business model, and indeed, may be in a stage of phase-out. For this reason, the commenters suggested that any reasonable assessment of an institution's financial health would need to account for the phase-out of older GE programs and the strength of the newer ones.
Second, the commenters recommended that the Department exclude from this determination any GE programs that are in the zone, or at a minimum, GE programs that have only been in the zone for two or fewer years. The commenters argued that, because a GE program must be in the zone for four consecutive years for which rates are calculated before it loses eligibility, the inclusion of a zone program prior to this point does not justify the presumption that the program may lose eligibility.
Finally, the commenters suggested that, rather than exempting institutions where fewer than 50 percent of the title IV recipients are enrolled in GE programs, the regulations should simply compare the number of students who receive title IV, HEA funds and are enrolled in failing GE programs to the total number of students. The commenters believed this approach would be a better and more straightforward measure of the risk of financial failure posed to the entire institution.
We proposed including zone programs in the GE trigger because there are no assurances that an institution will attempt to improve or succeed in improving those programs. However, we agree that the proposed trigger could influence an institution to discontinue an improving program prematurely or hold an institution accountable for poorly performing programs that it voluntarily discontinues. In proposing the 50 percent threshold, we were attempting to limit this trigger to those situations where the potential loss of program eligibility would have a material financial impact on an institution. But, as alluded to by the commenters, the percentage threshold based on title IV recipients may not apply to situations where an institution discontinues a zone program, or cases where 50 percent of the title IV recipients enrolled at an institution account for a small fraction of (1) the total number of students enrolled, or (2) institutional revenue.
To address these concerns, we are revising the GE trigger by considering only those programs that are one year away from losing their eligibility for title IV, HEA program funds and assessing the impact of that program's closure and any potential loss under the recalculated composite score approach. Specifically, the Department will use the amount of title IV, HEA program funds the institution received for those programs during its most recently completed fiscal year as the potential loss and recalculate the composite score based on that amount and an allowance for reductions in expenses that would occur if those programs were discontinued.
Some commenters appreciated the provision in § 668.171(d)(2) that would allow an institution whose composite score is based on the consolidated financial statements of a group of institutions, to report that an amount withdrawn from one institution was transferred to another entity within that group. However, the commenters argued that, since the Department is aware of the institutions whose composite scores are calculated based on consolidated financial statements, requiring those institutions to report every intercompany funds transfer imposes an unnecessary burden because the reporting provides little if any benefit to the Department. Therefore, the commenters recommend amending proposed § 668.171(c)(8) to expressly exclude any withdrawal of equity that falls within the circumstances described in § 668.171(d)(2).
Other commenters assumed that this provision is intended to apply only to proprietary institutions because nonprofits do not have owners. However, because in financial reporting, the term “equity” is often used conceptually to refer both to owner's equity for businesses or net assets for nonprofits, the commenters recommended that the Department clarify in the final regulations that this provision applies only to proprietary institutions.
In addition, by recalculating the composite score we capture the impact of withdrawals of owner's equity in cases where the withdrawals were not made solely to meet tax liabilities.
Some commenters urged the Department to remove the cohort default rate trigger, citing concerns that this trigger would have unintended consequences. The commenters believed that, because of the corresponding letter of credit requirements, it is likely that banks would curtail their lending to affected institutions making it more difficult for those institutions to initiate, or continue with, innovative educational efforts that are often capital-intensive.
In response to the Department's request for comment on whether a cohort default rate of 30 percent or more for a single year should be a triggering event, some commenters believed that the proposed two-year trigger should not be changed. One commenter suggested that this trigger should apply to any institution whose most recent cohort default rate is 30 percent or higher, arguing that keeping default rates below 30 percent is a very low standard for an institution to meet—only 3.2 percent of institutions have a default rate of 30 percent or higher. The commenter noted that, among all students attending institutions of higher education where the default rate is 30 percent or higher, 85 percent attend public institutions and just 11 percent attend proprietary institutions. The commenter urged the Department not to exempt public institutions from this trigger if the Department's goal is to protect as many students as possible.
We disagree with the notion that a bank will curtail its lending to an institution solely because the Department requests financial protection under this trigger. Like other creditors, a bank would assess the risks inherent in making a lending decision, including regulatory risks. In this case, under the statutory provisions in section 435(a)(2) of the HEA, pending any appeal for, or adjustment to, its cohort default rates the institution is one year away from losing its eligibility for title IV, HEA funds. Although an institution's intention to initiate or continue innovative educational efforts are laudable, we believe it is questionable that a bank would jeopardize funds requested by the institution after having assessed the risks of whether the institution could repay those funds in the event that the institution's eligibility under the title IV, HEA programs is terminated in the near term.
With regard to the Department's request for comment, we are persuaded to maintain the proposed two-year threshold.
With respect to the comment that, to protect as many students as possible, the Department should not exempt a public institution from the cohort default rate trigger, we note that while cohort default rates for all institutions are publicly available and can be used by students and parents in making enrollment decisions for particular institutions, the purpose of this trigger is to protect the Federal interest in the event an institution loses its eligibility for title IV, HEA funds in the coming year. In that circumstance for a public institution, we already have financial protection in the form of full faith and credit of the State to cover any liabilities that may arise (see the discussion under the heading “Public Domestic and Foreign Institutions”).
Some commenters believed this trigger was unjustified, arguing that an institution's eligibility to participate in the title IV, HEA programs is not at risk after a one-year failure. The commenters stated that section 487(d)(2) of the HEA provides that no penalties are imposed on an institution until it loses title IV eligibility by failing the 90/10 revenue test for two consecutive years, and that the sanctions that are specified do not include the financial responsibility consequences proposed under this trigger. For these reasons, the commenters concluded that, lacking specific statutory authority, the Department should remove this trigger from the final regulations.
Other commenters were concerned that institutions actively game the 90/10 requirements by (1) delaying title IV disbursements until the next fiscal year; (2) combining locations that exceed the 90 percent revenue limit with those that do not, and (3) raising tuition, which forces students to take out private loans that increase revenue from non-title IV sources. The commenters believed that these gaming strategies are the reason that only a few institutions fail the 90/10 revenue test each year (14 institutions for the 2013-14 reporting period) and urged the Department to limit the use of these strategies, recommending for example, that Department track for three years the 90/10 compliance for each location included at the institution's request under a single PPA or that the Department should not grant those
Contrary to the commenters' assertion that there is no risk to an institution's eligibility after a one-year failure, the HEA contemplates that risk under section 487(d)(2)(B) by providing that after a one year failure, the institution automatically becomes provisionally certified and remains on that status for the following two years, unless it fails the 90/10 revenue test in the subsequent year and loses eligibility. Moreover, the Department's authority to establish 90/10 as a basis for determining whether an institution is financially responsible is anchored under the provisions in section 498(c)(1) of the HEA, not the provisions governing the institution's eligibility under the 90/10 revenue provisions.
With regard to the comments about institutions evading the 90/10 requirements, we note that changes to these requirements are beyond the scope of this rulemaking. Administratively however, the Department will continue to diligently enforce the 90/10 requirements and work closely with the Office of the Inspector General to help ensure that institutions properly calculate their 90/10 rates.
Commenters believed that the NPRM did not provide meaningful rationale for some of the provisions that the Department asserts require financial protection, pointing for example to an institution's failure to file a timely report with the SEC, or noncompliance with exchange requirements, and noting that the Department only suggested that such events could lead to institutional failure. In response to the Department's request for comment regarding how these triggers could be more narrowly tailored to capture only those circumstances that could pose a risk to an institution's financial health, the commenters offered that the final regulations should provide that in every instance where an SEC action occurs, the Department will only take action after it affords the institution a notice and hearing and thereafter makes a reasoned determination that the event is likely to result in a material adverse effect. The commenters further stated that, to be a triggering event, any SEC action should be a final, non-appealable judgment or suspension and not merely a warning or notification. The commenters also stated that because many companies inadvertently and regularly miss a periodic filing deadline, the final regulations should require a finding of materiality, as applied to the delinquency of the filing, and the Department should consider whether the filing failure is an isolated incident or part of a pattern of conduct, and whether the missed filing was the fault of the institution.
Similarly, in response to the Department's request for comment, other commenters identified the following situations that they believed would provide for a more appropriate set of triggers for publicly traded institutions:
(1) The institution is in default on an obligation to make payments under a credit facility, or other debt instrument, and the default involves an amount in excess of 10 percent of the institution's current assets, and the default is not cured within 30 days;
(2) An event of default has been declared by the relevant lender or trustee under any outstanding credit facility or debt instrument of the institution or its parent, including any bond indenture, and the default is not cured within 30 days; or
(3) The institution or its parent declares itself insolvent, files a petition for reorganization or bankruptcy under any Federal bankruptcy statute, or makes an assignment for the benefit of creditors.
The commenters believed that adopting the recommended triggers would enable the Department to efficiently identify those cases in which a publicly traded institution is in financial trouble, and would avoid conflating investor-facing disclosures or nonmaterial administrative matters (
With regard to the proposal that the Department take action to impose financial protection based on an SEC or
While we appreciate the suggestions made by the commenters to streamline the triggers for publicly traded institutions, particularly with regard to making payments under a credit facility, as discussed more thoroughly under the heading “Violation of Loan Agreement,” we have made these provisions discretionary and they apply to all institutions. While we agree that some of the situations described would signal serious distress, under these regulations we will make those determinations on a case-by-case basis. As previously noted, if the lender files suit as a result of the delinquency, that suit would be considered under the private litigation assessment in § 668.171(c)(1)(ii).
The commenters argued that, while a delisting is significant, correlating an institution's financial health to its delisting incorrectly assumes that the delisting is generated as a result of financial problems and the delisting will materially impact the institution's financial health. Even where the delisting is itself related to something that is measured in dollars, like a minimum bid price, that measure is not necessarily indicative of the health of an institution, as opposed to the market value of a share of the institution.
Similarly, other commenters believed this triggering event would run counter to the long-standing practice of publicly traded institutions generally erring on the side of disclosing legal and regulatory events to the public and their shareholders. More specifically, the commenters asserted that publicly traded institutions tend to over-disclose these events, particularly since the materiality of those events often cannot be reasonably determined at their onset.
Commenters believed that the proposed discretionary triggers were unreasonable for several reasons. First, the commenters noted that the discretionary provisions do not afford institutions any opportunity to communicate with the Department regarding a possible materiality determination. Instead, it appeared to the commenters that the Department may determine unilaterally, and without engaging the school, that there is an event or condition that is reasonably likely to have a material adverse effect and proceed to demand financial protection, violating the school's due process. Moreover, the commenters argued that any standard of financial responsibility that does not permit the receipt and review of information from the school cannot produce consistent and accurate results and, as such, fails to satisfy the reasonability standard put into place by Congress.
Second, the commenters noted that the Department did not define the term “material adverse effect” and made no mention of the concept in the preamble to the proposed regulations. The commenters asserted that the Department must define this term to ensure that the regulations are consistently applied, particularly where an institution could be significantly penalized (required to submit a letter of credit) pending the result of the determination.
Third, the commenters argued that by requiring under proposed § 668.171(d) that an institution must report any automatic or discretionary trigger within 10 days, the proposed regulations are unworkable—because the discretionary triggers are not exhaustive, an institution would have an obligation to speculate as to the types of events the Department might determine would have a material adverse effect and report those events. Conversely, the commenters were concerned that the Department could argue that an institution's failure to report an event, that the Department might deem likely to have material adverse effect, is a failure to provide timely notice under § 668.171(d), and grounds to initiate a proceeding.
Fourth, the commenters argued that the six examples of events that the Department might consider “reasonably likely” to have a material adverse effect on an institution are vague, and asserted that the Department offered no factual support in the preamble for the notion that these events regularly, or even more often than not, lead to financial instability at an institution. The commenters stated that the only rationale the Department offers for including these six events is that each could, in theory, signal financial stress. For example, they noted that a citation from a State-authorizing agency for failing a State requirement could concern almost any aspect of an institution's operations. The commenters contended that routine citations occur with great frequency in annual visit reports and routine audits. Therefore, under the proposed regulations, an institution would be required to report every citation, without regard to materiality, frequency, or the relationship to the institution's financial health. According to the commenters, events such as “high annual dropout rates,” a “significant fluctuation” in the amount of Federal financial aid funds received by an institution, an undisclosed stress test, and an adverse event reported on a Form 8-K with the SEC are equally problematic and vague. Commenters stated that it was unclear what these thresholds or events represent, how they would be evaluated, or how an institution would know that one has occurred and report it to the Department.
Other commenters believed that the Secretary should not have open-ended discretion to determine which categories of events or conditions would be financial responsibility triggers. Like other commenters, these commenters argued that as a practical matter it
Some commenters believed that the discretionary triggers constitute an open invitation for litigation by anyone with an “axe to grind” with any school. The commenters were concerned that the Secretary could use the expanded authority under the discretionary triggers to take actions against institutions for any reason.
. . . usually signals a severe decline in profitability and/or the possibility that the company's operations and/or financial position may be seriously compromised. This is a clear signal to investors that there is something wrong . . . Material adverse effect is not an early warning signal, but rather a sign that a situation has already deteriorated to a very bad stage. Investopedia
205-40-55-2 The following are examples of adverse conditions and events that may raise substantial doubt about an entity's ability to continue as a going concern. The examples are not all-inclusive. The existence of one or more of these conditions or events does not determine that there is substantial doubt about an entity's ability to continue as a going concern. Similarly, the absence of those conditions or events does not determine that there is no substantial doubt about an entity's ability to continue as a going concern. Determining whether there is substantial doubt depends on an assessment of relevant conditions and events, in the aggregate, that are known and reasonably knowable at the date that the financial statements are issued (or at the date the financial statements are available to be issued when applicable). An entity should weigh the likelihood and magnitude of the potential effects of the relevant conditions and events, and consider their anticipated timing. a. Negative financial trends, for example, recurring operating losses, working capital deficiencies, negative cash flows from operating activities, and other adverse key financial ratios. b. Other indications of possible financial difficulties, for example, default on loans or similar agreements, arrearages in dividends, denial of usual trade credit from suppliers, a need to restructure debt to avoid default, noncompliance with statutory capital requirements, and a need to seek new sources or methods of financing or to dispose of substantial assets. c. Internal matters, for example, work stoppages or other labor difficulties, substantial dependence on the success of a particular project, uneconomic long-term commitments, and a need to significantly revise operations. d. External matters, for example, legal proceedings, legislation, or similar matters that might jeopardize the entity's ability to operate; loss of a key franchise, license, or patent; loss of a principal customer or supplier; and an uninsured or underinsured catastrophe such as a hurricane, tornado, earthquake, or flood.
We address specific concerns and suggestions about the discretionary triggers in the following discussion for each factor or event. In addition, we have added pending borrower defense claims as a discretionary trigger because it is possible that an administrative action could cause an influx of borrower defense claims that we can expect to be successful, though that will vary on a case-by-case basis.
Other commenters argued that assuming that schools with noninvestment grade bond ratings are somehow deficient is unwarranted. The commenters noted that the majority of nonprofit colleges and universities do not have a bond rating at all, since they have not issued public debt, citing the data provided by the Department in the
Also, the commenters believed that, because of the proposed trigger, publicly traded institutions would have an incentive not to report events on Form 8-K that could potentially be adverse events, but in the ordinary course would have provided useful information to investors. In conclusion, the commenters feared that, without clear guidelines from the Department about what constitutes an adverse event, publicly traded institutions would have to make their own decisions as to whether to treat something as an adverse event. Commenters were concerned that, even where institutions make that decision in good faith, they could potentially be exposing themselves later to an action by the Department if the Department exercises its own judgment in hindsight.
Similarly, other commenters believed that a number of events on Form 8-K have little or no relationship to the institution's continued capacity to operate or to administer the title IV, HEA programs. Instead of using a trigger based on Form 8-K reporting, the commenters suggested that the financial responsibility regulations should be focused on potential risks to the title IV, HEA programs and, as a related matter, institutional outcomes that are indicative of that risk.
Other commenters were concerned that this trigger is arbitrary because it is unlikely that a high dropout rate is related to a school's financial stability. The commenters pointed to a study published in December 2009 by Public Agenda showing that the most common reason students dropped out of school is because they needed to work. Other reasons cited in the study include: Needing a break from school, inability to afford the tuition and fees, and finding the classes boring or not useful. Based on this study and survey results from the Pew Research Center, the commenters concluded that the reasons students drop out of school typically have very little to do with school itself, and therefore suggested that the Department remove this triggering event.
Some commenters argued that the use of the dropout rate as a trigger fails to account for the various missions that title IV institutions represent, or the extended time to graduation that many contemporary students face as they balance career, family and higher education. The commenters believed that establishing a dropout rate as a trigger for a letter of credit creates a perverse incentive for institutions to enroll and educate only those students who are most likely to succeed, instead of continuing to extend access to higher education to the broader population. In addition, the commenters believed that measures of academic quality are best left to accreditors, but if the Department chooses to take on this role, it should consider instead triggering a letter of credit if an institution's persistence rate decreases significantly between consecutive award years, or over a period of award years. The commenters believed this approach would account for the significant variances in mission and student body across higher education without potentially limiting access.
Commenters believed the proposed trigger for a significant fluctuation between consecutive award years, or a period of award years, in the amount of Pell Grant and Direct Loan funds received by an institution, is overly vague. The commenters noted that year-over-year fluctuations can occur when an institution decides to discontinue individual programs or close campus locations, often because those campuses or programs are under-performing financially even where the overall institution is financially strong and argued that because these are sound business decisions made in the long-term interests of the institution, they should not give rise to a letter of credit requirement.
Some commenters believed that a decrease in total title IV expenditures should not trigger a letter of credit requirement because the decreases in the amount of title IV, HEA funds disbursed puts the Department at less risk of financial loss. In addition, the commenters stated that a decrease in title IV, HEA funding to a school is largely out of the school's control—it is usually a result of decreased enrollments or the Department's rulemaking actions.
Other commenters agreed that big changes in the amount of financial aid received by an institution could be a sign that growth that is too fast, or an enrollment decline may signal a school is in serious trouble. The commenters argued, however, that at small schools, big percentage changes could simply be the result of small changes in the number of students. While the commenters were confident that the actual implementation of this rule would not result in the Department holding a small school accountable for what is a minor change, they believed the Department should clarify that the change in Federal aid would need to be large both in percentage and dollar terms as a way of proactively assuaging this concern.
One commenter noted that the phrase “significant fluctuation” was not defined, but that the Department implied on page 39393 of its NPRM that it believes a reasonable standard would be a 25 percent or greater change in the amount of title IV, HEA funds a school receives from year to year, after accounting for changes in the title IV, HEA programs. The commenter urged the Department to clarify in the final regulations precisely what this phrase means so that institutions would know how to comply. Moreover, the commenter argued that the Department may be evaluating institutions by the wrong metric, stating that the for-profit sector has seen six-fold enrollment growth over the past 25 years where significant fluctuations in title IV, HEA program volume may be a reflection of that expansion. Said another way, a significant fluctuation in title IV, HEA program volume, without looking at important contextual clues, is insufficient to determine whether there is questionable conduct at the institution. In addition, the commenter warned that including significant fluctuation as a trigger may serve to deter institutional growth, since a large increase in enrollment would trigger the financial protection requirement even if that increase was perfectly legitimate.
In addition, the commenter believed that, while the Department has a compelling interest in ensuring that institutions do not raise tuition unnecessarily to take advantage of title IV, HEA aid, the Department should try to address this problem in a way that does not discourage institutions from expanding their enrollment.
For these reasons, the commenter suggested revising the trigger so it refers to a significant fluctuation in title IV, HEA program volume per aid recipient, not program volume overall. The commenters believed this approach would guard against increases in tuition designed to take advantage of the title IV, HEA programs while not penalizing institutions with rapid enrollment growth.
As noted in the introductory discussion of this section and noted by some commenters, the materiality or relevance of factors like dropout rates and fluctuations in funding must be evaluated on a case-by-case basis in view of the circumstances surrounding or causes giving rise to what may appear to be excessive or alarming outcomes. In other words, what may be a high dropout rate or significant fluctuation in funding at one institution may not be relevant at another institution. In this regard, we appreciate the suggestions made by the commenters for how the Department could view or determine whether or the extent to which these factors are significant.
While a case-by-case approach argues against setting bright-line thresholds, to mitigate some of the anxiety expressed by the commenters as to what may be a high dropout rate or fluctuation in funding, we may consider issuing guidance or providing examples of actual cases where the Department made an affirmative determination.
Other commenters recommend that the Department apply the State agency-
Some commenters were concerned that the Department did not provide any evidence that would support that an institution that chooses to discontinue State approval for a single program at a single location would implicate the financial stability of an entire institution, much less a large institution with a wide range of programming and multi-million dollar endowment.
A State licensing or authorizing agency, for the purpose of this trigger, includes any agency or entity in the State that regulates or governs (1) whether an institution may operate or offer postsecondary educational programs in the State, (2) the nature or delivery of those educational programs, or (3) the certification or licensure of students who complete those programs. In this regard, we disagree with the assertion that actions by a State agency responsible for professional licensure would never have a material impact on the financial condition of the institution. To the contrary, because the State agency enforces standards that restrict professional practice to individuals who, in part, satisfy rigorous educational qualifications, a citation or finding by the agency could impact how an institution offers or delivers an educational program.
Finally, with regard to the comment about an institution voluntarily discontinuing State approval for a program at a particular location, we note that, unless the State cited the institution for discontinuing the program, this is not a reportable event.
Other commenters echoed the suggestion to develop the stress test through negotiated rulemaking, arguing that developing a test would not only be time consuming and complex, but have serious implications for institutions—all the reasons why institutions and other stakeholders should have an opportunity to provide their views and analyses.
Some commenters argued that it was premature and unreasonable to include reference to a stress test, which has yet to be developed, and which schools have not had a chance to review and offer comment on.
We certainly understand the community's desire to participate in any process the Department undertakes to develop a stress test, or evaluate adopting an existing stress test, but cannot at this time commit to a particular process. However, we wish to assure institutions and other affected parties that we will seek their input in whatever process is used.
Some commenters noted that because the largest secured extension of credit may be for a very small dollar amount, the Department should specify a minimum threshold below which a violation of a loan agreement is not a triggering event.
Other commenters believed that a school that satisfies the composite score requirements should not be required to post a letter of credit relating to violations of loan agreements. The commenters cautioned that this provision could have the unintended impact of altering the relationship
Along the same lines, other commenters warned that the proposed loan agreement triggers would create significant leverage for banks that does not presently exist. The commenters opined that a bank potentially could threaten to trigger a violation of a loan agreement or obligation, thereby exercising inappropriate leverage over the institution and its operations to the detriment of its educational mission, students, and employees. The commenters believed this outcome would be a significant threat that the Department must consider this “countervailing evidence” in rationalizing the reasonableness of this proposed trigger.
Other commenters agreed that, in certain circumstances, the violation of a loan agreement or other financial obligation may signal the need for financial protection. However, the commenters believed the proposed triggering events were overly broad and could result in financially sound institutions being regularly penalized. The commenters recommended that the Department revise the triggering events in two ways.
First, the Department should include a materiality threshold in proposed § 668.171(c)(4)(i) so that this provision is only triggered when a default is material and adverse to the institution. In addition, the commenters suggested that this provision should apply only to any undisputed amounts and issues that are determined by a final order after all applicable cure periods and remedies have expired. With regard to proposed § 668.171(c)(4)(ii), because cross-defaults are prevalent in most material loan agreements, commenters suggested that the Department should focus on defaults that are material and adverse to the institution as a going concern, as opposed to narrowing the trigger to the institution's largest secured creditor.
Second, commenters suggested that the language in proposed § 668.171(c)(4)(iii) should be revised to exclude events where the institution it permitted to cure the violation in a timely manner in accordance with the loan agreement. They noted that this type of “curing” is a common occurrence and specifically contemplated in the agreements between the parties.
Other commenters believed that the Department should include allowances for instances in which the creditor waives any action regarding a violation of a provision in a loan agreement, or the creditor does not consider the violation to be material. The commenters note that although the reporting requirements under proposed § 668.171(d)(3) permit an institution to notify the Department that a loan violation was waived by the creditor, it does not explicitly state that such a waiver would make the institution financially responsible. The commenters urged the Department to revise this provision to clearly state that a waiver of a term or condition granted by a creditor cures the triggering event so that financial protection is not required. According to the commenters, certified public accountants use this standard when assessing a school's ability to continue as a going concern—if a waiver is issued or granted by the creditor the certified public accountant does not mention this event in the school's audited financial statements because it is no longer an issue for the debtor.
Some commenters believed that the proposed loan agreement provisions were too broad and would unnecessarily impact institutions that pose no risk. The commenters stated that loan agreements may include a number of events that are not related to the failure of the institution to make payments that trigger changes to the terms of the agreement, and in that case the proposed provisions would seem to capture the change in terms as a reportable event. The commenters noted that nonprofit institutions have access to and use variable rate loans, and that some nonprofit institutions have synthetically converted their variable rate interest borrowings into fixed rate debt by entering into an interest rate swap agreement. The commenters believed that, under these circumstances, it would be incorrect to assume that changes to the interest rates negatively impact the institution. Further, while the loan provision in the proposed regulations is narrower than the current one since it only applies to an institution's largest secured creditor, rather than all creditors, the commenters believed the Department should establish a materiality threshold and/or make a determination that any changes to the interest rate or other terms would have a material impact on the institution. In addition, the commenters noted that the exception provided under § 668.171(d)(3), allowing the institution to show that penalties or constraints imposed by a creditor will not impact the institution's ability to meet its financial obligations, only applies if the creditor waived a violation and questioned whether the end result would be the same if the creditor did not waive the violation, but the penalties or changes to the loan nevertheless would not have an adverse impact.
Commenters were concerned that the Department would not be bound to act or consider any evidence an institution would provide under proposed § 668.171(d)(2) regarding the waiver of a violation of a loan agreement, or provide any opportunity to the institution to discuss the waiver. Moreover, the commenters were concerned that the waiver reporting provisions would permit the Department to disregard any such evidence if the creditor imposes additional constraints or requirements as a condition of waiving the violation, or imposes penalties or requirements. Absent a materiality modifier, the commenters believed that the waiver “carve out” would become meaningless. Ostensibly, the commenters feared that the Department could proceed to demand financial protection even if a creditor waived the underlying violation and the institution effectively demonstrated that the additional requirements imposed would only have a negligible impact on the institution's ability to meet current and future financial obligations. The commenters recommended that at a minimum, proposed § 668.171(d)(2) should be modified to require a material adverse effect on the institution's financial condition.
Other commenters believed that requiring institutions to report the widely disparate events reflected in the proposed triggering events within 10 days is unreasonable, particularly for large, decentralized organizations. The commenters believed that it was one thing to demand that type of prompt reporting on a limited number of items from institutions that already have been placed on heightened monitoring but quite different to require hyper-vigilance from all institutions. The commenters argued that various offices across the institution might be involved and have contemporaneous knowledge of the triggering events, but the individuals dealing with an unrelated agency action, a lawsuit, or a renegotiation of debt are unlikely to have a Department reporting deadline on the top of minds. Moreover, the commenters believed that individuals at an institution who are charged with maintaining compliance with Department regulations are unlikely to learn about some of these events within such a short period of time.
1. For the lawsuits and other actions or events in § 668.171(c)(1)(i), 10 days after a payment was required, a liability was incurred, or a suit was filed, and for suits, 10 days after the suit has been pending for 120 days;
2. For lawsuits in § 668.171(c)(1)(ii), 10 days after the suit was filed and the deadlines for filing summary judgment motions established, and 10 days after the earliest of the events for the summary judgments described in that paragraph;
3. For accrediting agency actions under § 668.171(c)(1)(iii), 10 days after the institution is notified by its accrediting agency that it must submit a teach-out plan.
4. For the withdrawal of owner's equity in § 668.171(c)(1)(v), 10 days
6. For the SEC and exchange provisions for publicly traded institutions under § 668.171(e), 10 days after the SEC or stock exchange notifies or takes action against the institution, or 10 days after any extension granted by SEC.
7. For State or agency actions in paragraph (g)(2), 10 days after the institution is cited for violating a State or agency requirement;
8. For probation or show cause actions under paragraph (g)(5), 10 days after the institution's accrediting agency places the institution on that status; or
9. For the loan agreement provisions in paragraph (g)(6), 10 days after a loan violation occurs, the creditor waives the violation, or imposes sanctions or penalties in exchange or as a result of the waiver. We note that the proposed loan agreement provisions are discretionary triggers in these final regulations, and as such facilitate a more thorough dialogue with the institution about waivers of loan violations and creditor actions tied to those waivers.
We also are providing that an institution may show that a reportable event no longer applies or is resolved or that it has insurance that will cover the debts and liabilities that arise at any time from that triggering event.
In addition, we are providing that an institution may demonstrate at the time it reports a State or Federal lawsuit under § 668.171(c)(1)(i)(B) that the amount claimed under that lawsuit exceeds the potential recovery. We stress that this option does not include any consideration of the merit of the government suit. It addresses only the situation in which the government agency asserts a claim that the facts alleged, if accepted as true, and the legal claims asserted, if fully accepted, could still not produce a recovery of the deemed or claimed amount for reasons totally distinct from the merit of the government suit. Thus, the regulations in some instances deem a suit to seek recovery of all tuition received by an institution, but the allegations of the complaint describe only a limited period, or a given location, or specific programs, and the institution can prove that the total amount of tuition received for that identified program, location, or period is smaller than the amount claimed or the amount of recover deemed to be sought.
Other commenters believed that the Department intended to exempt public institutions, as it currently does, from the financial responsibility standards, including the proposed triggering events, but the Department did not explicitly do so in the NPRM.
According to the commenter, a $1,000,000 letter of credit that might have cost $5,000 to issue with no collateral 30 years ago now costs $10,000-$20,000 and requires $500,000 to $1,000,000 of cash to collateralize it. The commenter opined that while this is still relatively easy for the wealthiest
According to the commenter, a performance bond guarantees the performance of a task on behalf of the client. In the case of a borrower defense, the Department is using the letter of credit to guarantee to successful completion of the education for which the Department issued title IV loans. By allowing performance bonds, according to the commenter, the Department could protect itself from poorly run schools that harm students without harming thinly capitalized schools by forcing them to purchase more expensive products. The commenter stated that a typical surety bond for $1,000,000 might cost $5,000-$15,000 and only require 25 percent collateral or less. This means that the schools get to keep more of their cash to better deliver education to students and the Department is still adequately protected against a claim from a closed school.
Some commenters noted that the Department has the statutory authority under section 498(c)(3)(A) of the HEA to accept performance bonds and should use that authority because surety bonds cost far less than letters of credit and are equally secure.
Other commenters were concerned that the cost of securing required letters of credit could be prohibitive and cause some schools to close. These and other commenters believed that schools are finding that it is increasingly more difficult to secure letters of credit because of high cost and the regulatory uncertainties facing the higher education sector. The commenters noted that these costs include fees to the lenders and attorneys each time the underlying credit facility is negotiated to expand the letters of credit (schools are required to pay their attorney's fees as well as lender attorney fees for these transactions). Moreover, the commenters stated that because of the Department's compliance actions against proprietary schools, many lenders will no longer lend to proprietary institutions. Therefore, if schools are forced to obtain large letters of credit they will need to turn to second or third tier lenders, or lenders who offer crisis loans, who will charge significant fees for these letters of credit.
In view of the cost and financial resources needed to secure a letter of credit, some commenters believed that the Department should apply a cap of 25 percent on the amount of the cumulative letters of credit that a provisionally certified institution could be required to post under the revised regulations.
Other commenters suggested that if a letter of credit is imposed for an accrediting agency trigger relating to closing a location, the letter of credit should be based on a percentage of the amount of title IV, HEA funds the closing location received, not a percentage of title IV, HEA funds received by the entire institution. The commenters reasoned that if the financial impact of the closing of the branch or additional location will have a material negative impact on the school, then the Department should set the letter of credit amount based on 10 percent of the branch or additional location's title IV, HEA funds, arguing that this approach is straight-forward: Any liabilities that the school may incur resulting from the closure of a branch or additional location would relate only to the students attending the closing location. In contrast, the commenter believed that imposing the letter of credit based on the total title IV, HEA funds received by the school would be disproportionate to the financial impact of the potential student issues to which a letter of credit may relate. The commenters noted that the NPRM expressly recognized the cost of securing letters of credit and the difficulties a school may have in obtaining a letter of credit within 30 days. 81 FR 39368. If a school cannot secure a letter of credit within that timeframe, the Department would set aside title IV, HEA funds, which according to the commenters would almost assuredly have a catastrophic financial impact on the institution. Therefore, the commenters concluded that imposing a larger letter of credit on the school than is necessary will impose cost and financial burden on the school far greater than any possible benefits that the Department could obtain from the larger letter of credit, and will negatively impact students in the process.
We do not disagree with the general notion that the costs associated with a letter of credit have increased over time and that some institutions may not be able to secure, or may have difficulty securing, a letter of credit. We acknowledged this in the preamble to the NPRM and offered the set-aside as an alternative to the letter of credit. With regard to other alternatives, we are not aware of any surety instruments that are as secure as bank-issued letters of credit and that can be negotiated easily by the Department to meet the demands of protecting the Federal interests in a dependable and efficient manner. However, if surety instruments come to light, or are developed, that are more affordable to institutions than letters of credit but that offer the same benefits to the Department, we will consider accepting those instruments. To leave open this possibility, we are amending the financial protection requirements in § 668.175(f)(2)(i) to provide that the Department may, in a notice published in the
Lastly, as discussed previously throughout this preamble, an institution that can prove that it has sufficient insurance to cover immediate and potential debts, liabilities, claims, or financial obligations stemming from each triggering event, will not be required to provide financial protection of any kind.
With regard to the amount of financial protection stemming from the teach-out trigger for closed locations under § 668.171(c)(iv), by considering only closures of locations that cause the composite score to fall below a 1.0, we identify those events that pose a significant risk to the continued viability of the institution as a whole, and the financial protection needed should be based on the risk of closure and attendant costs to the taxpayer, not merely the expected costs of closed school discharges to students enrolled at the closed location.
Finally, the Department has long had discretion, under current regulations, in setting the amount of the required financial protection, and we are revising § 668.175(f)(4) to memorialize our existing discretion to require financial protection in amounts beyond the minimum 10 percent where appropriate.
Other commenters acknowledged the Department's concern about getting financial protection into place quickly, but believed that 90 days would be a more reasonable timeframe. The commenters stated that under current conditions in the financial markets, even with the best efforts it is almost impossible to get a letter of credit approved within the proposed 30-day timeframe. Also, the commenters suggested that if the Department implements the set-aside because of a school's delay in providing the letter of credit, this section needs to allow for the set-aside agreement to be terminated once the school is able to provide the letter of credit.
Other commenters agreed that the Department needs some way to obtain funds from institutions that fail to provide a letter of credit. The commenters believed, however, that the proposed set-aside provisions are overly generous in terms of time and amount. In particular, the commenters suggested the following changes:
(1)
(2)
(3)
We disagree with the assertion that an institution is likely to close if it is placed on HCM2. Based on data available on the Department's Web site at
With regard to extending the time within which an institution must submit a letter of credit, we adopt in these regulations the Department's current practice of allowing an institution 45 days.
In addition, we are providing in the final regulations that when an institution submits a letter of credit, the Department will terminate the corresponding set-aside agreement and return any funds held under that agreement. With regard to the comments that the Department should increase the amount of the set-aside or shorten the time within which the set-aside must be fully funded, we see no justification for
Other commenters questioned whether the Department made a change in the applicability of the provisional certification alternative in § 668.175(f) that was not discussed in the NPRM. The commenters stated that it was unclear whether excluding the measures in § 668.171(b)(2) and (b)(3) from either zone alternative or the provisional certification alternatives in proposed § 668.175(d) and (f) was intentional or if the reference to § 668.171(b)(1) should just be § 668.171(b). In addition, the commenters noted that only the provisional certification alternative in proposed § 668.175(f) refers to the proposed substitutes for a letter of credit (cash and the set-aside), whereas both the NPRM and proposed § 668.175(h), by cross-reference to § 668.175(d), refer to the substitutes as applicable to the zone alternative.
One commenter noted that the current regulations create multiple options for institutions with a failing financial responsibility score, but the terms between the zone and provisional certification alternatives are not sufficiently equal. The commenter also contended that the time limits associated with the alternatives are unclear. To address this, the commenter recommended the following changes to the current regulations.
(1) Increase the minimum size of the initial letter of credit for institutions on provisional status.
Currently, an institution choosing this option only has to provide a letter of credit for an amount that in general is, at a minimum, 10 percent of the amount of title IV, HEA funds received by the institution during its most recently completed fiscal year, while an institution that chooses to avoid provisional certification must submit a 50 percent letter of credit. The commenter recognized that part of this difference reflects the bigger risks to an institution that come with being provisionally certified but believed the current gap in letters of credit is too large. The commenter recommended that the Department increase the minimum letter of credit required from provisionally certified institutions that enter this status after the final regulations take effect to 25 percent.
(2) Automatically increase the letter of credit for institutions that renew their provisional status.
The commenter stated that § 668.175(f)(1) of the current regulations suggests that an institution may participate under the provisional certification alternative for no more than three consecutive years, whereas § 668.175(f)(3) suggests that the Secretary may allow the institution to renew this provisional certification and may require additional financial protection.
The commenter requested that the Department clarify the terms on which it will renew a provisional status. In particular, the commenter recommended that we require the institution, as part of any renewal, to increase the size of the letter of credit to 50 percent of the institution's Federal financial aid. This amount would align with the current requirements for an institution with a failing composite score that does not choose the provisional certification alternative and, according to the commenter, would reflect that an institution has already spent a great deal of time in a status that suggests financial concerns.
(3) Limit how long an institution may renew its provisional status.
The commenter stated that § 668.175(f)(3) of the current regulations suggests an institution could potentially stay in provisional status forever. The commenter asked the Department to place a time limit on these renewals that would ideally be no longer than the period during which institutions can continue to participate in the title IV, HEA programs while subject to other conditions under the Department's regulations, which tends to be three years. However, the commenter believed that even six years in provisional status may be an unacceptably long amount of time.
As noted above, the Department continues to assert both its authority to require disclosures related to financial responsibility and the usefulness of those disclosures for student consumers. However, in the interest of clarity and ensuring that disclosures are as meaningful as possible, we have made several changes to proposed § 668.41(i). Under the proposed regulations, institutions required to provide financial protection to the Secretary must disclose information about that financial protection to enrolled and prospective students. These final regulations state that the Department will rely on consumer testing to inform the identification of events for which a disclosure is required. Specifically, the Secretary will consumer test each of the events identified in § 668.171(c)-(g), as well as other events that result in an institution being required to provide financial protection to the Department, to determine which of these events are most meaningful to students in their educational decision-making. The Department expects that not all events will be demonstrated to be critical to students; however, events like lawsuits or settlements that require financial protection under § 668.171(c)(1)(i) and (ii); borrower defense claims that require financial protection under § 668.171(g)(7); and two consecutive years of cohort default rates of at least 30 percent, requiring financial protection under § 668.171(f) are likely to be of more relevance to students. Findings resulting from the Department's administrative proceedings are included among these triggering events. The issue of students being ill-informed about ongoing lawsuits or settlements with their institutions was raised by students, particularly Corinthian students, during negotiated rulemaking, as well as by commenters during the public comment period. We also believe that students will have a particular interest in, and deserve to be made aware of, instances in which an institution has a large volume of borrower defense claims; this may inform their future enrollment decisions, as well as notify them of a potential claim to borrower defense they themselves may have. Finally, we believe that cohort default rate is an important accountability metric established in the HEA, and that ability to repay student loans is of personal importance to many students. Any or all of these items may be identified through consumer testing as important disclosures.
However, some commenters who supported the proposed requirements raised the concern that unscrupulous institutions might intentionally attempt to undermine the disclosures by burying or disguising them. Accordingly, those commenters suggested that the Department should prescribe the wording, format, and labeling of the disclosures. Other commenters expressed disappointment that the proposed regulations do not require institutions to deliver financial protection disclosures to prospective students at the first contact with those students, and strongly supported including such a requirement in the final regulations. Though acknowledging several negotiators' objections that establishing a point of first contact would prove too difficult, one commenter was unconvinced, and asserted the importance of requiring delivery of critical student warnings at a point when they matter most. The same commenter found the proposed regulatory language on financial protection disclosures to be vague, and requested clarification as to whether proposed § 668.41(h)(7) (requiring institutions to deliver loan repayment warnings in a form and manner prescribed by the Secretary) applies to financial protection disclosures as well. The commenter further asserted that information regarding financial protection is even more important to consumers than repayment rates, and therefore institutions' promotional materials should be required to contain financial protection disclosures in the same way that the proposed regulations require such material to contain repayment rate warnings.
Finally, some commenters urged that, notwithstanding the proposed financial protection disclosures required of institutions, the Department should itself commit to disclosing certain information about institutions that are subject to enhanced financial responsibility requirements. Specifically, the commenters suggested that the Department disclose the amount of any letter of credit submitted and the circumstances that triggered the enhanced financial responsibility requirement.
For several reasons described in this section, many commenters opposed either the concept of requiring institutions to make financial protection disclosures, or the way in which such disclosures are prescribed under the proposed regulations. One commenter suggested removing financial protection disclosure requirements solely on the grounds that students will neither take notice of nor care about this information. The commenter expressed the belief that most people do not really know what a letter of credit is, and that
While mindful of the potential benefit to prospective students of receiving disclosures early, we are not convinced that requiring institutions to deliver such disclosures at first contact with a student is necessary or efficacious. In many cases and at certain types of institutions, it is impractical if not impossible to isolate the initial point of contact between a student and an institutional representative. Such a requirement would place a significant burden on compliance officials and auditors as well as on institutions. Section 668.41(i)(5) of the final regulations requires institutions to provide disclosures to prospective students before they enroll, register, or enter into a financial obligation with the institution. We believe this provides prospective students with adequate advance notice.
Regarding whether requirements in the proposed regulations pertaining to the delivery of loan repayment warnings to prospective and enrolled students apply to financial protection disclosures as well, we are revising the regulations to separately state the requirements for loan repayment warnings and financial protection disclosures. Section § 668.41(i) states that, subject to consumer testing as to which events are most relevant to students, an institution subject to one or more of the actions or triggering events identified in § 668.171(c)-(g) must disclose information about that action or triggering event to enrolled and prospective students in the manner prescribed in paragraphs (i)(4) and (5).
However, the actions and triggering events disclosures are not required to be included in an institution's advertising and promotional materials. We concur with the commenter that such financial protection disclosures will provide critical information to students, but maintain that delivery of those disclosures to students through the means prescribed in revised § 668.41(i)(4) and (5), and posting of the disclosures to the institution's Web site as included in revised § 668.41(i)(6), are most appropriate for this purpose. The loan repayment warning provides information on the outcomes of all borrowers at the institution, whereas the financial protection disclosure pertains directly to the institution's compliance and other matters of financial risk. We believe this type of disclosure is better provided on an individual basis, directly to students, and that it may require a longer-form disclosure than is practicable in advertising and promotional materials.
