Federal Register Vol. 81, No.231,

Federal Register Volume 81, Issue 231 (December 1, 2016)

Page Range86555-86904
FR Document

81_FR_231
Current View
Page and SubjectPDF
81 FR 86714 - Sunshine Act MeetingPDF
81 FR 86730 - Agency Information Collection Activities; Submission for OMB Review; Revision of Confidentiality Pledges Under the Confidential Information Protection and Statistical Efficiency ActPDF
81 FR 86697 - Initiation of Five-Year (“Sunset”) ReviewsPDF