Regarding the commenters' suggestion that the Department itself disclose certain information about institutions subject to enhanced financial responsibility requirements, we understand the value of this approach, especially with respect to uniformity and limiting the opportunity for unscrupulous institutions to circumvent the regulations. However, we remain convinced that schools, as the primary and on-the-ground communicators with their students, and the source of much of the information students receive about financial aid, are well-placed to reach their students and notify them of the potential risks of attending that institution. We do not believe there are any practical means through which the Department might similarly convey to individual students the volume of information suggested by commenters. Nevertheless, we intend to closely monitor the way in which institutions comply with the actions and triggering events disclosure requirements, and may consider at some point in the future whether the Department should assume responsibility for making some or all of the required disclosures. Additionally, the Department may, in the future, consider requiring these disclosures to be placed on the Disclosure Template under the Gainful Employment regulations, to streamline the information flow to those prospective and enrolled students.
We respectfully disagree with the commenter who suggested removing the financial protection disclosure requirements on the grounds that students will neither take notice of nor care about this information. Some of the information conveyed in the disclosures would undoubtedly be of a complex nature. We also recognize that many people have limited familiarity with financial instruments such as letters of credit. For that reason, and to minimize confusion, we proposed consumer testing of the disclosure language itself, in addition to consumer testing of the actions and triggering events that require financial protection, to ensure that the disclosures are meaningful and helpful to students. As discussed above, in the final regulations we are revising proposed § 668.41(i) to require consumer testing prior to identifying the actions and/or triggering events for financial protection that require disclosures. We believe this change will result in disclosures that are more relevant to students, and that relate directly to actions and/or events that potentially affect the viability of institutions they attend or are planning to attend. In keeping with the intent of the proposed regulations to ensure that disclosures are meaningful and helpful to students, the final regulations retain the use of consumer testing, not only in determining the language to be used in such disclosures but also the specific actions and triggering events to be disclosed.
Echoing this overall concern, one commenter expressed the belief that warnings based on triggering events that have not been rigorously proven to demonstrate serious financial danger would destroy an institution's reputation based on insinuation, not fact. The commenter proposed that an institution should have the opportunity to demonstrate that it is not in danger of closing before requiring disclosures.
Strenuously objecting to financial protection disclosures, one commenter described the relationship between some of the triggering events listed in § 668.171(c) and the institution's value to students or its financial standing as tenuous. The commenter further argued that the “zone alternative” found in current § 668.175(d) recognizes the potential for an institution to be viable in spite of financial weakness; and that the proposed regulations weaken the zone alternative.
A commenter, although acknowledging that students should be made aware of some triggering events, took particular exception to the Department's assertion that students are entitled to know about any event significant enough to warrant disclosures to investors, suggesting that SEC-related disclosures are not a reliable basis on which to require disclosures to students. In support of this position, the commenter noted that SEC disclosure requirements may or may not indicate that a publicly traded institution will have difficulty meeting its financial obligations to the Department, because such disclosures serve a different purpose, namely to assist potential investors in pricing the publicly traded institution's securities. The commenter stated that linking financial protection disclosures to SEC reporting may create false alarms for students and cause them to react impulsively.
Under the regulations, an institution is required to provide financial protection, such as an irrevocable letter of credit, only if that institution is deemed to be not financially responsible because of an action or event described in § 668.171(b). As described in the NPRM, we believe that the factors necessitating an institution to provide financial protection could have a significant impact on a student's ability to complete his or her education at an institution.
However, we recognize that not all of the actions and triggering events for financial protection will be relevant to students. Therefore, we have revised the requirement to clarify that the Secretary will select particular actions and events from the new triggers specified in § 668.171(c)-(g), as well as other events that result in an institution being required to provide financial protection to the Department, based on consumer testing. The events that are demonstrated to be most relevant to students will be published by the Secretary, and schools subject to financial protection requirements for those events will be required to make a disclosure, with language to be determined by the Secretary, to prospective and enrolled students about the event. In addition to making required disclosures more useful and understandable to students, while accurately reflecting concerns about the institution's financial viability, this change will ensure that the action or triggering events behind the disclosure are relevant to students.
As the actions and triggering events identified in proposed § 668.171(c) may affect an institution's ability to exist as a going concern or continue to deliver educational services, we continue to believe that, having made a substantial investment in their collective educations, students have an absolute interest in being apprised of at least several of these actions and events. This is not, as the commenter suggests, destruction of an institution's reputation by insinuation in place of facts, but rather the providing of factual information to students on which they can make a considered decision whether to attend or continue to attend that institution.
We agree with the commenter that noted that the purposes of disclosures to investors required by the SEC and these proposed disclosures are different in some respects. As discussed under “Automatic Triggering Events,” we are revising the triggers in § 668.171(c) to ensure that the triggers, including the proposed triggers that were drawn from SEC disclosure requirements, are tailored to capture events that are most relevant to an institution's ability to provide educational services to its students. With these changes, we believe that each of these triggers and the related disclosure will serve the Department's stated purpose.
We understand the commenters' concern that some students may draw undesirable or even erroneous conclusions from the disclosures or act impulsively as a result of the disclosures. As students must decide for themselves the value of any institution and the extent to which that value is affected by the event or condition that triggered the disclosure, there might always be some subjectivity inherent to an individual's reading of the required disclosure. However, we believe the benefit to those students in being apprised of actions or events that might affect an institution's viability outweighs this potential concern. Moreover, as previously discussed, the Department will conduct consumer testing to ensure that both the events that result in institutions being required to provide financial protection to the Department, as well as the language itself, is meaningful and helpful to students before requiring disclosures of those events. Our intent is for the required disclosures to convey accurate, important information.
Finally, with regard to the suggestion made by one commenter that institutions be afforded the opportunity to demonstrate that they are not in imminent danger of closing before having to provide financial protection and the accompanying financial protection disclosures, as discussed above under “Reporting Requirements,” we are revising § 668.171(h) to permit an institution to demonstrate, at the time it reports a triggering event, that the event or condition no longer exists, has been resolved or that it has insurance that will cover any and all debts and liabilities that arise at any time from that triggering event. If such a demonstration is successfully made, the institution will not be required to provide financial protection, and will not be subject to the financial protection disclosure requirement.
We agree with the commenter who pointed out that the “zone alternative” in current § 668.175(d) recognizes the potential for an institution to be viable in spite of financial weakness, but we do not concur with the assertion that the regulations would weaken the zone alternative. The zone alternative is specific to an institution that is not financially responsible solely because the Secretary determines its composite score is less than 1.5 but at least 1.0. Such an institution may nevertheless participate in the title IV, HEA programs as a financially responsible institution under the provisions of the zone. We are not proposing to change current regulations related to the zone alternative. Participation under the zone alternative is not an action or triggering event and would, therefore, not result in an institution having to make a disclosure.
Another commenter noted that the zone alternative under § 668.175(d) does not include a requirement to provide financial protection to the Department and therefore should not be referenced in the disclosure requirement.
To clarify the scope of proposed § 668.41(i), that section would have required disclosures for any financial protection an institution is required to provide under § 668.175(f) or for any set-aside under § 668.175(h), not just financial protection provided as a result of the new triggering actions and events established in these regulations.
However, as described above, we are revising the financial protection disclosures so that the Secretary will conduct consumer testing to identify which actions and triggering events should be disclosed. Institutions will be required to disclose information about those events only if it is found to be relevant to students.
Underlying the commenters' concern over potential negative outcomes was the opinion that the required disclosures are based on flawed financial standards that are not truly indicative of whether an institution is carrying out its educational mission. One commenter suggested that the Department might cause lasting and perhaps grave harm to institutions not currently at risk of failure, turning disagreements about accounting issues into existential enrollment threats. Another commenter pointed out that some nonprofit institutions operate close to the margin of sustainability because of their mission, or a charitable commitment to supporting needy students. The proposed financial protection disclosures would, in the opinion of the commenter, thrust such institutions into a cycle of failure.
We address earlier in this section the commenters' contention that the financial responsibility standards on which the actions and triggering events disclosure requirements are based are flawed and not indicative of institutions' actual financial positions. We do not agree with the observation of one commenter that the proposed regulations require financial protection disclosures for what are essentially disagreements about accounting issues. As discussed under “Triggering Events,” our analysis and assessment of the triggering actions and events which necessitate providing financial protection indicates they would have a demonstrable effect on an institution's financial position.
Lastly, with regard to the point made by one commenter that some nonprofit institutions operate close to the margin in adherence to a mission or particular commitment to funding needy students, the Department commends the efforts of such institutions. We do not believe that for the most part, such institutions have a heightened risk of experiencing a triggering action or event. The financial stress on institutions operating close to the margin of sustainability for the reasons noted above is most likely to reflect in a lower composite score than might otherwise be the case. Those institutions are frequently able to operate as financially responsible institutions under the zone alternative, and would not be subject to financial protection disclosures.
Furthermore, the form, place, and even the actual language of this warning may change based on consumer testing or other factors to help ensure that the warning is meaningful and helpful to students, and if so, the Department will publish those matters in a notice in the
We note first that the governmental interest in compelling speech is not limited to “preventing deception,” as the commenter appears to suggest.
However, several commenters argued that, because repayment behavior is not controllable by the institution, the repayment rate is not an appropriate institutional performance measure. Another argued that loan repayment rate reflects financial circumstances, but not educational quality, so it is not appropriate to require institutions to issue warnings based on their loan repayment rate.
Several commenters also raised concerns that § 668.41(h) would place an undue burden on institutions and duplicates other established disclosure requirements. They contended that the requirement is unnecessary, particularly because the proprietary institutions required to comply with § 668.41(h) are already subject to the GE reporting and disclosure requirements, including a repayment rate disclosure if specified by the Secretary; and because the Department already publishes both cohort default rates and institutional repayment rates on the College Scorecard. Other commenters suggested that the measure would increase costs of higher education due to higher administrative burden, and contended that the disclosures were not likely to make much impact, given the large number of mandated disclosures already in place.
We do not agree with the commenters who stated that repayment does not constitute a measure of educational quality, or the commenter who argued that repayment rate is a measure of students' financial backgrounds and not academic quality. We believe that all students deserve to have information about their prospective outcomes after leaving the institution. Particularly for students who expect to borrow Federal loans to attend college, it is critical to know whether other students have been able to repay their debts incurred at the institution.
However, while we believe that this information is very important for prospective students to be aware of and to consider, we agree with the concerns that creating a new rate could confuse the borrowers who will also receive the GE program-level repayment rate disclosures using a different calculation and different cohorts for measuring borrower outcomes. While not decisive, we also recognize and understand the comments from those who raised concerns that the requirement may be overly burdensome because of the differences with the data used in the GE calculation. Requiring a separate data corrections process for proprietary institutions, which are already subject to reporting requirements for repayment rate under GE for virtually all of their borrowers, may be needlessly burdensome given the virtually complete overlap in students covered.
To avoid any confusion resulting from a new repayment rate calculation, as well as to limit burden on institutions, we are revising the repayment rate provision. Under this revised provision, the repayment rate data that proprietary institutions report at the program level will be used to calculate a comparable repayment rate at the institution level. Specifically, the Department will calculate, for those borrowers who entered repayment during a particular two-year cohort period, the repayment rate as follows: The number of borrowers in GE programs who are paid in full or who are in active repayment (defined as the number of borrowers who entered repayment and, during the most recently completed award year, made loan payments sufficient to reduce the outstanding balance of loans received for enrollment in the program by at least one dollar), divided by the number of borrowers reported in GE programs who entered repayment. Institutions with a repayment rate showing that the median borrower has not either fully repaid the borrower's loans by the end of the third year after entering repayment, or reduced their outstanding balance by at least one dollar, over the third year of repayment (which, under the calculation methodology, is equivalent to a loan repayment rate of less than 0.5) will be subject to a requirement that they include a warning, to be prescribed in a later
We disagree with the commenters who argued that the disclosures would not make much impact. A large and growing body of research suggests that in many cases, students and families react to information about the costs and especially the value of higher education, including by making different decisions.
However, as described earlier, the Department has revised the repayment rate provision in the final regulations to mirror the program-level rates used under the GE regulations. Those rates calculate the share of borrowers who have made progress in repaying their loans, and will rely exclusively on data reported already under the GE regulations. We believe that these changes address the concerns of the commenters.
However, many commenters disagreed with the Department's proposal to limit the requirement to proprietary institutions. One commenter questioned the validity of the Department's argument that limiting the applicability of § 668.41(h) to proprietary institutions reduces the burden on institutions because only certain institutions benefit from the reduced burden. Noting that there is no similar limitation applicable to financial protection disclosures, one commenter suggested that the Department's limitation of the repayment rate provision to proprietary institutions was inconsistent. Some commenters argued that the Department was ignoring the needs of students at the estimated 30 percent of public and private nonprofit institutions with similarly low repayment rates that are not subject to the warning requirement, particularly because a majority of Federal student loan borrowers attend public institutions. Others stated that a repayment rate warning requirement for public and private nonprofit institutions is necessary to help students understand their choices and contextualize the information available to them. Several of these commenters proposed that public and private nonprofit institutions be required to disclose that the Department had not calculated a loan repayment rate for the institution and that it is therefore not possible to know whether the institution's repayment rate is acceptable.
Some commenters contended that there is no rationale for limiting the warning requirement to the proprietary sector. Other commenters stated that the Department lacked sufficient research to support the proposed regulations. Several commenters argued that the information cited as justification for limiting the repayment rate warning requirement to the proprietary sector was overstated or invalid. One commenter suggested that the Department cited inaccurate data from the College Scorecard. Several commenters noted that they could not replicate their Scorecard repayment rates due to inconsistencies in the National Student Loan Data System (NSLDS) data underlying the measure. Another commenter suggested that the cohort used to support the analysis did not reflect typical cohorts, since those students entered repayment during a recession. Several other commenters contended that the decision to limit the warning requirement to proprietary institutions violates GEPA and has no basis in the HEA.
A number of commenters suggested removing the loan repayment warning provision entirely, while several proposed expanding its application to all institutions with low repayment rates, regardless of sector. Several commenters suggested limiting the repayment rate warning requirement to institutions at which a majority of students are enrolled in programs subject to the Department's GE regulations, because, according to the commenters, students at career-oriented institutions frequently have misconceptions about their likely earnings. Alternatively, commenters suggested limiting the requirement to schools with “financially interested boards” to include proprietary
Most students in the proprietary sector borrow Federal loans, while borrowing rates among public and private nonprofit institutions are far lower; and debt levels are often higher. For instance, as also noted in the final Gainful Employment regulations, in 2011-2012, 60 percent of certificate students who were enrolled at for-profit two-year institutions took out Federal student loans during that year, compared with 10 percent at public two-year institutions. Of those who borrowed, the median amount borrowed by students enrolled in certificate programs at two-year for-profit institutions was $6,629, as opposed to $4,000 at public two-year institutions. Additionally, in 2011-12, 66 percent of associate degree students who were enrolled at for-profit institutions took out student loans, while only 20 percent of associate degree students who were enrolled at public two-year institutions did so. Of those who borrowed in that year, for-profit two-year associate degree enrollees had a median amount borrowed during that year of $7,583, compared with $4,467 for students at public two-year institutions.
In addition to higher rates of borrowing, students at proprietary schools also default at higher rates than borrowers who attend schools in other sectors. Proprietary institutions have higher three-year cohort default rates than other sectors (15.0 percent, compared with 7.0 percent at private nonprofit institutions and 11.3 percent at public institutions in fiscal year 2013), and enroll a disproportionate share of students who default relative to all borrowers in the repayment cohort.
In the final regulations, the Department seeks to reduce confusion among students and families by using rates that parallel the Gainful Employment program-level repayment rate, including using the same cohorts of students as the GE rates do. As a result of these changes, the repayment rate will be calculated using data that institutions already report to the Department through the GE regulations, rather than through a distinct data reporting and corrections process. This eliminates many of the concerns raised by commenters and discussed in the NPRM about the burden to institutions of complying with the repayment rate calculation provision.
However, the Department believes that, because of the changes, it would be inappropriate to apply an institutional warning to sectors other than the proprietary sector, because public and private nonprofit institutions are not typically comprised solely of GE programs and the repayment rate warning may not be representative of all borrowers at the school. Federal student loan borrowers also typically represent a relatively small proportion of the student population in the public sector, whereas borrowing rates are much higher, on average, at proprietary institutions (for instance, among full-time undergraduates enrolled in 2011-12, 19.7 percent borrowed Stafford loans at public less-than-two-year institutions, compared with 82.9 percent at for-profit less-than-two-year institutions and 83.3 percent at for-profit two-year-and-above institutions).
With these changes, we believe that the Department's decision to limit the repayment rate warning to proprietary institutions is well-founded and does not raise concerns about excessive burden or inaccurate representation of student outcomes, and we disagree with the commenters who stated that the limitation to proprietary schools is not appropriate.
In response to the commenter who asserted that requiring only proprietary institutions to disclose repayment rates is inconsistent, as noted earlier, we decided to limit the repayment rate warning requirement to the sector of institutions where the frequency of poor repayment outcomes is greatest. Also as described earlier, the Department's analysis of data shows the financial risk to students to be far more severe in the proprietary sector; and data suggest that an institution-wide warning about borrower outcomes is more appropriate in the proprietary sector, given higher rates of borrowing among students (particularly in GE programs).
While we recognize some users' concerns with specific elements of the data cited in the NPRM, we believe that the data corrections process that will be established through the GE regulations will ensure the accuracy of the information on which the warning in advertisements and promotional materials is based. We recognize the concerns of the commenter who stated that the data cited in the NPRM reflect a cohort that entered repayment during the recession, but believe that this regulation will appropriately capture the actual outcomes of students, given that even students who enter repayment during a recession will be required to repay their loans in accordance with the terms and conditions of the Federal student loan programs. The provision of GEPA to which the commenter refers requires uniform application of regulations throughout the United States. 20 U.S.C. 1232(a). The HEA authorizes the Department to adopt disclosure regulations as does the general authority of the Secretary in 20 U.S.C. 1221e-3 and 20 U.S.C. 3474.
We disagree with the commenters who propose to remove the repayment rate warning provision from the regulations. The Department believes that this information is critical to ensure students and families have the information they need to make well-informed decisions about where to go to college. Given the concerns discussed earlier about the inaccuracy of applying a warning to an entire institution based on data that do not necessarily represent all borrowers at the school, and the added burden both on public and private nonprofit institutions and on the Department to identify the relatively few institutions that might be accurately represented by such a rate, we believe it is appropriate to maintain the repayment rate warning provision only for proprietary schools. We appreciate the comments from those who suggested tying the repayment rate warning requirement to those institutions with a significant proportion of students in GE programs, and have adopted a version of that requirement (
Several commenters proposed to remove from the repayment rate calculation any borrower making payments under any Federal repayment plan, including IDR plans. Alternatively, one of the commenters proposed that the Department should allow institutions to include in the warning to students that the negative amortization of its borrowers occurred because of federally authorized repayment plans where that is the case.
To that end, as described earlier, the Department has revised the repayment rate provision in the final regulations to mirror the program-level rates used under the GE regulations. Those rates calculate the share of borrowers who have made progress in repaying their loans; and will rely exclusively on data already reported under the GE regulations. We believe that these changes address the commenters' concerns. Moreover, the GE definition of “repayment rate” has been subjected to research, analysis, and consumer testing by the field.
One commenter expressed confusion over the use of “accrued interest” in the definition of “original outstanding balance,” and the use of “capitalized interest” in the definition of current outstanding balance for the repayment measure. Another commenter proposed that, for graduate programs that prepare students for medical residencies, the original outstanding balance should be defined as the principal balance after the medical residency forbearance period.
Other commenters suggested minor changes to the proposed calculation. One commenter argued that the Department proposed inconsistent treatment of borrowers who default on their loans. This commenter urged the Department to ensure that all defaulters appear as a zero percent repayment rate, or that defaulters are given no distinct treatment. Another commenter proposed that, under § 668.41(h)(6)(i), there should be a minimum of 30 students in the cohort, rather than 10, before requiring a loan repayment warning.
As noted earlier, several commenters argued that the zero percent repayment rate threshold was not supported by any evidence or analysis, and one contended that it is legally unsupportable.
Several commenters raised concerns about the five-year window for measuring borrowers' repayment. Some argued that the five-year measurement period is not predictable because of insufficient data. Some commenters argued that a two- or three-year measurement period would be better supported; or alternatively, proposed to use a 10-year window. Another commenter stated that analysis of data from the College Scorecard found that three- or seven-year repayment rates would be more reliable. One commenter argued that the repayment rate window for medical schools should be seven years, as in the Gainful Employment regulations; while another commenter proposed that repayment rates for graduate programs that prepare students for medical residencies should be measured five years from the end of their medical residency forbearance period.
Several commenters raised concerns about excluding from the measurement only those students who are in certain deferments during the measurement year. One commenter proposed to extend the measurement window of borrowers who spend several years in in-school deferments, while others proposed to exclude any borrower who entered an in-school or military deferment at any point during the measurement period.
Several commenters argued that borrowers' backgrounds affect their repayment rates; one commenter asserted that when borrowers' backgrounds are taken into consideration, repayment rates of low-income students and students enrolled at proprietary institutions are similar to those of their higher-income peers. One commenter suggested that the Department should revise the loan repayment rate methodology to exclude all borrowers with an Expected Family Contribution of zero dollars in any year of attendance. Another proposed to disclose the percentage of Pell Grant recipients or adjust the threshold at institutions with a high enrollment of Pell Grant recipients.
We believe that we have clarified the treatment of consolidation loans, which will mirror the treatment of such loans in the GE regulations. We also believe that additional clarification of the definitions of “accrued” and “capitalized” interest, and one commenter's proposed change to the definition for graduate programs that prepare students for medical residencies, is not necessary because the repayment rate will instead rely on data already reported under the GE regulations. Similarly, the treatment of defaulted student loans will mirror the GE data that are already reported to the Department. We will continue to use a minimum cohort size of 10, rather than 30 as one commenter proposed, because 10 is a sufficiently large size to meet both minimum requirements and best practices for the protection of student privacy; a minimum count of 10 borrowers is also the standard already used in the GE regulations for repayment rate and other metrics. With respect to concerns from several commenters about the use of negative amortization as a threshold for requiring warnings, we disagree that there is no support in research for doing so. Based on internal analysis of data from the National Student Loan Data System
We agree with commenters who stated that a measurement three years after entering repayment (
With respect to comments raised about students who use in-school or military deferments, we will again mirror the provisions outlined in the GE regulations. Because that calculation measures active repayment during the most recently completed award year, we believe that we have addressed concerns about borrowers who may have used deferments in the interim. For the purposes of this calculation, the Department plans to rely on the data reporting and data corrections under the GE regulations for the purposes of calculating repayment rates.
We disagree with the commenters who stated that borrowers' backgrounds drive their ability to repay, and that institutions should therefore not be held accountable for their repayment rates. One of the central missions of institutions of higher education is to ensure low-income students receive an education that will help them to earn a living and successfully repay their loans. At institutions where more than half of borrowers do not successfully pay down the balance on their loans, the Department believes that students have the right to know—before they enroll or borrow financial aid—that the majority of borrowers have not repaid even one dollar in outstanding balance three years out of school.
Additionally, we do not believe the participation rate index (
However, several commenters suggested that the loan repayment warning raises First Amendment concerns. Some commenters believed that the requirement would both target institutions at which borrowers are appropriately using IDR plans and excuse private nonprofit and public institutions with similarly poor loan repayment rates. One commenter raised concerns that the specific language provided for illustrative purposes in the
One commenter believed that the warning would be most effective if it were included within other loan and borrowing information, rather than delivered separately along with other disclosures. The commenter also stated that institutions should not be required to provide the warning to students who do not intend to borrow Federal student loans.
Several commenters argued that requiring institutions to include the entire content of the warning in advertising and promotional materials would be cost-prohibitive. Instead, commenters proposed that institutions provide a briefer statement, similar to the requirements in the Gainful Employment regulations.
We also appreciate the perspective of commenters who supported hand-delivered warnings at early stages in a student's college search. However, we recognize that many of these goals will be accomplished under the GE regulations, which require that program-level data be provided on a GE disclosure template to students. To that end, we have removed the requirement that an institution-level warning also be provided directly to prospective and enrolled students, and instead will require that the warnings be provided through advertising and promotional materials. This also resolves the concerns of the commenter who believed that the warning would be most effective if accompanied by other loan and borrowing information; and the commenter who argued that institutions should be required to provide the warning directly to only those students who intend to borrow Federal student loans.
While we recognize that some institutions believe providing these warnings in advertising and promotional materials would be cost-prohibitive, we believe that this is important information to help students themselves make critical cost-benefit analyses prior to investing their time and money in an institution.
We address the First Amendment concerns above in the section “Warnings” and do not repeat them here. We also remind commenters that the warning language included in the final regulations may be subject to consumer testing and may change in accordance with the results of that testing. The precise warning language, if revised, will be published in the
Many commenters argued that the Federal Arbitration Act (FAA) precludes the Department from restricting the use of arbitration agreements. Commenters noted that the FAA makes arbitration agreements “valid, irrevocable, and enforceable as written,” reflecting a national preference for resolving disputes by arbitration. These commenters believed that the proposed regulations run counter to public policy and violate the FAA. According to commenters, the prohibition on arbitration in the proposed regulations is precisely the type of agency action that Congress sought to curtail with the FAA.
The commenters asserted that the Supreme Court has repeatedly demonstrated its support for the FAA and for arbitration as an effective method of dispute resolution. Commenters cited cases in which they view the Supreme Court as having struck down regulations and statutes that are inconsistent with the pro-arbitration policy established by the FAA, such as
Commenters contended that, under the FAA, the Department may not issue the proposed regulations absent a clear congressional command, which they argued the Department lacks. According to commenters, when Federal law is silent as to whether Congress intended to override the FAA for a claim, the FAA requires that an arbitration agreement be enforced according to its terms. Here, in the absence of explicit congressional command, commenters believed that the Department is not authorized to restrict arbitration. To support this position, commenters noted that Congress has granted the necessary authority to other agencies in other circumstances. Commenters suggested that because Congress has granted agencies this authority in the past, but has not granted this authority to the Department, this silence means that Congress did not intend for the Department to exercise such authority.
Specifically, commenters stated that the HEA does not authorize the Department to supersede the FAA. As a result, commenters contended that the proposed ban on arbitration must yield to the FAA. Specifically, commenters noted that sections 454(a)(6) and 455(h) of the HEA, which the Department cites in the proposed regulations, provide no indication that the Department is authorized to override the FAA. One commenter contended that the Department has misinterpreted its statutory mandate by relying on these provisions to justify the proposed arbitration ban. Specifically, this
Further, another commenter stated that section 454(a) of the HEA does not relate to contracts between students and schools and that none of the current regulatory requirements governing PPAs regulate contracts between students and the institution. These commenters objected that the Department is acting outside the scope of its statutory authority by attempting to become involved in contractual relationships between students and institutions.
Other commenters, in contrast, asserted that the Department has authority to regulate the use of arbitration. One commenter stated that the FAA does not limit the Department's ability to require schools to remove forced arbitration clauses and class action waivers from enrollment contracts. The commenter noted that the FAA legal analysis is not triggered in the absence of an arbitration clause and that the FAA does not preclude laws or regulations preventing parties from placing arbitration provisions in their contracts. This commenter asserted that the history of the FAA and judicial treatment of arbitration provisions does not suggest an absolute right to impose an arbitration agreement.
Another commenter strongly asserted that the Department may condition Federal funding on a school's agreement not to use forced arbitration clauses without violating the FAA. This commenter cited to section 2 of the FAA, stating that agreements to arbitrate are “valid, irrevocable, and enforceable,” except where grounds “exist at law or in equity for the revocation of any contract.” This commenter suggested that the proposed regulations would not interfere with existing arbitration agreements and that students would still have the ability to arbitrate if they chose to do so. One commenter noted that the Department's authority to adopt stand-alone conditions on funding as part of its PPAs is broad with respect to the Direct Loan Program, and stated that barring predispute arbitration agreements is within the scope of this authority. The commenter noted that including this restriction in PPAs would force schools to internalize the cost of their misconduct and minimize costs imposed on the public.
Another commenter cited the Spending Clause of the Constitution in support of its position that the Department is authorized to impose conditions of this nature on Federal funding recipients. The commenter stated that the Supreme Court has recognized the constitutionality of such conditional funding in
This regulation addresses class action waivers and predispute arbitration agreements separately, because the proscriptions adopted here are distinct and apply to each separately. As we explained in the NPRM, recent experience with class action waivers demonstrates that some institutions, notably Corinthian, aggressively used class action waivers to thwart actions by students for the very same abusive conduct that government agencies, including this Department, eventually pursued. Corinthian used these waivers to avoid the publicity that might have triggered more timely enforcement agency action, which came too late for Corinthian to provide relief to affected students. 81 FR 39383.
Separately, we considered the effect of predispute arbitration agreements on the achievement of Direct Loan Program objectives and the Federal interest, as evidenced during the same period. A major objective of the program is protecting the taxpayer investment in Direct Loans. That objective includes preventing the institutions empowered to arrange Direct Loans for their students from insulating themselves from direct and effective accountability for their misconduct, from deterring publicity that would prompt government oversight agencies to react, and from shifting the risk of loss for that misconduct to the taxpayer. Predispute arbitration agreements, like class action waivers, do each of these, and thus jeopardize the taxpayer investment in Direct Loans. Aligned with these steps
For all these reasons, as explained in the NPRM, we concluded that agreements barring individual or joint actions by students frustrate Federal interests and Direct Loan Program objectives for the same reasons as did class action waivers. Therefore, we concluded that section 454(a)(6) of the HEA authorizes the Department to regulate the use of predispute arbitration agreements.
As explained in the NPRM, we acknowledge that the FAA assures that agreements to arbitrate shall be valid, and may not be invalidated “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. 2. Contrary to the commenters' assertion, none of the case authority to which the commenters cite addresses Federal regulations that may affect arbitration, and the disputes addressed in that case authority appear to involve litigation between private parties regarding rights arising under Federal, State, or local law or contracts between those parties.
As we also stated in the NPRM, the Department does not have the authority, and does not propose, to displace or diminish the effect of the FAA. 81 FR 39385. These regulations do not invalidate any arbitration agreement, whether already in existence or obtained in the future. Moreover, the Department does not have the authority to invalidate any arbitration agreement, did not propose to do, and does not in this final rule attempt to do so.
However, as we explained in the NPRM, and repeat under “Class Action Waivers” here, the Department considers the regulation of class action waivers and predispute arbitration agreements to be justified because they affect Direct Loan borrowing.
These requirements are well within the kind of regulation upheld by courts that address the authority of the government to impose conditions that limit the exercise of constitutional rights by beneficiaries. That case law gives strong support for the position that the Department has authority to impose limits of the kind adopted here on the use of class action waivers and predispute arbitration agreements. For example, the government may impose a restriction on the exercise of a recipient's First Amendment rights so long as that restriction does not extend beyond the recipient's participation in the Federal program:
Our `unconstitutional conditions' cases involve situations in which the Government has placed a condition on the
For several reasons, the fact that Congress gave certain agencies power to regulate arbitration, or outright banned mandatory arbitration, supports no inference that Congress considered other agencies, such as the Department, to lack the power to regulate.
Here, newer enactments addressing arbitration provide no “legislative interpretation” of the HEA, because they share neither language nor subject matter with the 1965 Higher Education Act in general or the 1993 Direct Loan Program statute in particular. To the contrary, Congress has generally rejected any inference that other Federal law regulating consumer lending, most prominently, the Truth in Lending Act (TILA), operates on “the same general subject matter” as Federal education loans financed under the HEA. See,
Like any new regulations, these regulations impose requirements on the future conduct of institutions that intend to continue to participate in the Direct Loan Program. Regulations commonly change the future consequences of permissible acts that occurred prior to adoption of the regulations, and such regulations are not retroactive, much less impermissibly retroactive, if they affect only future conduct, and impose no fine or other liability on a school for lawful conduct that occurred prior to the adoption of the regulations. The regulations do not make an institution prospectively ineligible because it has already entered into contracts with arbitration provisions. The regulations impose no fine or liability on a school that has already obtained such agreements. The regulations address only future conduct by the institution, and only as that conduct is related to the institution's participation in the Federal Direct Loan Program. The institution is not obligated
In response to the assertion that requiring the institution to include provisions in any arbitration agreement it has obtained or obtains in the future violates the First Amendment, we note that the regulations compel action, not merely speech. The requirements of § 685.300(e)(1) and (2) and (f)(1) and (2) are different than the warnings required under § 668.41, and those warnings and disclosures regarding gainful employment programs that were challenged and upheld in
Regarding the commenter that objected to our reliance on the CFPB study because that study may not be relevant to the Federal student loan market, the CFPB's study did analyze the prevalence of arbitration agreements for private student loans as well as disputes concerning those loans. Schools participating in the Direct Loan Program not infrequently provide or arrange private student loans to their students; these private loan borrowers may also have Direct Loans, and in any case can be expected often to share characteristics with Direct Loan borrowers.
Another commenter suggested that class actions are beneficial to students because they minimize resource obstacles often faced by students. According to this commenter, class actions are powerful tools that can rectify wrongs and create incentives for industries to change behavior. Further, this commenter noted that class actions enable students to band together to seek relief, rather than bringing such grievances to the Department as defenses to repayment of taxpayer-funded Direct Loans.
Other commenters disapproved of the Department's proposed ban on class action waivers. These commenters contended that class actions only benefit lawyers and are not helpful to students. A few commenters noted that an individual participant in a class
Another commenter criticized class actions as being incredibly time consuming and yielding minimal public benefit. The commenter stated that attorneys are less likely to represent students from small schools in class actions because of the lower potential rewards, leaving injured students at small schools without adequate recourse.
One commenter rejected the Department's position that class actions are likely to have a deterrence effect, contending that plaintiffs' lawyers often pursue frivolous claims for which institutions could not anticipate liability and therefore could not effectively monitor their own behavior.
One commenter stated that the ban on class action waivers would be harmful to schools, particularly private institutions that lack the legal protections afforded to public institutions. A commenter contended that the rule would expose institutions to frivolous lawsuits and thus would divert funds needed for educational expenses to pay the costs of litigation.
We expect that institutions, like other parties that provide consumer services, already monitor, and will continue to monitor, court rulings to guide these efforts. By strengthening the incentive for all institutions to serve consumers fairly, and thereby reduce both grievances by students and attendant scrutiny by the Department (and other enforcement agencies), we expect that the limits we adopt here will tend to reduce the likelihood that an institution that neglects these efforts will enjoy a competitive advantage over those that engage in these efforts. Although it is possible that frivolous lawsuits may be brought, and that institutions will incur costs to defend such suits, institutions already face that risk and expense. We do not dismiss this risk, but we have no basis from which to speculate how much this regulation might increase that risk and attendant expense. We see that risk as outweighed by the benefits to students and the taxpayer in allowing those students who wish to seek relief in court the option to do so.
Commenters who oppose the regulations on the ground that class actions benefit lawyers more than consumers, and may result in modest returns for an individual member of the class, disregard the need for this regulation in this field. Contrary to the assertion that class actions provide only modest returns, we note that the CFPB found, in its study, that the 419 consumer finance class actions during the five-year period it studied produced some $2.2 billion in net cash or in kind relief to consumers in those markets.
We do not suggest that class actions are a panacea, and the criticisms of class actions in other markets may also apply to class actions in the postsecondary education market if such suits were available. We stress that class actions have significant effects beyond financial recovery for the particular class members, including deterring misconduct by the institution, deterring misconduct by other industry members, and publicizing claims of misconduct that law enforcement authorities might otherwise have never been aware of, or may have discovered only much later. The CFPB described these effects in its proposed rule,
Commenters also addressed the issue of “opt-out” clauses with similar concerns. A comment signed by sixteen attorneys general urged that the regulation ban the use of “opt-out” clauses, which they viewed as unfair as mandatory arbitration clauses. They asserted that predatory for-profit schools, in particular, have a history of using arbitration clauses to violate the rights of their students, and that in their experience, students often do not consider the consequences of an arbitration agreement, or the value of opting out, until they have a legitimate complaint against the school, at which point it is too late to opt out of any arbitration agreement that may have appeared in the student's enrollment agreement. Other commenters strongly believed that arbitration agreements containing opt-out clauses should still be considered mandatory, and should be prohibited under § 685.300(f). According to these commenters, opt-out provisions are highly ineffective because students misunderstand the provisions or choose not to accept them to avoid being disagreeable. Commenters also asserted that recruiters at proprietary institutions are trained to manipulate students and may be able to convince them to sign agreements even if students are apprehensive about the meaning and consequences. Some commenters noted that students are unable to make informed decisions about whether to accept these optional agreements because students must understand and exercise the option well before any disputes arise. One commenter cited to a CFPB study that found that, even when consumers are afforded the opportunity to opt-out of arbitration clauses, many are either unaware of this option or do not exercise this right. Another commenter cited to examples from court records indicating that students who receive an opt-out provision rarely take advantage.
Based on these concerns, commenters recommended that the Department prohibit schools from entering into any predispute arbitration agreements, even those containing opt-out provisions. Commenters cautioned that the Department's failure to explicitly prohibit these agreements would create an exception that swallows the Department's proposed rule on forced arbitration. Some commenters suggested that failure to ban opt-out clauses would actually make students worse off than if the agreements had no such option. According to these commenters, students who unknowingly sign arbitration agreements containing opt-out provisions may face greater hurdles in any efforts to circumvent them by demonstrating their unconscionability, as is generally required for challenges to arbitration agreements. Additionally, commenters suggested that, as proposed, it would be more difficult for the Department to take enforcement actions against schools that take advantage of loopholes in the regulations.
Another commenter believed that allowing the enforcement of arbitration agreements containing opt-out provisions would be highly beneficial to both students and the Department. This commenter believed that these provisions afford students a higher degree of choice and control over their situations. Additionally, this commenter believed that allowing such provisions would relieve the Department of a potential influx of claims.
Our proposal in the NPRM to bar only mandatory “take it or leave it” predispute arbitration agreements rested on the expectation that a student consumer could make an informed choice prior to a dispute to agree to arbitrate such a dispute, and that this
We see no reason to expect that students who are now enrolled or will enroll in the future will be different than those described or included in the comments. We see no realistic way to improve this awareness, and thus, we do not believe that the use of predispute agreements to arbitrate will result in well-informed choices, particularly by students in the sector of the market in which such agreements are most commonly used. Based on the lack of understanding of the consequences of these agreements evidenced in the CFPB survey of credit card users, in the literature dealing with credit cards and other financial products, and in the examples of individual postsecondary students' lack of awareness, we consider predispute arbitration agreements, whether voluntary or mandatory, and whether or not they contain opt-out clauses, to frustrate achievement of the goal of the regulation—to ensure that students who choose to enter into an agreement to arbitrate their borrower defense type claims do so freely and knowingly.
Some commenters lauded arbitration as fair and legally sound. One commenter noted that under a particular arbitration agreement, students received a fair and impartial hearing, comprehensive review of evidence, and an impartial ruling by an independent arbitrator. This commenter also noted that the arbitration agreement in question is governed by State law, which the commenter believes provides sufficient legal oversight.
Other commenters noted that arbitrators generally have more subject area expertise than judges, which makes them more qualified to issue an informed decision on a particular matter. One commenter suggested that students benefit from widespread arbitration because administrators learn to run more effective and service-oriented schools by participating in arbitration proceedings. One commenter noted that the benefits of arbitration are particularly profound in smaller institutions with closer relationships between students and administrators.
Further, commenters suggested that arbitration is more efficient than litigation, and suggested that limiting the availability of arbitration would unduly delay provision of relief to students. Some commenters suggested that students benefit from the flexibility afforded by arbitration agreements. According to a few commenters, the flexibility available in arbitration proceedings allows participants to schedule events around their availability. Additionally, commenters believed that parties benefit from not being restricted by requirements that they adhere to traditional rules of evidence or civil procedure.
One commenter asserted that arbitrators are generally very fair to students. This commenter opined that the consumer arbitration rules are particularly friendly to plaintiffs, particularly because of lower fees associated with proceedings. Another commenter asserted that plaintiffs prevail in arbitration proceedings at least as frequently as they do in court. Some commenters believed that the arbitration process often facilitates more positive outcomes because both students and institutions participate fully in the process, and are more invested in the outcomes.
Additionally, some commenters suggested that in the absence of widespread arbitration, legal fees associated with litigation would take money away from institutions that could be used towards resources that
On the other hand, a number of commenters supported the proposed ban on mandatory predispute arbitration agreements for various reasons. Several commenters suggested that arbitration systems create structures that the commenters view as inherently biased against students. Commenters noted that arbitrators are often paid on a case-by-case or hour-by-hour basis, which can create incentives for them to rule in favor of institutions, which are more likely than individuals to be able to produce repeat business for them. One commenter cited to empirical evidence that the commenter viewed as supporting its position that arbitration is harmful to consumers. Additionally, commenters noted that because arbitrators are not bound by adhering to precedent, their decisions are less predictable and reliable.
Further, commenters stated that arbitration can be extremely costly. Commenters attributed the high costs of arbitration to the private nature of the system, noting that individual parties are often responsible for paying costs associated with arbitration, which may include high fees that arbitrators may tack on to total costs without sufficient notice. One commenter also cited the procedural limitations of arbitration as another detriment. This commenter stated that students may miss out on the opportunity for discovery in arbitration because the discovery process is not formalized in the same manner as civil lawsuits. According to the commenter, students are often denied access to information that is essential to their claims. Additionally, the commenter noted that there is a lack of oversight in arbitration proceedings, which may result in a lack of accountability among arbitrators for following by their own established procedures. This commenter also believed that the appeal process under arbitration is inadequate and that the narrow grounds and limited time frame for appeals ultimately harms students. Several commenters also suggested that the lack of transparency in the arbitration system works to the detriment of students. These commenters believed that the public and parties benefit from the transparency offered by civil litigation. Unlike civil litigation, arbitration is generally not public, transcripts are not provided to the public at large, and some proceedings include gag clauses to maintain privacy.
One commenter believed that forced arbitration impedes the Department's ability to effectively oversee Federal assistance programs and ensure proper use of taxpayer dollars. This commenter also suggested that forced arbitration is unfair to students and deprives them of the opportunity to receive an education in a well-regulated system. Several commenters lauded the Department for taking measures to ensure that students who are wronged by unscrupulous schools receive their day in court. These commenters were particularly concerned that many students have been signing their rights away upon enrollment and urged the Department to prevent the continuation of that practice.
The regulations do not bar the school from seeking to persuade students to agree to arbitrate, so long as the attempt is made after the dispute arises. The regulations, moreover, extend only to predispute agreements to arbitrate borrower defense-type grievances. They do not prohibit a school from requiring the student, as a condition of enrollment or continuing in a program, to agree to arbitrate claims that are not borrower defense-related grievances. Consistent with our statutory authority to regulate Direct Loan participation terms, the regulations address only predispute arbitration agreements for claims related to borrower defenses and not for other claims.
Multiple comments supported the Department's proposed use of forbearance (along with information about how to decline forbearance and providing information about income-driven repayment plans). One commenter, however, recommended that the Department require borrowers to request forbearance instead of expecting borrowers to decline forbearance (opting-in rather than opting-out). Commenters also expressed the view that forbearance should apply to all loan types.
Another commenter suggested that the use of administrative forbearance or the suspension of collection activity would lead to frivolous claims intended to delay repayment.
A group of commenters recommended that forbearance for a borrower who files a borrower defense claim be granted in yearly increments, or for some other explicit time frame designated by the Department, during which the Department will make a determination of eligibility for a borrower defense claim. These commenters noted that servicing systems generally require periods of forbearance to have explicit begin and end dates. The commenters believed that the proposed change would resolve the servicing requirement and permit the Department to designate an explicit time frame for servicers (such as one to three years) during which the Department would make a determination of eligibility for relief under a borrower defense claim.
Under the commenters' proposal, upon receiving the notification of the Department's determination of eligibility for relief under borrower defenses, FFEL Loan servicers would either end the forbearance and resume servicing or maintain the forbearance until the borrower's loans are consolidated into a Direct Consolidation loan. A group of commenters recommended that, if the Department plans to begin the process for prequalification or consolidation before the effective date of the final regulations, the Department consider permitting early implementation of the new mandatory administrative forbearance under § 682.211(i)(7). The commenters noted that without the new authority to grant mandatory administrative forbearance, discretionary forbearance can be used to suspend servicing and collection. However, these commenters pointed out that discretionary forbearance requires a borrower's request and agreement to the terms of the forbearance. A discretionary forbearance may also be subject to a borrower's cumulative maximum forbearance limit. If a borrower has reached his or her maximum forbearance limit, the loan holder would have no other remedy but to provide a borrower relief during the review period. The commenters believed that early implementation of § 682.211(i)(7) would be more efficient and provide a necessary benefit for borrowers that have reached their cumulative maximum forbearance limit while the Department makes a discharge eligibility determination.
One commenter noted that, under the proposed regulation, a borrower who files a defense to repayment claim will experience immediate relief due to forbearance or suspension of collection. However, any interest that is not paid during forbearance will be capitalized. This commenter suggested that a borrower should not be discouraged from mounting a defense to repayment that could involve extended
A group of commenters recommended a conforming change to § 682.410(b) to address defaulted loans held by a guaranty agency. In such cases, a guaranty agency is the holder of a loan for which the Department is making a determination of eligibility, not a lender. Under the conforming change, when the guarantor is the holder of a loan, the Department will notify the guarantor to suspend collection efforts, comparably to when a lender is notified by the Department under § 682.211(i)(7) of a borrower defense claim. Upon receiving notification of the Department's determination, a guarantor would either resume collection efforts or maintain the suspension until the borrower's loans are consolidated into a Direct Consolidation loan.
The Department will allow lenders and loan holders to implement § 682.211(i)(7) early, so that they may grant the forbearance prior to July 1, 2017. Lenders and loan holders will be required to grant such forbearance as of July 1, 2017, the effective date of these regulations.
We disagree that forbearance should be an opt-in process, as we believe that the majority of borrowers will want to receive the forbearance, making an opt-out process both more advantageous to borrowers and more efficient.
We also disagree that providing forbearance and suspending collection activities will lead to substantial numbers of frivolous claims. Borrowers experiencing difficulty with their monthly loan obligations may avail themselves of income-driven repayment plans, loan deferment, and voluntary forbearance upon request. Additionally, because applicants for forbearance are required to sign a certification statement that the information contained on their application is true and that false statements are subject to penalties of perjury, we do not expect a sizeable increase in fraudulent claims.
We disagree with the recommendation that the Department set a limit on the amount of accrued interest that may be capitalized, or the length of time that interest may be allowed to accrue, during the administrative forbearance. We have seen no evidence that capitalization of interest that accrues during a forbearance period while a discharge claim is being reviewed discourages borrowers from applying for loan discharges. Even in situations when the suspension of collection activity may be for an extended period of time—such as during bankruptcy proceedings—interest that accrues during the suspension of collection activity is capitalized. We see no justification for limiting capitalization of interest during the period in which a borrower defenses claim is being evaluated by the Department.
We agree with the commenters that it is preferable to have a set time period for mandatory forbearances granted during the period that the Department is reviewing a borrower defense claim. In addition to resolving the systems issues raised by the commenters, it would help borrowers to have precise begin and end dates for the forbearance. Granting these forbearances in yearly increments, with the option to end the forbearance earlier if the borrower does not qualify, would be consistent with most of the other mandatory forbearances in the FFEL Program, which are granted in yearly increments, or a lesser period equal to the actual period of time for which the borrower is eligible for the forbearance. In most cases, we do not believe that the full year for the forbearance will be required.
We also agree to make the conforming changes that would address defaulted loans held by a guaranty agency.
We have added a new § 682.410(b)(6)(viii), requiring a guaranty agency to suspend collection activities on a FFEL Loan held by the guaranty agency for borrowers seeking relief under § 682.212(k) upon notification by the Department.
A group of commenters also felt that too few eligible borrowers apply for closed school discharges, primarily because these borrowers are unaware of their eligibility. These commenters believed that amending the regulations to provide additional closed school discharge information to borrowers, to make relief automatic and mandatory for borrowers who do not re-enroll within one year, and to provide for review of guaranty agency denials, would ensure that eligible students get relief.
One commenter supported strengthening regulations to hold institutions accountable and protect student borrowers from fraudulent and predatory conduct. This commenter applauded the Department's efforts on behalf of Latino students who are overrepresented in institutions that engage in this conduct, while suggesting that more must be done to ensure the success of these students.
A group of commenters recommended that the Department broaden the scope of the proposed regulation to apply to any planned school closures, rather than only school closures for which schools submit teach-out plans. These commenters noted that very few closing schools arrange for teach-outs at other schools, and that many of the recent school closures did not involve teach-outs. These commenters believed that the proposed regulations would fail to ensure that students at closing schools that do not submit teach-out plans receive accurate, complete, and unbiased information about their rights prior to the school closure.
One commenter recommended that the Department require institutions to facilitate culturally responsive outreach and counseling to students who opt-in to teach-out plans to ensure that they understand the benefits and consequences of their decision.
Although we agree that schools should provide culturally responsive outreach and counseling to students who opt-in to teach-out plans, we believe that it would be difficult to establish standards for such outreach and counseling or to define “culturally responsive” through regulation. However, we expect institutions to be cognizant of the needs of their student population, and to provide appropriate outreach and counseling for their students. At a future date, the Department may consider providing resources, guidance, or technical assistance to institutions to facilitate a culturally responsive dissemination of information.
A group of commenters urged the Department to clarify that closed school discharges may be available to eligible students who have re-enrolled in another institution. These commenters argued that relief should not be limited to students who do not re-enroll in a title IV-eligible institution. Commenters stated that the HEA and current regulations provide that a borrower is eligible for closed school discharge if the borrower did not complete a program due to school closure and did not subsequently complete the program through a teach-out or credit transfer. Students who participate in a teach-out or who transfer credits but do not complete their program remain eligible for a closed school discharge, as do students who re-enroll in a different institution but do not transfer credits or transfer some credits to an entirely different program. According to these commenters, this clarification is particularly important because students attending closing institutions have reported frequent instances of having been misled by closing institutions and recruiters from proprietary schools.
In these commenters' view, the low application rate for closed school discharges is due to a lack of understandable and accessible information about closed school discharges.
A group of commenters noted that in some cases it may be unclear when loan discharge information should be provided because the 60-day forbearance or suspension of collection activity period may expire while the borrower is still within the six-month grace period before collection begins. Therefore collection activities will not be resumed by the guaranty agency or lender under § 682.402(d)(6)(ii)(H), or by the Department under § 685.214(f)(4). These commenters urged the Department to revise the regulations to clarify that the closed school discharge information must be provided either when collection first begins (when a borrower enters repayment after the grace period and will be more inclined to exercise their discharge rights) or when collection is resumed, whichever is applicable.
A group of commenters supported the Department's proposal to require closing schools to provide discharge information to students. When schools announce that they are closing, they currently have no obligation to inform their students about their loan discharge rights and options. According to these commenters, students feel compelled to continue their educations in ways that may not be in their best interests because they lack sufficient information. For example, commenters contended that when a teach-out is offered, students often believe they are obligated to participate, even though they have a right to opt for a closed school discharge instead. Alternatively, although instruction may be seriously deteriorating, students may feel compelled to complete the program at the closing school, unaware that they have a right to withdraw within 120 days of the closure and receive a closed school discharge. These commenters also suggested that students may feel compelled to accept another school's offer to accept their credits, without understanding that by accepting the offer they may become ineligible for a closed school discharge.
Because of the issues discussed above, these commenters supported the Department's proposal to require schools to provide borrowers with a notice about closed school discharge rights when they submit a teach-out plan after the Department initiates an action to terminate title IV eligibility or other specified events.
A group of commenters recommended that we revise the regulations to require that whenever a school notifies the Department of its intent to close, it must provide a written notice to students about the expected date of closure and their closed school discharge rights, including their right to a discharge if they withdraw within 120 days prior to closure.
One commenter stated that the proposed regulations would require the dissemination of a closed school discharge application to students who are not and will not be eligible for discharge. The commenter recommended that the Department revise proposed § 668.14(b)(32) so that an institution would not be required to disseminate a closed school discharge application if the institution's teach-out plan provides that the school or location will close only after all students have graduated or withdrawn. According to this commenter, if a school that plans to close remains open until all students have graduated or withdrawn, few if any students would be eligible for a loan discharge.
The commenter believed that the proposed regulations create incentives to withdraw that are contrary to public policy favoring program completion. The commenter recommended that proposed § 668.14(b)(32) be revised to
Another commenter disagreed with the inclusion of voluntary school closures in § 668.14(b)(31)(iv) where the institution intends to close a location that provides 100 percent of at least one program. The commenter stated that when a school decides that a particular location is no longer desirable or viable, and makes plans to responsibly teach-out the enrolled students itself, the school should not be treated like a school which has lost State approval, accreditation, or Federal eligibility. The commenter believed that the proposed regulation would discourage schools from acting responsibly and undertaking the considerable expense to voluntarily teach-out a location because after receiving a discharge application, students would be more likely to withdraw and seek a discharge rather than finishing their education. This commenter recommended limiting the requirement that closing schools provide a discharge application and a written disclosure to situations described in § 668.14(b)(31)(ii) and (iii), where there is some likelihood that the school's behavior may have disadvantaged students.
Some commenters urged the Department to locate the provision requiring closing schools to provide a discharge application and written disclosures in § 668.26, rather than § 668.14, the section of the regulations pertaining to the PPA. These commenters asserted that placing this provision in the PPA could lead to potential False Claims Act liability centered around disputes of fact that cannot be resolved absent undergoing discovery in a court proceeding. According to these commenters, schools would face the risk of costly litigation to address issues of fact regarding whether students received proper notice, even where schools have documented the proper provision of notice.
One commenter recommended a technical change for non-defaulted loans, by moving the proposed requirement to provide a second application from guarantor responsibilities in § 682.402(d)(6)(ii)(J) to lender responsibilities in § 682.402(d)(7)(ii).
With regard to the recommendation that the Department revise the regulations to specify that closed school discharge information be provided either when collection first begins, or when collection resumes, whichever is applicable, we do not believe that a lender in the FFEL program would find the use of the term “resume” confusing. We note that current regulations in § 682.402(d)(7)(i) use the term “resume.” We are not aware of any cases in which a FFEL lender failed to meet the requirements in the current regulations to “resume” collections activities because the lender had not yet begun collection activities.
We disagree with the recommendation that a school that plans to keep a closing location open until all of the students have either graduated or withdrawn should be exempted from the requirement to provide its students with the closed school disclosures or the application. Because all students at such a school or location are entitled to the option of a closed school discharge, we believe that all such borrowers should receive this information, so that they have full knowledge of their options. While many of the students at such a school location may plan to take advantage of the teach-out, not all necessarily will.
We disagree with the recommendation that the closed school discharge form only be provided to borrowers who decline the teach-out. As other commenters pointed out, students may accept a teach-out not realizing that they have other options. The disclosure information and the information on the discharge application form will apprise borrowers of their options, and help the borrower to make an informed decision based on full knowledge of the borrower's options.
We disagree with the comment suggesting that the proposed regulations create an incentive to withdraw that is contrary to public policy. Although public policy generally favors higher rates of program completion, it is not always in the individual borrower's best interest to continue a program through graduation. In a closed school situation, the value of the degree the borrower obtains may be degraded, depending on the reasons for the school closure. Borrowers at closing schools may incur unmanageable amounts of debt in exchange for relatively low-value degrees. We do not believe that it is good public policy to require these borrowers to repay that debt if they cannot or choose not to complete the program and are eligible for a closed school discharge.
Similarly, we disagree with the recommendation that voluntary school closures be exempted from the requirements. As noted earlier, the teach-out requirements in 34 CFR 668.14(a)(31) apply whether the school is forced to close or voluntarily closes. We see no basis for exempting schools that voluntarily close from the closed school discharge requirements promulgated in these final regulations.
With regard to schools being discouraged from acting responsibly and voluntarily providing teach-outs, as noted above, closing schools are
We do not agree with the recommendation that a school be required to provide disclosures whenever a school notifies the Department of its intent to close. The regulations as proposed require a school to provide disclosures as result of any of the events in section 668.14(b)(31)(ii)-(v), which includes “an institution otherwise intends to cease operations.” We disagree with the recommendation that the provision in § 668.14 be moved to § 668.26. We believe the provision is more appropriately included in § 668.14, which enumerates the requirements of a school's PPA. We do not agree that schools are at greater risk of costly litigation if the provision is located in § 668.14 than they would be if the provision were located in § 668.26. To the extent that a closed school would face potential liability under the False
We agree with the recommended technical change that, for non-defaulted FFEL Program loans, the regulations should include the requirement to provide a borrower a second closed school application under lender responsibilities in § 682.402(d)(7).
This group of commenters also recommended modifications to the closed school discharge regulations, to proscribe the content of the disclosures. These commenters believed that if the Department provided or approved the written disclosures, it would help ensure that borrowers are able to make better-informed choices over how they proceed with their higher education.
These commenters believed that the Department should not rely on failing schools to ensure that students receive this information prior to closure. According to these commenters, because these schools can be liable for the closed school discharges, closing schools often provide inaccurate closed school discharge information or provide information in a format that students are unlikely to read or notice.
To prevent misleading disclosures, which would defeat the purpose of the proposed regulation, these commenters recommend that the Department amend proposed § 668.14(b)(32) to require that the written disclosure the school gives to its students be in a form provided or approved by the Secretary.
This group of commenters recommended that the closed school disclosures also include the expected closure date. These commenters asserted that when schools announce that they are closing, but plan on teaching out all the existing programs themselves, they currently have no obligation to inform their students about the expected date of closure. These commenters suggest that, as a result, students who experience a deterioration in the level of instruction are hesitant to withdraw and in many cases do not know they have the right to withdraw. These commenters contend that even students who are aware of their right to withdraw do not know when they can withdraw while remaining eligible for a closed school discharge.
To provide borrowers with more choice over how they proceed with their higher education, these commenters recommended that, upon notifying the Department of its intent to close and teach-out all existing students, the regulations require a school to provide a written notice to students about the expected date of closure and their right to a discharge if they withdraw within 120 days prior to closure.
One commenter contended that schools required to post letters of credit before closing have a strong financial incentive to minimize the number of students who choose to take a closed school discharge, regardless of what is in each student's best interest. In addition, this commenter suggested that unscrupulous schools often aggressively recruit students from closed schools. This commenter recommended that, to ensure students at closing schools receive clear, accurate, and complete information about their options, the Department should require schools to use standard language and/or a standard fact sheet approved by the Department in their disclosures.
This group of commenters recommended that the disclosures clearly explain the student's closed school discharge rights. The commenters asserted that closing schools often obfuscate a borrower's discharge rights and options. In the commenters' view, the Department's proposal would only encourage continued obfuscation. Under the proposed regulations, a school must provide a disclosure that describes the benefits and consequences of a closed school discharge as an alternative to a teach-out agreement. The commenters believe that a school could comply with this proposed requirement by providing a long, complicated disclosure about benefits and consequences, while burying a borrower's right to obtain a closed school discharge instead of participating in a teach-out. To prevent obfuscation and confusion the commenters recommended that the Department revise proposed § 668.14(b)(32) to require a clear and conspicuous written disclosure informing students of their right to seek a closed school discharge as an alternative to a teach-out.
The current closed school discharge form provided to borrowers,
We disagree with the recommendation that we require schools to provide students with the expected date of a school closure. The expected date of closure may not be the actual closure date, and the school may actually close earlier or later than that date. Providing a date that may or not be accurate could be confusing to borrowers. It may also discourage borrowers from continuing in their education programs when, in some cases, it may be beneficial for them to complete their programs at that institution.
Some commenters believed that many borrowers do not respond to the notice regarding closed school discharge because it is typically provided within the six-month grace period. At that time the borrower is focused on his or her school closure rather than debt burden. These commenters contend that providing another closed school discharge application when the loan is actually being collected, and the borrower faces the burden of loan payments, is likely to increase the borrower response rate.
Another group of commenters proposed that after one year, the Department or guaranty agency should provide a closed school discharge application and information to borrowers who have re-enrolled in a title IV institution, noting that borrowers who have re-enrolled may still qualify for a closed school discharge.
These commenters also recommended requiring that closed school discharge information be provided with the borrower's monthly payment statement upon beginning or resuming collection, or the appropriate entity if the borrower is in default. These commenters contended that many closed school borrowers receive fraudulent solicitations containing inaccurate information. These commenters asserted that many borrowers are confused about which notifications are legitimate and which are not, and are most likely to trust and pay attention to the monthly payment statement from their loan servicer.
This group of commenters recommended that the Department take measures to ensure that disclosures are provided on a timely basis. In the commenters' view, the Department's proposal does not address a situation in which the school fails to provide the required information. The commenters noted that most schools close due to financial problems, and that by the time they submit teach-out plans (if they do submit such plans), most schools have lost significant personnel and their operations are in disarray. As a result, commenters suggested that some schools are likely to fail to provide the required notices. The commenters recommended that the Department clarify that, if a school fails to provide the notice required under proposed § 668.14(b)(32) within five days after submission of a teach-out plan, the Secretary would be required to provide timely disclosures before any student may take steps toward participation in a teach-out plan that may impact his or her discharge eligibility.
Similarly to teach-outs, a group of commenters recommended that whenever a school notifies the Department of its intent to close, the Department provide a written notice to students about the expected date of closure and their closed school discharge rights, including their right to a discharge if they withdraw within 120 days prior to closure, if the school fails to do so within five days of informing the Department of closure.
We have concerns with the recommendation that a second closed school discharge application be provided to the borrower when payment resumes, either after the six-month grace period has elapsed or after the end of the 60-day forbearance period. We also have concerns about the recommendation that a second closed school discharge application be provided after one year if the borrower has re-enrolled. Borrowers are often overwhelmed with information that is provided to them related to their student loans, either by the Department or other sources. Providing multiple copies of the discharge form to borrowers at different points in time would likely add to the information overload that student loan borrowers currently experience. We also point out that the Department's current closed school discharge form is easily available on the Department's
We disagree with the recommendation that the Department provide the required disclosures if the school does not provide them within five days of submission of the teach-out plan. We do not believe that the commenters' suggestion is feasible or practical. The Department expects regulated parties to comply with regulatory requirements, and typically reviews for such compliance in program reviews or audits. It would be difficult for the Department to determine whether the school has provided the disclosures within five days of submission of the teach-out plan without such a review or audit.
One commenter applauded this proposal, noting that 47 percent of all Direct Loan borrowers at schools that closed from 2008-2011 did not receive a closed school discharge or title IV, HEA aid to enroll elsewhere in the three years following the school's closure. The commenter asserted that students were left with debt but no degree, putting them at great risk of default. The commenter asserted that research has consistently shown that students who do not complete their programs are among the most likely to default on their loans, leaving them worse off than when they enrolled. The commenter recommended that the final preamble clearly state that after three years, an eligible borrower's loans shall be
One of the commenters supportive of the proposal noted that the proposed regulations would not discharge the loans of students who enroll in a teach-out program but do not complete it and are not still enrolled within three years of a school's closure. The commenter noted that these borrowers may be unaware of their eligibility for a closed school discharge. The commenter recommended that the Department use available data on program completion among students receiving title IV, HEA aid to automatically discharge the loans of students who did not complete and are not enrolled in a comparable program within three years of their school closing.
A commenter recommended that the final regulation provide for automatic discharges of the loans, to the extent that data are available to identify them, for borrowers who:
• Transfer credits from a closed school and enroll in, but do not complete, a comparable program, and
• Transfer credits to enroll in a completely different program.
Several commenters did not support the automatic discharge provision of the proposed rule. One group of commenters contended that under the proposed regulations, the Department would discharge the loan absent any evidence that the failure of the student to re-enroll in another school was a result of the closed school or that the student did not receive any value for the education received from the closed school. This group of commenters believed the proposed rule would not serve the public interest, as it would minimize borrowers' incentives to continue educational pursuits. These commenters recommended that the automatic discharge provision be deleted from the final rule. These commenters further recommended that if the automatic discharge provision is not removed, that schools should not be held liable for loans that have been automatically discharged due to a student's failure to re-enroll in another school.
Another commenter believed that it would not be appropriate for the Department to grant a closed school discharge without a borrower application. In this commenter's view, a loan servicer may easily provide a borrower with the information necessary to apply for a closed school discharge. This commenter noted that in many instances a student may have completed his or her education under a teach-out agreement without necessarily receiving any additional title IV, HEA aid, and NSLDS may not indicate that the student enrolled in another institution.
A group of commenters that supported the Department's proposal to allow loan holders to grant closed school discharges without applications to borrowers who do not re-enroll in a new institution within three years of their schools' closures noted that, although the disclosures discussed earlier in this section will increase the number of closed school discharge applications submitted by eligible borrowers, many borrowers will still not likely respond to the disclosures. These commenters noted that borrowers in closed school situations, even students who receive information about their rights from State agencies and the Department, are often confused by contradictory information from their schools, as well as aggressive solicitations from other proprietary schools and fraudulent student loan debt relief companies.
The commenters also urged the Department to make additional revisions in the final regulations. They recommended that the Department make automatic discharges mandatory for borrowers who have not re-enrolled in a title IV-eligible institution within three years of their schools' closures. These commenters believed that discharges under the proposed rule would be entirely discretionary, noting that under the proposed rule, loan holders “may” grant discharges in certain circumstances. The commenters expressed concern that, given that the Department and guaranty agencies have conflicting duties and motivations to collect on loans, the discretionary language could make this regulation meaningless. These commenters also noted that the proposed regulations lack a mechanism for allowing an organization, borrower, or attorney general to demand that the Department or guaranty agency implement the automatic discharge provision. These commenters recommended that the Department make automatic discharge mandatory, noting that the Department proposed to make this provision mandatory during the negotiated rulemaking sessions.
This group of commenters also recommended shortening the re-enrollment period from three years to one year. These commenters stated that the vast majority of closed school borrowers who are able to transfer their credits do so within several weeks to several months after a school closes. They noted that other schools often market their programs to affected students immediately following a school closure. They also claimed that that other schools, including community colleges, often reach out to students within the first few weeks after a school closure, and that students actively search for a new school to accept their closed school credits.
Commenters contended that because very few students transfer their closed school credits after one year, all closed school borrowers who do not re-enroll in a title IV institution within one year should be granted a closed school discharge without any application. These commenters believed that it would be unfair to require these borrowers to wait three years for a closed school discharge, during which time they will make payments and may face burdensome involuntary debt collection tactics if they default.
This group of commenters anticipated that the vast majority of eligible borrowers would likely want a closed school discharge. However, these commenters asserted that some borrowers may not want a discharge. These commenters propose addressing this potential issue through an opt-out procedure, in which students receive notice of the consequences of the discharge and are afforded the opportunity to opt-out of a discharge within 60 days of receiving the notice.
One commenter raised concerns that the proposal to discharge loans without an application from a borrower would deny institutions due process. This commenter proposed revising the regulations to clarify whether there is a presumption that the borrower did not re-enroll absent evidence to the contrary, or whether the Department must have in its possession evidence that the borrower did not re-enroll in another institution. The commenter also recommended that the regulation be revised to afford the closed school with notice and the opportunity to contest the student's eligibility for a loan discharge (
In the commenter's view, the procedures the Department follows to discharge a student loan and make a determination regarding amounts owed by an institution constitute informal agency adjudication, and even in the context of informal adjudication, an agency must provide fundamental due
Another group of commenters recommended eliminating the automatic discharge provision. These commenters expressed concern with the concept of an automatic closed school discharge, especially if the Department intends to rely on the school's NSLDS enrollment reporting process for information about student re-enrollment. In the school enrollment reporting process for NSLDS, schools are only required to include title IV recipients. Therefore, NSLDS may not identify students who re-enrolled but did not receive title IV, HEA aid. As a result, commenters suggested that borrowers who received credit from attending the closed school for the same or similar program of study could be improperly identified as eligible to receive a discharge.
Under proposed § 682.402(d)(6)(ii)(K)(
These commenters also recommended changes to the regulations to provide that the guarantor pay the claim if the Department determines a borrower is eligible for a discharge. This change would not impact lender actions in § 682.402(d)(7)(iv).
These commenters also recommended that, if the Department continues using NSLDS and providing an automatic discharge after three years, the Department should be responsible for monitoring identified borrowers during this period, and notifying the applicable guarantor when a closed school discharge must be processed.
We recognize that some borrowers will qualify for closed school discharges, but will not receive an automatic closed school discharge because they re-enrolled in a title IV school within the three-year timeframe. If the borrower is not participating in a teach-out, or transferring credits from the closed school to a comparable program at the new school, the borrower would still be eligible for a closed school discharge. We do not agree, however, that the Department should automatically grant closed school discharges in these situations. A borrower in this type of situation still has access to a closed school discharge; however, the borrower must apply directly for the discharge. The provisions for discharges without an application are intended to provide closed school discharges to borrowers that the Department can readily determine qualify for the discharge, based on information in our possession. A borrower who re-enrolled within the three-year time period may or may not qualify for a closed school discharge, depending on whether the borrower transferred credits from the closed school to a comparable program. A borrower who re-enrolled, but still qualifies for a closed school discharge, would have to provide more detailed information to the Department through the closed school application process to allow for a determination of the borrower's eligibility for a closed school discharge. However, the Department has continued to increase and improve the quality of data reporting by institutions, including beginning the collection of program-level data for borrowers through recently implemented Gainful Employment regulations and through recent Subsidized Stafford Loan reporting requirements. While current data limitations make it challenging to definitively identify a borrower who has enrolled in a comparable program or who has successfully transferred credits, in future years, the Department may be able to identify those eligible borrowers who did re-enroll, but
We disagree with the commenters who recommended eliminating automatic closed school discharges from the final regulations. We note that the current regulations already provide for a closed school discharge without an application, and believe that this is an important benefit to borrowers. We also believe that the final regulations provide sufficient safeguards to prevent abuse, such as the three-year period before an automatic closed school discharge is granted. Therefore, we also decline to accept the recommendation that we reduce the three-year time period to one year.
With regard to the three-year time period, we note that the discharge of a loan is a significant benefit to a borrower, with potentially significant fiscal impacts. Absent a closed school discharge application from a borrower, we do not believe that a one-year period of non-enrollment would be sufficient to discharge a borrower's debt.
We see no basis for exempting schools from liability for closed school discharges when the discharge is granted without an application.
We do not believe an opt-out notice for the automatic discharge without an application is necessary. It is unlikely that a sufficient number of borrowers will choose not to have their loans discharged to justify the administrative burden involved in sending the borrower an opt-out notice. We are also concerned that an opt-out notice could be confusing, and result in “false positives”—borrowers inadvertently choosing to opt out of the discharge.
We acknowledge that the automatic discharge process could result in discharges being granted to some borrowers who were able to complete their programs but we believe this would be a negligible number of borrowers. Even a borrower who does not receive title IV, HEA aid to attend
The comment regarding the Department monitoring borrowers during the three-year period relates to operationalization of the final regulations. The Department will develop procedures for determining whether borrowers qualify for a closed school discharge without an application, and the appropriate method of notifying guaranty agencies if the Department makes such a determination. We note, however, that the final regulations in § 682.402(d)(8)(iii) give guaranty agencies the authority to grant closed school discharges without an application based on information in the guaranty agency's possession.
We disagree with commenters who stated that closed school discharge procedures may deny schools of due process. The closed school discharge procedures do not currently involve the school in the determination process. The Department currently pursues recovery of the amounts lost through closed school and other discharges under section 437(c) of the HEA through the ordinary audit and program review process. Thus, in the final audit determination or the final program review determination issued upon closure of a school or one of its locations, the Department asserts a claim for recovery of the amounts discharged. The school may challenge that claim in an appeal under Subpart L of Part 668, as it can with any other audit or program review liability.
These commenters noted that the guarantor in this case would need to notify the lender to resubmit the closed school claim for reimbursement.
A group of commenters recommended that the Department retain current language requiring the guaranty agency to state the reasons for its denial. The group of commenters supported the Department's proposal to provide for the review of guaranty agency denials of closed school discharge applications for FFEL Loans. These commenters averred that FFEL borrowers, whose loans are held by guaranty agencies, should have the same right to challenge an erroneous unpaid refund or closed school discharge denial as Direct Loan and FFEL Loan borrowers whose loans are held by the Department. The commenters noted that current FFEL Loan regulations do not provide borrowers with any right to seek review of guaranty agency denials of closed school discharges. The commenters also noted that, even when FFEL borrowers are entitled to administrative review, their right to seek further review in court is not clear, unlike Direct Loan borrowers. Commenters noted that the APA does not provide for judicial review of decisions by private, non-governmental entities such as guaranty agencies, nor is there any explicit right to judicial review of guaranty agency decisions in the HEA.
As a result, commenters said that FFEL borrowers whose loans are held by guaranty agencies have no clear way to challenge an erroneous closed school discharge decision from a guaranty agency. Only Direct Loan and FFEL Loan borrowers whose loans are held by the Department may seek judicial review of administrative unpaid refund or closed school discharge denials. These commenters believe that the Department's proposed rule would address what the commenters consider an arbitrary denial of borrower due process.
This group of commenters recommended one modification to the proposed regulations. Under current § 682.402(d)(6)(ii)(F), if a guaranty agency denies a closed school discharge application, it must notify the borrower in writing of its determination and the reasons for the determination. Under the proposed regulation, a guaranty agency would still be required to notify the borrower of its determination, but would not be required to notify the borrower of its reasons for the determination. These commenters believed that removing this requirement would frustrate the purpose of the review process and urged the Department not to remove the notification requirement.
Multiple groups of commenters noted that the proposed regulations do not provide a time frame during which a borrower can request an appeal of a denied closed school discharge by the guarantor. These commenters recommended a 30-day timeframe, which would align with the timeframe allowed for an appeal of a false certification discharge denial. These commenters also proposed language that would allow a borrower to submit a request after the 30-day period.
One group of commenters proposed that the guarantor would still submit the appeal to the Department; however, collection of the loan would continue during the Department's review.
Another group of commenters also recommended additional language to address situations in which a borrower submits a request after the 30-day period. The commenters suggested that in this case, the guarantor would still submit the appeal to the Secretary; however, unlike with a timely request, collection of the loan (nondefaulted or defaulted) would continue during the Secretary's review.
This group of commenters stated that the proposed regulations are not clear on the availability of an appeal option for non-defaulted borrowers. These commenters recommended adding language to clarify that non-defaulted borrowers should be afforded the same opportunity to appeal. Under the proposed regulations, a guarantor would be responsible for notifying a defaulted borrower of the option for review by the Secretary. For consistency, the commenters believed it would be reasonable for the guarantor to utilize this same process for non-defaulted borrowers.
These commenters also believed that it would be less confusing for a borrower for the guarantor to retain the loan until 30 days after the agency's notification to the borrower of the right to appeal. Commenters proposed that if the borrower appeals within 30 days, the loan should remain with the guarantor until the Secretary renders a final determination on the borrower's appeal. These commenters recommended that the guarantor should be responsible for notifying defaulted and non-defaulted borrowers of the option for review by the Secretary.
Under proposed § 682.402(d)(6)(ii)(K)(
A group of commenters expressed the view that the cross-reference to § 682.402(d)(6) is too broad. These commenters believed that § 682.402(d)(6)(ii)(E) and 682.402(d)(6)(ii)(H)(1) more specifically describe the required action by the guarantor and should replace § 682.402(d)(6) in the cross-reference. These commenters also recommended that we clarify under § 682.402(d)(6)(ii)(K)(
We agree with the commenters who recommended that proposed § 682.402(d)(6)(ii)(F) be revised to specify that, when a guaranty agency notifies a borrower of the denial of a closed school discharge claim and of the opportunity to appeal the denial to the Department, that the notification from the guaranty agency should state the reasons for the denial. Since the proposed revision to the regulation is intended to provide borrowers an opportunity to appeal a negative decision, a borrower should have the opportunity to address the issues that led to the denial during the appeal process.
We agree with the commenters that the regulations should provide for an appeal process for non-defaulted FFEL borrowers (whose loans are held by lenders) as well as for defaulted FFEL borrowers (whose loans are held by guaranty agencies). Although the NPRM only addressed an appeal process for FFEL Program loans held by a guaranty agency, our intent was to provide an appeal process for FFEL Program loans held by either a lender or a guaranty agency.
We agree that the cross-references to § 682.402(d)(6)(ii)(K)(
We have revised the cross-references in § 682.402(d)(6)(ii)(K)(
We have made a technical correction to § 682.402(d)(6)(ii)(H), deleting the reference to a guaranty agency exercising a forbearance during the suspension of collection activity.
We have revised § 682.402(d)(7)(iii) to clarify that a borrower whose FFEL Loan is held by a lender, has the same appeal rights as a borrower whose loan is held by a guaranty agency if the guaranty agency denies the closed school discharge request.
In addition, this commenter recommended that the Department offer ongoing assistance through the creation of a student loan discharge hotline and/or on-line computer chat, and hyper-links on the Department's Web site directing students to assistance in their local communities. The commenter averred that assistance should be made available in multiple formats (telephone, smartphone apps, mail, in person, and on-line), as many students at closing or closed schools do not own or have limited access to computers.
A group of commenters recommended that the discharge regulations for Perkins and Direct Loans be amended to extend the 120-day look back period by the number of days between the expected and actual date of closure whenever the actual closure date is later than the expected and disclosed closure date.
Another commenter recommended prohibiting the capitalization of interest when the collections process has been suspended because a student is filing for a closed school discharge.
A group of commenters recommended that the terminology throughout § 682.402(d) be updated for consistency with current § 682.402 regulations for other discharges types. Specifically, commenters suggested replacing references to written and sworn statements with references to applications.
With regard to the comment recommending that we extend the look-back period beyond 120 days if the expected closure date is different than the actual closure date, we do not believe such a change is necessary. Under current regulations in
Under § 682.202(b)(2)(ii) and (iii) a lender may capitalize interest that accrues during a period of authorized deferment or forbearance. We see no justification for exempting the 60-day forbearance period from this practice.
We agree with the recommendation to update the terminology throughout § 682.402(d) for consistency with current § 682.402 for other discharges types, and will make those changes in the final regulations.
A group of commenters expressed support for the proposed regulatory changes that would provide a false certification loan discharge to borrowers whose schools have falsely reported that they earned a high school diploma, including schools that have facilitated the borrower's attainment of a fabricated high school diploma. The commenters noted that that proposed § 685.215(a)(1)(ii) would allow for discharge of a borrower's loan if the school falsified the borrower's high school graduation status; falsified the borrower's high school diploma; or referred the borrower to a third party to obtain a falsified high school diploma. The commenters viewed this proposed regulation as a critical improvement over the current false certification regulations.
However, several commenters expressed concern that some otherwise eligible borrowers may be denied discharges because their financial aid applications, which were completed by the school, indicate that they reported having earned a high school diploma.
A group of commenters recommended revisions to the final regulations regarding what they referred to as “unfair” evidentiary burdens. These commenters recommended that the Department clarify that students whose schools falsely certified that they have high school diplomas, including schools that do so by falsely certifying financial aid applications, are eligible for false certification discharges.
One group of commenters recommended that the Department further modify the regulatory language to clarify that borrowers who report to their school that they earned a high school diploma are ineligible for a false certification loan discharge, but that borrowers whose FAFSA falsely indicates the borrower had earned a high school diploma may be eligible for a false certification loan discharge.
Another group of commenters believed that the Department should revise the proposed regulations to ensure that a borrower will qualify for a false certification discharge only if the borrower can fulfill the bases for discharge. These commenters recommended that the Department revise proposed § 685.215(c) to require borrowers to demonstrate each element of the bases for discharge under proposed § 685.215(a)(l) in order to qualify for a discharge. The commenters also recommended that the Department provide guidance regarding acceptable online high schools.
These commenters observed that the Department's intent, as stated in the preamble to the NPRM, is that borrowers who provide false information to postsecondary schools regarding high school graduation status will not obtain a false certification discharge. Proposed § 685.215(a)(l) (“Basis for Discharge”) states that a false certification discharge is available if a borrower reported to the postsecondary school that the borrower did not have a high school diploma. The commenters believed that the section of the proposed regulation regarding borrower qualifications for discharge does not reflect the Department's intent. Proposed § 685.215(c) (“Borrower qualification for discharge”) does not require a borrower to demonstrate that the borrower presented accurate information regarding the borrower's high school graduation status to the postsecondary school.
These commenters believe that under the proposed regulations, taxpayers may be forced to pay for false certification discharges for borrowers who did not meet the test in proposed § 685.215(a)(l) and yet qualified under proposed § 685.215(c)(1). The commenters noted that the Department can seek recovery from institutions for certain losses determined under proposed § 685.2125(a)(l). However, if borrowers are granted discharges under the weaker standard at proposed § 685.215(c)(1), then in many cases the Department will be unable to collect from institutions under the stronger standard at proposed § 685.215(a)(l).
The commenters believed that schools should be able to rely on the fact that a high school is accredited by a reputable accrediting agency, absent a list of high schools that provide instruction to adult students and that are acceptable to the Department. Another commenter requested that the Department provide schools with a reliable source of information regarding appropriately accredited high school
A group of commenters expressed concerns that the proposed false certification and unauthorized payment discharge rule would penalize institutions for the false certification of the student or the independent actions of a third party.
In addition, these commenters recommended that, under the evidentiary standards articulated in proposed § 685.215(c)(1), a borrower requesting a false certification loan discharge should be required to certify that, at the time of enrollment, he or she did not represent to the school, either orally or in writing, that he or she had a high school diploma. The commenters believed that this evidentiary requirement would help deter frivolous false certification claims.
Some commenters observed that, pursuant to proposed § 685.215(a)(l)(ii), a borrower would be eligible for a false certification loan discharge if the school the borrower attended certified the eligibility of a student who is not a high school graduate based on “[a] high school diploma falsified by the school or a third party to which the school referred the borrower.” The commenters recommended that the regulation be revised to clarify that a school is only penalized if it referred a student to a third party for the purpose of having the third party falsify the high school diploma. These commenters believed that it is not uncommon for a school to refer a student to a third-party servicer to verify the diploma, particularly in the case of students who graduated from foreign high schools. The commenters believed that institutions should not be penalized if a third-party verification entity falsified the legitimacy of the foreign credential without the school's knowledge.
We agree with the commenters who noted a discrepancy between the language in proposed § 685.215(a)(l) and proposed § 685.215(c)(l). Section 685.215(a)(l) provides the basic eligibility criteria for a false certification discharge based on false certification of a borrower's high school graduation status. Section 685.215(c)(1) describes how a borrower qualifies for a discharge. The two sections are intended to mirror each other, not to establish slightly different standards for the discharge. If a borrower, in applying for the discharge, is only required to state that the borrower “did not have a valid high school diploma at the time the loan was certified,” the question of whether the borrower “reported not having a high school diploma or its equivalent” would not be addressed.
We also agree that the standards under which the Department may seek recovery for losses under § 685.215(a)(1) should not be different from the standards under which a borrower may receive a false certification discharge under § 685.215(c)(1).
The commenter who recommended that schools be able to rely on a high school's accreditation status by a “reputable accrediting agency” did not specify what criteria would be used to determine if an agency accrediting a high school is reputable, and does not suggest a process for making such determinations. Moreover, even if it were feasible for the Department to provide a list of acceptable high schools for title IV student financial assistance purposes or guidance regarding acceptable schools, there is no guarantee that a diploma purporting to come from such a school is legitimate.
We do not share the concern of commenters that the proposed regulations may penalize a school for relying on the independent actions of a third party. If a school is relying on a third party to verify the high school graduation status of a borrower, it is incumbent on the school to ensure that the third-party is providing legitimate verifications. We note that high school graduation status, or its approved equivalent, is a fundamental borrower eligibility criterion for title IV federal student assistance. Any school that wishes to participate in the title IV, HEA programs and outsources the determination of high school graduation status to a third party without ensuring that the third party is trustworthy, is acting irresponsibly.
We also note, in response to this comment, that the Department is not proposing revisions to the regulations governing false certification discharges due to unauthorized payment.
We also disagree with the comment recommending that a school should only be penalized if it referred a student to a third-party “for the purpose of having the third party falsify the high-school diploma.” This commenter raised this issue in particular with regard to students who graduated from foreign high schools. The commenter stated that schools often use third parties to verify the legitimacy of a foreign credential. We do not believe that the Department must demonstrate intent on the part of a school when assessing liabilities against a school due to false certification of borrower eligibility. We do not believe that a school that routinely certifies eligibility of borrowers who graduated from foreign high schools can credibly claim to be ignorant of the legitimacy of a third-party verification entity that the school uses for verification purposes.
We agree with the comment that the false certification loan discharge application should include a certification from the borrower that the borrower did not report to the school that the borrower had a high school diploma. The current form,
A group of commenters sought confirmation that, while a borrower may be eligible for a false certification discharge due to a condition that disqualified them for employment in the field for which postsecondary education was pursued, the postsecondary institution would not be financially liable for the discharged loan. These commenters believed that this is the Department's intent because the remedial action provision at proposed § 685.308 does not list the disqualifying condition discharge provision at proposed § 685.215(a)(l)(iv) as a basis for institutional liability. These commenters observed that the current version of § 685.308 states the Department may seek recoupment if the loan certification resulted in whole or in part from the school's violation of a Federal statute or regulation or from the school's negligent or willful false certification.
These commenters averred that anti-discrimination laws limit schools' ability to deny admission to a prospective student, even when the individual would be disqualified for employment in the career field for which the program prepares students. The commenters recommended that the Department state explicitly in the preamble to the final regulations that disqualifying condition discharges will not result in institutional liabilities.
Another commenter asserted that it would be administratively burdensome for institutions to maintain the knowledge necessary to determine what conditions would disqualify a prospective student for employment in a specific field. This commenter suggested that this would be particularly challenging for distance education programs that serve students remotely, since these institutions would only be aware of potentially disqualifying conditions that the student discloses.
A group of commenters echoed this concern, stating that it would be administratively burdensome for distance education programs to comply with proposed § 685.215(c)(2). In these commenters' view, a primarily distance education institution may not have occasion to become aware of a student's disqualifying physical or mental condition unless and until the student voluntarily discloses such information. In addition, for institutions that operate in numerous States, the commenters stated that it would be administratively burdensome and near impossible for an institution to remain constantly vigilant about potential changes to State statutes, State regulations, or other limitations established by the States that may affect a student's eligibility for employment.
Since institutions must comply with various anti-discrimination laws when admitting students, several commenters argued that institutions should not be held liable for discharges based on disqualifying conditions unless it can be shown that the institution engaged in substantial misrepresentation. Another commenter stated that there are legitimate reasons why institutions—including, but not limited to, distance education institutions—may not be aware of a student's disqualifying physical or mental condition or criminal record. The commenter claimed that, under applicable Department regulations, an institution may not make a preadmission inquiry as to whether an applicant has a disability. The commenter cited regulations at 34 CFR 104.42(b)(2) limiting schools' ability to determine whether applicants have a disability.
Another commenter referenced the Department's publication
A commenter asked why the regulation does not specify that the institution knew about or could be expected to have known about the disqualifying condition. The commenter questioned whether a student who intentionally concealed a disqualifying condition should obtain a discharge. The commenter also raised the issue of a borrower whose disqualifying impairment occurs after the fact, but does not qualify for a disability discharge. In such situations, the commenter recommended that the Department clearly state that the school would not be subject to any penalty under § 685.308.
Another group of commenters recommended that the Department expand the regulation pertaining to disqualifying conditions to include certifications not provided by the State, such as those referenced in the Gainful Employment regulations such as professional licensure and certification requirements, including meeting the requirements to sit for any required licensure or certification exam.
A group of commenters noted their opposition to the Department's proposal which, in their view, narrows discharge eligibility for students whose schools falsely certify that they meet the requirements for employment in the occupations for which their programs are intended to train. These commenters asserted that some schools frequently recruit students they know will be barred from employment in their field after program completion.
These commenters objected to the proposed regulatory language, which addresses requirements imposed by the State, not by the profession. To the extent that this discharge provision is intended to provide relief to students whose schools recruit and enroll them despite the fact that they cannot benefit from the program, the commenters believed that the Department should not limit the scope of this protection. The commenters observed that while most professional licensing is found in State law and regulation, others—such as those from trade-specific entities—are not. In the commenters' view, the proposed change would unnecessarily restrict relief to students who are unemployable because they are ineligible for certifications not provided by a State.
The commenters also believed that this change would be inconsistent with the Department's Gainful Employment regulations, which requires schools to certify that each of their career education programs “satisfies the applicable educational prerequisites for professional licensure or certification requirements in that State so that the student who completes the program and seeks employment in that State qualifies to take any licensure or certification exam that is needed for the student to practice or find employment in an occupation that the program prepares students to enter.” 34 CFR 668.414(d)(3). As the Department noted in the preamble to the NPRM for the Gainful Employment regulations, a student's enrollment in a program intended to prepare them for a career for which they cannot be certified “can have grave consequences for students' ability to find jobs and repay their loans after graduation.” 79 FR 16478.
The commenters believed that the consequences are equally grave for students who are unwittingly enrolled in programs that they personally can never benefit from, though their classmates might. In the view of these commenters, it is therefore unnecessary and unfair to narrow this standard for relief.
The commenter who suggested that it would be administratively burdensome for schools to maintain the knowledge necessary to determine what conditions would disqualify a prospective student from employment in a specific field appears to be unaware of the current regulatory requirements. Under current § 685.215(a)(1)(iii), the Department considers a school to have falsely certified a borrower's eligibility for a title IV loan if the school “certified the eligibility of a student who, because of a physical or mental condition, age, criminal record, or other reason accepted by the Secretary would not meet the requirements for employment (in the student's State of residence when loan was originated) in the occupation for which the training program supported by the loan was intended.” The final regulations revise this provision to refer to “State requirements,” but make no additional changes to this provision. The change is consistent with our interpretation set forth in Dear Colleague Letter (DCL) GEN-95-42, dated September 1995. In that DCL, we clarified that for a borrower to qualify for a false certification discharge due to a disqualifying condition, a borrower must provide evidence that the borrower had a disqualifying condition at the time of enrollment and of “a
We note in response to the commenters who were concerned about the administrative burden associated with compliance for distance education programs that these schools have been subject to this regulatory requirement for over 20 years. Neither the proposed regulations nor these final regulations would change the basic requirements regarding false certification due to a disqualifying condition.
The regulation at 34 CFR 104.42 refers to general postsecondary education admission procedures, not eligibility for title IV student financial assistance. While the requirements in § 685.215 do not apply to a school's evaluation of whether to admit a student to a particular program, they do apply to its certification of that student's eligibility for title IV student financial assistance for that program. Therefore, we do not believe that the further limitation suggested by the commenter is necessary.
The Department of Education
Tailor questions about CJI [“Criminal Justice Information”] to avoid unnecessarily precluding applicants from entering training programs, and thus employment, for which they might be eligible. For career-oriented training programs, institutions should limit CJI inquiries to criminal convictions that pose barriers to certification and licensing. For example, if a State teacher's board will not grant a license to anyone with a felony conviction for sexual assault or rape, the teaching program could specifically ask, “Have you ever been convicted of felony sexual assault or rape?” instead of broadly asking, “Have you ever been convicted of a crime?” This specificity would enable the institution to adequately assess whether a student could face occupational licensing and credentialing barriers (
As stated in the
In response to the comment regarding a student intentionally misleading a school, if the school could demonstrate that a student intentionally misled the school about a disqualifying condition, we would take that into account in determining the amount that the school is liable to repay under § 685.308(a). However, in our view, it seems unlikely that a borrower would knowingly go through the time, effort, and expense of enrolling in an education program that trains the borrower for an occupation for which the borrower is unemployable. A far more common scenario is unscrupulous schools recruiting students with disqualifying conditions who cannot possibly benefit from the training programs that the school offers.
With regard to borrowers who do not have a disqualifying condition at the time of enrollment, the regulations specify that a borrower qualifies for the discharge only if the borrower had a disqualifying condition that “would have” disqualified the borrower from employment in the occupation, and that the borrower “did not meet” State requirements for employment in the career. A condition that arose after the borrower was no longer enrolled at the school would not qualify the borrower for a false certification discharge due to a disqualifying condition.
We addressed the question of expanding the scope of this provision to include non-State requirements for employment in certain fields, such as employment standards established by professional associations during the negotiated rulemaking sessions and in the NPRM. As we noted earlier, employment standards established by professional associations could vary, and it would not be practical to require schools to determine which professional association standards to use. The reference to the Gainful Employment requirements is inapplicable here, as the Gainful Employment requirements relate to the quality of a school's program.
The commenters urged the Department to clarify that students may also apply for a discharge on this basis, rather than wait for the Department to grant discharges without applications. The commenters observed that there are often False Claims Act and government cases involving false certification of SAP, and that many students also know when their academic progress was falsified by schools, but are not covered by such cases.
The commenters suggested that information provided by students in discharge applications would also allow the Department to identify bad-acting schools and prevent abuse of title IV, HEA funding. These commenters recommended that the Department revise the proposed rules to provide a means for students to individually apply for discharge when their SAP is falsely certified by their school.
We do not believe that a school should be penalized for legitimate attempts to help a student who is not meeting SAP standards, nor do we believe a student who has successfully appealed a SAP determination should be able to use that initial SAP determination to obtain a false certification discharge on his or her student loans. In addition, we continue to believe that it would be very difficult for an individual borrower to sufficiently demonstrate that a school violated its own SAP procedures.
Given these considerations, the final regulations continue to limit false certification discharges based on falsification of SAP to discharges based on information in the Secretary's possession.
These commenters referenced two DCLs the Department issued in connection with false certification of ability to benefit: DCL GEN-95-42 (dated September 1995) and DCL FP-07-09 (dated September 2009). The commenters characterized the DCLs as establishing a presumption that students who claim ability to benefit fraud are not telling the truth unless they submit independent corroborating evidence to support their discharge application. To support this claim, these commenters quoted the statement in DCL GEN-95-42 that the absence of findings of improper ability to benefit practices by authorities with oversight powers “raises an inference that no improper practices were reported because none were taking place.”
The commenters asserted that many borrowers cannot provide proof of Federal or State investigations of particular schools because enforcement has been lenient in this area. They asserted that, in 1992, Congress provided for the false certification discharge and overhauled the student loan system because oversight of schools was inadequate.
A group of commenters criticized the Department's current approach, and noted that statements that a borrower makes on the current Loan Discharge Application: False Certification (Ability to Benefit) are made under penalty of perjury. According to commenters, if a borrower is unable to provide investigative findings supporting the borrower's claim, the Department or the guaranty agency will deny the discharge unless the borrower submits additional corroborating evidence (such as statements by school officials or statements made in other borrower claims for discharge relief).
The commenters noted that DCL FP-07-09 discusses guaranty agencies' consideration of “the incidence of discharge applications filed regarding that school by students who attended the school during the same time frame as the applicant,” and suggested that students have no way of knowing whether a guaranty agency has done so in evaluating their applications.
The commenters asserted that students do not have access to school employee statements and do not know whether other borrowers have filed similar claims for relief. When borrowers are able to find attorneys to help them, attorneys are often unable to obtain the required evidence through Freedom of Information Act requests. The commenters also asserted that the Department does not have possession of all false certification discharge applications and does not ensure that copies are retained when guaranty agencies go out of business or retain all potentially corroborating evidence. In addition, if the student has carried the debt for years before learning of their right to a false certification discharge, the school may have closed. At that point, key documents and corroborating evidence may no longer be available.
The commenters recommended that the Department revise its proposed regulations to specify that a student may establish a right to a false certification discharge through a “preponderance of the evidence,” as it has proposed for borrower defense claims. In addition, the commenters recommended that borrowers be presumptively eligible for discharge after application in the following circumstances:
• The school's academic and financial aid files do not include a copy of test answers and results showing that the borrower obtained a passing score on an ability-to-benefit test approved by the Secretary;
• No testing agency has registered a passing score on an ability-to-benefit test approved by the Secretary for the borrower; or
• The school directed the borrower to take an online test to obtain a high school degree, the borrower believed the test to be legitimate, and the high school diploma is invalid.
We disagree with the recommendation to revise the regulations pertaining to the evidentiary standards for false certification of ability to benefit. Any modifications to these regulations could only be applied prospectively. Schools can be held liable for false certification discharges, and we cannot impose retroactive requirements on schools.
We also disagree with the commenters' characterization of the guidance in DCL GEN-95-42 and DCL FP-07-09. DCL FP-07-09 does not require a borrower to provide additional corroborating evidence if the borrower is unable to do so. That DCL provides examples of “credible evidence” that would provide a guaranty agency with “an adequate basis for granting a discharge application” when there is no borrower-specific evidence that the borrower qualifies for a discharge due to false certification of ability to benefit.
We believe the two DCLs still provide an accurate description of the legal requirements for false certification, so we do not have plans to update them in the near future.
A group of commenters noted that in the preamble to the NPRM, the Department characterized these changes as clarifications of existing regulations. The commenters disagreed with this characterization, stating that during the negotiated rulemaking sessions, negotiators representing guaranty agencies, lenders, and servicers did not agree that current regulations prohibit the capitalization of interest following loan rehabilitation. The commenters further stated that the negotiating committee agreed to add this issue to the negotiating agenda after an agreement was reached with the Department that the proposed changes represented a change in policy for prospective implementation. The commenters added that when the Department was asked by another member of the negotiating committee whether the proposed changes would have any retroactive impact, the Department responded that retroactive application was not the issue being negotiated. The commenter requested that the Department clarify in the final regulations that the changes to the FFEL Program regulations prohibiting the capitalization of interest following loan rehabilitation are amendments to the current rules, consistent with the commenters' understanding of what was agreed to during the negotiations. Based on that understanding, the commenters stated that FFEL Program guarantors, lenders, and servicers are planning to implement the changes for loans that go into default on or after the effective date of the regulations and are subsequently rehabilitated.
Under Executive Order 12866, it must be determined whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive order and subject to review by the Office of Management and Budget (OMB). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action likely to result in a rule that may—
(1) Have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities in a material way (also referred to as an “economically significant” rule);
(2) Create serious inconsistency or otherwise interfere with an action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles stated in the Executive order.
This final regulatory action will have an annual effect on the economy of more than $100 million because regulations would have annual federal budget impacts of approximately $1.9 billion in the low impact scenario to $3.5 billion in the high impact scenario at 3 percent discounting and $1.8 billion and $3.4 billion at 7 percent discounting, additional transfers from affected institutions to student borrowers via reimbursements to the Federal government, and annual quantified costs of $9.8 million related to paperwork burden. Therefore, this final action is “economically significant” and subject to review by OMB under section 3(f)(1) of Executive Order 12866. Notwithstanding this determination, we have assessed the potential costs and benefits, both quantitative and qualitative, of this final regulatory action and have determined that the benefits justify the costs.
We have also reviewed these regulations under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—
(1) Propose or adopt regulations only on a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);
(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practicable—the costs of cumulative regulations;
(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and
(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.
Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”
We are issuing these final regulations only on a reasoned determination that
We also have determined that this regulatory action does not unduly interfere with State, local, or tribal governments in the exercise of their governmental functions.
In accordance with both Executive Orders, the Department has assessed the potential costs and benefits, both quantitative and qualitative, of this regulatory action. The potential costs associated with this regulatory action are those resulting from statutory requirements and those we have determined as necessary for administering the Department's programs and activities.
In this Regulatory Impact Analysis (RIA) we discuss the need for regulatory action, the comments about the NPRM analysis and significant changes from the NPRM, the potential costs and benefits, net budget impacts, assumptions, limitations, and data sources, as well as regulatory alternatives we considered. Although the majority of the costs related to information collection are discussed within this RIA, elsewhere in this notice under
These final regulations address several topics related to the administration of title IV, HEA student aid programs and benefits and options for borrowers.
As detailed in the NPRM, the Department last revised the borrower defense regulations over two decades ago, and until recently, use of borrower defense has been very limited. The lack of clarity in the current regulations has led to much confusion among borrowers regarding what protections and actions for recourse are available to them when dealing with cases of wrongdoing by their institutions. The Department received comments addressing this lack of clarity during the public comment period.
The need for a clearer and more efficient process was also highlighted when the collapse of Corinthian generated an unprecedented level of borrower defense claims activity. As detailed extensively in the NPRM, Corinthian, a publicly traded for-profit higher education company that in 2014 enrolled over 70,000 students at more than 100 campuses nationwide, filed for bankruptcy in 2015 after being the subject of multiple investigations and actions by Federal and State governments. The Department committed itself to ensuring that students harmed by Corinthian's misrepresentations receive the relief to which they are entitled, and realized that the existing regulations made this process burdensome, both for borrowers and for the Department. Under the current process, the Department would be required to devote significant resources to reviewing individual State laws to determine which law to apply to each borrower's claim. The Department appointed a Special Master in June of 2015 to create and oversee the process of providing debt relief for these Corinthian students. As of October 2016, approximately 3,787 borrower defense discharges totaling $73.1 million had been completed and another 7,858 closed school discharges totaling approximately $103.1 million have been processed. Moreover, the Department has received thousands more claims—both from former Corinthian students and from students at a number of other institutions—that are pending a full review, and expects to receive more as the Department continues to conduct outreach to potentially affected students.
The Department remains committed to ensuring that borrowers with a valid defense to repayment are able to benefit from this option. Research has shown that large sums of student debt can reduce levels of participation in the economy, especially if borrowers are unable to obtain adequate income to repay their debts.
The landscape of higher education has changed significantly over the past 20 years, including a substantial increase in the number of students enrolled in distance education. Because distance education allows students to enroll in courses and programs based in other States and jurisdictions, it has created additional challenges as it relates to the Department's current borrower defense regulations.
The current regulations require an analysis of State law to determine the validity of a borrower defense claim. This approach creates complexities in determining which State law applies and may give rise to potential inequities, as students in one State may receive different relief than students in another State, despite common underlying facts and claims.
The expansion of distance education has also impacted the Department's ability to apply its borrower defense regulations. The current borrower defense regulations do not identify which State's law is considered the “applicable” State law on which the borrower's claim can be based.
The final regulations give students access to consistent, clear, fair, and transparent processes to seek debt relief. The new Federal standard will allow a borrower to assert a borrower defense on the basis of a substantial misrepresentation, a breach of contract, or a favorable, nondefault contested judgment against the school for its act or omission relating to the making of the borrower's Direct Loan or the provision of educational services for which the loan was provided. Additionally, the final regulations separately address predispute arbitration clauses, another possible obstacle to borrowers pursuing a borrower defense claim. These final regulations also prohibit a school participating in the Direct Loan Program from obtaining, through the use of contractual provisions or other agreements, a predispute agreement for arbitration to resolve claims brought by a borrower against the school that could also form the basis of a borrower defense under the Department's
Additionally, to enhance and clarify other existing protections for students, these regulations update the basis for obtaining a false certification discharge, clarify the processes for false certification and closed school discharges, require institutions to provide applications and explain the benefits and consequences of a closed school discharge, and establish a process for a closed school discharge without an application for students who do not re-enroll in a title IV-participating institution within three years of an institution's closure. These regulations also codify the Department's practice that a discharge based on school closure, false certification, unpaid refund, or defense to repayment will result in the elimination or recalculation of the subsidized usage period associated with the loan discharged.
These regulations also amend the regulations governing the consolidation of Nursing Student Loans and Nurse Faculty Loans so that they align with the statutory requirements of section 428C(a)(4)(E) of the HEA; clarify rules regulating the capitalization of interest on defaulted FFEL Loans; require that proprietary schools at which the median borrower has not repaid in full, or paid down the balance of, the borrower's loans include a warning in advertising and promotional materials about those repayment rate outcomes; require that a school disclose on its Web site and to prospective and enrolled students about events for which it is required to provide financial protection to the Department; clarify the treatment of spousal income in the PAYE and REPAYE plans; and make other changes that we do not expect to have a significant economic impact.
A number of commenters expressed that the RIA in the NPRM was inadequate and did not support proceeding with the regulations without further study. Commenters noted that the accuracy of several of the Department's past budget estimates had been questioned by Congressional committees and other outside reviewers. Several commenters pointed out that the wide range in the estimate, from $646 million up to $41.3 billion over the 2017 to 2026 loan cohorts, indicated that the Department does not know the potential budget impact of the regulation. Other commenters noted that if the impact is at the higher end of the range, the analysis does not quantify benefits greater than the costs to justify the decision to proceed with the regulations.
Another set of comments focused on the impact of the regulations on higher education, the costs to institutions, and the potential for institutional closures. A number of commenters expressed concern that institutional closures related to the regulations, especially the financial responsibility provisions, will reduce access to higher education for low-income and minority students. Materials included with the comments analyzed National Postsecondary Student Aid Study 2012 (NPSAS 2012) data to demonstrate that students at for-profit institutions are, on average, more likely to be older, racial minorities, veterans, part-time, financially independent, responsible for dependents, and Pell Grant recipients. A number of commenters suggested that the costs of providing financial protection would result in increased costs for students and potentially limit access to higher education. Other commenters were concerned with a lack of analysis about the costs of the financial protection or the possibility that schools would be unable to obtain a letter of credit and would lose access to title IV, HEA funding and be forced to close. Several commenters suggested that the regulations would open the floodgates to frivolous claims that would overwhelm the Department and institutions, exacerbating the harmful effects on higher education.
One commenter argued that the proposed regulations would result in a large number of disappointed borrowers filing borrower defense claims without merit. Several commenters were concerned that the projected net budget impact referred to in the NPRM of as much as $42.698 billion during the coming decade would undermine the integrity of the Direct Loan Program and that neither American taxpayers, nor schools that have successfully educated students, could cover these costs if thousands of students or graduates start requesting discharges of their loans. The commenters argued that the regulations lack any quality control measure to ensure that the Department would not be hit with an influx of fraudulent claims. They cited a recent lawsuit in which a former law student unsuccessfully sued her law school for false advertising.
Finally, a number of commenters suggested the high cost estimate was overstated because schools would change their practices and limit behavior that would result in valid borrower defense claims. Another commenter questioned the characterization of the net budget impact as a cost based on the idea that the Department should not collect on loans established fraudulently. Several commenters noted that the potential fiscal impact should not factor into decisions about whether borrowers are eligible for relief.
We appreciate the comments about the RIA in the NPRM. As discussed in the NPRM, given the limited history of borrower defense claims and the limitations of available data, there is uncertainty about the potential impact of the regulations. Per OMB Circular A-4, in some cases, uncertainty may be addressed by presenting discrete alternative scenarios without addressing the likelihood of each scenario quantitatively. The uncertainty about borrower defense was acknowledged and reflected in the wide range of scenario estimates in the NPRM. The Department presented the range of scenarios and discussion of sources of uncertainty in the estimates in order to be transparent and encourage comments that might aid the Department in refining the estimates for the final regulations.
We do not agree that the analysis was inadequate to support proceeding with the regulations. Under Executive Orders 12866 and 13563, the Department must adopt a regulation only upon a reasoned determination that its benefits justify its cost. The Executive Orders recognize that some benefits and costs are difficult to quantify, and provide that costs and benefits include both quantifiable measures—to the fullest extent that they can be usefully estimated—as well as qualitative measures of costs and benefits that are difficult to quantify but “essential to consider.” OMB Circular A-4 provides that in cases where benefit and cost estimates are uncertain, benefit and cost estimates that reflect the full
OMB Circular A-4 suggests that in some instances when uncertainty has significant effects on the final conclusion about net benefits, the agency should consider additional research prior to rulemaking. For example, when the uncertainty is due to a lack of data, the agency might consider deferring rulemaking, pending further study to obtain sufficient data. Delaying a decision will also have costs, as will further efforts at data gathering and analysis. The Department has weighed the benefits of delay against these costs in making the decision to proceed with the regulation. With respect to borrower defense, if the Department did not proceed with the final regulations, the existing borrower defense provisions would remain in effect and some of the costs associated with potential claims would be incurred whether or not the final regulations go into effect. The final regulations build in more clarity and add accountability and transparency provisions that are designed to shift risk from the taxpayers to institutions. Moreover, if the Department were to delay implementation of the final regulations to obtain further information about the scope of institutional behavior that could give rise to claims, it is not clear when a significant amount of relevant data would become available. Borrower responses in absence of the process established in the final regulations do not necessarily reflect the level of claims that will be processed under the final regulations. Delaying the regulations would delay the improved clarity and accountability from the regulations without developing additional data within a definite timeframe, and we do not believe the benefits of such a delay outweigh the costs. As with any regulation, additional data that becomes available will be taken into account in the ongoing re-estimates of the title IV, HEA aid programs.
We have considered the other comments received. Revisions to the analysis in response to those comments and our internal review of the analysis are incorporated into the
In developing the final regulations, the Department made some changes to address concerns expressed by commenters and to achieve the objectives of the regulations while acknowledging the potential costs of the provisions to institutions and taxpayers. As noted in the NPRM, the primary potential benefits of these regulations are: (1) An updated and clarified process and a Federal standard to improve the borrower defense process and usage of the borrower defense process to increase protections for students; (2) increased financial protections for taxpayers and the Federal government; (3) additional information to help students, prospective students, and their families make educated decisions based on information about an institution's financial soundness and its borrowers' loan repayment outcomes; (4) improved conduct of schools by holding individual institutions accountable and thereby deterring misconduct by other schools; (5) improved awareness and usage, where appropriate, of closed school and false certification discharges; and (6) technical changes to improve the administration of the title IV, HEA programs. Costs associated with the regulations will fall on a number of affected entities including institutions, guaranty agencies, the Federal government, and taxpayers. These costs include changes to business practices, review of marketing materials, additional employee training, and unreimbursed claims covered by taxpayers. The largest quantified impact of the regulations is the transfer of funds from the Federal government to borrowers who succeed in a borrower defense claim, a significant share of which will be offset by the recovery of funds from institutions whose conduct gave rise to the claims.
We have considered and determined the primary costs and benefits of these regulations for the following groups or entities that we expect to be impacted by the proposed regulations:
• Students and borrowers
• Institutions
• Guaranty agencies and loan servicers
• Federal, State, and local government
The fundamental underlying right of borrowers to assert a defense to repayment and obligation of institutions to reimburse the Federal government for such claims that are valid exist under the current borrower defense regulations. These final regulations aim to establish processes that enable more borrowers to pursue valid claims and increase their likelihood of discharging their loans as a result of institutional actions generating such claims. As detailed in the NPRM, borrowers will be the primary beneficiaries of these regulations as greater awareness of borrower defense, a common Federal standard, and a better defined process may encourage borrowers who may have been unaware of the process, or intimidated by its complexity in the past, to file claims.
Furthermore, these changes could reduce the number of borrowers who are struggling to meet their student loan obligations. During the public comment periods of the negotiated rulemaking sessions, many public commenters who were borrowers mentioned that they felt that they had been defrauded by their institutions of higher education and were unable to pay their student loans, understand the borrower defense process, or obtain debt relief for their FFEL Loans under the current regulations. We received many comments on the NPRM echoing this sentiment.
Through the financial responsibility provisions, these final regulations introduce far stronger incentives for schools to avoid committing acts or making omissions that could lead to a valid borrower defense claim than currently exist. In addition, through clarification of circumstances that could lead to a valid claim, institutions may better avoid behavior that could result in a valid claim and future borrowers may be less likely to face such behavior.
Providing an automatic forbearance with an option for the borrower to decline the temporary relief and continue making payments will reduce the potential burden on borrowers pursuing borrower defenses. These borrowers will be able to focus on
Borrowers who ultimately have their loans discharged will be relieved of debts they may not have been able to repay, and that debt relief can ultimately allow them to become bigger participants in the economy, possibly buying a home, saving for retirement, or paying for other expenses. Recent literature related to student loans suggests that high levels of student debt may decrease the long-term probability of marriage,
Affected borrowers also will be able to return into the higher education marketplace and pursue credentials they need for career advancement. To the extent borrowers have subsidized loans, the elimination or recalculation of the borrowers' subsidized usage period could relieve them of their responsibility for accrued interest and make them eligible for additional subsidized loans, which could make returning to higher education a more acceptable option.
These regulations will also give borrowers more information with which they can make informed decisions about the institutions they choose to attend. An institution will be required to provide a disclosure for certain actions and triggering events, to be determined through consumer testing, for which it was required to obtain a letter of credit. Recent events involving closure of several large proprietary institutions have shown the need for lawmakers, regulatory bodies, State authorizers, taxpayers, and students to be more broadly aware of circumstances that could affect the continued existence of an institution. This disclosure, the content of which will be prescribed by the Secretary in a notice published in the
Proprietary institutions will also be required to provide a warning through advertising and promotional materials if their loan repayment rate, based on the proportion of students who have repaid at least one dollar in outstanding balance and measured in the third year after entering repayment, using data reported and validated through the Gainful Employment repayment rate calculation, shows that the median borrower has not paid down his balance by at least one dollar. To estimate the effect of the repayment rate warning on institutions, the Department analyzed program-level repayment rate data prepared for the Gainful Employment regulation
A number of commenters pointed to the Department's failure to quantify the benefits of the proposed regulations in the NPRM as an indication that the analysis did not support the implementation of the final regulations. As mentioned throughout the RIA, the extent of the private and public benefit from the regulations is difficult to quantify. We have limited experience with borrower defense claims to draw upon in generating a profile of those likely to make successful claims. There are different potential profiles of student loan borrowers in terms of loan amounts, loan type composition, likelihood of default, fields of employment, degree level, and other factors. We do not have a basis in the data from existing claims to know how borrower profiles and the distribution and nature of claims will intersect. The economic and psychological benefits of debt relief may vary for a graduate student with high income potential receiving partial relief on a high level of debt and a student who dropped out of a certificate program with a lower level of debt and lower earnings potential from that program of education. While we do not quantify the amount, we expect the benefits associated with the substantial transfers to students from successful borrower defense claims will be significant. Several commenters noted that students may face costs or other negative impacts from these final regulations. In particular, commenters expressed concern that the closure of institutions, especially proprietary institutions that serve many low-income, minority, first-generation, and non-traditional students, will hurt access to higher education, especially for those groups. The Department acknowledges that some institutions may close if their actions mean that they are required to provide a substantial amount of financial protection, or that a large number of successful claims are made against them. However, as the regulation comes into effect and examples of conduct that generates claims are better understood, we expect institutions will limit such behavior and compete for students without such conduct, and that closures will be reduced over time. The Department also believes that institutions that do not face significant claims will be able to provide opportunities for students in
Another possible impact on students mentioned by some commenters is that the costs of financial protection or other compliance measures will be passed on to students in tuition and fee increases. We believe potential tuition increases will be constrained by loan limits and other initiatives, such as the Department's Gainful Employment regulations, where institutions would be negatively affected by such increases.
Institutions will bear many of this regulation's costs, which fall into three categories: Paperwork costs associated with compliance with the regulations; other compliance costs that may be incurred as institutions adapt their business practices and training to ensure compliance with the regulations; and costs associated with obtaining letters of credit or suitable equivalents if required by the institution's performance under a variety of triggers. Additionally, there may be a potentially significant amount of funds transferred between institutions and the Federal government as reimbursement for successful claims. Some institutions may close some or all of their programs if their activities generate large numbers of borrower defense claims.
A key consideration in evaluating the effect on institutions is the distribution of the impact. While all institutions participating in title IV loan programs are subject to the possibility of borrower defense, closed school, and false certification claims and the reporting requirements in these final regulations, the Department expects that fewer institutions will engage in conduct that generates borrower defense claims. Over time, the Department expects the number of schools that would face the most significant costs to come into compliance, the amount of transfers to reimburse the government for successful claims, costs to obtain required letters of credit, and disclosure of borrower defense claims against the schools to be reduced as some offenders are eliminated and other institutions adjust their practices. In the primary budget scenario described in the Net Budget Impacts section of this analysis, the annual transfers from institutions to students, via the Federal government, as reimbursement for successful claims are estimated at $994 million. On the other hand, it is possible that high-quality, compliant institutions, especially in the for-profit sector, will see benefits if the overall reputation of the sector improves as a result of (1) more trust that enforcement against bad actors will be effective, and (2) the removal of bad schools from the higher education marketplace, freeing up market share for the remaining schools.
The accountability framework in the regulations requiring institutions to provide financial protection in response to various triggers would generate costs for institutions. Some of the triggering provisions would affect institutions differently depending upon their type and control, as, for example, only publicly traded institutions are subject to delisting or SEC suspension of trading, only proprietary institutions are subject to the 90/10 rule, and public institutions are not subject to the financial protection requirements. To the extent data were available, we evaluated the financial protection triggers to analyze the expected impact on institutions. Several of the triggers are based on existing performance measures and are aimed at identifying institutions that may face sanctions and experience difficulty meeting their financial obligations. The triggers and, where available, data about their potential impact are discussed in Table 2. The consequences of an institution being found to be not financially responsible are set out in § 668.175 and include providing financial protection through a letter of credit, a set-aside of title IV, HEA funds, or other forms of financial protection specified by the Secretary in a notice published in the
The Department will review the triggering events before determining whether to require separate financial protection for a triggering event that occurs with other triggering events. Another change from the NPRM concerns those triggers that include a materiality threshold. Instead of being evaluated separately, lawsuits, borrower protection repayments to the Secretary, losses from gainful employment and campus closures, withdrawal of owner's equity, and other triggers with a materiality threshold will be evaluated by their effect on the institution's most recent composite score, which will allow the cumulative effect of violation of multiple triggers to be taken into account. If the recalculated composite score is a failing score, institutions would be required to provide financial protection. For the triggers evaluated through the revised composite score approach, the required financial protection is 10 percent or more, as determined by the Secretary, of the total amount of title IV, HEA program received by the institution during its most recently completed fiscal year. For the other triggers, the amount of financial protection required remains 10 percent or more, as determined by the Secretary, of the total amount of title IV, HEA program received by the institution during its most recently completed fiscal year, unless the Department determines that based on the facts of that particular case, the potential losses are greater.
In addition to any resources institutions would devote to training or changes in business practices to improve compliance with the final regulations, institutions would incur costs associated with the reporting and disclosure requirements of the final regulations. This additional workload is discussed in more detail under
Several provisions may impose a cost on guaranty agencies or lenders, particularly the limits on interest capitalization. Loan servicers may have to update their process to accept electronic death certificates, but increased use of electronic documents should be more efficient over the long term. As indicated in the Paperwork Reduction Act of 1995 section of this preamble, the final regulations are estimated to increase burden on guaranty agencies and loan servicers by 7,622 hours related to the mandatory forbearance for FFEL borrowers considering consolidation for a borrower defense claim and reviews of denied closed school claims. The monetized cost of this burden on guaranty agencies and loan servicers, using wage data developed using BLS data available at
In addition to the costs detailed in the
The accountability framework and financial protection triggers will provide some protection for taxpayers as well as potential direction for the Department and other Federal and State investigatory agencies to focus their enforcement efforts. The financial protection triggers may potentially assist the Department as it seeks to identify, and take action regarding, material actions and events that are likely to have an adverse impact on the financial condition or operations of an institution. In addition to the current process where, for the most part, the Department determines annually whether an institution is financially responsible based on its audited financial statements, under these final regulations the Department may determine at the time a material action or event occurs that the institution is not financially responsible.
The technical corrections and additional changes in the final regulations will benefit student borrowers and the Federal government's administration of the title IV, HEA programs. Updates to the acceptable forms of certification for a death discharge will be more convenient for borrowers' families or estates and the Department. The provision for consolidation of Nurse Faculty Loans reflects current practice and gives those borrowers a way to combine the servicing of all their loans. Many of these technical corrections and changes involve relationships between the student borrowers and the Federal government, such as the clarification in the REPAYE treatment of spousal income and debt, and they are not expected to significantly impact institutions.
The final regulations are estimated to have a net budget impact in costs over the 2017-2026 loan cohorts of $16.6 billion in the primary estimate scenario, including a $381 million modification to cohorts 2014-2016 for the 3-year automatic closed school discharge. A cohort reflects all loans originated in a given fiscal year. Consistent with the requirements of the Credit Reform Act of 1990, budget cost estimates for the student loan programs reflect the estimated net present value of all future non-administrative Federal costs associated with a cohort of loans.
As noted by many commenters, in the NPRM we presented a number of scenarios that generated a wide range of potential budget impacts from $1.997 billion in the lowest impact scenario to $42.698 billion in the highest impact scenario. As described in the NPRM, this range reflected the uncertainty related to the borrower defense provisions in the regulations and our intent to be transparent about the estimates to generate discussion and information that could help to refine the estimates. In response to comments and our own internal review, we have made a number of revisions to the borrower defense budget impact estimate that are described in the discussion of the impact of those provisions.
The provisions with the greatest impact on the net budget impact of the regulations are those related to the discharge of borrowers' loans, especially the changes to borrower defense and closed school discharges. As noted in the NPRM, borrowers may pursue closed school, false certification, or borrower defense discharges depending on the circumstances of the institution's conduct and the borrower's claim. If the institution does not close, the borrower cannot or does not pursue closed school or false certification discharges, or the Secretary determines the borrower's claim is better suited to a borrower defense group process, the borrower may pursue a borrower defense claim. The precise split among the types of claims will depend on the borrower's eligibility and ease of pursuing the different claims. While we recognize that some claims may be fluid in classification between borrower defense and the other discharges, in this analysis any estimated effect from borrower defense related claims are described in that estimate, and the net budget impact in the closed school estimate focuses on the process changes and disclosures related to that discharge.
As the Department will eventually have to incorporate the borrower defense provisions of these final regulations into its ongoing budget estimates, we have moved closer to that goal in refining the estimated impact of the regulations to reflect a primary scenario. The uncertainty inherent in the borrower defense estimate given the limited history of borrower defense claims and other factors described in the NPRM is reflected in the additional sensitivity runs that demonstrate the effect of changes in the specific assumption being tested. Another change from the NPRM is the specification of an estimated baseline scenario for the impact of borrower defense claims if these final regulations did not go into effect and borrowers had to pursue claims under the existing borrower defense regulation. Similar to the NPRM, the estimated net budget impact of $14.9 billion attributes all borrower defense activity for the 2017 to 2026 cohorts to these final regulations, but with the baseline scenario, we present an estimate of the subset of those costs that could be incurred under the existing borrower defense regulation.
These final regulations establish a Federal standard for borrower defense claims related to loans first disbursed on or after July 1, 2017, as well as describe the process for the assertion and resolution of all borrower defense claims—both those made for Direct Loans first disbursed prior to July 1, 2017, and for those made under the regulations after that date. As indicated in this preamble, while regulations governing borrower defense claims have existed since 1995, those regulations have rarely been used. Therefore, we have used the limited data available on borrower defense claims, especially information about the results of the collapse of Corinthian, projected loan volumes, Departmental expertise, the discussions at negotiated rulemaking, comments on the NPRM analysis, and information about past investigations into the type of institutional acts or omissions that would give rise to borrower defense claims to refine the primary estimate and sensitivity scenarios that we believe will capture the range of net budget impacts
While we have refined the assumptions used to estimate the impact of the borrower defense provisions, the ultimate method of estimating the impact remains entering a level of net borrower defense claims into the student loan model (SLM) by risk group, loan type, and cohort. The net present value of the reduced stream of cash flows compared to what the Department would have expected from a particular cohort, risk group, and loan type generates the expected cost of the regulations. Similar to the NPRM, we applied an assumed level of school misconduct, borrower claims success, and recoveries from institutions (respectively labeled as Conduct Percent, Borrower Percent, and Recovery Percent in Tables 3-A and 3-B) to the President's Budget 2017 (PB2017) loan volume estimates to generate the estimated net borrower defense claims for each cohort, loan type, and sector.
The limited history of borrower defense claims and other factors that lead the Department to the range of scenarios described in the NPRM are still in effect. These factors include the level of school misconduct that could give rise to claims and institutions' reaction to the regulation to cut back on such activities, borrowers' response to the regulations including the consolidation of FFEL and Perkins borrowers to access the Direct Loan borrower defense process, the level of group versus individual claims, and the extent of full or partial relief applied to claims. Additionally, other regulatory and enforcement initiatives such as the Gainful Employment regulations, creation of the Student Aid Enforcement Unit, and greater rigor in the Department's review of accrediting agencies may have overlapping effects and may affect loan volumes and potential exposure to borrower defense claims at some institutions. To demonstrate the effect of the uncertainty about these factors, we estimated several scenarios to test the sensitivity of the various assumptions.
In refining our approach and estimating a primary scenario with several sensitivity runs, we also changed the assumptions from the NPRM in response to comments and our own review. The development of the estimated baseline scenario described in Table 3-B is one of the changes. Another major change is the incorporation of a deterrent effect of the borrower defense provisions on institutional behavior. In the NPRM, there was no change across cohorts in the level of school misconduct giving rise to claims. Upon review, we believe it is more likely that the borrower defense provision will have an impact like that of other title IV policies such as the cohort default rate or 90/10 in that institutions will make efforts to comply as the rule comes into effect and the precedents for what constitutes behavior resulting in successful claims are developed. In the past, when provisions targeting specific institutional activities or performance have been introduced, there has generally been a period of several years while the worst performers are removed from the system and while other institutions adapt to the new requirements and a lower steady state is established. We expect a similar pattern to develop with respect to borrower defense, as reflected in the Conduct Percent in Table 3-A. Another change reflected by the Conduct Percent is an increase in maximum level of claims from public and private non-profit institutions to 3 percent. Many commenters expressed concern about the effect of the regulations on these sectors or questions about the type of misconduct leading to claims that exist in those sectors. A number of commenters pointed to graduate programs, especially law programs, as a potential source of claims. Graduate students took out approximately 36 percent of all Direct Loans in 2015-16.
There are a number of other potential mitigating factors that we did not explicitly adjust in our estimates in order to avoid underestimating the potential cost of the borrower defense provisions. Several commenters expressed concern about the effect of the regulations on access to higher education, especially for low-income, minority, or first-generation students. It is possible that the mix of financial aid received by students could shift if they attend different institutions than they would if the rule were not in place, but we believe that students whose choice of schools may have been affected by an institution's wrongdoing will find an alternative and receive similar amounts of title IV, HEA aid. Some students who may not have pursued higher education without the institution's act or omission may not enter the system, reducing the amount of Pell Grants or loans taken out, but we do not expect this to be a substantial portion of affected student borrowers. In the case of Pell Grants in particular, we do not want to estimate savings from potential reductions in aid related to borrower defense until such an effect is demonstrated in relevant data. Similarly, default discharges may decrease as borrowers seek discharge under the borrower defense provisions of these final regulations. If borrowers with valid borrower defense claims differ in their payment profile from the overall portfolio, the effect on the level of defaults, especially in some risk groups, could be substantial.
Table 3-A presents the assumptions for the primary budget estimate with the budget estimate for each scenario presented in Table 4. As in the NPRM, we also estimated the impact if the Department received no recoveries from institutions, the results of which are discussed after Table 4. As in the NPRM, we do not specify how many institutions are represented in the estimate, as the scenario could represent a substantial number of institutions engaging in acts giving rise to borrower defense claims or could represent a small number of institutions with significant loan volume subject to a large number of claims. According to Federal Student Aid data center loan volume reports, the five largest proprietary institutions in loan volume received 26 percent of Direct Loans disbursed in the proprietary sector in award year 2014-15 and the 50 largest represent 69 percent.
As was done in the NPRM, the PB2017 loan volumes by sector were multiplied by the Conduct Percent that represents the share of loan volume estimated to be affected by institutional behavior that results in a borrower defense claim and the Borrower Percent that captures the percent of loan volume associated with potentially eligible borrowers who successfully pursue a claim to generate gross claims. The
We also estimated a baseline scenario for the potential impact of borrower defense in recognition that many claims could be pursued under the existing State standards. The publicity and increased awareness of borrower defense could lead to increased activity under the existing regulations. In addition to the Corinthian claims, as of October 2016, the Department had received nearly 4,400 claims from borrowers of at least 20 institutions. The Federal standard in the final regulations will provide a unified standard across all States but is based on elements of relevant consumer protection law from the various States. We estimate that the final regulations could increase claims beyond those that could be pursued without it by an average of approximately 10 percent for the FY2017 cohort. This is based on our initial review of claims presented that does not reveal significant differences between the State and Federal standards, limiting the expected increase in claims from the adoption of the Federal standard. The baseline school conduct percentage does improve over time, but at a slower rate than occurs under the regulation. The borrower claim percentage for the baseline is based on the history of limited claims, informational sessions
As noted in the NPRM, and throughout this RIA, the Department recognizes the uncertainty associated with the factors contributing to the primary budget assumptions presented in Table 3-A. The baseline scenario defined by the assumptions in Table 3-B indicates the net costs of claims the Department assumes could occur in absence of these final regulations. The $4.9 billion estimated cost for the baseline scenario is provided for illustrative purposes and, as discussed above, is included in the $14.9 billion total estimated cost for the borrower defense provisions. To demonstrate the effect of a change in any of the assumptions, the Department designed the following scenarios to isolate each assumption and adjust it by 15 percent in the direction that would increase costs, increasing the Conduct or Borrower percentages and decreasing recoveries. As the gross claims are generated by multiplying the PB2017 estimated volumes by the Conduct Percent and the Borrower Percent, the Con15 scenario demonstrates the effect of the change in either assumption. The recovery percentage is applied to the gross claims to generate the net claims, so the REC15 scenario reduces recoveries by 15 percent to demonstrate the impact of that assumption. The final two runs adjust all the assumptions simultaneously to present a maximum and minimum expected budget impact. These sensitivity runs are identified as Con15, Rec15, All15, and Min15 respectively. The results of the various scenarios range from $14.9 billion to $21.2 billion and are presented in Table 4.
The transfers among the Federal government and affected borrowers and institutions associated with each scenario above are included in Table 5, with the difference in amounts transferred to borrowers and received from institutions generating the budget impact in Table 4. The amounts in Table 4 assume the Federal Government will recover some portion of claims from institutions. In the absence of any recovery from institutions, taxpayers would bear the full cost of successful claims from affected borrowers. At a 3 percent discount rate, the annualized costs with no recovery are approximately $2.465 billion for the primary budget estimate, $637 million for the baseline scenario, $2.758 billion for the Con15 scenario, $3.279 billion for the All15 scenario, and $1.666 billion for the Min15 scenario. At a 7 percent discount rate, the annualized costs with no recovery are approximately $2.414 billion for the primary budget estimate, $628 million for the baseline scenario, $2.699 billion for the Con15 scenario, $3.213 billion for the All15 scenario, and $1.627 billion for the Min15 scenario. This potential increase in costs demonstrates the significant effect that recoveries from institutions have on the net budget impact of the borrower defense provisions.
In addition to the provisions previously discussed, the final regulations also would make changes to the closed school discharge process, which are estimated to cost $1.732 billion, of which $381 million is a modification to cohorts 2014-2016 related to the extension of the automatic 3-year discharge and $1.351 billion is for cohorts 2017-2026. The final regulations include requirements to inform students of the consequences, benefits, requirements, and procedures of the closed school discharge option, including providing students with an application form, and establish a Secretary-led discharge process for borrowers who qualify but do not apply and, according to the Department's information, did not subsequently re-enroll in any title IV-eligible institution within three years from the date the school closed. The increased information about and automatic application of the closed school discharge option and possible increase in school closures related to the institutional accountability provisions in the proposed regulations are likely to increase closed school claims. Chart 1 provides the history of closed schools, which totals 12,666 schools or campus locations through September 2016.
In order to estimate the effect of the changes to the discharge process that would grant relief without an application after a three-year period, the Department looked at all Direct Loan borrowers at schools that closed from 2008-2011 to see what percentage of them had not received a closed school discharge and had no NSLDS record of title-IV aided enrollment in the three years following their school's closure. Of 2,287 borrowers in the file, 47 percent had no record of a discharge or subsequent title IV, HEA aid. This does not necessarily mean they did not re-enroll at a title IV institution, so this assumption may overstate the potential effect of the three-year discharge provision. The Department used this information and the high end of closed school claims in recent years to estimate the effect of the final regulations related to closed school discharges. The resulting estimated cost to the Federal government of the closed school provisions is $1.732 billion, of which $381 million is a modification related to extending the 3-year automatic discharge to cohorts 2014 through 2016 and $1.351 billion relates to the 2017 to 2026 loan cohorts.
The final regulations will also change the false certification discharge process to include instances in which schools certified the eligibility of a borrower who is not a high school graduate (and does not meet applicable alternative to high school graduate requirements) where the borrower would qualify for a false certification discharge if the school falsified the borrower's high school graduation status; falsified the borrower's high school diploma; or referred the borrower to a third party to obtain a falsified high school diploma. Under existing regulations, false certification discharges represent a very low share of discharges granted to borrowers. The final regulations will replace the explicit reference to ability to benefit requirements in the false
As indicated in the NPRM, there are a number of additional provisions in these final regulations that are not expected to have a significant net budget impact. These provisions include a number of technical changes related to the PAYE and REPAYE repayment plans and the consolidation of Nurse Faculty Loans, updates to the regulations describing the Department's authority to compromise debt, and updates to the acceptable forms of verification of death for discharge of title IV loans or TEACH Grant obligations. The technical changes to the REPAYE and PAYE plans were already reflected in the Department's budget estimates for those regulations, so no additional budget effects are included here. Some borrowers may be eligible for additional subsidized loans and no longer be responsible for accrued interest on their subsidized loans as a result of their subsidized usage period being eliminated or recalculated because of a closed school, false certification, unpaid refund, or defense to repayment discharge. However, we believe the institutions primarily affected by the 150 percent subsidized usage regulation are not those expected to generate many of the applicable discharges, so this reflection of current practice is not expected to have a significant budget impact. Allowing death discharges based on death certificates submitted or verified through additional means is convenient for borrowers, but is not estimated to substantially change the amount of death discharges. These updates to the debt compromise limits reflect statutory changes and the Secretary's existing authority to compromise debt, so we do not estimate a significant change in current practices. Revising the regulations to expressly permit the consolidation of Nurse Faculty Loans is not expected to have a significant budget impact, as this technical change reflects current practices. According to Department of Health and Human Services budget documents, approximately $26.5 million
In developing these estimates, we used a wide range of data sources, including data from the NSLDS; operational and financial data from Department systems; and data from a range of surveys conducted by the National Center for Education Statistics such as the 2012 National Postsecondary Student Aid Survey. We also used data from other sources, such as the U.S. Census Bureau.
As required by OMB Circular A-4 (available at
In response to comments received and the Department's further internal consideration of these final regulations, the Department reviewed and considered various changes to the proposed regulations detailed in the NPRM. The changes made in response to comments are described in the
In particular, the Department extensively reviewed the financial responsibility provisions and related disclosures, the repayment rate warning, and the arbitration provisions of these final regulations. In developing these final regulations, the Department considered the budgetary impact, administrative burden, and effectiveness of the options it considered.
The Secretary is amending the regulations governing the Direct Loan Program to establish a new Federal standard, limitation periods, and a process for determining whether a borrower has a borrower defense based on an act or omission of a school. We are also amending the Student Assistance General Provisions regulations to revise the financial responsibility standards and add disclosure requirements for schools. Finally, we are amending the discharge provisions in the Perkins Loan, Direct Loan, FFEL Program, and TEACH Grant programs. These changes will provide transparency, clarity, and ease of administration to current and new regulations and protect students, the Federal government, and taxpayers against potential school liabilities resulting from borrower defenses.
The U.S. Small Business Administration Size Standards define “for-profit institutions” as “small businesses” if they are independently owned and operated and not dominant in their field of operation with total annual revenue below $7,000,000. The standards define “non-profit institutions” as “small organizations” if they are independently owned and operated and not dominant in their field of operation, or as “small entities” if they are institutions controlled by governmental entities with populations below 50,000. Under these definitions, an estimated 4,365 institutions of higher education subject to the paperwork compliance provisions of the proposed regulations are small entities. Accordingly, we have prepared this final regulatory flexibility analysis to present an estimate of the effect of these regulations on small entities.
Section 455(h) of the HEA authorizes the Secretary to specify in regulation which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a Direct Loan. Current regulations in § 685.206(c) governing defenses to repayment have been in place since 1995, but have rarely been used. Those regulations specify that a borrower may assert as a defense to repayment any “act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable State law.” In response to the collapse of Corinthian, the Secretary announced in June of 2015 that the Department would develop new regulations to clarify and streamline the borrower defense process, in a manner that would protect borrowers and allow the Department to hold schools accountable for actions that result in loan discharges.
These final regulations will affect institutions of higher education that participate in the Federal Direct Loan Program and borrowers. Approximately 60 percent of institutions of higher education qualify as small entities, even though the range of revenues at the non-profit institutions varies greatly. Using data from the Integrated Postsecondary Education Data System, the Department estimates that approximately 4,365 institutions of higher education qualify as small entities—1,891 are not-for-profit institutions, 2,196 are for-profit institutions with programs of two years or less, and 278 are for-profit institutions with four-year programs.
Table 6 relates the estimated burden of each information collection requirement to the hours and costs estimated in the
The final regulations are unlikely to conflict with or duplicate existing Federal regulations.
As described above, the Department participated in negotiated rulemaking and reviewed a large number of comments when developing the regulations, and considered a number of options for some of the provisions. We considered multiple issues, including the group discharge process for borrower defense claims, the limitation periods, the appropriate procedure for considering borrower defense claims including the role of State AGs, the Department, borrowers, and institutions, and the continued use of State standards for borrower defense claims. While no alternatives were aimed specifically at small entities, limiting repayment rate warnings to affected proprietary institutions will reduce the burden on the private not-for-profit institutions that are a significant portion of small entities that would be affected by the final regulations. The additional options to provide financial protection may also benefit small entities, even though the changes were not specifically directed at them.
As part of its continuing effort to reduce paperwork and respondent burden, the Department provides the general public and Federal agencies with an opportunity to comment on proposed and continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public understands the Department's collection instructions, respondents can provide the requested data in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the Department can properly assess the impact of collection requirements on respondents.
Sections 668.14, 668.41, 668.171, 668.175, 682.211, 682.402, 685.222, and 685.300 contain information collection requirements. Under the PRA, the Department has submitted a copy of these sections and an Information Collections Request to OMB for its review.
A Federal agency may not conduct or sponsor a collection of information unless OMB approves the collection under the PRA and the corresponding information collection instrument displays a currently valid OMB control number. Notwithstanding any other provision of law, no person is required to comply with, or is subject to penalty for failure to comply with, a collection of information if the collection instrument does not display a currently valid OMB control number.
In these final regulations, we have displayed the control numbers assigned by OMB to any information collection requirements in this NPRM and adopted in the final regulations.
We estimate that an institution will require two hours to prepare the required written disclosure to be sent with a copy of the closed school discharge application and the necessary mailing list for currently enrolled students. We anticipate that most schools will provide this information electronically to their students, thus decreasing burden and cost.
On average, we estimate that it will take the estimated eight private institutions 16 hours to prepare the written disclosure information required (8 institutions × 2 hours).
On average, we estimate that it will take the estimated eight private institutions that will close a total of 324 hours (1,904 students × .17 (10 minutes)) to process the required written disclosure with a copy of the closed school discharge application based on the mailing list for the estimated 1,904 enrolled students.
The burden for this process for private institutions is 340 hours.
On average, we estimate that it will take the estimated 38 proprietary institutions 76 hours to prepare the written disclosure information required (38 institutions × 2 hours).
On average, we estimate that it will take the estimated 38 proprietary institutions that will close a total of 1,537 hours (9,044 students × .17 (10 minutes)) to process the required written disclosure with a copy of the closed school discharge application based on the mailing list for the estimated 9,044 enrolled students.
The burden for this process for proprietary institutions is 1,613 hours.
For § 668.14, the total increase in burden is 1,953 hours under OMB Control Number 1845-0022.
The process through which a proprietary institution will be informed of its repayment rate, and provided the opportunity to appeal that rate, is included in § 668.41(h)(2) of the final regulations. The Department notifies the institution of its repayment rate. Upon receipt of the rate the institution has 15 days to submit an appeal based on the two conditions in § 668.41(h)(2)(ii) to the Secretary.
Additionally, § 668.41(h)(3) of the final regulations stipulates the treatment of required disclosures in advertising and promotional materials. Under the provision, all advertising and promotional materials made available by or on behalf of an institution that identify the institution by name must include a warning about loan repayment outcomes as prescribed by the Secretary. The Secretary may conduct consumer testing to ensure meaningful and helpful language is provided to the students. All promotional materials, including printed materials, about an institution must be accurate and current at the time they are published, approved by a State agency, or broadcast. The warning must be prominent, clear and conspicuous, easily heard or read. The Secretary may require modifications to such materials if the warning does not meet the regulatory conditions.
Based on an analysis of Departmental data, 972 of the 1,345 proprietary institutions with reported repayment rate data would not meet the negative amortization threshold for the repayment rate calculation.
We estimate that it will take the 972 institutions 30 minutes (.50 hours) or 486 hours to review the institutional repayment rate and determine if it meets one of the conditions to submit an appeal to the Secretary (972 institutions × .50 hours = 486 hours).
Of the 972 institutions that would not meet the negative amortization loan repayment threshold, we anticipate that one percent or 10 institutions could meet the appeal criteria identified in 668.41(h)(2)(ii)(A).
We estimate that it will take the 10 institutions another 2 hours to produce the required evidence to submit with the appeal (10 institutions × 2 hours = 20 hours). We estimate it will take the approximate 10 institutions an additional 30 minutes (.50 hours) to submit the appeal to the Secretary (10 institutions × .50 hours = 5 hours) for a total of 25 hours.
We estimate that 5 institutions will be successful in their appeal, leaving 967 institutions that are required to include the necessary loan repayment warning in their promotional materials.
We estimate it will take each of the approximate 967 proprietary institutions a total of 5 hours to update their promotional materials (967 institutions × 5 hours = 4,835 hours).
For § 668.41(h), the total increase in burden is 5,346 hours under OMB Control Number 1845-0004.
The total increase in burden is 5,346 hours for OMB Control Number 1845-0004.
In that notice, the institution may show that certain actions or events are not material or that those actions are resolved. Specifically the institution may demonstrate that:
• The amount claimed in a lawsuit by a State or Federal authority for financial relief on a claim related to the making of a Direct Loan for enrollment at the school or the provision of educational services exceeds the potential recovery.
• The withdrawal of owner's equity was used solely to meet tax liabilities of the institution or its owners.
• The creditor waived a violation of a loan agreement. If the creditor imposes additional constraints or requirements as a condition of waiving the violation and continuing with the loan, the institution must identify and describe those constraints or requirements but would be permitted to show why these actions would not have an adverse financial impact on the institution.
• The reportable action or event no longer exists, has been resolved, or there is insurance to cover the liabilities that arise from the action or event.
For § 668.175, the total increase in burden is 60,560 hours under OMB Control Number 1845-0022.
The combined total increase in burden for §§ 668.14, 668.171, and 668.175 is 65,541 hours under OMB Control Number 1845-0022.
For § 682.211, the total increase in burden is 5,784 hours under OMB Control Number 1845-0020.
Section 682.402(d)(6)(ii)(I) of the final regulations requires the lender or guaranty agency, upon resuming collection, to provide a FFEL borrower with another closed school discharge application, and an explanation of the requirements and procedures for obtaining the discharge.
Section 682.402(d)(6)(ii)(K) of the final regulations describes the responsibilities of the guaranty agency if the borrower requests such a review.
Section 682.402(d)(8)(ii) of the final regulations authorizes the Department, or a guaranty agency with the Department's permission, to grant a closed school discharge to a FFEL borrower without a borrower application based on information in the Department's or guaranty agency's possession that the borrower did not subsequently re-enroll in any title IV-
There is an increase in burden of 108 hours under OMB Control Number 1845-0020.
There will be burden on guaranty agencies, upon receipt of the request for escalated review from the borrower, to forward to the Secretary the discharge form and any relevant documents. For the period between 2011 and 2015 there were 43,268 students attending closed schools, of which 9,606 students received a closed school discharge. It is estimated that 5 percent of the 43,268, or 2,163 closed school applications were denied. We estimate that 10 percent or 216 of those borrowers whose application was denied will request escalated review by the Secretary. We estimate that the process to forward the discharge request and any relevant documentation to the Secretary will take .5 hours (30 minutes) per request. There will be an estimated burden of 58 hours on the 17 public guaranty agencies based on an estimated 116 requests (116 × .5 hours = 58 hours). There will be an estimated burden of 50 hours on the 10 not-for-profit guaranty agencies (100 × .5 hours = 50 hours). There is an increase in burden of 108 hours under OMB Control Number 1845-0020.
The guaranty agencies will have burden assessed based on these final regulations to provide another discharge application to a borrower upon resuming collection activities with explanation of process and requirements for obtaining a discharge. We estimate that for the 2,163 closed school applications that were denied, it will take the guaranty agencies .5 hours (30 minutes) to provide the borrower with another discharge application and instructions for filing the application again. There will be an estimated burden of 582 hours on the 17 public guaranty agencies based on an estimated 1,163 borrowers (1,163 × .5 hours = 582 hours). There will be an estimated burden of 500 hours on the 10 not-for-profit guaranty agencies (1,000 × .5 hours = 500 hours). There is an increase in burden of 1,082 hours under OMB Control Number 1845-0020.
There will be burden on the guaranty agencies to determine the eligibility of a borrower for a closed school discharge without the borrower submitting such an application. This determination requires a review of those borrowers who attended a closed school but did not apply for a closed school discharge to determine if the borrower re-enrolled in any other institution within three years of the school closure. We estimate that 20 hours of programming will be necessary to enable a guaranty agency to establish a process to review its records for borrowers who attended a closed school and to determine if any of those borrowers reenrolled in a title IV eligible institution within three years. There will be an estimated burden of 340 hours on the 17 public guaranty agencies for this programming (17 × 20 hours = 340 hours). There will be an estimated burden of 200 hours on the not-for-profit guaranty agencies for this programming (10 × 20 hours = 200 hours). There is an increase in burden of 540 hours under OMB Control Number 1845-0020.
For § 682.402, the total increase in burden is 1,838 hours under OMB Control Number 1845-0020.
The combined total increase in burden for §§ 682.211 and 682.402 is 7,622 hours under OMB Control Number 1845-0020.
While the decision of the Department official will be final as to the merits of the claim and any relief that may be warranted on the claim, if the borrower defense is denied in full or in part, the borrower will be permitted to request that the Secretary reconsider the borrower defense upon the identification of new evidence in support of the borrower's claim. “New evidence” will be defined as relevant evidence that the borrower did not previously provide and that was not identified by the Department official as evidence that was relied upon for the final decision.
Additionally there will be burden on any borrower whose borrower defense claim is denied, if they elect to request reconsideration from the Secretary based on new evidence in support of the borrower's claim. We estimate that two percent of borrower defense claims received will be denied and those borrowers will then request reconsideration by presenting new evidence to support their claim. As of April 27, 2016, 18,688 borrower defense claims had been received. Of that number, we estimate that 467 borrowers including those that opted out of a successful Borrower Defense group relief would require .5 hours (30 minutes) to submit the request for reconsideration to the Secretary for a total of 234 burden hours (467 × .5 hours) under OMB Control Number 1845-0142.
Once a group of borrowers with common facts and claims has been identified, the Secretary will designate a Department official to present the group's common borrower defense in the fact-finding process, and will provide each identified member of the
Under § 685.222(g)(1) of the final regulations, a hearing official will review the Department official's basis for identifying the group and resolve the claim through a fact-finding process. As part of that process, the hearing official will consider any evidence and argument presented by the Department official on behalf of the group and on behalf of individual members of the group. The hearing official will consider any additional information the Department official considers necessary, including any Department records or response from the school or a person affiliated with the school as described § 668.174(b) as reported to the Department or as recorded in the Department's records if practicable.
A hearing official will resolve the borrower defense and determine any liability of the school through a fact-finding process. As part of the process, the hearing official will consider any evidence and argument presented by the school and the Department official on behalf of the group and, as necessary, any evidence presented on behalf of individual group members.
The hearing official will issue a written decision. If the hearing official approves the borrower defense, that decision will describe the basis for the determination, notify the members of the group of the relief provided on the basis of the borrower defense, and notify the school of any liability to the Secretary for the amounts discharged and reimbursed.
If the hearing official denies the borrower defense in full or in part, the written decision will state the reasons for the denial, the evidence that was relied upon, the portion of the loans that are due and payable to the Secretary, and whether reimbursement of amounts previously collected is granted, and will inform the borrowers that their loans will return to their statuses prior to the group borrower defense process. It also will notify the school of any liability to the Secretary for any amounts discharged. The Secretary will provide copies of the written decision to the members of the group, the Department official and the school.
The hearing official's decision will become final as to the merits of the group borrower defense claim and any relief that may be granted within 30 days after the decision is issued and received by the Department official and the school unless, within that 30-day period, the school or the Department official appeals the decision to the Secretary. A decision of the hearing official will not take effect pending the appeal. The Secretary will render a final decision following consideration of any appeal.
After a final decision has been issued, if relief for the group has been denied in full or in part, a borrower may file an individual claim for relief for amounts not discharged in the group process. In addition, the Secretary may reopen a borrower defense application at any time to consider new evidence, as discussed above.
We further estimate that the appeal process will require 150 hours from the three open private institutions or persons affiliated with that school (3 institutions × 50 hours). We estimate that the appeal process will require 150 hours from the three open proprietary institutions or persons affiliated with that school (3 institutions × 50 hours). We estimate the burden to be 300 hours (6 institutions × 50 hours). The total estimated burden for this section will be 600 hours assessed under OMB Control Number 1845-0142.
Additionally, any borrower whose borrower defense claim is denied under the group claim may request reconsideration based on new evidence to support the individual claim. We believe that the estimate for the total universe of denied claims in § 685.222(e) includes these borrowers.
The combined total increase in burden for § 685.222 is 1,049 hours under OMB Control Number 1845-0142.
Section 685.300(f) of the final regulations requires institutions who, after the effective date of the final regulations, incorporate predispute arbitration agreements with Direct Loan program borrowers to include specific language regarding a borrower's right to file a lawsuit against the institution when it concerns acts or omissions surrounding the making of the Direct Loan or provision of educational services purchased with the Direct Loan. Additionally, institutions that incorporated predispute arbitration agreements with Direct Loan program borrowers prior to the effective date of the final regulations must provide borrowers with agreements or notices containing specific language regarding a borrower's right to file a lawsuit against the institution when the class action concerns acts or omissions surrounding the making of the Direct Loan or provision of educational services purchased with the Direct. Institutions must provide this notice to such borrowers no later than the date of the loan exit counseling for current students or the date the school files an initial response to an arbitration demand or complaint suit from a student who hasn't received such notice.
Section 685.300(h) of the final regulations requires institutions to provide to the Secretary, copies of specified records connected to a claim filed in lawsuit by the school by a student or any party against the school regarding a borrower defense claim. The school must submit any records within 30 days of the filing or receipt of the complaint by the school or upon receipt by the school of rulings on a dipositive motion or final judgement.
The combined total increase in burden for § 685.300 is 179,362 hours under OMB Control Number 1845-0143.
Consistent with the discussion above, the following chart describes the sections of the final regulations involving information collections, the information being collected, the collections that the Department will submit to OMB for approval and public comment under the PRA, and the estimated costs associated with the information collections. The monetized net costs of the increased burden on institutions, lenders, guaranty agencies, and borrowers, using wage data developed using BLS data, available at
The total burden hours and change in burden hours associated with each OMB Control number affected by the final regulations follows:
Under § 668.171(h) of the final regulations, institutions are required to report to the Department certain events or occurrences that they may also be required to report to the SEC. Under SEC rules and regulations, institutions are generally required to report information that would be material to stockholders, including certain specified information, whereas the Department has identified events and occurrences unique to institutions of higher education that it believes could threaten an institution's financial viability and for which it requires specific and perhaps more timely reporting. We believe this reporting is necessary to ensure that institutions provide financial protection, for the benefit of students and taxpayers, against actions or events that threaten an institution's ability to (1) meet its current and future financial obligations, (2) continue as a going concern or continue to participate in the title IV, HEA programs, and (3) continue to deliver educational services.
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Claims, Income taxes.
Administrative practice and procedure, Colleges and universities, Consumer protection, Grant programs—education, Loan programs—education, Reporting and recordkeeping requirements, Selective Service System, Student aid, Vocational education.
Loan programs—education, Reporting and recordkeeping, Student aid.
Administrative practice and procedure, Colleges and universities, Loan programs—education, Reporting and recordkeeping requirements, Student aid, Vocational education.
Administrative practice and procedure, Colleges and universities, Education, Elementary and Secondary education, Grant programs—education,
For the reasons discussed in the preamble, the Secretary of Education amends parts 30, 668, 674, 682, 685, and 686 of title 34 of the Code of Federal Regulations as follows:
20 U.S.C. 1221e-3(a)(1), and 1226a-1, 31 U.S.C. 3711(e), 31 U.S.C. 3716(b) and 3720A, unless otherwise noted.
(a)(1) The Secretary uses the standards in the FCCS, 31 CFR part 902, to determine whether compromise of a debt is appropriate if the debt arises under a program administered by the Department, unless compromise of the debt is subject to paragraph (b) of this section.
(2) If the amount of the debt is more than $100,000, or such higher amount as the Department of Justice may prescribe, the Secretary refers a proposed compromise of the debt to the Department of Justice for approval, unless the compromise is subject to paragraph (b) of this section or the debt is one described in paragraph (e) of this section.
(b) Under the provisions in 34 CFR 81.36, the Secretary may enter into certain compromises of debts arising because a recipient of a grant or cooperative agreement under an applicable Department program has spent some of these funds in a manner that is not allowable. For purposes of this section, neither a program authorized under the Higher Education Act of 1965, as amended (HEA), nor the Impact Aid Program is an applicable Department program.
(c)(1) The Secretary uses the standards in the FCCS, 31 CFR part 903, to determine whether suspension or termination of collection action on a debt is appropriate.
(2) Except as provided in paragraph (e), the Secretary—
(i) Refers the debt to the Department of Justice to decide whether to suspend or terminate collection action if the amount of the debt outstanding at the time of the referral is more than $100,000 or such higher amount as the Department of Justice may prescribe; or
(ii) May suspend or terminate collection action if the amount of the debt outstanding at the time of the Secretary's determination that suspension or termination is warranted is less than or equal to $100,000 or such higher amount as the Department of Justice may prescribe.
(d) In determining the amount of a debt under paragraph (a), (b), or (c) of this section, the Secretary deducts any partial payments or recoveries already received, and excludes interest, penalties, and administrative costs.
(e)(1) Subject to paragraph (e)(2) of this section, under the provisions of 31 CFR part 902 or 903, the Secretary may compromise a debt in any amount, or suspend or terminate collection of a debt in any amount, if the debt arises under the Federal Family Education Loan Program authorized under title IV, part B, of the HEA, the William D. Ford Federal Direct Loan Program authorized under title IV, part D of the HEA, or the Perkins Loan Program authorized under title IV, part E, of the HEA.
(2) The Secretary refers a proposed compromise, or suspension or termination of collection, of a debt that exceeds $1,000,000 and that arises under a loan program described in paragraph (e)(1) of this section to the Department of Justice for review. The Secretary does not compromise, or suspend or terminate collection of, a debt referred to the Department of Justice for review until the Department of Justice has provided a response to that request.
(f) The Secretary refers a proposed resolution of a debt to the Government Accountability Office (GAO) for review and approval before referring the debt to the Department of Justice if—
(1) The debt arose from an audit exception taken by GAO to a payment made by the Department; and
(2) The GAO has not granted an exception from the GAO referral requirement.
(g) Nothing in this section precludes—
(1) A contracting officer from exercising his authority under applicable statutes, regulations, or common law to settle disputed claims relating to a contract; or
(2) The Secretary from redetermining a claim.
(h) Nothing in this section authorizes the Secretary to compromise, or suspend or terminate collection of, a debt—
(1) Based in whole or in part on conduct in violation of the antitrust laws; or
(2) Involving fraud, the presentation of a false claim, or misrepresentation on the part of the debtor or any party having an interest in the claim.
20 U.S.C. 1001-1003, 1070g, 1085, 1088, 1091, 1092, 1094, 1099c, 1099c-1, 1221-3, and 1231a, unless otherwise noted.
The addition reads as follows:
(b) * * *
(32) The institution will provide all enrolled students with a closed school discharge application and a written disclosure, describing the benefits and consequences of a closed school discharge as an alternative to completing their educational program through a teach-out agreement, as defined in 34 CFR 602.3, immediately upon submitting a teach-out plan after the occurrence of any of the following events:
(i) The initiation by the Secretary of an action under 34 CFR 600.41 or subpart G of this part or the initiation of an emergency action under § 668.83, to terminate the participation of an institution in any title IV, HEA program.
(ii) The occurrence of any of the events in paragraph (b)(31)(ii) through (v) of this section.
(h)
(i) The reference to “program” in § 668.413(b)(3)(vi) is read to refer to “institution”;
(ii) “Award year” means the 12-month period that begins on July 1 of one year and ends on June 30 of the following year;
(iii) “Borrower” means a student who received a FFEL or Direct Loan for enrolling in a gainful employment program at the institution; and
(iv) “Two-year cohort period” is defined as set forth in § 668.402.
(2)
(ii) If an institution's final loan repayment rate shows that the median borrower has not either fully repaid all FFEL or Direct Loans received for enrollment in the institution or made loan payments sufficient to reduce by at least one dollar the outstanding balance of each of the borrower's FFEL or Direct Loans received for enrollment in the institution—
(A) Using the calculation described in paragraph (h)(4)(ii) of this section, the institution may submit an appeal to the Secretary within 15 days of receiving notification of its final loan repayment rate; and
(B) The Secretary will notify the institution if the appeal is—
(
(
(3)
(B) Promotional materials include, but are not limited to, an institution's Web site, catalogs, invitations, flyers, billboards, and advertising on or through radio, television, video, print media, social media, or the Internet.
(C) The institution must ensure that all promotional materials, including printed materials, about the institution are accurate and current at the time they are published, approved by a State agency, or broadcast.
(ii)
(4)
(i) That rate is based on fewer than 10 borrowers in the cohort described in paragraph (h)(1) of this section; or
(ii) The institution demonstrates to the Secretary's satisfaction that not all of its programs constitute GE programs and that if the borrowers in the non-GE programs were included in the calculation of the loan repayment rate, the loan repayment rate would show that the median borrower has made loan payments sufficient to reduce by at least one dollar the outstanding balance of each of the borrower's FFEL or Direct Loans received for enrollment in the institution.
(i)
(2)
(3)
(4)
(i) Hand-delivering the disclosure as a separate document to the student individually or as part of a group presentation; or
(ii)(A) Sending the disclosure to the student's primary email address or delivering the disclosure through the electronic method used by the institution for communicating with the student about institutional matters; and
(B) Ensuring that the disclosure is the only substantive content in the message sent to the student under this paragraph unless the Secretary specifies additional, contextual language to be included in the message.
(5)
(i) Hand-delivering the disclosure as a separate document to the student individually, or as part of a group presentation; or
(ii)(A) Sending the disclosure to the student's primary email address or delivering the disclosure through the electronic method used by the institution for communicating with
(B) Ensuring that the disclosure is the only substantive content in the message sent to the student under this paragraph unless the Secretary specifies additional, contextual language to be included in the message.
(6)
The addition reads as follows:
(c) * * *
(a) * * *
(3) Notwithstanding the provisions of paragraph (a)(2) of this section—
(i) If, in a termination action against an institution, the hearing official finds that the institution has violated the provisions of § 668.14(b)(18), the hearing official also finds that termination of the institution's participation is warranted;
(ii) If, in a termination action against a third-party servicer, the hearing official finds that the servicer has violated the provisions of § 668.82(d)(1), the hearing official also finds that termination of the institution's participation or servicer's eligibility, as applicable, is warranted;
(iii) In an action brought against an institution or third-party servicer that involves its failure to provide a letter of credit or other financial protection under § 668.15 or § 668.171(c) through (g), the hearing official finds that the amount of the letter of credit or other financial protection established by the Secretary under § 668.175(f)(4) is appropriate, unless the institution can demonstrate that the amount was not warranted because—
(A) For financial protection demanded based on events or conditions described in § 668.171(c) through (f), the events or conditions no longer exist or have been resolved or the institution demonstrates that it has insurance that will cover the debts and liabilities that arise from the triggering event or condition, or, for a condition or event described in § 668.171(c)(1)(iii) (teach out) or (iv) (gainful employment eligibility loss), the amount of educationally related expenses reasonably attributable to the programs or location is greater than the amount calculated in accordance with Appendix C of subpart L of this part. The institution can demonstrate that insurance covers risk by presenting the Department with a statement from the insurer that the institution is covered for the full or partial amount of the liability in question;
(B) For financial protection demanded based on a suit described in § 668.171(c)(1)(i) that does not state a specific amount of relief and on which the court has not ruled on the amount of relief, the institution demonstrates that, accepting the facts alleged as true, and assuming the claims asserted are fully successful, the action pertains to a period, program, or location for which the maximum potential relief is less than the amount claimed or the amount determined under § 668.171(c)(2)(ii);
(C) For financial protection demanded based on the ground identified in § 668.171(g), the factor or event does not and will not have a material adverse effect on the financial condition, business, or results of operations of the institution;
(D)(
(
(i) The risk of loss to the Secretary on the grounds demonstrated by the Secretary does not exist;
(ii) The loss as demonstrated by the Secretary is not reasonably likely to arise within the next 18 months; or
(
(E) The institution has proffered alternative financial protection that provides students and the Department adequate protection against losses resulting from the risks identified by the Secretary. In the Secretary's discretion, adequate protection may consist of one or more of the following—
(
(
(iv) In a termination action taken against an institution or third-party servicer based on the grounds that the institution or servicer failed to comply with the requirements of § 668.23(c)(3), if the hearing official finds that the institution or servicer failed to meet those requirements, the hearing official finds that the termination is warranted;
(v)(A) In a termination action against an institution based on the grounds that the institution is not financially responsible under § 668.15(c)(1), the hearing official finds that the termination is warranted unless the institution demonstrates that all applicable conditions described in § 668.15(d)(4) have been met; and
(B) In a termination or limitation action against an institution based on the grounds that the institution is not financially responsible—
(
(
(h) A change in the participation status of the institution from fully certified to participate to provisionally certified to participate under § 668.13(c).
(a)
(1) Provide the services described in its official publications and statements;
(2) Meet all of its financial obligations; and
(3) Provide the administrative resources necessary to comply with title IV, HEA program requirements.
(b)
(1) The institution's Equity, Primary Reserve, and Net Income ratios yield a composite score of at least 1.5, as provided under § 668.172 and appendices A and B to this subpart;
(2) The institution has sufficient cash reserves to make required returns of unearned title IV, HEA program funds, as provided under § 668.173;
(3) The institution is able to meet all of its financial obligations and otherwise provide the administrative resources necessary to comply with title IV, HEA program requirements. An institution may not be able to meet its financial or administrative obligations if it is subject to an action or event described in paragraph (c), (d), (e), (f), or (g) of this section. The Secretary considers those actions or events in determining whether the institution is financially responsible only if they occur on or after July 1, 2017; and
(4) The institution or persons affiliated with the institution are not subject to a condition of past performance under § 668.174(a) or (b).
(c)
(i)
(B) The institution is being sued in an action brought on or after July 1, 2017 by a Federal or State authority for financial relief on claims related to the making of the Direct Loan for enrollment at the school or the provision of educational services and the suit has been pending for 120 days.
(ii)
(A) The institution has filed a motion for summary judgment or summary disposition and that motion has been denied or the court has issued an order reserving judgment on the motion;
(B) The institution has not filed a motion for summary judgment or summary disposition by the deadline set for such motions by the court or agreement of the parties; or
(C) If the court did not set a deadline for filing a motion for summary judgment and the institution did not file such a motion, the court has set a pretrial conference date or trial date and the case is pending on the earlier of those two dates.
(iii)
(iv)
(v)
(2)
(ii)
(A) The amount of debt;
(B) For a suit, the amount set by a court ruling, or, in the absence of a court ruling—
(
(
(
(iii)
(A) The amount of relief claimed in the complaint;
(B) If the complaint demands no specific amount of relief, the amount stated in any final written demand by the claimant to the institution prior to the suit or a lesser amount that the plaintiff offers to accept in settlement of any financial demand in the suit; or
(C) If the complainant stated no specific demand in the complaint, in a pre-filing demand, or in a written offer of settlement, the amount of the claim as stated in a response to a discovery request, including an expert witness report.
(iv)
(B) For the withdrawal of owner's equity, described in paragraph (c)(1)(v) of this section, the amount of loss is the amount transferred to any entity other than the institution.
(d)
(e)
(1)
(2)
(3)
(f)
(1) The institution files a challenge, request for adjustment, or appeal under that subpart with respect to its rates for one or both of those fiscal years; and
(2) That challenge, request, or appeal remains pending, results in reducing below 30 percent the official cohort default rate for either or both years, or precludes the rates from either or both years from resulting in a loss of eligibility or provisional certification.
(g)
(1) There is a significant fluctuation between consecutive award years, or a period of award years, in the amount of Direct Loan or Pell Grant funds, or a combination of those funds, received by the institution that cannot be accounted for by changes in those programs;
(2) The institution is cited by a State licensing or authorizing agency for failing State or agency requirements;
(3) The institution fails a financial stress test developed or adopted by the Secretary to evaluate whether the institution has sufficient capital to absorb losses that may be incurred as a result of adverse conditions and continue to meet its financial obligations to the Secretary and students;
(4) As calculated by the Secretary, the institution has high annual dropout rates;
(5) The institution is or was placed on probation or issued a show-cause order, or placed on an accreditation status that poses an equivalent or greater risk to its accreditation, by its accrediting agency for failing to meet one or more of the agency's standards;
(6)(i) The institution violated a provision or requirement in a loan agreement; and
(ii) As provided under the terms of a security or loan agreement between the institution and the creditor, a monetary or nonmonetary default or delinquency event occurs, or other events occur, that trigger, or enable the creditor to require or impose on the institution, an increase in collateral, a change in contractual obligations, an increase in interest rates or payments, or other sanctions, penalties, or fees;
(7) The institution has pending claims for borrower relief discharge under § 685.206 or § 685.222; or
(8) The Secretary expects to receive a significant number of claims for borrower relief discharge under § 685.206 or § 685.222 as a result of a lawsuit, settlement, judgement, or finding from a State or Federal administrative proceeding.
(h)
(i) For lawsuits and for other actions or events described in paragraph (c)(1)(i) of this section—
(A) For lawsuits, 10 days after the institution is served with the complaint and 10 days after the suit has been pending for 120 days; and
(B) For debts arising from lawsuits and for other actions or events, 10 days after a payment was required or a liability was incurred.
(ii) For lawsuits described in paragraph (c)(1)(ii) of this section—
(A) Ten days after the institution is served with the complaint;
(B) Ten days after the court sets the dates for the earliest of the events described in paragraph (c)(1)(ii) of this section, provided that, if the deadline is set by procedural rules, notice of the applicable deadline must be included with notice of the service of the complaint; and
(C) Ten days after the earliest of the applicable events occurs;
(iii) For an accrediting agency action described in paragraph (c)(1)(iii) of this section, 10 days after the institution is notified by its accrediting agency that it must submit a teach-out plan;
(iv) For a withdrawal of owner's equity described in paragraph (c)(1)(v) of this section, 10 days after the withdrawal is made;
(v) For the non-title IV revenue provision in paragraph (d) of this section, 45 days after the end of the institution's fiscal year, as provided in § 668.28(c)(3);
(vi) For the SEC and stock exchange provisions for publicly traded institutions in paragraph (e), 10 days after the SEC or exchange warns, notifies, or takes an action against the institution, or 10 days after any extension granted by the SEC;
(vii) For State or agency actions in paragraph (g)(2) of this section, 10 days after the institution is cited for violating a State or agency requirement;
(viii) For probation or show cause actions under paragraph (g)(5) of this section, 10 days after the institution's accrediting agency places the institution on that status; or
(ix) For the loan agreement provisions in paragraph (g)(6) of this section, 10 days after a loan violation occurs, the creditor waives the violation, or the creditor imposes sanctions or penalties in exchange or as a result of the waiver.
(2) The Secretary may take an administrative action under paragraph (k) of this section against the institution if it fails to provide timely notice under this paragraph (h).
(3) In its notice to the Secretary, the institution may demonstrate that—
(i) For a suit by a Federal or State agency described in paragraph (c)(1)(i)(B) of this section, the amount claimed in the complaint or determined
(ii) The reported withdrawal of owner's equity under paragraph (c)(1)(v) of this section was used exclusively to meet tax liabilities of the institution or its owners for income derived from the institution;
(iii) The reported violation of a provision or requirement in a loan agreement under paragraph (g)(6) of this section was waived by the creditor. However, if the creditor imposes additional constraints or requirements as a condition of waiving the violation, or imposes penalties or requirements under paragraph (g)(6)(ii) of this section, the institution must identify and describe those penalties, constraints, or requirements and may demonstrate that complying with those actions will not adversely affect the institution's ability to meet its current and future financial obligations; or
(iv) The action or event reported under this paragraph (h) no longer exists or has been resolved or the institution has insurance that will cover part or all of the debts and liabilities that arise at any time from that action or event.
(i)
(i)(A) Notifies the Secretary that it is designated as a public institution by the State, local, or municipal government entity, tribal authority, or other government entity that has the legal authority to make that designation; and
(B) Provides a letter from an official of that State or other government entity confirming that the institution is a public institution; and
(ii) Is not subject to a condition of past performance under § 668.174.
(2) The Secretary considers a foreign public institution to be financially responsible if the institution—
(i)(A) Notifies the Secretary that it is designated as a public institution by the country or other government entity that has the legal authority to make that designation; and
(B) Provides documentation from an official of that country or other government entity confirming that the institution is a public institution and is backed by the full faith and credit of the country or other government entity; and
(ii) Is not subject to a condition of past performance under § 668.174.
(j)
(k)
(1) Initiate an action under subpart G of this part to fine the institution, or limit, suspend, or terminate the institution's participation in the title IV, HEA programs; or
(2) For an institution that is provisionally certified, take an action against the institution under the procedures established in § 668.13(d).
The revisions and addition read as follows:
(c)
(d)
(i)(A) An institution qualifies initially under this alternative if, based on the institution's audited financial statement for its most recently completed fiscal year, the Secretary determines that its composite score is in the range from 1.0 to 1.4; and
(B) An institution continues to qualify under this alternative if, based on the institution's audited financial statement for each of its subsequent two fiscal years, the Secretary determines that the institution's composite score is in the range from 1.0 to 1.4.
(ii) An institution that qualified under this alternative for three consecutive years, or for one of those years, may not seek to qualify again under this alternative until the year after the institution achieves a composite score of at least 1.5, as determined by the Secretary.
(2) Under the zone alternative, the Secretary—
(i) Requires the institution to make disbursements to eligible students and parents, and to otherwise comply with the provisions, under either the heightened cash monitoring or reimbursement payment method described in § 668.162;
(ii) Requires the institution to provide timely information regarding any of the following oversight and financial events—
(A) Any event that causes the institution, or related entity as defined in Accounting Standards Codification (ASC) 850, to realize any liability that was noted as a contingent liability in the institution's or related entity's most recent audited financial statement; or
(B) Any losses that are unusual in nature or infrequently occur, or both, as defined in accordance with Accounting Standards Update (ASU) No. 2015-01 and ASC 225;
(iii) May require the institution to submit its financial statement and compliance audits earlier than the time specified under § 668.23(a)(4); and
(iv) May require the institution to provide information about its current operations and future plans.
(3) Under the zone alternative, the institution must—
(i) For any oversight or financial event described in paragraph (d)(2)(ii) of this section for which the institution is required to provide information, in accordance with procedures established by the Secretary, notify the Secretary no later than 10 days after that event occurs; and
(ii) As part of its compliance audit, require its auditor to express an opinion on the institution's compliance with the requirements under the zone alternative, including the institution's administration of the payment method under which the institution received and disbursed title IV, HEA program funds.
(4) If an institution fails to comply with the requirements under paragraph (d)(2) or (3) of this section, the Secretary may determine that the institution no longer qualifies under this alternative.
(f)
(i) The institution is not financially responsible because it does not satisfy the general standards under § 668.171(b)(1) or (3), its recalculated composite score under § 668.171(c)(2) is less than 1.0, is subject to an action or event under § 668.171(d), (e), (f),or (g) or because of an audit opinion described in § 668.171(i); or
(ii) The institution is not financially responsible because of a condition of past performance, as provided under § 668.174(a), and the institution demonstrates to the Secretary that it has satisfied or resolved that condition.
(2) Under this alternative, the institution must—
(i) Provide to the Secretary an irrevocable letter of credit that is acceptable and payable to the Secretary, agree to a set-aside under paragraph (h) of this section, or, at the Secretary's discretion, provide another form of financial protection specified by the Secretary in a notice published in the
(ii) Comply with the provisions under the zone alternative, as provided under paragraph (d)(2) and (3).
(3) If at the end of the period for which the Secretary provisionally certified the institution, the institution is still not financially responsible, the Secretary—
(i) May permit the institution to participate under a provisional certification, but—
(A) May require the institution, or one or more persons or entities that exercise substantial control over the institution, as determined under § 668.174(b)(1) and (c), or both, to provide to the Secretary financial protection for an amount determined by the Secretary under paragraph (f)(4) of this section; and
(B) May require one or more of the persons or entities that exercise substantial control over the institution, as determined under § 668.174(b)(1) and (c), to be jointly or severally liable for any liabilities that may arise from the institution's participation in the title IV, HEA programs; and
(ii) May permit the institution to continue to participate under a provisional certification but requires the institution to provide, or continue to provide, the financial protection resulting from an event described in § 668.171(c) through (g) until the institution meets the requirements of paragraph (f)(5) of this section.
(4)(i) The institution must provide to the Secretary the financial protection described under paragraph (f)(2)(i) in an amount that, together with the amount of any financial protection that the institution has already provided if that protection covers the period described in paragraph (f)(5) of this section, equals, for a composite score calculated under § 668.172, a composite score recalculated under § 668.171(c)(2), or for any other reason that the institution is not financially responsible—
(A) Ten percent of the total amount of title IV, HEA program funds received by the institution during its most recently completed fiscal year; and
(B) Any additional amount that the Secretary demonstrates is needed under paragraph (f)(4)(ii) of this section.
(ii) The Secretary determines the amount specified in paragraph (f)(4)(i)(B) of this section that must be provided by the institution in addition to the amount specified in paragraph (f)(4)(i)(A) of this section, and must ensure that the total amount of financial protection provided under paragraph (f)(4)(i) of this section is sufficient to fully cover any estimated losses. The Secretary may reduce the amount required under paragraph (f)(4)(i)(B) only if an institution demonstrates that this amount is unnecessary to protect, or is contrary to, the Federal interest.
(5) The Secretary maintains the full amount of the financial protection provided by the institution under paragraph (f)(4) of this section until the Secretary first determines that the institution has—
(i) A composite score of 1.0 or greater based on the review of the audited financial statements for the fiscal year in which all losses from any event described in § 668.171(c), (d), (e), (f), or (g) on which financial protection was required have been fully recognized; or
(ii) A recalculated composite score of 1.0 or greater, and any event or condition described in § 668.171(d), (e), (f), or (g) has ceased to exist.
(h)
If any provision of this subpart or its application to any person, act, or practice is held invalid, the remainder of the subpart or the application of its provisions to any person, act, or practice will not be affected thereby.
20 U.S.C. 1070g, 1087aa—1087hh, unless otherwise noted.
The revision and addition read as follows:
(g) * * *
(3)
(A) The borrower qualified for and received a discharge on a loan pursuant to 34 CFR 682.402(d) (Federal Family Education Loan Program) or 34 CFR 685.214 (Federal Direct Loan Program), and was unable to receive a discharge on an NDSL or Federal Perkins Loan because the Secretary lacked the statutory authority to discharge the loan; or
(B) Based on information in the Secretary's possession, the borrower qualifies for a discharge.
(ii) With respect to schools that closed on or after November 1, 2013, the Secretary will discharge the borrower's obligation to repay an NDSL or Federal Perkins Loan without an application from the borrower if the Secretary determines that the borrower did not subsequently re-enroll in any title IV-eligible institution within a period of three years from the date the school closed.
(8) * * *
(vi) Upon resuming collection on any affected loan, the Secretary provides the borrower another discharge application and an explanation of the requirements and procedures for obtaining a discharge.
(a)
(i) An original or certified copy of the death certificate;
(ii) An accurate and complete photocopy of the original or certified copy of the death certificate;
(iii) An accurate and complete original or certified copy of the death certificate that is scanned and submitted electronically or sent by facsimile transmission; or
(iv) Verification of the borrower's death through an authoritative Federal or State electronic database approved for use by the Secretary.
(2) Under exceptional circumstances and on a case-by-case basis, the chief financial officer of the institution may approve a discharge based upon other reliable documentation of the borrower's death.
20 U.S.C. 1071-1087-4, unless otherwise noted.
(i) * * *
(7) The lender must grant a mandatory administrative forbearance to a borrower upon being notified by the Secretary that the borrower has made a borrower defense claim related to a loan that the borrower intends to consolidate into the Direct Loan Program for the purpose of seeking relief in accordance with § 685.212(k). The mandatory administrative forbearance shall be granted in yearly increments or for a period designated by the Secretary until the loan is consolidated or until the lender is notified by the Secretary to discontinue the forbearance.
The revisions and additions read as follows:
(b) * * *
(2)(i) A discharge of a loan based on the death of the borrower (or student in the case of a PLUS loan) must be based on—
(A) An original or certified copy of the death certificate;
(B) An accurate and complete photocopy of the original or certified copy of the death certificate;
(C) An accurate and complete original or certified copy of the death certificate that is scanned and submitted electronically or sent by facsimile transmission; or
(D) Verification of the borrower's or student's death through an authoritative Federal or State electronic database approved for use by the Secretary.
(ii) Under exceptional circumstances and on a case-by-case basis, the chief executive officer of the guaranty agency may approve a discharge based upon other reliable documentation of the borrower's or student's death.
(d) * * *
(3)
(6) * * *
(ii) * * *
(F) If the guaranty agency determines that a borrower identified in paragraph (d)(6)(ii)(C) or (D) of this section does not qualify for a discharge, the agency shall notify the borrower in writing of that determination and the reasons for it, the opportunity for review by the Secretary, and how to request such a review within 30 days after the date the agency—
(H) If a borrower described in paragraph (d)(6)(ii)(E) or (F) of this section fails to submit the completed application within 60 days of being notified of that option, the lender or guaranty agency shall resume collection.
(I) Upon resuming collection on any affected loan, the lender or guaranty agency provides the borrower another discharge application and an explanation of the requirements and procedures for obtaining a discharge.
(K)(
(
(
(7) * * *
(i) * * *
(ii) If the borrower fails to submit a completed application described in paragraph (d)(3) of this section within 60 days of being notified of that option, the lender shall resume collection and shall be deemed to have exercised forbearance of payment of principal and interest from the date the lender suspended collection activity. The lender may capitalize, in accordance with § 682.202(b), any interest accrued and not paid during that period. Upon resuming collection, the lender provides the borrower with another discharge application and an explanation of the
(iii) The lender shall file a closed school claim with the guaranty agency in accordance with § 682.402(g) no later than 60 days after the lender receives a completed application described in paragraph (d)(3) of this section from the borrower, or notification from the agency that the Secretary approved the borrower's appeal in accordance with paragraph (d)(6)(ii)(K)(
(8)
(A) Borrower received a discharge on a loan pursuant to 34 CFR 674.33(g) under the Federal Perkins Loan Program, or 34 CFR 685.214 under the William D. Ford Federal Direct Loan Program; or
(B) Secretary or the guaranty agency, with the Secretary's permission, determines that the borrower qualifies for a discharge based on information in the Secretary or guaranty agency's possession.
(ii) With respect to schools that closed on or after November 1, 2013, a borrower's obligation to repay a FFEL Program loan will be discharged without an application from the borrower if the Secretary or guaranty agency determines that the borrower did not subsequently re-enroll in any title IV-eligible institution within a period of three years after the school closed.
The addition reads as follows:
(b) * * *
(4) * * *
(ii) The lender must not consider the purchase of a rehabilitated loan as entry into repayment or resumption of repayment for the purposes of interest capitalization under § 682.202(b).
The addition reads as follows:
(b) * * *
(6) * * *
(viii) Upon notification by the Secretary that the borrower has made a borrower defense claim related to a loan that the borrower intends to consolidate into the Direct Loan Program for the purpose of seeking relief in accordance with § 685.212(k), the guaranty agency must suspend all collection activities on the affected loan for the period designated by the Secretary.
20 U.S.C. 1070g, 1087a,
(f) * * *
(3) * * *
(v) A borrower who receives a closed school, false certification, unpaid refund, or defense to repayment discharge that results in a remaining eligibility period greater than zero is no longer responsible for the interest that accrues on a Direct Subsidized Loan or on the portion of a Direct Consolidation Loan that repaid a Direct Subsidized Loan unless the borrower once again becomes responsible for the interest that accrues on a previously received Direct Subsidized Loan or on the portion of a Direct Consolidation Loan that repaid a Direct Subsidized Loan, for the life of the loan, as described in paragraph (f)(3)(i) of this section.
(4) * * *
(iii) For a first-time borrower who receives a closed school, false certification, unpaid refund, or defense to repayment discharge on a Direct Subsidized Loan or a portion of a Direct Consolidation Loan that is attributable to a Direct Subsidized Loan, the Subsidized Usage Period is reduced. If the Direct Subsidized Loan or a portion of a Direct Consolidation Loan that is attributable to a Direct Subsidized Loan is discharged in full, the Subsidized Usage Period of those loans is zero years. If the Direct Subsidized Loan or a portion of a Direct Consolidation Loan that is attributable to a Direct Subsidized Loan is discharged in part, the Subsidized Usage Period may be reduced if the discharge results in the inapplicability of paragraph (f)(4)(i) of this section.
(b) * * *
(6) Periods necessary for the Secretary to determine the borrower's eligibility for discharge—
(i) Under § 685.206(c);
(ii) Under § 685.214;
(iii) Under § 685.215;
(iv) Under § 685.216;
(v) Under § 685.217;
(vi) Under § 685.222; or
(vii) Due to the borrower's or endorser's (if applicable) bankruptcy;
(c)
(i) A defense to repayment of amounts owed to the Secretary on a Direct Loan, in whole or in part.
(ii) A claim to recover amounts previously collected by the Secretary on the Direct Loan, in whole or in part.
(2) The order of objections for defaulted Direct Loans are as described in § 685.222(a)(6). A borrower defense claim under this section must be asserted, and will be resolved, under the procedures in § 685.222(e) to (k).
(3) For an approved borrower defense under this section, except as provided in paragraph (c)(4) of this section, the Secretary may initiate an appropriate proceeding to collect from the school whose act or omission resulted in the borrower defense the amount of relief arising from the borrower defense, within the later of—
(i) Three years from the end of the last award year in which the student attended the institution; or
(ii) The limitation period that State law would apply to an action by the borrower to recover on the cause of action on which the borrower defense is based.
(4) The Secretary may initiate a proceeding to collect at any time if the
(i) Actual notice from the borrower, from a representative of the borrower, or from the Department;
(ii) A class action complaint asserting relief for a class that may include the borrower; and
(iii) Written notice, including a civil investigative demand or other written demand for information, from a Federal or State agency that has power to initiate an investigation into conduct of the school relating to specific programs, periods, or practices that may have affected the borrower.
(a)
(i) An original or certified copy of the death certificate;
(ii) An accurate and complete photocopy of the original or certified copy of the death certificate;
(iii) An accurate and complete original or certified copy of the death certificate that is scanned and submitted electronically or sent by facsimile transmission; or
(iv) Verification of the borrower's or student's death through an authoritative Federal or State electronic database approved for use by the Secretary.
(2) Under exceptional circumstances and on a case-by-case basis, the Secretary discharges a loan based upon other reliable documentation of the borrower's or student's death that is acceptable to the Secretary.
(k)
(i) The Secretary discharges the obligation of the borrower in whole or in part in accordance with the procedures in §§ 685.206(c) and 685.222, respectively; and
(ii) The Secretary returns to the borrower payments made by the borrower or otherwise recovered on the loan that exceed the amount owed on that portion of the loan not discharged, if the borrower asserted the claim not later than—
(A) For a claim subject to § 685.206(c), the limitation period under applicable law to the claim on which relief was granted; or
(B) For a claim subject to § 685.222, the limitation period in § 685.222(b), (c), or (d), as applicable.
(2) In the case of a Direct Consolidation Loan, a borrower may assert a borrower defense under § 685.206(c) or § 685.222 with respect to a Direct Loan, FFEL Program Loan, Federal Perkins Loan, Health Professions Student Loan, Loan for Disadvantaged Students under subpart II of part A of title VII of the Public Health Service Act, Health Education Assistance Loan, or Nursing Loan made under part E of the Public Health Service Act that was repaid by the Direct Consolidation Loan.
(i) The Secretary considers a borrower defense claim asserted on a Direct Consolidation Loan by determining—
(A) Whether the act or omission of the school with regard to the loan described in paragraph (k)(2) of this section, other than a Direct Subsidized, Unsubsidized, or PLUS Loan, constitutes a borrower defense under § 685.206(c), for a Direct Consolidation Loan made before July 1, 2017, or under § 685.222, for a Direct Consolidation Loan made on or after July 1, 2017; or
(B) Whether the act or omission of the school with regard to a Direct Subsidized, Unsubsidized, or PLUS Loan made on after July 1, 2017 that was paid off by the Direct Consolidation Loan, constitutes a borrower defense under § 685.222.
(ii) If the borrower defense is approved, the Secretary discharges the appropriate portion of the Direct Consolidation Loan.
(iii) The Secretary returns to the borrower payments made by the borrower or otherwise recovered on the Direct Consolidation Loan that exceed the amount owed on that portion of the Direct Consolidation Loan not discharged, if the borrower asserted the claim not later than—
(A) For a claim asserted under § 685.206(c), the limitation period under the law applicable to the claim on which relief was granted; or
(B) For a claim asserted under § 685.222, the limitation period in § 685.222(b), (c), or (d), as applicable.
(iv) The Secretary returns to the borrower a payment made by the borrower or otherwise recovered on the loan described in paragraph (k)(2) of this section only if—
(A) The payment was made directly to the Secretary on the loan; and
(B) The borrower proves that the loan to which the payment was credited was not legally enforceable under applicable law in the amount for which that payment was applied.
The revisions and addition read as follows:
(c) * * *
(2) If the Secretary determines, based on information in the Secretary's possession, that the borrower qualifies for the discharge of a loan under this section, the Secretary—
(i) May discharge the loan without an application from the borrower; and
(ii) With respect to schools that closed on or after November 1, 2013, will discharge the loan without an application from the borrower if the borrower did not subsequently re-enroll in any title IV-eligible institution within a period of three years from the date the school closed.
(f) * * *
(4) If a borrower fails to submit the application described in paragraph (c) of this section within 60 days of the Secretary's providing the discharge application, the Secretary resumes collection and grants forbearance of principal and interest for the period in which collection activity was suspended. The Secretary may capitalize any interest accrued and not paid during that period.
(5) Upon resuming collection on any affected loan, the Secretary provides the borrower another discharge application and an explanation of the requirements and procedures for obtaining a discharge.
The revisions and addition read as follows:
(a)
(i) Certified the eligibility of a student who—
(A) Reported not having a high school diploma or its equivalent; and
(B) Did not satisfy the alternative to graduation from high school requirements under section 484(d) of the Act that were in effect at the time of certification;
(ii) Certified the eligibility of a student who is not a high school graduate based on—
(A) A high school graduation status falsified by the school; or
(B) A high school diploma falsified by the school or a third party to which the school referred the borrower;
(iii) Signed the borrower's name on the loan application or promissory note without the borrower's authorization;
(iv) Certified the eligibility of the student who, because of a physical or mental condition, age, criminal record, or other reason accepted by the Secretary, would not meet State requirements for employment (in the student's State of residence when the loan was originated) in the occupation for which the training program supported by the loan was intended; or
(v) Certified the eligibility of a student for a Direct Loan as a result of the crime of identity theft committed against the individual, as that crime is defined in paragraph (c)(5)(ii) of this section.
(c)
(1)
(i) Reported not having a valid high school diploma or its equivalent at the time the loan was certified; and
(ii) Did not satisfy the alternative to graduation from high school statutory or regulatory eligibility requirements identified on the application form and applicable at the time the institution certified the loan.
(2)
(i) Did not meet State requirements for employment (in the student's State of residence) in the occupation that the training program for which the borrower received the loan was intended because of a physical or mental condition, age, criminal record, or other reason accepted by the Secretary.
(ii) [Reserved]
(8)
(d)
(2) If the borrower fails to submit the application described in paragraph (c) of this section within 60 days of the Secretary's providing the application, the Secretary resumes collection and grants forbearance of principal and interest for the period in which collection activity was suspended. The Secretary may capitalize any interest accrued and not paid during that period.
(3) If the borrower submits the application described in paragraph (c) of this section, the Secretary determines whether the available evidence supports the claim for discharge. Available evidence includes evidence provided by the borrower and any other relevant information from the Secretary's records and gathered by the Secretary from other sources, including guaranty agencies, other Federal agencies, State authorities, test publishers, independent test administrators, school records, and cognizant accrediting associations. The Secretary issues a decision that explains the reasons for any adverse determination on the application, describes the evidence on which the decision was made, and provides the borrower, upon request, copies of the evidence. The Secretary considers any response from the borrower and any additional information from the borrower, and notifies the borrower whether the determination is changed.
(4) If the Secretary determines that the borrower meets the applicable requirements for a discharge under paragraph (c) of this section, the Secretary notifies the borrower in writing of that determination.
(5) If the Secretary determines that the borrower does not qualify for a discharge, the Secretary notifies the borrower in writing of that determination and the reasons for the determination.
(a)
(2) For loans first disbursed on or after July 1, 2017, a borrower asserts and the Secretary considers a borrower defense in accordance with this section. To establish a borrower defense under this section, a preponderance of the evidence must show that the borrower has a borrower defense that meets the requirements of this section.
(3) A violation by the school of an eligibility or compliance requirement in the Act or its implementing regulations is not a basis for a borrower defense under either this section or § 685.206(c) unless the violation would otherwise constitute a basis for a borrower defense under this section or § 685.206(c), as applicable.
(4) For the purposes of this section and § 685.206(c), “borrower” means—
(i) The borrower; and
(ii) In the case of a Direct PLUS Loan, any endorsers, and for a Direct PLUS Loan made to a parent, the student on whose behalf the parent borrowed.
(5) For the purposes of this section and § 685.206(c), a “borrower defense” refers to an act or omission of the school attended by the student that relates to the making of a Direct Loan for enrollment at the school or the provision of educational services for which the loan was provided, and includes one or both of the following:
(i) A defense to repayment of amounts owed to the Secretary on a Direct Loan, in whole or in part; and
(ii) A right to recover amounts previously collected by the Secretary on the Direct Loan, in whole or in part.
(6) If the borrower asserts both a borrower defense and any other objection to an action of the Secretary with regard to that Direct Loan, the order in which the Secretary will consider objections, including a borrower defense, will be determined as appropriate under the circumstances.
(b)
(c)
(d)
(2) For the purposes of this section, a designated Department official pursuant to paragraph (e) of this section or a hearing official pursuant to paragraph (f), (g), or (h) of this section may consider, as evidence supporting the reasonableness of a borrower's reliance on a misrepresentation, whether the school or any of the other parties described in paragraph (d)(1) engaged in conduct such as, but not limited to:
(i) Demanding that the borrower make enrollment or loan-related decisions immediately;
(ii) Placing an unreasonable emphasis on unfavorable consequences of delay;
(iii) Discouraging the borrower from consulting an adviser, a family member, or other resource;
(iv) Failing to respond to the borrower's requests for more information including about the cost of the program and the nature of any financial aid; or
(v) Otherwise unreasonably pressuring the borrower or taking advantage of the borrower's distress or lack of knowledge or sophistication.
(e)
(i) Submit an application to the Secretary, on a form approved by the Secretary—
(A) Certifying that the borrower received the proceeds of a loan, in whole or in part, to attend the named school;
(B) Providing evidence that supports the borrower defense; and
(C) Indicating whether the borrower has made a claim with respect to the information underlying the borrower defense with any third party, such as the holder of a performance bond or a tuition recovery program, and, if so, the amount of any payment received by the borrower or credited to the borrower's loan obligation; and
(ii) Provide any other information or supporting documentation reasonably requested by the Secretary.
(2) Upon receipt of a borrower's application, the Secretary—
(i) If the borrower is not in default on the loan for which a borrower defense has been asserted, grants forbearance and—
(A) Notifies the borrower of the option to decline the forbearance and to continue making payments on the loan; and
(B) Provides the borrower with information about the availability of the income-contingent repayment plans under § 685.209 and the income-based repayment plan under § 685.221; or
(ii) If the borrower is in default on the loan for which a borrower defense has been asserted—
(A) Suspends collection activity on the loan until the Secretary issues a decision on the borrower's claim;
(B) Notifies the borrower of the suspension of collection activity and explains that collection activity will resume if the Secretary determines that the borrower does not qualify for a full discharge; and
(C) Notifies the borrower of the option to continue making payments under a rehabilitation agreement or other repayment agreement on the defaulted loan.
(3) The Secretary designates a Department official to review the borrower's application to determine whether the application states a basis for a borrower defense, and resolves the claim through a fact-finding process conducted by the Department official.
(i) As part of the fact-finding process, the Department official notifies the school of the borrower defense application and considers any evidence or argument presented by the borrower and also any additional information, including—
(A) Department records;
(B) Any response or submissions from the school; and
(C) Any additional information or argument that may be obtained by the Department official.
(ii) Upon the borrower's request, the Department official identifies to the borrower the records the Department official considers relevant to the borrower defense. The Secretary provides to the borrower any of the identified records upon reasonable request of the borrower.
(4) At the conclusion of the fact-finding process, the Department official issues a written decision as follows:
(i) If the Department official approves the borrower defense in full or in part, the Department official notifies the borrower in writing of that determination and of the relief provided as described in paragraph (i) of this section.
(ii) If the Department official denies the borrower defense in full or in part, the Department official notifies the borrower of the reasons for the denial, the evidence that was relied upon, any portion of the loan that is due and payable to the Secretary, and whether the Secretary will reimburse any amounts previously collected, and informs the borrower that if any balance remains on the loan, the loan will return to its status prior to the borrower's submission of the application. The Department official also informs the borrower of the opportunity to request reconsideration of the claim based on new evidence pursuant to paragraph (e)(5)(i) of this section.
(5) The decision of the Department official is final as to the merits of the claim and any relief that may be granted on the claim. Notwithstanding the foregoing—
(i) If the borrower defense is denied in full or in part, the borrower may request that the Secretary reconsider the borrower defense upon the identification of new evidence in support of the borrower's claim. “New evidence” is relevant evidence that the borrower did not previously provide and that was not identified in the final decision as evidence that was relied upon for the final decision. If accepted for reconsideration by the Secretary, the Secretary follows the procedure in paragraph (e)(2) of this section for granting forbearance and for defaulted loans; and
(ii) The Secretary may reopen a borrower defense application at any time to consider evidence that was not considered in making the previous decision. If a borrower defense application is reopened by the Secretary, the Secretary follows the procedure paragraph (e)(2) of this section for granting forbearance and for defaulted loans.
(6) The Secretary may consolidate applications filed under this paragraph (e) that have common facts and claims, and resolve the borrowers' borrower defense claims as provided in paragraphs (f), (g), and (h) of this section.
(7) The Secretary may initiate a proceeding to collect from the school the amount of relief resulting from a borrower defense under this section—
(i) Within the six-year period applicable to the borrower defense under paragraph (c) or (d) of this section;
(ii) At any time, for a borrower defense under paragraph (b) of this section; or
(iii) At any time if during the period described in paragraph (e)(7)(i) of this section, the institution received notice of the claim. For purposes of this paragraph, notice includes receipt of—
(A) Actual notice from the borrower, a representative of the borrower, or the Department of a claim, including notice of an application filed pursuant to this section or § 685.206(c);
(B) A class action complaint asserting relief for a class that may include the borrower for underlying facts that may form the basis of a claim under this section or § 685.206(c);
(C) Written notice, including a civil investigative demand or other written demand for information, from a Federal or State agency that has power to initiate an investigation into conduct of the school relating to specific programs, periods, or practices that may have affected the borrower, for underlying facts that may form the basis of a claim under this section or § 685.206(c).
(f)
(i) The members of the group may be identified by the Secretary from individually filed applications pursuant to paragraph (e)(6) of this section or from any other source.
(ii) If the Secretary determines that there are common facts and claims that apply to borrowers who have not filed an application under paragraph (e) of this section, the Secretary may identify such borrowers as members of a group.
(2) Upon the identification of a group of borrowers under paragraph (f)(1) of this section, the Secretary—
(i) Designates a Department official to present the group's claim in the fact-finding process described in paragraph (g) or (h) of this section, as applicable;
(ii) Provides each identified member of the group with notice that allows the borrower to opt out of the proceeding;
(iii) If identified members of the group are borrowers who have not filed an application under paragraph (f)(1)(ii) of this section, follows the procedures in paragraph (e)(2) of this section for granting forbearance and for defaulted loans for such identified members of the group, unless an opt-out by such a member of the group is received; and
(iv) Notifies the school of the basis of the group's borrower defense, the initiation of the fact-finding process described in paragraph (g) or (h) of this section, and of any procedure by which the school may request records and respond. No notice will be provided if notice is impossible or irrelevant due to a school's closure.
(3) For a group of borrowers identified by the Secretary, for which the Secretary determines that there may be a borrower defense under paragraph (d) of this section based upon a substantial misrepresentation that has been widely disseminated, there is a rebuttable presumption that each member
(g)
(1) A hearing official resolves the borrower defense through a fact-finding process. As part of the fact-finding process, the hearing official considers any evidence and argument presented by the Department official on behalf of the group and, as necessary to determine any claims at issue, on behalf of individual members of the group. The hearing official also considers any additional information the Department official considers necessary, including any Department records or response from the school or a person affiliated with the school as described in § 668.174(b), if practicable. The hearing official issues a written decision as follows:
(i) If the hearing official approves the borrower defense in full or in part, the written decision states that determination and the relief provided on the basis of that claim as determined under paragraph (i) of this section.
(ii) If the hearing official denies the borrower defense in full or in part, the written decision states the reasons for the denial, the evidence that was relied upon, the portion of the loans that are due and payable to the Secretary, and whether reimbursement of amounts previously collected is granted, and informs the borrowers that if any balance remains on the loan, the loan will return to its status prior to the group claim process.
(iii) The Secretary provides copies of the written decision to the members of the group and, as practicable, to the school.
(2) The decision of the hearing official is final as to the merits of the group borrower defense and any relief that may be granted on the group claim.
(3) After a final decision has been issued, if relief for the group has been denied in full or in part pursuant to paragraph (g)(1)(ii) of this section, an individual borrower may file a claim for relief pursuant to paragraph (e)(5)(i) of this section.
(4) The Secretary may reopen a borrower defense application at any time to consider evidence that was not considered in making the previous decision. If a borrower defense application is reopened by the Secretary, the Secretary follows the procedure in paragraph (e)(2) of this section for granting forbearance and for defaulted loans.
(h)
(1) A hearing official resolves the borrower defense and determines any liability of the school through a fact-finding process. As part of the fact-finding process, the hearing official considers any evidence and argument presented by the school and the Department official on behalf of the group and, as necessary to determine any claims at issue, on behalf of individual members of the group. The hearing official issues a written decision as follows:
(i) If the hearing official approves the borrower defense in full or in part, the written decision establishes the basis for the determination, notifies the members of the group of the relief as described in paragraph (i) of this section, and notifies the school of any liability to the Secretary for the amounts discharged and reimbursed.
(ii) If the hearing official denies the borrower defense for the group in full or in part, the written decision states the reasons for the denial, the evidence that was relied upon, the portion of the loans that are due and payable to the Secretary, and whether reimbursement of amounts previously collected is granted, and informs the borrowers that their loans will return to their statuses prior to the group borrower defense process. The decision notifies the school of any liability to the Secretary for any amounts discharged or reimbursed.
(iii) The Secretary provides copies of the written decision to the members of the group, the Department official, and the school.
(2) The decision of the hearing official becomes final as to the merits of the group borrower defense and any relief that may be granted on the group borrower defense within 30 days after the decision is issued and received by the Department official and the school unless, within that 30-day period, the school or the Department official appeals the decision to the Secretary. In the case of an appeal—
(i) The decision of the hearing official does not take effect pending the appeal; and
(ii) The Secretary renders a final decision.
(3) After a final decision has been issued, if relief for the group has been denied in full or in part pursuant to paragraph (h)(1)(ii) of this section, an individual borrower may file a claim for relief pursuant to paragraph (e)(5)(i) of this section.
(4) The Secretary may reopen a borrower defense application at any time to consider evidence that was not considered in making the previous decision. If a borrower defense application is reopened by the Secretary, the Secretary follows the procedure in paragraph (e)(2) of this section for granting forbearance and for defaulted loans.
(5)(i) The Secretary collects from the school any liability to the Secretary for any amounts discharged or reimbursed to borrowers under this paragraph (h).
(ii) For a borrower defense under paragraph (b) of this section, the Secretary may initiate a proceeding to collect at any time.
(iii) For a borrower defense under paragraph (c) or (d) of this section, the Secretary may initiate a proceeding to collect within the limitation period that would apply to the borrower defense, provided that the Secretary may bring an action to collect at any time if, within the limitation period, the school received notice of the borrower's borrower defense claim. For purposes of this paragraph, the school receives notice of the borrower's claim by receipt of—
(A) Actual notice of the claim from the borrower, a representative of the borrower, or the Department, including notice of an application filed pursuant to this section or § 685.206(c);
(B) A class action complaint asserting relief for a class that may include the borrower for underlying facts that may form the basis of a claim under this section or § 685.206(c); or
(C) Written notice, including a civil investigative demand or other written demand for information, from a Federal or State agency that has power to initiate an investigation into conduct of the school relating to specific programs, periods, or practices that may have affected the borrower, of underlying facts that may form the basis of a claim under this section or § 685.206(c).
(i)
(1) The Department official or the hearing official deciding the claim determines the appropriate amount of relief to award the borrower, which may be a discharge of all amounts owed to the Secretary on the loan at issue and may include the recovery of amounts previously collected by the Secretary on the loan, or some lesser amount.
(2) For a borrower defense brought on the basis of—
(i) A substantial misrepresentation, the Department official or the hearing official will factor the borrower's cost of attendance to attend the school, as well as the value of the education the borrower received, the value of the education that a reasonable borrower in the borrower's circumstances would have received, and/or the value of the education the borrower should have expected given the information provided by the institution, into the determination of appropriate relief. A borrower may be granted full, partial, or no relief. Value will be assessed in a manner that is reasonable and practicable. In addition, the Department official or the hearing official deciding the claim may consider any other relevant factors;
(ii) A judgment against the school—
(A) Where the judgment awards specific financial relief, relief will be the amount of the judgment that remains unsatisfied, subject to the limitation provided for in § 685.222(i)(8) and any other reasonable considerations; and
(B) Where the judgment does not award specific financial relief, the Department will rely on the holding of the case and applicable law to monetize the judgment; and
(iii) A breach of contract, relief will be determined according to the common law of contracts, subject to the limitation provided for in § 685.222(i)(8) and any other reasonable considerations.
(3) In a fact-finding process brought against an open school under paragraph (h) of this section on the basis of a substantial misrepresentation, the school has the burden of proof as to any value of the education.
(4) In determining the relief, the Department official or the hearing official deciding the claim may consider—
(i) Information derived from a sample of borrowers from the group when calculating relief for a group of borrowers; and
(ii) The examples in Appendix A to this subpart.
(5) In the written decision described in paragraphs (e), (g), and (h) of this section, the designated Department official or hearing official deciding the claim notifies the borrower of the relief provided and—
(i) Specifies the relief determination;
(ii) Advises that there may be tax implications; and
(iii) Advises the borrower of the requirements to file a request for reconsideration upon the identification of new evidence.
(6) Consistent with the determination of relief under paragraph (i)(1) of this section, the Secretary discharges the borrower's obligation to repay all or part of the loan and associated costs and fees that the borrower would otherwise be obligated to pay and, if applicable, reimburses the borrower for amounts paid toward the loan voluntarily or through enforced collection.
(7) The Department official or the hearing official deciding the case, or the Secretary as applicable, affords the borrower such further relief as appropriate under the circumstances. Such further relief includes, but is not limited to, one or both of the following:
(i) Determining that the borrower is not in default on the loan and is eligible to receive assistance under title IV of the Act.
(ii) Updating reports to consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to the borrower's Direct Loan.
(8) The total amount of relief granted with respect to a borrower defense cannot exceed the amount of the loan and any associated costs and fees and will be reduced by the amount of any refund, reimbursement, indemnification, restitution, compensatory damages, settlement, debt forgiveness, discharge, cancellation, compromise, or any other financial benefit received by, or on behalf of, the borrower that was related to the borrower defense. The relief to the borrower may not include non-pecuniary damages such as inconvenience, aggravation, emotional distress, or punitive damages.
(j)
(k)
(2) The provisions of this paragraph (k) apply notwithstanding any provision of State law that would otherwise restrict transfer of those rights by the borrower, limit or prevent a transferee from exercising those rights, or establish procedures or a scheme of distribution that would prejudice the Secretary's ability to recover on those rights.
(3) Nothing in this paragraph (k) limits or forecloses the borrower's right to pursue legal and equitable relief against a party described in this paragraph (k) for recovery of any portion of a claim exceeding that assigned to the Secretary or any other claims arising from matters unrelated to the claim on which the loan is discharged.
If any provision of this subpart or its application to any person, act, or practice is held invalid, the remainder of the subpart or the application of its provisions to any person, act, or practice shall not be affected thereby.
The Department official or the hearing official deciding a borrower defense claim determines the amount of relief to award the borrower, which may be a discharge of all amounts owed to the Secretary on the loan at issue and may include the recovery of amounts previously collected by the Secretary on the loan, or some lesser amount. The following are some conceptual examples demonstrating relief. The actual relief awarded will be determined by the Department official or the hearing official deciding the claim, who shall not be bound by these examples.
1. A school represents to prospective students, in widely disseminated materials, that its educational program will lead to employment in an occupation that requires State licensure. The program does not in fact meet minimum education requirements to enable its graduates to sit for the exam necessary for them to obtain licensure. The claims are adjudicated in a group process.
Appropriate relief: Borrowers who enrolled in this program during the time that the misrepresentation was made should receive full relief. As a result of the schools' misrepresentation, the borrowers cannot work in the occupation in which they reasonably expected to work when they enrolled. Accordingly, borrowers received limited or no value from this educational program because they did not receive the value that they reasonably expected.
2. A school states to a prospective student that its medical assisting program has a faculty composed of skilled nurses and physicians and offers internships at a local hospital. The borrower enrolls in the school in reliance on that statement. In fact, none of the teachers at the school other than the Director is a nurse or physician. The school has no internship program. The teachers at the school are not qualified to teach medical assisting and the student is not qualified for medical assistant jobs based on the education received at the school.
Appropriate relief: This borrower should receive full relief. None of the teachers at the school are qualified to teach medical assisting, and there was no internship. In contrast to reasonable students' expectations, based on information provided by the school, the typical borrower received no value from the program.
3. An individual interested in becoming a registered nurse meets with a school's admissions counselor who explains that the school does not have a nursing program but that completion of a medical assisting program is a prerequisite for any nursing program. Based on this information, the borrower enrolls in the school's medical assisting program rather than searching for another nursing program, believing that completing a medical assisting program is a necessary step towards becoming a nurse. After one year in the program, the borrower realizes that it is not necessary to become a medical assistant before entering a nursing program. The borrower's credits are not transferrable to a nursing program.
Appropriate relief: This borrower should receive full relief. Because it is not necessary to become a medical assistant prior to entering a nursing program, she has made no progress towards the career she sought, and in fact has received an education that cannot be used for its intended purpose.
4. A school tells a prospective student, who is actively seeking an education, that the cost of the program will be $20,000. Relying on that statement, the borrower enrolls. The student later learns the cost for that year was $25,000. There is no evidence of any other misrepresentations in the enrollment process or of any deficiency in value in the school's education.
Appropriate relief: This borrower should receive partial relief of $5,000. The borrower received precisely the value that she expected. The school provides the education that the student was seeking but misrepresented the price.
5. A school represents in its marketing materials that three of its undergraduate faculty members in a particular program have received the highest award in their field. A borrower choosing among two comparable, selective programs enrolls in that program in reliance on the representation about its faculty. However, although the program otherwise remains the same, the school had failed to update the marketing materials to reflect the fact that the award-winning faculty had left the school.
Appropriate relief: Although the borrower reasonably relied on a misrepresentation about the faculty in deciding to enroll at this school, she still received the value that she expected. Therefore, no relief is appropriate.
6. An individual wishes to enroll in a selective, regionally accredited liberal arts school. The school gives inflated data to a well-regarded school ranking organization regarding the median grade point average of recent entrants and also includes that inflated data in its own marketing materials. This inflated data raises the place of the school in the organization's rankings in independent publications. The individual enrolls in the school and graduates. Soon after graduating, the individual learns from the news that the school falsified admissions data. Notwithstanding this issue, degrees from the school continue to serve as effective, well-regarded liberal arts credentials.
The Department also determines that the school violated the title IV requirement that it not make substantial misrepresentations pursuant to 34 CFR 668.71, which constitutes an enforceable violation separate and apart from any borrower defense relief.
Appropriate Relief: The borrower relied on the misrepresentation about the admissions data to his detriment, because the misrepresentation factored into the borrower's decision to choose the school over others. However, the borrower received a selective liberal arts education which represents the value that he could reasonably expect, and gets no relief.
The additions read as follows:
(b) * * *
(11) Comply with the provisions of paragraphs (d) through (i) of this section regarding student claims and disputes.
(d)
(e)
(2) Reliance on a predispute arbitration agreement, or on any other predispute agreement, with a student, with respect to any aspect of a class action includes, but is not limited to, any of the following:
(i) Seeking dismissal, deferral, or stay of any aspect of a class action.
(ii) Seeking to exclude a person or persons from a class in a class action.
(iii) Objecting to or seeking a protective order intended to avoid responding to discovery in a class action.
(iv) Filing a claim in arbitration against a student who has filed a claim on the same issue in a class action.
(v) Filing a claim in arbitration against a student who has filed a claim on the same issue in a class action after the trial court has denied a motion to certify the class but before an appellate court has ruled on an interlocutory appeal of that motion, if the time to seek such an appeal has not elapsed or the appeal has not been resolved.
(vi) Filing a claim in arbitration against a student who has filed a claim on the same issue in a class action after the trial court in that class action has granted a motion to dismiss the claim and, in doing so, the court noted that the consumer has leave to refile the claim on a class basis, if the time to refile the claim has not elapsed.
(3)
(ii) When a predispute arbitration agreement or any other predispute agreement addressing class actions has been entered into before the effective date of this regulation and does not contain a provision described in paragraph (e)(3)(i) of this section, the school must either ensure the agreement is amended to contain the provision specified in paragraph (e)(3)(iii)(A) of this section or provide the student to whom the agreement applies with the written notice specified in paragraph (e)(3)(iii)(B) of this section.
(iii) The school must ensure the agreement described in paragraph (e)(3)(ii) of this section is amended to contain the provision specified in paragraph (e)(3)(iii)(A) or must provide the notice specified in paragraph (e)(3)(iii)(B) to students no later than the exit counseling required under § 685.304(b), or the date on which the school files its initial response to a demand for arbitration or service of a complaint from a student who has not already been sent a notice or amendment.
(A)
(B)
(f)
(ii) A student may enter into a voluntary post-dispute arbitration agreement with a school to arbitrate a borrower defense claim.
(2) Reliance on a predispute arbitration agreement with a student with respect to any aspect of a borrower defense claim includes, but is not limited to, any of the following:
(i) Seeking dismissal, deferral, or stay of any aspect of a judicial action filed by the student, including joinder with others in an action;
(ii) Objecting to or seeking a protective order intended to avoid responding to discovery in a judicial action filed by the student; and
(iii) Filing a claim in arbitration against a student who has filed a suit on the same claim.
(3)
(ii) When a predispute arbitration agreement has been entered into before the effective date of this regulation that did not contain the provision specified in paragraph (f)(3)(i) of this section, the school must either ensure the agreement is amended to contain the provision specified in paragraph (f)(3)(iii)(A) of this section or provide the student to whom the agreement applies with the written notice specified in paragraph (f)(3)(iii)(B) of this section.
(iii) The school must ensure the agreement described in paragraph (f)(3)(ii) of this section is amended to contain the provision specified in paragraph (f)(3)(iii)(A) of this section or must provide the notice specified in paragraph (f)(3)(iii)(B) of this section to students no later than the exit counseling required under § 685.304(b), or the date on which the school files its initial response to a demand for arbitration or service of a complaint from a student who has not already been sent a notice or amendment.
(A)
(B)
(g)
(i) The initial claim and any counterclaim.
(ii) The arbitration agreement filed with the arbitrator or arbitration administrator.
(iii) The judgment or award, if any, issued by the arbitrator or arbitration administrator.
(iv) If an arbitrator or arbitration administrator refuses to administer or dismisses a claim due to the school's failure to pay required filing or administrative fees, any communication the school receives from the arbitrator or arbitration administrator related to such a refusal.
(v) Any communication the school receives from an arbitrator or an arbitration administrator related to a determination that a predispute arbitration agreement regarding educational services provided by the school does not comply with the administrator's fairness principles, rules, or similar requirements, if such a determination occurs.
(2) A school must submit any record required pursuant to paragraph (g)(1) of this section within 60 days of filing by the school of any such record with the arbitrator or arbitration administrator and within 60 days of receipt by the school of any such record filed or sent by someone other than the school, such as the arbitrator, the arbitration administrator, or the student.
(h)
(i) The complaint and any counterclaim.
(ii) Any dispositive motion filed by a party to the suit; and
(iii) The ruling on any dispositive motion and the judgment issued by the court.
(2) A school must submit any record required pursuant to paragraph (h)(1) of this section within 30 days of filing or receipt, as applicable, of the complaint, answer, or dispositive motion, and within 30 days of receipt of any ruling on a dispositive motion or a final judgment.
(i)
(1) “Borrower defense claim” means a claim that is or could be asserted as a borrower defense as defined in § 685.222(a)(5), including a claim other than one based on § 685.222(c) or (d) that may be asserted under § 685.222(b) if reduced to judgment;
(2) “Class action” means a lawsuit in which one or more parties seek class treatment pursuant to Federal Rule of Civil Procedure 23 or any State process analogous to Federal Rule of Civil Procedure 23;
(3) “Dispositive motion” means a motion asking for a court order that entirely disposes of one or more claims in favor of the party who files the motion without need for further court proceedings;
(4) “Predispute arbitration agreement” means any agreement, regardless of its form or structure, between a school or a party acting on behalf of a school and a student providing for arbitration of any future dispute between the parties.
(a) The Secretary collects from the school the amount of the losses the Secretary incurs and determines that the institution is liable to repay under § 685.206, § 685.214, § 685.215(a)(1)(i), (ii), (iii), (iv) or (v), § 685.216, or § 685.222 or that were disbursed—
(1) To an individual, because of an act or omission of the school, in amounts that the individual was not eligible to receive; or
(2) Because of the school's violation of a Federal statute or regulation.
If any provision of this subpart or its application to any person, act, or practice is held invalid, the remainder of the subpart or the application of its provisions to any person, act, or practice shall not be affected thereby.
20 U.S.C. 1070g,
(a)
(i) An original or certified copy of the death certificate;
(ii) An accurate and complete photocopy of the original or certified copy of the death certificate;
(iii) An accurate and complete original or certified copy of the death certificate that is scanned and submitted electronically or sent by facsimile transmission; or
(iv) Verification of the grant recipient's death through an authoritative Federal or State electronic database approved for use by the Secretary.
(2) Under exceptional circumstances and on a case-by-case basis, the Secretary discharges the obligation to complete the agreement to serve based on other reliable documentation of the grant recipient's death that is acceptable to the Secretary.
Postal Service.
Notice of a change in rates of general applicability for competitive products.
This notice sets forth changes in rates of general applicability for competitive products.
Daniel J. Foucheaux, Jr., 202-268-2989.
On October 11, 2016, pursuant to their authority under 39 U.S.C. 3632, the Governors of the Postal Service established prices and classification changes for competitive products. The Governors' Decision and the record of proceedings in connection with such decision are reprinted below in accordance with section 3632(b)(2).
Federal Communications Commission.
Final rule.
This document retains the broadcast ownership rules with minor modifications in compliance with section 202(h) of the Telecommunications Act of 1996 which requires the Commission to review its broadcast ownership rules quadrennially to review these rules to determine whether they are necessary in the public interest as a result of competition. In addition, this document adopts an eligible entity definition pursuant to the remand of the Commission's 2008
Effective December 1, 2016, except for the amendment to § 73.3526, which contains information collection requirements that are not effective until approved by the Office of Management and Budget (OMB). The Commission will publish a document in the
Benjamin Arden, Industry Analysis Division, Media Bureau, FCC, (202) 418-2605. For additional information concerning the PRA information collection requirements contained in the
This
1. The Commission brings to a close the 2010 and 2014 Quadrennial Review proceedings with this
2. The media ownership rules subject to this quadrennial review are the local television ownership rule, the local radio ownership rule, the newspaper/broadcast cross-ownership rule, the radio/television cross-ownership rule, and the dual network rule. Congress requires the Commission to review these rules every four years to determine whether they are necessary in the public interest as the result of competition and to repeal or modify any regulation the Commission determines to be no longer in the public interest. The Third Circuit has instructed in
3.
4. The current Local Television Ownership Rule allows an entity to own two television stations in the same Nielsen Designated Market Area (DMA) only if no Grade B contour overlap between the commonly owned stations exists, or at least one of the commonly owned stations is not ranked among the top-four stations in the market (top-four prohibition) and at least eight independently owned television stations remain in the DMA after ownership of the two stations is combined (eight-voices test). Based on the record that was compiled for the 2010 and 2014 Quadrennial Review proceedings, the Commission finds that the current Local Television Ownership Rule, with a limited contour modification, remains necessary in the public interest.
5. Under the revised Local Television Ownership Rule, an entity may own up to two television stations in the same DMA if: (1) The digital NLSCs of the stations (as determined by § 73.622(e) of the Commission's rules) do not overlap;
6.
7. While the Commission recognizes the popularity of video programming delivered via MVPDs, the Internet, and mobile devices, it finds that competition from such video programming providers remains of limited relevance for the purposes of analysis. Video programming delivered by MVPDs such as cable and DBS is generally uniform across all markets, as is online video programming content. Unlike local broadcast stations, such programming providers are not likely to make programming decisions based on conditions or preferences in local markets. No commenter in this proceeding offered evidence of non-broadcast video programmers modifying their programming decisions based on the competitive conditions in a particular local market. This strengthens the Commission's determination that, while non-broadcast video programming may offer consumers additional programming options in general, they do not serve as a meaningful substitute in local markets due to their national focus. Unlike broadcast television stations, national programmers are not responsive to the specific needs and interests of local markets, and as the Commission has previously stated, competition among local rivals most benefits consumers and serves the public interest.
8. In addition, the Commission finds that broadcast television's strong position in the local advertising market supports the Commission's view that non-broadcast video programming distributors are not meaningful substitutes in local television markets. The current data do not support the claim that advertisers no longer distinguish local broadcast television from non-broadcast sources of video programming when choosing how to allocate spending for local advertising, as advertising revenues for broadcast television stations remain strong and are projected to grow through 2019. While advertising revenues on cable, satellite, and digital platforms have risen, those gains do not appear to be at the expense of broadcast television stations. The Commission finds that broadcast television continues to play a significant role in the local advertising market, particularly when it comes to political advertising. Broadcast stations receive considerable revenue from political advertising every other year, which further highlights broadcast television's unparalleled value to advertisers for reaching local markets.
9. With regard to an economic study submitted by the National Association of Broadcasters, the Commission does not find the study relevant or informative in this proceeding for multiple reasons. First, the Commission finds significant issues with the statistical methods employed within the study and with the interpretation of those results. In addition, the study critiques the local broadcast television market relied on by the Department of Justice (DOJ) in its merger reviews pursuant to Section 7 of the Clayton Act—which focuses solely on the impact of the transaction in the local advertising market—and not the market definition relied on by the Commission for analyzing its Local Television Ownership Rule pursuant to Section 202(h), as discussed herein. While the Commission's market definition for purposes of the Local Television Ownership Rule is similar to the market definition used by DOJ when evaluating broadcast television mergers, in that the scope of the Commission's rule is limited to broadcasters, DOJ focuses on competition for advertising, whereas the Commission's rule is premised on multiple factors, including audience share. Therefore, the Commission finds that the study does not inform the current proceeding.
10. The Commission concludes that broadcast television stations continue to play a unique and vital role in local communities that is not meaningfully duplicated by non-broadcast sources of video programming. In addition to providing viewers with the majority of the most popular programming on television, broadcast television stations remain the primary source of local news and public interest programming. Accordingly, the Commission concludes that, for purposes of determining whether the Local Television Rule remains necessary in the public interest, the relevant product market is the delivery of local broadcast television service.
11.
12. The Commission confirms that the digital NLSC is an accurate measure of a station's current service area and thus is an appropriate standard. The Local Television Ownership Rule must take into account the current digital service
13. The Commission also adopts the proposal to grandfather existing ownership combinations that would exceed the numerical limits by virtue of the revised contour approach instead of requiring divestiture. Under these circumstances, the Commission does not believe that compulsory divestiture is appropriate. In the Local Radio Ownership Rule section, the Commission confirms the disruptive impact of compulsory divestitures but determine that divestitures would be appropriate if it tightened the local radio ownership limits. In adopting the digital NLSC standard, the Commission is not reducing the number of stations that can be commonly owned by all licensees; rather, it is adopting a technical change that may result in a small number of station combinations no longer complying with the criteria necessary to permit such common ownership. Accordingly, compulsory divestiture is not appropriate in these circumstances. The Commission continues to believe that the disruption to the marketplace and hardship for individual owners resulting from forced divestiture of stations would outweigh any benefits of forced divestiture to its policy goals, including promoting ownership diversity. Furthermore, the Commission notes that the replacing the Grade B contour with the digital NLSC—given the similarity in the contours—effectively maintains the status quo for most, if not all, owners of duopolies formed as a result of the previous Grade B contour overlap provision.
14. However, the Commission concludes that where grandfathered combinations are sold, the ownership rule governing television stations in effect at the time of the sale must be complied with. If the digital NLSC of two stations in the same DMA overlap, then the stations serve the same area, even if there was no Grade B contour overlap before the digital transition. Accordingly, requiring that a grandfathered combination be brought into compliance with the new standard at the time of sale is consistent with the Commission's rationale for adopting the digital NLSC-based standard and does not cause hardship by requiring premature divestiture. Consistent with Commission precedent, the Commission finds that the public interest would not be served by allowing grandfathered combinations to be freely transferable in perpetuity where a combination does not comply with the ownership rules at the time of transfer or assignment. Under the adopted approach, the Commission continues to allow grandfathered combinations to survive
15.
16. Likewise, the Commission does not find that there have been sufficient changes in the local television marketplace to justify ownership of a third in-market station. Growing competition from non-broadcast alternatives and the economic efficiencies of owning multiple stations are cited generally as the reasons why the Commission should permit ownership of more than two stations. As with the decision to define the relevant product market as broadcast television, the Commission concludes that it is not appropriate to consider competition from non-broadcast sources in evaluating whether the rule remains necessary. Despite the aforementioned benefits that duopolies can create, excessive consolidation remains likely to threaten the Commission's competition and diversity goals by jeopardizing small and mid-sized broadcasters. Without significant evidence of the public interest benefits that could result from the ownership of three stations in a local market that are not already available from the ownership of two stations, the Commission does not believe that adequate justification exists at this time for increasing the numerical limits.
17.
18. The Commission reaffirms its belief that top-four combinations would generally result in a single firm obtaining a significantly larger market share than other firms in the market and that such combinations would create welfare harms. Top-four combinations reduce incentives for local stations to improve their programming by giving once strong rivals incentives to coordinate their programming to minimize competition between the commonly owned stations. The Commission is not persuaded by assertions that commonly owned stations have no incentive to coordinate their programming based solely on anecdotal showings from Nexstar-owned stations in two DMAs. While the Commission recognizes that duopolies permitted subject to the restrictions of the current rule can create operating efficiencies, which allow the commonly owned stations to invest in news and other local programming, the Commission finds that this potential benefit is outweighed by the harm to competition where a single firm obtains a significantly larger market share through a combination of two top-four stations. Accordingly, the Commission finds that the public interest is best served by retaining the top-four prohibition.
19.
20. Moreover, the Commission cautioned in 1999 that future transactions, such as license transfers, that do not satisfy the top-four prohibition may not be granted. This demonstrates that the Commission sought to distinguish instances where a station organically becomes a top-four station through station improvement from situations where a station actively transacts to become a top-four station via an ownership transfer or assignment. As the Commission said in the
21. While the Commission said in the
22. The Commission rejects any assertion that extending the top-four prohibition to affiliation swaps amounts to impermissible content regulation and is subject to strict scrutiny. The adopted clarifying amendment does not regulate content any more than the top-four prohibition and the media ownership rules that consistently have been upheld by the courts, and it is therefore subject to rational basis review. The decision to prohibit affiliation swaps involving two top-four stations, as described herein, does not consider content but rather the
23. The
24. The Commission also rejects the assertion that extension of the top-four prohibition constitutes unlawful interference in the network affiliation marketplace. The Commission does not believe that its action is likely to have a significant impact on the marketplace, as affiliation swaps are, at this point, rare. Indeed, the record demonstrates only a single instance of an affiliation swap that would be subject to the rule adopted herein. Evidence in the record demonstrates that the negotiation of affiliation agreements typically does not involve affiliation swaps; therefore, most negotiations will be unaffected by the amendment clarifying the top-four prohibition. The Commission confirms that extension of the top-four prohibition to affiliation swaps would not prevent a station from obtaining an affiliation through negotiating with a national network outside the context of an affiliation swap. While affiliation swaps have not occurred often to date, given the potential of such transactions to undermine the Local Television Ownership Rule, the Commission finds that the application of the top-four prohibition to such transactions is necessary to ensure the continued effectiveness of that rule. Such action is necessary because the Commission does not believe a reliable marketplace solution exists that would restrain the future use of affiliation swaps to evade the top-four prohibition should it decline to extend the top-four prohibition to affiliation swaps, nor is there a less restrictive means to accomplish the goal.
25. Accordingly, to close this loophole, the Commission finds that affiliation swaps must comply with the top-four prohibition at the time the agreement is executed. Specifically, an entity will not be permitted to directly or indirectly own, operate, or control two television stations in the same DMA through the execution of any agreement (or series of agreements) involving stations in the same DMA, or any individual or entity with a cognizable interest in such stations, in which a station (the new affiliate) acquires the network affiliation of another station (the previous affiliate), if the change in network affiliations would result in the licensee of the new affiliate, or any individual or entity with a cognizable interest in the new affiliate, directly or indirectly owning, operating, or controlling two of the top-four rated television stations in the DMA at the time of the agreement. In addition, for purposes of making this determination, the new affiliate's post-consummation ranking will be the ranking of the previous affiliate at the time the agreement is executed, determined in accordance with § 73.3555(b)(1)(i) of the Commission's rules. The Commission will find any party that directly or indirectly owns, operates, or controls two top-four stations in the same DMA as a result of such transactions to be in violation of the top-four prohibition and subject to enforcement action. Application of this rule to affiliation swaps is prospective; therefore, all future transactions will be required to comply with the Commission's rules then in effect. Parties that acquired control over a second in-market top-four station by engaging in affiliation swaps before the release date of this
26.
27. The Commission continues to believe the minimum threshold maintained by the eight-voices test helps to ensure robust competition among local television stations in the markets where common ownership is permitted under the rule. The eight-voices test increases the likelihood that markets with common ownership will continue to be served by stations affiliated with each of the Big Four networks as well as at least four independently owned and operated stations unaffiliated with these major networks. In addition, the Commission disagrees with the interpretation that the eight-voices test implies that at least eight competing over-the-air TV stations are the minimum necessary to ensure competition and so each market must have at least eight independent stations. The eight-voices test only establishes the minimum level necessary to permit common ownership of stations in a market, subject to the other requirements in the rule. Therefore, markets with fewer than eight independent stations can still maintain a significant level of competition given the absence of duopolies in these markets. Also, because a significant gap in audience share persists between the top-four stations in a market and the remaining stations in most markets—demonstrating the dominant position of
28. The Commission also sought comment on whether the
29. The Commission's conclusion adheres to
30.
31. The Third Circuit vacated the Television JSA Attribution Rule in
32. Consistent with
33. In addition, the Commission adopts different transition procedures than those adopted in the
34. In addition to readopting the Television JSA Attribution Rule, the Commission finds that such attribution does not change its determination here that the existing Local Television Ownership Rule should be retained, with a minor contour modification. The analysis underlying the various components of the Local Television Ownership Rule (
35. The attribution of certain television JSAs, which prevents those agreements from being used to circumvent the ownership limits by compromising the independence of a same-market station, helps to ensure that the goals of the Local Television Ownership Rule are realized. This mechanism applies to any circumstances in which an individual or entity has an attributable interest in more than one station in a market. The arguments that television JSAs should not be attributed because they produce public interest benefits are essentially indistinguishable from arguments that the ownership limits should be relaxed because common ownership produces public interest benefits. The Commission acknowledges and addresses these arguments throughout; however, it has ultimately determined that the Local Television Ownership Rule should be retained, with a minor modification to the contour standard. The Commission's responsibility under section 202(h) is to ensure that the Local Television Ownership Rule continues to serve the public interest, not to manipulate the rule to counterbalance the attribution of television JSAs. As discussed in this section, the Commission finds that the adopted rule serves the public interest.
36.
37. Waiver of the Commission's rules is meant to be exceptional relief, and the Commission finds that the existing waiver criteria effectively establish when relief from the rule is appropriate. The Commission remains concerned that loosening the existing failed/failing station waiver criteria—such as by eliminating the four percent audience share requirement or by reducing the negative cash flow period from three years to one—would result in a waiver standard that is more vulnerable to manipulation by parties seeking to obtain a waiver. Also, such changes may not be rationally related to improving the Commission's ability to evaluate the viability of a station subject to the waiver request. The Commission declines to adopt any industry-proposed waiver standard that would significantly expand the circumstances in which a waiver of the Local Television Ownership Rule would be granted, absent sufficient demonstration that the stations could not effectively compete in the market. Such relaxation of the waiver standard would be inconsistent with the Commission's determination that the public interest is best served by retaining the existing television ownership limits to promote competition. Therefore, the Commission concludes that the existing waiver standard is not unduly restrictive and that it provides appropriate relief in all television markets. The Commission also declines to adopt a 180-day shot clock for waiver request reviews. No record evidence indicates that waiver requests are subject to undue delay; on the contrary, the Commission believes that the current process works effectively and that applications are processed in a timely and efficient manner. In addition, the Commission currently endeavors to complete action on assignment and transfer of control applications (including those requesting a failed/failing station waiver) within 180 days of the public notice accepting the applications. Routine applications are typically decided within the 180-day mark, and all applications are processed expeditiously as possible consistent with the Commission's regulatory responsibilities. However, several factors could cause the Commission's review of a particular application to exceed 180 days. Certain cases will present difficult issues that require additional consideration, and the Commission does not believe that artificially constraining its review is appropriate.
38.
39. As proposed in the
40. The factors that justify the Commission's decision not to restrict dual affiliations via multicast are not present in circumstances involving affiliation swaps. Dual affiliations via multicasting do not result in an entity owning two television stations rated in the top four in the market in violation of the Local Television Ownership Rule, which is the case with affiliation swaps now subject to the top-four prohibition, and no marketplace forces exist that would limit affiliation swaps absent the Commission's action in this
41.
42. The Commission is unconvinced by arguments made by the Coalition of Smaller Market Television Stations that sharing agreements, such as JSAs and SSAs, promote minority and female ownership. While the record demonstrates that some stations that are owned by minorities and women participate in JSAs, the record also indicates that many such stations do not. The Smaller Market Coalition provides statistics regarding only full power television stations owned by women and African Americans. By their own data, the majority of stations owned by women do not participate in JSAs; moreover, they do not offer any statistics for stations owned by other minority groups, which make up the largest portion of minority station owners. No evidence shows that current minority or female station owners utilized such agreements to acquire those stations. To the contrary, anecdotal evidence suggests that JSAs, in particular, have been used by large station owners to foreclose entry into markets and that the Commission's decision to attribute JSAs has actually led to greater ownership diversity—a proposition supported by multiple parties throughout this proceeding.
43. Additionally, the Commission finds the claim that tightening the Local Television Ownership Rule will promote increased opportunities for minority and female ownership to be both speculative and unsupported by existing ownership data. No data provided in the record support a contention that the duopoly rule has reduced minority ownership or suggest that a return to the one-to-a-market rule would increase ownership opportunities for minorities and women. On the other hand, while the data reflect an increase in minority ownership following relaxation of the Local Television Ownership Rule, the Commission has no evidence in the record that would permit it to infer causation and thus it declines to loosen the rule on this basis.
44. Finally, the Commission finds that, at the present time, analyzing the implications of the incentive auction for the Local Television Ownership Rule generally, or minority and female ownership specifically is impossible. In the auction proceeding, the Commission has considered the effects of the auction on diversity, stating that voluntary participation in the reverse auction, via a channel sharing, ultra-high frequency (UHF)-to-very-high frequency (VHF), or high-VHF-to-low-VHF bid, offers a significant and unprecedented opportunity for these owners to raise capital that may enable them to stay in the broadcasting business and strengthen their operations. A licensee's participation in the reverse auction does not mean it has decided to exit the business, even if its bid is accepted. The auction provides for bid options that allow the licensee to obtain a share of auction proceeds but still remain on the air: (i) Channel sharing; (ii) a UHF station could bid to move to a VHF channel; and (iii) a high VHF station
45. The broadcast television incentive auction is ongoing and its implications will not be known for some time. Broadcasters interested in participating in the reverse auction filed their applications in January 2016. Entities interested in bidding in the forward auction on the spectrum made available through the reverse auction filed applications in February 2016. The clock round bidding for the reverse auction commenced on May 31, 2016, and concluded on June 29, 2016; the Commission announced August 16, 2016, as the start date for the initial stage of the forward auction. Under statute, the identities of the broadcasters participating in the reverse auction are confidential. After the conclusion of the auction—the date of which is unknown—the Commission will release a public notice announcing the reverse and forward auction winners, and identifying those television stations that will be reassigned to new channels (or repacked). Reassigned stations will have up to 39 months after release of that public notice to complete the transition to their new channels, while winning bidders who will relinquish their spectrum entirely or move to share a channel with another station must do so within a specified number of months from receipt of their incentive payment.
46. Because of these factors, and because the incentive auction is a unique event without precedent, the Commission cannot evaluate or predict the likely impacts of the auction at this time. The Commission will soon commence its evaluation of the broadcast marketplace post-auction, and the Commission will address the implications of the incentive auction for the media ownership rules in the context of future quadrennial reviews. Further, the court in
47. Based on the record in the 2010 and 2014 Quadrennial Review proceedings, the Commission finds that the current Local Radio Ownership Rule remains necessary in the public interest and should be retained without modification. The Commission finds that the rule remains necessary to promote competition and that the radio ownership limits promote viewpoint diversity by ensuring a sufficient number of independent radio voices and by preserving a market structure that facilitates and encourages new entry into the local media market. Similarly, the Commission finds that a competitive local radio market helps to promote localism, as a competitive marketplace tends to lead to the selection of programming that is responsive to the needs and interests of the local community. Also, the Commission finds that the Local Radio Ownership Rule is consistent with its goal of promoting minority and female ownership of broadcast television stations. The Commission finds that these benefits outweigh any burdens that may result from retaining the rule without modification.
48. Accordingly, the Local Radio Ownership Rule will continue to permit the following: An entity may own (1) up to eight commercial radio stations in radio markets with 45 or more radio stations, no more than five of which can be in the same service (AM or FM); (2) up to seven commercial radio stations in radio markets with 30-44 radio stations, no more than four of which can be in the same service (AM or FM); (3) up to six commercial radio stations in radio markets with 15-29 radio stations, no more than four of which can be in the same service (AM or FM); and (4) up to five commercial radio stations in radio markets with 14 or fewer radio stations, no more than three of which can be in the same service (AM or FM), provided that an entity may not own more than 50 percent of the stations in such a market, except that an entity may always own a single AM and single FM station combination.
49. Under section 202(h), the Commission considers whether the Local Radio Ownership Rule continues to be necessary in the public interest as a result of competition. In determining whether the rule meets that standard, the Commission considers whether the rule serves the public interest. While the Commission believes that the competition-based Local Radio Ownership Rule is consistent with its other policy goals and may promote such goals in various ways, the Commission does not rely on these other goals as the basis for retaining the rule. Consistent with Commission precedent, upheld by the court in
50.
51. As noted in the
52. In addition, the Commission disagrees with NAB's assertion regarding the lack of significance of non-broadcast radio's national platform. The local character of broadcast radio is a significant aspect of the service that must be considered when determining whether alternate audio platforms provide a meaningful substitute. The record fails to demonstrate that non-broadcast radio programmers make programming decisions to respond to competitive conditions in local markets. As the Commission has stated previously, competition among local rivals most benefits consumers and serves the public interest.
53. The Commission also disagrees with NAB's characterization that the Commission has recognized non-broadcast radio programming as meaningful substitutes for broadcast radio simply by virtue of the Commission's acknowledgment of the potential impact of alternate audio platforms on AM radio. While the Commission has recognized that AM radio is susceptible to audience migration due to its technical shortcomings, recognition of this fact does not mean that non-broadcast audio alternatives are a meaningful substitute for AM radio, specifically, or broadcast radio, in general. As discussed earlier, non-broadcast audio alternatives do not respond to competitive conditions in local markets and are not available to all consumers in a local market to the same extent as broadcast radio, which are critical considerations when determining substitutability. While the Commission does not take the position that advanced telecommunications/broadband deployment and adoption must be universal before it will consider Internet-delivered audio programming to be a competitor in the local radio listening market, the Commission finds that the current level of penetration and adoption of broadband service remains relevant when considering the extent to which this platform is a meaningful substitute for broadcast radio stations.
54. Ultimately, the Commission finds that the record demonstrates that alternative sources of audio programming are not currently meaningful substitutes for broadcast radio stations in local markets; therefore, the Commission declines to depart from its tentative conclusion to exclude non-broadcast sources of audio programming from the relevant market for the purposes of the Local Radio Ownership Rule. The Commission's approach to limit the relevant market to broadcast radio stations in local radio listening markets is consistent with current DOJ precedent in evaluating proposed mergers involving broadcast radio stations. The Commission finds that the Local Radio Ownership Rule should continue to focus on promoting competition among broadcast radio stations in local radio listening markets.
55.
56. The Commission received two proposals for alternative methodologies for determining market size tiers. Mid-West Family proposes that the Commission assign different values to stations of different classes when calculating how many stations an entity owns in a local market (
57. The Commission declines to adopt Mid-West Family's proposals. First, the Commission disagrees with Mid-West Family's contention that the
58. Moreover, service contour (and the associated population coverage) is just one of many aspects of station operations that may impact the ability to compete in a local market. Each station serves as a voice in its local market, and the Commission is not inclined to discount the value of certain voices, particularly based on criteria that may have a limited impact on a station's ability to compete. For these reasons, the Commission declines to change the methodology for determining market size tiers, as proposed by Mid-West Family.
59. The Commission also declines to adopt Mid-West Family's proposal for a case-by-case analysis of population coverage. The Commission does not believe that population coverage alone is an appropriate basis on which to judge the competitiveness of a station (or cluster of stations) or the impact of these voices in the local market. The existing rule already provides for economies of scale that help stations compete; the Commission does not believe it is appropriate (or even possible) to revise the rule based on population coverage in an attempt to achieve a competitive equilibrium, which is effectively what Mid-West Family seeks. Moreover, the ability to seek a waiver of the ownership limits already provides parties with an opportunity to assert that special circumstances justify deviation from the rule in a particular case.
60. The Commission also declines to alter the methodology for determining market size tiers as proposed by Connoisseur. Under the current methodology, owners wishing to acquire a radio station in an embedded market must satisfy the numerical limits in both the embedded market and the overall parent market. In the
61. However, the Commission recognizes Connoisseur's concerns that Nielsen Audio and BIA's practice of designating all embedded market stations as home to the parent market—regardless of actual market share—could result in certain stations being counted for multiple ownership purposes in a market in which they do not actually compete. Although the Commission does not believe that the record justifies a blanket exception to the rule, it will entertain market-specific waiver requests under section 1.3 demonstrating that the BIA listings in a parent market do not accurately reflect competition by embedded market stations and should thus not be counted for multiple ownership purposes.
62.
63. The Commission also concludes that the record in this proceeding does not reflect changes in the marketplace that warrant reconsideration of the Commission's previous decision not to make the limits more restrictive. The Commission continues to believe that tightening the restrictions would disregard the previously identified benefits of consolidation in the radio industry and would be inconsistent with the guidance provided by Congress in the 1996 Act. Further, the Commission continues to find that tightening the rule, absent grandfathering, would require divestitures that it believes would be disruptive to the radio industry and would upset the settled expectations of individual owners. The record does not indicate that the benefits derived from tightening the limits would outweigh these countervailing considerations. For these reasons, and consistent with prior decisions, the Commission concludes that tightening the limits would not be in the public interest.
64.
65. Note 4 to § 73.3555 of the Commission's rules (Note 4) grandfathers existing station combinations that do not comply with the numerical ownership limits of § 73.3555(a). However, the Commission recognizes that certain circumstances require applicants to come into compliance with the numerical ownership limits even though the relevant station may have been part of an existing grandfathered cluster. One such circumstance is a community of license change, which occasionally can lead to difficulty when an applicant with a grandfathered cluster of stations seeks to move a station's community of license outside the relevant Nielsen Audio Metro market. Given that the Commission relies on the BIA database for information regarding Nielsen Audio Metro home designations, such an applicant cannot concurrently demonstrate compliance with the multiple ownership limits at the time of
66. The Commission also proposed to exempt intra-Metro community of license changes from the requirements of Note 4. In 2006, the Commission introduced a streamlined procedure allowing an FM or AM broadcast licensee or permittee to change its community of license by filing a minor modification application. The Commission has found that strict application of Note 4 has produced disproportionately harsh results from what is now otherwise a minor and routine application process. The Commission also agrees with commenter Results Radio that the reasoning supporting the proposed exemption should apply not only to community of license changes within the physical boundaries of the Metro market, but to any community of license change where the station remains designated as home to the Metro market. Such an exemption would, in limited circumstances, provide equitable relief from the divestiture requirements of Note 4. Moreover, the Commission finds that such intra-market community of license changes in most cases will have little or no impact on the concentration of ownership within the local market. Accordingly, the Commission adopts these exemptions to Note 4.
67. Since 2003, the Commission has regularly waived the Nielsen Audio Metro market definition for Puerto Rico, which defines Puerto Rico as a single market, instead relying on a contour overlap analysis for proposed transactions. The Commission has held that the unique characteristics of Puerto Rico present a compelling showing of special circumstances that warrant departing from the Nielsen Audio Metro as the presumptive definition of the local market. This practice is based on Puerto Rico's extremely mountainous topography, large number of radio stations and station owners, and division into eight Metropolitan Statistical Areas (MSAs) as defined by the Office of Management and Budget (OMB), which demonstrate that Puerto Rico has more centers of economic activity than are accounted for by the single Puerto Rico Nielsen Audio Metro definition.
68. In previous waiver proceedings involving the Puerto Rico radio market, the Commission utilized the contour-overlap methodology that normally applies to defining markets in non-Nielsen Audio rated markets. The contour-overlap methodology is generally permitted to define the local radio market only when a station's community of license is located outside of a Nielsen Audio Metro boundary. Under this methodology, the relevant radio market is defined by the area encompassed by the mutually overlapping principal community contours of the stations proposed to be commonly owned. The Commission has determined previously that this methodology was appropriate to apply when examining the Puerto Rico radio market because of Puerto Rico's unique characteristics. Therefore, the Commission concludes that adoption of the contour-overlap market definition will facilitate the most appropriate application of the Local Radio Ownership Rule in Puerto Rico, and there is no opposition to this proposal in the record. Accordingly, the Commission adopts the market definition based on contour overlap for Puerto Rico that it has applied consistently in previous waiver proceedings.
69.
70. The Commission is not persuaded by suggestions that eliminating the subcaps would result in public interest benefits sufficient to justify that action. While flexibility in ownership structuring may benefit existing licensees, such benefits may not extend to new entrants who potentially would see opportunities for radio ownership diminish through the increased concentration of ownership in a particular service that elimination of the subcaps would permit. The Commission also does not agree that eliminating or modifying the AM subcap would be an effective way to revitalize AM radio. NAB's assertion that elimination of the subcap would revitalize AM radio is unsupported, as NAB fails to explain how additional consolidation of AM stations will improve the ability of those stations to overcome existing technological and competitive challenges.
71. The Commission continues to believe that broadcast radio, in general, remains the most likely avenue for new entry in the media marketplace—including entry by small businesses and entities seeking to serve niche audiences—as a result of radio's ability to more easily reach certain demographic groups and the relative affordability of radio stations compared to other mass media. As the Commission has stated previously, AM stations are generally the least expensive option for entry into the radio market, often by a significant margin, and therefore permit new entry for far less capital investment than is required to purchase an FM station. Nothing in the record of this proceeding indicates that this marketplace characteristic has changed. Therefore, the Commission concludes that the public interest remains best served by retaining the existing AM subcap, which limits concentration of AM station ownership and thereby promotes opportunities for new entry that further competition and viewpoint diversity. In addition, FCC Form 323 data for 2011 and 2013 notably indicates that minority and female ownership of radio stations (and AM stations, in particular) exceeds that of television stations.
72. Furthermore, despite the general technological limitations of AM stations, there continue to be many markets in which AM stations are significant radio voices. No data was offered in the record to refute the Commission's tentative conclusion in the
73. The Commission also concludes that there continue to be technical and marketplace differences between AM and FM stations that justify retention of both the AM and FM subcaps to promote competition in local radio markets. As the Commission has noted previously, FM stations enjoy unique advantages over AM stations, such as increased bandwidth, superior audio signal fidelity, and longer hours of operation. These technological differences often, but not always, result in greater listenership and revenues for FM stations that justifies a limit on the concentration of FM station ownership, in particular. Nothing in the record of this proceeding indicates that the Commission should depart from the tentative conclusions in the
74. The Commission also finds that the digital radio transition and the changes to the FM translator rules have not yet meaningfully ameliorated the general differences between AM and FM stations, such that the justifications described above have been rendered moot. Recent digital radio deployment data support previous findings that FM stations are actually increasing the technological divide through greater adoption rates of digital radio technology than AM stations. The trends noted in the
75.
76.
77. Consistent with Commission analysis of the local television ownership rule above, however, the Commission finds the claim that tightening the Local Radio Ownership Rule would promote increased opportunities for minority and female ownership to be speculative and unsupported by existing ownership data. No data in the record support a contention that tightening the local radio ownership limits would promote ownership opportunities for minorities and women.
78. In addition, the Commission does not believe that Media Ownership Study 7, which considers the relationship between ownership structure and the provision of radio programming targeted to African-American and Hispanic audiences, supports the contention that tightening the local radio ownership limits would promote minority and female ownership. While the data suggest the existence of a positive relationship between minority ownership of radio stations and the total amount of minority-targeted radio programming available in a market, the potential impact of tightening the ownership limits on minority ownership was not part of the study design, nor something that can be reasonably inferred from the data.
79. Nothing in the data or any other evidence in the record permits the Commission to infer causation; therefore, the Commission declines to loosen the existing ownership limits on the basis of any trend reflected in the data. The Commission remains mindful of the potential impact of consolidation in the radio industry on ownership opportunities for new entrants, including small businesses, and minority- and women-owned businesses, and the Commission will continue to consider the implications in the context of future quadrennial reviews.
80. The Newspaper/Broadcast Cross-Ownership (NBCO) Rule prohibits common ownership of a daily newspaper and a full-power broadcast station (AM, FM, or TV) if the station's service contour encompasses the newspaper's community of publication. The rule currently in effect prohibits the licensing of an AM, FM, or TV broadcast station to a party (including all parties under common control) that directly or indirectly owns, operates, or controls a daily newspaper, if the entire community in which the newspaper is published would be encompassed within the service contour of the station, namely: (1) The predicted or measured 2 mV/m contour of an AM station, computed in accordance with § 73.183 or § 73.186; (2) the predicted 1 mV/m contour for an FM station, computed in accordance with § 73.313; or (3) the
81. In analyzing the NBCO Rule under section 202(h), the Commission's focus is on the rule's primary purpose—to promote viewpoint diversity at the local level. As the Commission noted in adopting the NBCO Rule, if a democratic society is to function, nothing can be more important than insuring a free flow of information from as many divergent sources as possible. Broadcast stations and daily newspapers remain the predominant sources of the viewpoint diversity that the NBCO Rule is designed to protect. The proliferation of (primarily national) content available from cable and satellite programming networks and from online sources has not altered the enduring reality that traditional media outlets are the principal sources of essential local news and information. The rapid and ongoing changes to the overall media marketplace do not negate the rule's basic premise that the divergence of viewpoints between a cross-owned newspaper and broadcast station cannot be expected to be the same as if they were antagonistically run.
82. After careful consideration of the record, the Commission concludes that regulation of newspaper/broadcast cross-ownership within a local market remains necessary to protect and promote viewpoint diversity. The Commission continues to find, however, that an absolute ban on newspaper/broadcast cross-ownership is overly broad. Accordingly, and consistent with the Commission's approach in the 2006 proceeding, the adopted rule generally prohibits common ownership of a broadcast station and daily newspaper in the same local market but provides for a modest loosening of the previous ban on cross-ownership consistent with the Commission's view that an absolute ban may be overly restrictive in some cases. The Commission finds that the benefits of the revised rule outweigh any burdens that may result from adopting the rule.
83.
84. With regard to the first argument, in the
85. With regard to the second argument, in the
86. After reviewing the
87. The Commission concludes that the NBCO Rule should continue to apply to newspaper/radio cross-ownership. The Commission finds that the newspaper/radio cross-ownership restriction serves the public interest because the record shows that radio stations contribute in meaningful ways to viewpoint diversity within their communities. The Commission is persuaded that radio adds an important voice in many local communities such that lifting the restriction could harm viewpoint diversity. Although the Commission tentatively concluded earlier in this proceeding that radio stations are not the primary outlets that contribute to viewpoint diversity in local markets and that consumers rely predominantly on other sources for local news and information, the Commission finds that radio's role in promoting viewpoint diversity is significant enough to warrant retention of the restriction. Therefore, the Commission declines to eliminate the restriction or to adopt a presumptive waiver standard, such as the one proposed in the
88. As discussed in the
89. With over 90 percent of Americans listening to radio on a weekly basis, radio's potential for influencing viewpoint is great. Moreover, recent evidence suggests that radio stations air a substantial amount of local news programming. Evidence in the record also indicates that members of certain communities may rely more heavily on broadcast radio stations for local news and information. Such reliance may be especially strong when radio stations target particular demographic groups or offer news programs in a foreign language. A community radio station recently licensed in Minneapolis reports local news stories in the Somali language and provides information of particular interest to the local Somali-American community. Although the NBCO Rule does not apply to that particular station due to its low-power status, the example nonetheless demonstrates the important contributions that radio can make to viewpoint diversity.
90. Evidence of reliance on broadcast radio for local news and public information programming is important for assessing radio's contributions to viewpoint diversity; however, to be a meaningful source of viewpoint diversity in local markets, broadcast radio stations must increase the diversity of local information, not simply its availability. The record demonstrates that radio stations still contribute to viewpoint diversity by producing a meaningful amount of local news and public interest programming that is responsive to the needs and concerns of the community. Moreover, invitations to call-in to a radio program offer local residents unique opportunities to participate interactively in a conversation about an issue of local concern.
91. For the foregoing reasons, the Commission finds that radio provides an important contribution to viewpoint diversity such that lifting the newspaper/radio cross-ownership restriction in all markets across-the-board could sweep too broadly. The Commission finds that it must take care not to overlook the contributions to viewpoint diversity offered by radio stations, particularly to the extent that dedicated audiences of radio stations rely on radio as a valuable source of local news and information, and that radio stations provide an additional opportunity for civic engagement, as certain commenters attest. Thus, while the Commission previously has recognized that a radio station generally cannot be considered the equal of a newspaper or television station when it comes to providing news, in fact, for a significant portion of the population radio may play an influential role as a source for news or the medium turned to for discussion of matters of local concern.
92. Accordingly, the Commission finds that radio stations can contribute in a meaningful way to viewpoint diversity within local communities and that a newspaper's purchase of a radio station in the same local market could harm viewpoint diversity in certain circumstances. As a result, the Commission retains both the newspaper/radio and the newspaper/television cross-ownership restrictions. However, consistent with previous Commission findings, the Commission believes that enforcement of the NBCO Rule may not be necessary to promote viewpoint diversity in every circumstance and that there could be situations where enforcement would disserve the public interest. Furthermore, the Commission reaffirms its earlier findings that the opportunity to share newsgathering resources and realize other efficiencies derived from economies of scale and scope may improve the ability of commonly owned media outlets to provide local news and information. In certain circumstances, newspaper/broadcast cross-ownership may benefit the news offerings in a local market without causing undue harm to viewpoint diversity. In recognition of this, the Commission will ease the application of the prohibition through a waiver process and other modifications to the scope of the rule.
93.
94.
95. Although the Commission does not find that the rule is necessary to promote competition, it has concluded that the rule is necessary to promote viewpoint diversity. Therefore, the Commission is not swayed by the media industry's arguments that the NBCO Rule should be eliminated because it potentially limits opportunities for newspapers and broadcasters to expand their businesses. As stated in the
96.
97. The Commission adopts its uncontested proposal in the
98.
99. Specifically, in areas designated as Nielsen Audio Metro markets, cross-ownership of a full-power radio station and a daily newspaper will be prohibited when: (1) The radio station and the community of publication of the newspaper are located in the same Nielsen Audio Metro market, and (2) the entire community in which the newspaper is published is encompassed within the service contour of the station, namely: (a) The predicted or measured 2 mV/m groundwave contour of an AM station, computed in accordance with § 73.183 or § 73.186; or (b) the predicted or measured 1 mV/m contour for an FM station, computed in accordance with § 73.313. Both conditions need to be met for the cross-ownership restriction to apply, except when both the community of publication of the newspaper and the community of license of the radio station are not located in a Nielsen Audio Metro market, then only the second condition need be met. Consistent with the Local Radio Ownership Rule, the Commission will rely on Nielsen to determine whether a radio station is in the same Nielsen Audio Metro market as the newspaper's community of publication. The Local Radio Ownership Rule relies, in part, on Nielsen Audio Metro markets in applying the radio ownership limits. In that context, the Commission has developed certain procedural safeguards to deter parties from attempting to manipulate Nielsen Audio market definitions to evade the Local Radio Ownership Rules. By relying on Nielsen Audio Metro markets, where available, the revised NBCO Rule is susceptible to similar manipulation by parties; accordingly, the Commission will apply the procedures adopted in the context of the Local Radio Ownership Rule to the adopted NBCO Rule. Specifically, for purposes of this rule, a radio station will be counted as part of the Nielsen Audio Metro market in which the station's community of license is geographically located and any other Nielsen Audio Metro market in which the station is listed by BIA as home to that market. This approach will ensure that a radio station is considered to be part of each Nielsen Audio Metro market in which that station is either geographically located or competes. The Commission believes Nielsen's determination of a radio market's boundaries is useful in considering whether particular communities rely on the same media voices. The Commission believes that such a determination, combined with the actual service areas of the respective facilities, gives a stronger picture of the relevant market and instances in which the Commission should prohibit common ownership. Therefore, the
100. For the reasons expressed in the
101. Consistent with its proposal in the
102. The Commission adopts failed/failing criteria consistent with those proposed in the
103. Because the Commission is creating an exception to the NBCO Rule, rather than a waiver opportunity, applicants seeking a failed/failing entity exception need not show, either at the time of their application or during subsequent license renewals, that the tangible and verifiable public interest benefits of the combination outweigh any harms. As the Commission has concluded that the exception serves the public interest in diversity simply by preserving a media outlet, licensees need not demonstrate that the additional benefits outweigh the potential harms. Recognizing that an absolute ban on newspaper/broadcast cross ownership is overly broad, the Commission believes providing greater flexibility and certainty in the context of this rule is appropriate. Thus, the Commission believes a clear exception to the rule for failed and failing entities, rather than a waiver requiring a balancing of the harms and benefits, is appropriate to provide certainty for relief, as the Commission believes such combinations will have a minimal impact on viewpoint diversity.
104. Consistent with the tentative conclusion in the
105. Therefore, consistent with other efforts to ease the rule's application, the Commission provides for the consideration of waiver requests of the NBCO Rule on a case-by-case basis. The Commission believes a case-by-case waiver approach will produce sensible outcomes and also improve transparency and public participation in the process. To facilitate public participation further, the Commission will require television and radio licensees to file a request for waiver of the NBCO Rule before consummating the acquisition of a newspaper, rather than at the time of the station's license renewal. As the Commission explained in the
106. With regard to the two case-by-case options described in the
107. The Commission recognizes that a case-by-case approach with presumptive guidelines, such as the one described in the
108. In addition, the Commission disagrees with Cox that a pure case-by-case approach is necessarily a retreat from a presumptive waiver standard. Rather, a pure case-by-case approach lifts the potential burden of having to overcome a negative presumption. Regardless, the Commission's intent in choosing a pure case-by-case approach over a presumptive waiver standard is not to increase or decrease the number of waiver approvals; it is to increase the likelihood of achieving the proper result in each individual case. Applying presumptive criteria can work well in other contexts and for other rules, but, under the current record and given the nature of viewpoint diversity and its dependency on the particular facts and circumstances of a specific market, the Commission finds that a pure case-by-case approach is best suited for handling requests for waiver of this rule.
109. The Commission also disagrees with Cox that a pure case-by-case approach is the equivalent of not having a waiver standard. To be clear, the Commission's standard requires applicants seeking a waiver of the NBCO Rule to show that their proposed combination would not unduly harm viewpoint diversity in the local market. The pure case-by-case approach describes the method by which the Commission will determine whether this standard is met. The method of examining the totality of the circumstances may entail a broad review, but the standard to be met is narrowly focused on the impact on viewpoint diversity. The Commission anticipates that the precedent that evolves from future waiver decisions will provide further guidance to entities considering a merger.
110. The Commission clarifies that this waiver standard is distinct from the traditional waiver standard under section 1.3, which requires a showing of good cause and applies to all Commission rules. By specifically allowing for a waiver of the NBCO Rule in cases where applicants can demonstrate that the proposed combination will not unduly harm viewpoint diversity, the Commission signals its recognition that there may be instances where enforcing the prohibition against ownership of a newspaper and broadcast station is not necessary to serve the rule's purpose of promoting viewpoint diversity in the local market. Indeed, the Commission's determination herein is that the public interest would not be served by restricting specific combinations that do not unduly harm viewpoint diversity. While in the context of section 1.3 waiver requests the Commission has considered showings of undue hardship, the equities of a particular case, or other good cause, in this particular context an applicant is
111.
112. The Commission will grandfather, to the extent required, any existing newspaper/broadcast combinations that no longer comply with the NBCO Rule as a result of the changes to the scope of the rule. In addition, as stated in the
113. The Commission has declined to adopt the potential rule changes that commenters argue could lead to increased consolidation to the possible detriment of minority- and women-owned businesses. Instead, the adopted rule generally prohibits common ownership of a broadcast station and daily newspaper in the same local market but provides for a modest loosening of the previous ban on cross-ownership through revisions to the rule's geographic scope, creation of an exception for failed/failing entities, and adoption of a viewpoint diversity-based waiver standard. The Commission does not believe that these modest revisions are likely to result in significant new combinations, nor does the record establish that significant demand exists for newspaper/broadcast combinations; indeed, the trend is in the opposite direction, as cross-owned combinations are being severed. Moreover, as discussed in the
114. Ultimately, while the Commission adopts the revised NBCO Rule based on its viewpoint diversity goal, and not with the purpose of preserving or creating specific amounts of minority and female ownership, the Commission finds that this rule nevertheless helps to promote opportunities for diversity in broadcast television and radio ownership. The rule helps to increase the likelihood of a variety of viewpoints and to preserve potential ownership opportunities for new voices.
115. The Radio/Television Cross-Ownership Rule prohibits an entity from owning more than two television stations and one radio station within the same market, unless the market meets the following size criteria. The rule applies only to commercial stations. If at least 10 independently owned media voices would remain in the market post-merger, an entity may own up to two television stations and four radio stations. If at least 20 independently owned media voices would remain in the market post-merger, an entity may own either: (1) Two television stations and six radio stations, or (2) one television station and seven radio stations. In all instances, entities also must comply with the local radio and local television ownership limits. The market is determined by looking at the service contours of the relevant stations. The rule specifies how to count the number of media voices in a market, including television stations, radio stations, newspapers, and cable systems.
116. After consideration of the full record, including the further comments received in response to the
117. The Commission concludes that the Radio/Television Cross-Ownership Rule should be retained because it finds that radio stations are meaningful contributors to viewpoint diversity within their communities. The Commission finds that broadcast radio and television stations are valuable mediums for viewpoint expression such that losing a distinct voice through additional consolidation could disserve the public interest. The Commission recognizes that the current rule permits a degree of common ownership, especially in larger markets, but that latitude is not a sufficient reason to ignore the potential harms to viewpoint diversity that may result from further consolidation. The Commission believes that a significant risk of harm exists in potentially reducing the number of diverse and antagonistic information sources within a market. Therefore, the Commission retains the Radio/Television Cross-Ownership Rule, with modifications limited to updating its obsolete references to analog television service contours, to protect viewpoint diversity in local markets. Consistent with Commission analysis in the NBCO context, it finds that Radio/Television Cross-Ownership Rule is not necessary to promote competition or localism in local markets. In the
118.
119. As acknowledged in the
120. Finally, the Commission asked in the
121.
122. The first of these modifications updates the television contour used to determine when the rule is triggered. The digital PCC, as defined in § 73.625 of the Commission's rules, will replace the analog Grade A contour when assessing whether a television station's contour encompasses a radio station's community of license. This change is consistent with the Commission's replacement of the Grade A contour for purposes of the NBCO Rule. Additionally, as stated in the
123. The second modification updates the use of a television station's Grade B contour for purposes of determining how many media voices would remain in a market following a station acquisition. A television station's digital NLSC, the digital approximate of the Grade B contour, will replace that analog measurement. Therefore, the Commission will count as media voices those independently owned and operating full-power broadcast television stations within the DMA of the television station's (or stations') community (or communities) of license that have digital NLSCs that overlap with the digital NLSC(s) of the television station(s) at issue. This digital NLSC substitution is consistent with the Commission's replacement of the Grade B contour in the Local Television Ownership Rule.
124.
125.
126. Based on the record compiled in the 2010 and 2014 Quadrennial Review proceedings, the Commission finds that the Dual Network Rule, which permits common ownership of multiple broadcast networks but prohibits a merger between or among the top-four networks (specifically, ABC, CBS, Fox, and NBC), continues to be necessary to promote competition and localism and should be retained without modification. The rule provides that a television broadcast station may affiliate with a person or entity that maintains two or more networks of television broadcast stations
127.
128. The Commission finds that the top-four broadcast networks continue to attract primetime audiences that are more consistent and larger than those achieved by other broadcast or cable networks, as measured both by the audience size for individual programs and by the audience size for each network as a whole. The primetime entertainment programming supplied by the top-four broadcast networks generally is designed to appeal to a mass audience, and financing such programming on the scale needed for a consistent primetime lineup, in turn, requires investment of substantial revenues that only a consistently large, mass audience can provide. Thus, the primetime entertainment programming that the top-four networks provide to their affiliated local stations is intended to attract on a regular basis both mass audiences and the advertisers that want to reach them. This is in contrast to other broadcast networks, and many cable networks, which tend to target more specialized, niche audiences. Due to their targeted approaches, programming on these networks attracts smaller audiences than the top-four networks.
129. The Commission notes that in recent years some cable networks may have modified their primetime lineups to more closely resemble those of broadcast networks and that some online video providers have started offering original programming that may also attract sizable audiences. Nonetheless, at this time the Commission does not believe that cable networks or online providers have assembled a platform of programming that is consistently of the same broad appeal and audience share, on the whole, as the primetime entertainment programming provided by the top-four broadcast networks.
130. Commission staff review of more recent data shows that, while certain cable networks have continued to air a discrete number of individual programs or episodes that have become increasingly capable of attracting primetime audiences on par with, or even greater than, the top-four broadcast networks, no one cable network—let alone several—has been able to consistently deliver such audiences beyond individual programs or episodes.
131. This conclusion is also supported by data on the average primetime audience size of individual broadcast and cable networks, as measured at the network level. Even though an increasing number of individual cable primetime entertainment programs or episodes have achieved audiences of a similar size to their broadcast network counterparts, on average the primetime audience size for each of the top-four broadcast networks has remained significantly larger than the audience size for even the most popular cable networks. Accordingly, the Commission concludes that the primetime entertainment programming provided by the top-four broadcast networks continues to be a distinct product capable of attracting large audiences of a size that individual cable networks cannot consistently replicate, despite the ability of a few primetime cable network programs to achieve similarly large audiences on an individual basis.
132. In addition, there continues to be a wide disparity in the advertising rates earned by the top-four broadcast networks and the advertising rates charged by other broadcast and cable networks, which further indicates that the top-four broadcast networks are distinct from other networks.
133. Data on net advertising revenues provide further indication that the top-four broadcast networks are particularly appealing to advertisers seeking consistent, large national audiences. The Commission finds that the data further support its conclusion that the top-four broadcast networks comprise a strategic group in the national advertising marketplace and compete largely among themselves for advertisers that seek to reach large, national mass audiences consistently.
134. Therefore, the Commission retains the existing Dual Network Rule without modification to promote competition in the sale of national advertising time. The Commission also agrees with comments that the rule remains necessary to promote competition in the marketplace for primetime programming. Specifically, the Commission finds that the top-four broadcast networks have a distinctive ability to attract, on a regular basis, larger primetime audiences than other broadcast and cable networks, which enables them to earn higher rates from those advertisers that are willing to pay a premium for such audiences. Thus, a combination between two top-four broadcast networks would reduce the choices available to advertisers seeking large, national audiences, which could substantially lessen competition and lead the networks to pay less attention to viewer demand for innovative, high-quality programming. The Commission therefore concludes that the primetime entertainment programming provided by the top-four broadcast networks and national television advertising time are each distinct products—the availability, price, and quality of which could be restricted, to the detriment of consumers, if two of the top-four networks were permitted to merge. Accordingly, the Commission finds that the Dual Network Rule remains necessary to foster competition in the sale of national television advertising time and the provision of primetime entertainment programming.
135.
136. In the context of this complementary network-affiliate relationship, the Commission agrees with network affiliate commenters that
137.
138.
139. In addition to assessing each of the broadcast ownership rules subject to quadrennial review pursuant to Section 202(h), the Commission is considering in this proceeding the Third Circuit's remand of the Commission's 2008
140. The
141. This action does not, of course, preclude Commission consideration of other or additional eligibility standards that have been put forward as means to promote minority and women ownership of broadcast stations. The Commission has carefully studied the record, and the evidence does not establish a basis for race-conscious remedies. Thus, the Commission does not believe that such measures would withstand review under the equal protection component of the Due Process Clause of the Constitution. The Supreme Court held in
142.
143. The Commission and Congress previously adopted race- and gender-conscious measures intended specifically to assist minorities and women in their efforts to acquire broadcast properties, such as tax certificates and distress sale policies. Following the
144.
145.
146.
147.
148.
149. The Commission recognizes, however, that no one study, including the
150.
151. To improve the quality of its broadcast ownership data, the Commission adopted several significant changes to Form 323 in the
152. In addition, the Commission revised Form 323-E to collect race, gender, and ethnicity information for attributable interest holders; to require that CORES FRNs or Restricted Use FRNs be used; and to conform the biennial filing deadline for NCE station ownership reports to the biennial filing deadline for commercial station ownership reports. Together, the further enhancements that the Commission adopted in the
153.
154.
155. In addition, the Media Bureau hosted an all-day public workshop in September 2015 to assist individuals and organizations that wish to use and study the large amount of broadcast ownership data that is available to the public on the Commission's Web site. The workshop addressed a number of topics concerning access to, and use of, the Commission's commercial broadcast ownership data, including relevant data that the Commission collects, how members of the public can access those data, and mechanisms for querying, studying, and visualizing the data, including in combination with data available from non-FCC sources. The workshop, a video of which is available online, provides researchers with the tools and understanding to electronically search, aggregate, and cross reference the data to prepare their own analysis.
156. The Commission concludes that its prior revenue-based eligible entity definition should be reinstated and applied to the regulatory policies set forth in the
157. The Commission concludes that the revenue-based eligible entity standard is a reasonable and effective means of promoting broadcast station ownership by small businesses and potential new entrants. The Commission
158. Moreover, the Commission concludes that its traditional policy objectives will be served by enhancing opportunities for small business participation in the broadcast industry via the eligible entity standard. The Commission continue to believe that enabling more small businesses to participate in the broadcast industry will encourage innovation and promote competition and viewpoint diversity. As the Commission has noted previously in the
159. The record supports these conclusions. Commenters, including AWM and NAB, agree that re-adopting the revenue-based eligible entity standard is an appropriate means of enhancing ownership opportunities for small businesses and new entrants. Although public interest commenters criticize the Commission's proposal to reinstate the revenue-based standard, they also acknowledge the data cited in the
160. The Native Public Media and the National Congress of American Indians (NPM/NCAI) argue that, pending further action on a race- and gender-conscious eligible entity standard, the Commission can take another significant step towards overcoming the underrepresentation of Native Americans in broadcast station ownership by expanding the definition of eligible entity to include Native Nations. The Commission does not believe expanding its revenue-based eligible entity definition to include Tribes and Tribal Applicants to enable more small businesses to participate in the broadcast industry is necessary. Moreover, as NPM/NCAI point out, the Commission has adopted measures in a separate proceeding that are intended to expand broadcast opportunities for Tribal Nations and Tribal entities. To the extent that their proposal is intended to increase broadcast service to Tribal lands, the Commission believes it is outside the scope of this quadrennial review proceeding. The Commission notes that, in a proceeding concerning rural radio, the Commission adopted a Tribal Radio Priority to expand the number of radio stations owned or majority controlled by federally recognized American Indian Tribes and Alaska Native Villages, or Tribal consortia, broadcasting to Tribal lands.
161. The Commission's decision to reinstate the revenue-based eligible entity standard is also supported by the Commission's own records, which indicate that a significant number of broadcast licensees and permittees availed themselves of policies based on the revenue-based eligible entity standard between the implementation of that standard and its suspension following
162. The data clearly suggest that providing additional time to construct broadcast facilities has facilitated market entry by small broadcasters. Further, the Commission notes that the data reflect the use of the prior eligible entity standard in a limited context and do not reflect the total number of applicants and permittees that benefited from all the various broadcast policies that relied on the revenue-based eligible entity standard. Even so, this information supports the Commission's conclusion that the revenue-based eligible entity standard has been used successfully by a significant number of small firms and has not only aided their entry, but also contributed to the sustained presence of small firms in broadcasting in furtherance of the Commission's public interest goals.
163. In addition to reinstating the revenue-based eligible entity standard, the Commission believes applying the standard to the full range of construction, licensing, transaction, and auction measures to which it previously applied is in the public interest. Commenters that have argued against reinstatement have done so based on whether the measures will specifically increase minority and female ownership of broadcast stations, which has no bearing on whether the measures will promote small business participation in the broadcast industry. Accordingly, the Commission hereby re-adopts each measure relying on this definition that was remanded in
164. Consistent with the Commission's pre-existing eligible entity definition, the Commission defines an eligible entity as any entity—commercial or noncommercial—that would qualify as a small business consistent with SBA standards for its industry grouping, based on revenue. As the Commission previously held, going forward it will include both commercial and noncommercial entities within the scope of the term eligible entity to the extent that they otherwise meet the criteria of this standard. In the
165. The Commission's adoption of a revenue-based definition of eligible entity to promote small business participation in the broadcast industry does not, of course, preclude the Commission from considering whether to adopt an additional standard designed specifically to promote minority and female ownership of broadcast stations.
166. However, the Commission declines to adopt an SDB eligibility standard or other race- or gender-conscious eligible entity standard. While the Commission finds that a reviewing court could find the Commission's interest in promoting a diversity of viewpoints over broadcast media compelling, the Commission does not believe that the record evidence sufficiently demonstrates that adoption of race-conscious measures would be narrowly tailored to further that interest. In particular, the Commission finds that the evidence in the record, including the numerous studies that have been conducted or submitted, does not demonstrate a connection between minority ownership and viewpoint diversity that is direct and substantial enough to satisfy strict scrutiny. The two recent studies that directly address the impact of minority ownership on viewpoint diversity, Media Ownership Studies 8A and 8B, find almost no statistically significant relationship between such ownership and their measure of viewpoint diversity. Other studies in the record examine the relationship between minority ownership and other aspects of the Commission's diversity goal, such as programming or format diversity, rather than the viewpoint diversity that the Supreme Court has recognized as an interest of the highest order and that the Commission believes is most central to First Amendment values. Many of the studies, too, demonstrate at most a limited relationship between minority ownership and other aspects of the Commission's diversity goal.
167. In addition, the Commission does not believe that the record evidence establishes a sufficiently strong relationship between diversity of viewpoint and female ownership of broadcast stations that would satisfy the constitutional standards for gender-based classifications. The Commission finds that the evidence in the record does not reveal that the content provided via women-owned broadcast stations substantially contributes to viewpoint diversity in a manner different from other stations or otherwise varies significantly from that provided by other stations. Because the studies in the record do not indicate that increased female ownership will increase viewpoint diversity, the Commission believes that they do not provide a rationale for adopting gender-based diversity measures.
168. Moreover, the Commission does not believe that the record evidence is sufficient to establish a compelling interest in remedying past discrimination. The Commission finds that no evidence exists in the record demonstrating a statistically significant disparity between the number of minority- and women-owned broadcast stations and the number of qualified minority- and women-owned firms, and the Commission lacks a plausible way to determine the number of qualified firms owned by minorities and women. The Commission believes that it cannot demonstrate a compelling interest in remedying discrimination in the Commission's licensing process in the absence of such evidence. Because the only statistical evidence in the record pertains to discriminatory access to capital and the rest is anecdotal evidence that is of more limited value for purposes of satisfying heightened scrutiny, the Commission finds that the record evidence of past discrimination in the broadcast industry—both by the Commission itself and by private parties with the Commission acting as a passive participant—is not nearly as substantial as that accepted by courts in other contexts as satisfying strict scrutiny. Based on its evaluation of the record evidence, the Commission also concludes that it is not of sufficient weight to support gender-based remedial action. Accordingly, the Commission cannot adopt rules that explicitly rely on race or gender. The
169.
170. Assuming a reviewing court could be convinced that diversity of viewpoint is a compelling governmental interest, the Commission finds that the record in this proceeding fails to satisfy the second prong of the strict scrutiny test,
171. The Commission's narrow tailoring analysis included a discussion of relevant judicial precedent, and its tentative findings were based on a careful reading of that precedent, taken as a whole, and its assessment of the body of evidence in this proceeding. The Commission finds no reason in the present record to depart from that analysis. Other commenters suggest additional topics that they believe the Commission should study but do not propose specific, executable studies or claim that the additional inquiries they propose would establish the requisite nexus between minority ownership and viewpoint diversity.
172. Moreover, while the Commission finds that the
173. Some commenters disagree with the Commission's analysis of case law involving judicial review of race-based classifications, but they do not cite any precedent that the Commission did not consider in the
174. In addition, the Commission continues to believe that implementing a program for awarding or affording preferences related to broadcast licenses based on the individualized review that the Supreme Court has required under strict scrutiny would pose a number of significant administrative and practical challenges for the Commission and would not be feasible. As explained in the
175.
176.
177. In response to the
178. Similarly, the Commission concludes that, although it has studied extensively the question, no strong basis exists in evidence of discrimination in the award of broadcast licenses or other discrimination in the broadcast industry in which the government has actively or passively participated that would satisfy the constitutional standards that apply to race- or gender-based remedial measures. Less evidence is required for gender-based measures than for race-based measures, although an exceedingly persuasive justification is still necessary. The question of whether governmental participation is required is unsettled. Some courts have held that private discrimination need not be linked to governmental action under intermediate scrutiny. As discussed in this section, the Commission also concludes that the record evidence is not of sufficient weight to support gender-based remedial action. In the
179. The Commission disagrees with the assertion that it raised the bar in its remedial interest tentative conclusions and that it incorrectly rejected or ignored evidence of discrimination in the broadcast industry. Rather than rejecting evidence because it does not prove that the Commission itself has engaged in discrimination, the
180. The Commission also disagrees with suggestions that it is legally permissible for the Commission to infer past discrimination based on the disparity between the number of minority- and women-owned broadcast stations and the number of minorities and women in the general population. As explained in the
181. Some commenters assert that the Commission is required to fund research to identify whether such disparities exist. According to these commenters, the Commission should refrain from making any tentative conclusions until its work is complete, including examining its own records and history to evaluate evidence to show that remedying past racial (or gender) discrimination is a compelling (or substantial) governmental interest. Based on its review of existing disparity studies, the Commission does not believe that is true. In particular, commenters identify no method of studying this question that would produce meaningful results in the broadcast context. For existing studies, often employed in government contracting cases, there is generally a ready database of minority or female contractors that are willing and able to perform a particular service—or an established methodology to identify such contractors—that can be compared to the number of such contractors that are actually engaged by the government. Indeed, in most industries one need not be a government contractor to operate a business that provides the services that the government seeks (
182. Several commenters state that the
183. Moreover, the Commission does not believe that any relevant statutory directive requires the adoption of race- or gender-conscious measures to promote ownership diversity. The Commission has previously determined that it has a general mandate to promote ownership diversity under section 257 of the 1996 Act and section 309(j) of the Act, which includes promoting ownership by small businesses, new entrants, and minority- and women-owned businesses. But this authority does not mandate specific outcomes or ownership levels or race- or gender-conscious action to foster diversity, nor does it permit the adoption of rules and policies that are not supported by the record or that conflict with the Constitution. Therefore, the Commission finds the suggestion that either the Third Circuit or the statute compels it to adopt race- or gender-conscious measures to be untenable. The Third Circuit ordered the Commission to make a final determination as to whether to adopt a new eligible entity definition (including consideration of SDB- and ODP-based definitions), and the Commission has done so. As discussed herein, the Commission continues to take significant steps to improve its ownership data and to promote ownership diversity, and its determination that it cannot take race- or gender-conscious action at this time does not mean that the Commission has failed to act appropriately in furtherance of its goal to promote ownership diversity.
184. Some commenters criticize the Commission based on their perception that the Commission has not made a substantial effort to gather evidence that would support race- and gender-conscious measures. Free Press notes that an analysis of ownership diversity would be useful even if it fell short of justifying race- and gender-based policies. One basic assessment that the Commission has not made is a study of the types of market and ownership structures that correlate with women's and people of color's entry into the market, success in the market, or exit from the market. The Commission disagrees and notes that it has made significant efforts to analyze issues of ownership diversity and market structure. Other public interest commenters assert that the Commission inappropriately places the burden of providing additional evidence on commenting parties without describing what it believes is necessary to withstand strict scrutiny. However, the Commission has not only commissioned a number of studies, none of which provided it a constitutional basis to take race- or gender-conscious action; it has also taken a number of steps to improve the quality of its broadcast ownership data and to facilitate future additional studies that commenters, academics, or others believe might provide a constitutional basis to adopt race- and gender-conscious measures. Further, the Commission has provided a detailed and thorough analysis of what is necessary to meet the relevant constitutional standards and identified the reasons it believes that, having studied the question, it does not have evidence that would allow it to meet those standards.
185. In addition, while some commenters have suggested study topics or broad research frameworks, none has provided actionable study designs that the Commission or private researchers could execute. The Commission has expended considerable time and effort throughout the course of this proceeding in an effort to create such study designs; and it has commissioned or performed a dozen studies that it was able to develop over the course of the proceeding. General calls to conduct
186. As discussed in the
187. Since the release of the
188. In the
189. The Commission does not believe that its concerns are addressed by the incubator program that NAB proposes, which would rely on an ODP standard to define the class of entities eligible to benefit from incubation. The Commission finds that the type of individualized consideration that would be required under an ODP standard would be administratively inefficient, unduly resource-intensive, and potentially inconsistent with First Amendment values. Therefore, limiting the incubator program in the manner that NAB suggests would not address the Commission's concern that implementation of an incubator program would pose administrative challenges, such as the need to monitor continually the complicated legal and financial agreements between broadcasters and the entities they seek to incubate. Other commenters that urge the Commission to adopt an incubator program similarly do not address the policy and practical concerns identified above. Therefore, the Commission declines to adopt an incubator program as proposed by NAB and others.
190. In the
191. The
192. The Commission has reviewed these proposals multiple times throughout the course of this proceeding. Those proposals that, based on Commission analysis, warranted additional consideration have been explored in relevant proceedings, such as the AM Revitalization Proceeding. However, upon review, the Commission determines that many of these proposals would be ineffective or insufficient to address the diversity issues under consideration in this proceeding. Despite multiple opportunities for comment, the record reflects little support for the majority of these proposals or evidence that would cause the Commission to reconsider its determination that these proposals warrant additional consideration or adoption. Accordingly, consistent with the tentative conclusion in the
193. In the
194. MMTC challenged the Commission's decision not to consider
195. Following the release of
196.
197.
198.
199.
200.
201. In response to the
202. The Commission believes it has acted to achieve the purposes of these proposals to the extent appropriate for the industry and the regulatory agency. As noted in the
203. With regard to the proposal to allow sellers to hold reversionary interests in Commission licenses in certain circumstances, the Commission previously noted that AWM's proposal does not address the Commission's historical concerns about reversionary interests and is insufficiently developed to warrant departure from the Commission's longstanding policy against the holding of such interests. The Commission has traditionally held that no right of reversion can attach to a broadcast license and that a station licensee is fully responsible for the conduct of the station and its operation in the public interest—a responsibility that cannot be delegated by contract. While NAB notes that it has previously urged the Commission to allow sellers to hold reversionary interests in certain circumstances, NAB does not address the specific concerns the Commission discussed in the
204. With this Order, the Commission brings transparency to the use of sharing agreements between independently owned commercial television stations. Through these agreements, competitive stations in a local market are able to combine certain operations, with effectively the same station personnel handling or facilities performing functions for multiple, independently owned stations. While such combined operations no doubt result in cost savings—savings that could be reinvested in improved programming and other public interest-promoting endeavors—the Commission has an obligation to ensure that these agreements are not being used to circumvent the Commission's broadcast ownership rules and are not otherwise inconsistent with the Commission's rules and policies. Specifically, the Commission adopts a comprehensive definition of SSAs and a requirement that commercial television stations disclose these agreements by placing them in the stations' online public inspection files. This method of disclosure will place a minimal burden on stations, while providing the public and the Commission with easy access to the agreements. Accordingly, the Commission finds that the benefits of this rule outweigh the minimal burdens associated with disclosure.
205. The Commission finds that commenters have raised meaningful concerns regarding the potential impact of sharing agreements involving
206.
207. To address concerns expressed by certain commenters, however, the Commission emphasizes that the adopted definition limits the scope of agreements to those that involve station-related services. The Commission also provides non-exhaustive examples in the definition for guidance, consistent with the proposal in the
208. Similarly, the Commission clarifies that ad hoc or on-the-fly arrangements during breaking news coverage are also outside the definition of SSAs. While such interactions may involve a station-related service, namely news-gathering, such informal, short-term arrangements are typically precipitated by unforeseen or rapidly developing events. Absent a covering agreement that facilitates such cooperation, the Commission does not believe that these types of interactions demonstrate that the stations are working together; rather, they are acting in a manner that allows each station to separately pursue its own ends (
209.
210. Accordingly, the Commission defines an SSA as any agreement or series of agreements, whether written or oral, in which (1) a station provides any station-related services, including, but not limited to, administrative, technical, sales, and/or programming support, to a station that is not directly or indirectly under common
211.
212. Moreover, the Commission's rules have long required that television and radio broadcast stations enable public inspection of certain documents to provide information both to the public and to the Commission about station operations. The public and the Commission rely on information about the nature of a station's operations and compliance with Commission rules to verify that a station is meeting its fundamental public interest obligations. The Commission has consistently found that disclosure requirements facilitate the Commission's regulatory purposes while imposing only a minimal burden on licensees.
213. Additionally, the Commission disagrees that it must first address the appropriate regulatory status of sharing agreements (
214. Furthermore, the Commission is not persuaded that the adopted disclosure requirement will discourage stations from entering into SSAs. First, the adopted method for disclosure minimizes the cost of compliance and utilizes a procedure with which commercial television broadcasters already have extensive experience. It cannot be credibly stated that the burden associated with disclosure would exceed the benefits of the agreements. Second, the Commission finds it instructive that no evidence exists showing that the disclosure requirements for JSAs and LMAs, specific types of SSAs, have inhibited the formation of those agreements. To the contrary, the Commission first required the public filing of television JSAs in 1999, and the prevalence of these agreements increased significantly after the disclosure requirement was adopted. Ultimately, the Commission does not find any evidence to support the contention that disclosure of SSAs would discourage stations from executing such agreements, particularly if the agreements are as beneficial as broadcast commenters contend.
215. Finally, the Commission rejects NAB's assertion that the SSA disclosure requirement would violate the First Amendment because the Commission is immersing itself in broadcasting stations' day-to-day operations. The cases cited by NAB in support of its theory are readily distinguishable from the adopted disclosure requirement, as neither case involves simply requiring disclosure of contracts relating to station operations. Contrary to NAB's claims, the Commission is not interfering with broadcasters' editorial discretion. Rather, the Commission is simply requiring that commercial television stations place certain contracts in their public file, just as the Commission has done numerous times in the past. In particular, the Commission is not restricting broadcasters' discretion to determine what content to offer, nor is the Commission mandating or prohibiting any particular contractual terms. Thus, the disclosure requirement does not burden broadcasters' speech. In particular, the Commission is not compelling broadcasters to express a message or viewpoint. Further, no evidence exists that previous disclosure requirements have resulted in such involvement. Indeed, the Commission has a long history of deferring to a licensee's good faith discretion in programming decisions—particularly news programming—and the Commission believes that the SSA disclosure requirement is consistent with this precedent. In this case, the Commission is not even proposing to regulate SSAs beyond the bare disclosure requirement.
216. NAB further argues that the disclosure requirement fails to satisfy the constitutional standards for regulations that require businesses to disclose factual information, stating that the agency must show that a substantial government interest exists that is directly and materially advanced by the restriction and that the restriction is narrowly tailored to achieve the government interest. On the contrary, even assuming that the disclosure requirement burdens broadcasters' speech to any extent (which the Commission concludes above is not the case), the requirement would be subject, at most, to rational basis review, which is the same standard that courts have applied to the Commission's ownership rules. Under this standard of review, a rule does not violate the First Amendment if it is a reasonable means of promoting the public interest in diversified mass communications.
217. The Commission's SSA disclosure requirement satisfies this standard. SSAs relate to a broadcast station's core operational functions and thus could have the effect of lessening competition, diversity, or localism by creating a commonality of interests. They could also have beneficial effects. Public interest commenters and broadcasters have conflicting viewpoints about whether SSAs should be deemed attributable for purposes of the Commission's ownership rules and whether they negatively or positively
218. The case law NAB cites in support of a higher standard of review concerns requiring a regulated entity to undertake new speech, and presents the question of whether a restriction on commercial speech, normally subject to intermediate scrutiny, satisfies the criteria for rational basis review under the exception applicable to compelled commercial speech that is strictly factual. Ultimately, NAB seems to be relying on
219. Finally, even assuming that the intermediate scrutiny standard of
220.
221. The Commission declines to adopt NAB's proposed alternative to require that stations submit an aggregate list of SSAs as part of the biennial ownership reports. The Commission agrees with comments that a mere list of agreements would be insufficient for the purpose the Commission seeks. Such a limited disclosure would not permit the public or the Commission to develop a full and complete understanding of SSAs and their impact on the broadcast television industry. Simply submitting a list of agreements would not provide the public or the Commission with any information about the nature and scope of the agreements, only that the agreements exist. While the prevalence of SSAs is of some importance, the terms of the agreements and their impact on station operations are far more critical to an analysis of the potential impact of SSAs on the Commission's rules and policy goals. In addition, disclosure only in biennial ownership reports would not result in timely disclosure of these agreements, which would frustrate continued efforts to study SSAs. Moreover, searching for SSAs disclosed in biennial ownership reports would be a more laborious task for the public and the Commission than searching the online public files. Indeed, a significant benefit of the online public file is that it improves public access to documents while minimizing burdens on stations. NAB's proposal ignores this significant benefit without identifying any meaningful benefits in return.
222.
223.
224. The Commission rejects NAB's argument that the redaction allowance will not be sufficient to protect broadcast stations' business interests because the disclosure of the mere existence of these agreements will provide useful information to competitors. All broadcasters have long been required to attach copies of transaction-related SSAs to a license assignment or transfer application, including placing the application and relevant agreements in the station's public inspection file until final action has been taken on the application. No evidence in the record indicates that this requirement has resulted in any competitive harm. In addition, the Commission notes that broadcast commenters have failed to provide evidence that the business interests of television broadcast stations have been inhibited by the adoption of the LMA and JSA disclosure requirements or that such interests are likely to be inhibited by the substantially similar SSA disclosure requirement adopted in this
225.
226.
227.
228. Finally, in response to the
229. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) of the possible significant economic impact on small entities of the policies and rules addressed in the
230.
231. Specifically, the
232. The
233. The
234. The
235. The
236. The
237. The
238. The
239.
240.
241. Additionally, the Commission has estimated the number of licensed commercial television stations to be 1,387. According to Commission staff review of the BIA/Kelsey, LLC's Media Access Pro Television Database on June 2, 2016, about 1,264 of an estimated 1,387 commercial television stations (or approximately 91 percent) had revenues of $38.5 million or less. The Commission has estimated the number of licensed noncommercial educational television stations to be 395.
242. The SBA defines a radio broadcasting entity that has $38.5 million or less in annual receipts as a small business. Census data for 2012 indicate that 3,187 radio broadcasting firms were in operation for the duration of that entire year. Of these, 3,134 had annual receipts of less than $25.0 million per year and 53 had annual receipts of $25.0 million or more per year. Based on this data and the associated size standard, the Commission concludes that the majority of such firms are small.
243. Further, according to Commission staff review of the BIA/Kelsey, LLC's Media Access Pro Radio Database on June 2, 2016, about 11,386 (or about 99.9 percent) of 11,395 commercial radio stations in the United States have revenues of $38.5 million or less. The Commission has estimated the number of licensed noncommercial radio stations to be 4,096. The Commission does not have revenue data or revenue estimates for these stations. These stations rely primarily on grants and contributions for their operations, so it will assume that all of these entities qualify as small businesses.
244. The Commission notes, however, that, in assessing whether a business concern qualifies as small under the SBA definition, business (control) affiliations must be included. The Commission's estimate, therefore, likely overstates the number of small entities that might be affected by its action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies.
245. In addition, an element of the definition of small business is that the entity not be dominant in its field of operation. The Commission is unable at this time to define or quantify the criteria that would establish whether a specific television or radio station is dominant in its field of operation. Accordingly, the estimate of small businesses to which rules may apply does not exclude any television or radio station from the definition of a small business on this basis and therefore may be over-inclusive to that extent. Also, as noted, an additional element of the definition of small business is that the entity must be independently owned and operated. The Commission notes that assessing these criteria in the context of media entities is difficult at times and the estimates of small businesses to which they apply may be over-inclusive to this extent.
246. The SBA has developed a small business size standard for the census category of Newspaper Publishers; that size standard is 1,000 or fewer employees. Census Bureau data for 2012 show that there were 4,466 firms in this category that operated for the entire year. Of this total, 4,378 firms had employment of 499 or fewer employees, and an additional 88 firms had employment of 500 to 999 employees. Therefore, the Commission estimates that the majority of Newspaper Publishers are small entities that might be affected by its action.
247.
248. As a result of these new or modified requirements, the Commission does not believe that small businesses will need to hire additional professionals (
249.
250. The Commission finds that the Local Television Ownership Rule, as modified, will continue to help ensure that local television markets do not become too concentrated and, by doing so, will allow more firms, including those that are small entities, to enter local markets and compete effectively. The
251. The
252. In several ways, the Commission's decisions regarding the NBCO Rule minimize the economic impact on small entities, namely small broadcasters and newspaper owners. First, retaining the prohibition on newspaper/broadcast combinations in local markets will help small entities compete on more equal footing with larger media owners that may have pursued consolidation strategies through cross-ownership. Second, by entertaining waiver requests on a pure case-by-case basis, taking into consideration the totality of circumstances surrounding a proposed transaction and the potential harm to viewpoint diversity, the Commission will have the flexibility to accord the proper weight to any factors that are particularly relevant for small media owners. The significant alternatives that the Commission considered, such as allowing combinations under either a bright-line rule or a presumptive waiver standard, would not have afforded the Commission the same degree of flexibility. Third, adopting a more lenient approach for proposed combinations involving a failed or failing broadcast station or newspaper will benefit entities in financial distress, which may be more likely to include small entities. Fourth, grandfathering existing combinations will avoid disruption of settled expectations of existing licensees and prevent any impact on the provision of service by smaller entities that are part of such combinations. Finally, requiring subsequent purchasers of grandfathered combinations to comply with the rule in effect at that time will provide opportunities for new entrants to acquire a divested media outlet.
253. By retaining the Radio/Television Cross-Ownership Rule, the Commission minimizes the economic impact on small entities. The Commission considered the significant alternative of eliminating the rule but concluded that it remained necessary to promote viewpoint diversity. Retaining the rule will benefit small broadcast stations by limiting the growth of existing combinations of radio stations and television stations in local markets. In addition, grandfathering existing combinations will avoid disruption of settled expectations of existing licensees and prevent any impact on the provision of service by smaller stations that are part of such combinations; requiring subsequent purchasers of grandfathered combinations to comply with the rule in effect at that time will provide opportunities for new entrants to acquire a divested media outlet. The Commission's decision also alleviates the concern expressed by commenters that further consolidation would harm small businesses because radio provides one of the few entry points into media ownership for minorities and women.
254. The Commission finds that the Dual Network Rule remains necessary to preserve the balance of bargaining power between the top-four networks and their affiliates, thus improving the ability of affiliates to exert influence on network programming decisions in a manner that best serves the interests of their local communities. The Commission believes that these benefits to affiliates are particularly important for small entities that may otherwise lack bargaining power.
255. The Commission finds that reinstating the revenue-based standard will help promote small business participation in the broadcast industry. The Commission believes that small-sized applicants and licensees benefit from flexible licensing, auctions, transactions, and construction policies. Often, small-business applicants have financing and operational needs distinct from those of larger broadcasters. By easing certain regulations for small broadcasters, the Commission believes that it will promote the public interest goal of making access to broadcast spectrum available to a broad range of applicants. The Commission also believes that enabling more small businesses to participate in the broadcast industry will help encourage innovation and expand viewpoint diversity. In addition, the Commission's intent in reinstating the previous revenue-based eligible entity definition—and in applying it to the construction, licensing, transaction, and auction measures to which it previously applied—is to expand broadcast ownership opportunities for new entrants, including small entities. Therefore, the Commission anticipates that these measures will benefit small entities, not burden them.
256. Although the Commission does not currently require the filing or disclosure of sharing agreements that do not contain time brokerage or joint advertising sales provisions, broadcasters are required to file many types of documents in their public inspection files. Therefore, broadcasters, including those qualifying as small entities, are well versed in the procedures necessary for compliance and will not be overly burdened with having to add SSAs to their public inspection files. In addition, the Commission considered various disclosure alternatives in the record, but determined that such measures would either be more burdensome than the disclosure method adopted in the
257. This Report and Order contains information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. The requirements will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies will be invited to comment on the information collection requirements contained in this proceeding. The Commission will publish a separate document in the
258. The Commission will send a copy of this Second Report and Order to the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
259. Accordingly,
260.
Radio, Reporting and recordkeeping requirements, Television.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 73 as follows:
47 U.S.C. 154, 303, 334, 336 and 339.
(e) * * *
(18)
(1) A station provides any station-related services, including, but not limited to, administrative, technical, sales, and/or programming support, to a station that is not directly or indirectly under common de jure control permitted under the Commission's regulations; or
(2) Stations that are not directly or indirectly under common de jure control permitted under the Commission's regulations collaborate to provide or enable the provision of station-related services, including, but not limited to, administrative, technical, sales, and/or programming support, to one or more of the collaborating stations. For purposes of this paragraph, the term “station” includes the licensee, including any subsidiaries and affiliates, and any other individual or entity with an attributable interest in the station.
(b)
(1) The digital noise limited service contours of the stations (computed in accordance with § 73.622(e)) do not overlap; or
(ii) At least 8 independently owned and operating, full-power commercial and noncommercial TV stations would remain post-merger in the DMA in which the communities of license of the TV stations in question are located. Count only those TV stations the digital noise limited service contours of which overlap with the digital noise limited service contour of at least one of the stations in the proposed combination. In areas where there is no DMA, count the TV stations present in an area that would be the functional equivalent of a TV market. Count only those TV stations digital noise limited service contours of which overlap with the digital noise limited service contour of at least one of the stations in the proposed combination.
(c) * * *
(1) * * *
(i) The predicted or measured 1 mV/m contour of an existing or proposed FM station (computed in accordance with § 73.313) encompasses the entire community of license of an existing or proposed commonly owned TV broadcast station(s), or the principal community contour(s) of the TV broadcast station(s) (computed in accordance with § 73.625) encompasses the entire community of license of the FM station; or
(ii) The predicted or measured 2 mV/m groundwave contour of an existing or proposed AM station (computed in accordance with § 73.183 or § 73.186), encompasses the entire community of license of an existing or proposed commonly owned TV broadcast station(s), or the principal community contour(s) of the TV broadcast station(s) (computed in accordance with § 73.625) encompass(es) the entire community of license of the AM station.
(3) * * *
(i) TV stations: Independently owned and operating full-power broadcast TV stations within the DMA of the TV station's (or stations') community (or communities) of license that have digital noise limited service contours (computed in accordance with § 73.622(e)) that overlap with the digital noise limited service contour(s) of the TV station(s) at issue;
(d)
(i) The predicted or measured 2 mV/m groundwave contour of the AM station (computed in accordance with § 73.183 or § 73.186) encompasses the entire community in which the newspaper is published and, in areas designated as Nielsen Audio Metro markets, the AM station and the community of publication of the newspaper are located in the same Nielsen Audio Metro market;
(ii) The predicted or measured 1 mV/m contour of the FM station (computed in accordance with § 73.313) encompasses the entire community in which the newspaper is published and, in areas designated as Nielsen Audio Metro markets, the FM station and the community of publication of the newspaper are located in the same Nielsen Audio Metro market; or
(iii) The principal community contour of the TV station (computed in accordance with § 73.625) encompasses the entire community in which the newspaper is published; and the community of license of the TV station and the community of publication of the newspaper are located in the same DMA.
(2) The prohibition in paragraph (d)(1) of this section shall not apply upon a showing that either the newspaper or television station is failed or failing.
Paragraphs (a) through (d) of this section will not be applied so as to require divestiture, by any licensee, of existing facilities, and will not apply to applications for assignment of license or transfer of control filed in accordance with § 73.3540(f) or § 73.3541(b), or to applications for assignment of license or transfer of control to heirs or legatees by will or intestacy, or to FM or AM broadcast minor modification applications for intra-market community of license changes, if no new or increased concentration of ownership would be created among commonly owned, operated or controlled media properties. Paragraphs (a) through (d) of this section will apply to all applications for new stations, to all other applications for assignment or transfer, to all applications for major changes to existing stations, and to all other applications for minor changes to existing stations that seek a change in an FM or AM radio station's community of license or create new or increased concentration of ownership among commonly owned, operated or controlled media properties. Commonly owned, operated or controlled media properties that do not comply with paragraphs (a) through (d) of this section may not be assigned or transferred to a single person, group or entity, except as provided in this Note, the Report and Order in Docket No. 02-277, released July 2, 2003 (FCC 02-127), or the Second Report and Order in MB Docket No. 14-50, FCC 16-107 (released August 25, 2016).
Paragraphs (b) through (e) of this section will not be applied to cases involving television stations that are “satellite” operations. Such cases will be considered in accordance with the analysis set forth in the Report and Order in MM Docket No. 87-8, FCC 91-182 (released July 8, 1991), in order to determine whether common ownership, operation, or control of the stations in question would be in the public interest. An authorized and operating “satellite” television station, the digital noise limited service contour of which overlaps that of a commonly owned, operated, or controlled “non-satellite” parent television broadcast station, or the principal community contour of which completely encompasses the community of publication of a commonly owned, operated, or controlled daily newspaper, or the community of license of a commonly owned, operated, or controlled AM or FM broadcast station, or the community of license of which is completely encompassed by the 2 mV/m contour of such AM broadcast station or the 1 mV/m contour of such FM broadcast station, may subsequently become a “non-satellite” station under the circumstances described in the aforementioned Report and Order in MM Docket No. 87-8. However, such commonly owned, operated, or controlled “non-satellite” television stations and AM or FM stations with the aforementioned community encompassment, may not be transferred or assigned to a single person, group, or entity except as provided in Note 4 of this section. Nor shall any application for assignment or transfer concerning such “non-satellite” stations be granted if the assignment or transfer would be to the same person, group or entity to which the commonly owned, operated, or controlled newspaper is proposed to be transferred, except as provided in Note 4 of this section.
An entity will not be permitted to directly or indirectly own, operate, or control two television stations in the same DMA through the execution of any agreement (or series of agreements) involving stations in the same DMA, or any individual or entity with a cognizable interest in such stations, in which a station (the “new affiliate”) acquires the network affiliation of another station (the “previous affiliate”), if the change in network affiliations would result in the licensee of the new affiliate, or any individual or entity with a cognizable interest in the new affiliate, directly or indirectly owning, operating, or controlling two of the top-four rated television stations in the DMA at the time of the agreement. Parties should also refer to the Second Report and Order in MB Docket No. 14-50, FCC 16-107 (released August 25, 2016).
Parties seeking waiver of paragraph (d)(1) of this section, or an exception pursuant to paragraph (d)(2) of this section involving failed or failing properties, should refer to the Second Report and Order in MB Docket No. 14-50, FCC 16-107 (released August 25, 2016).
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration |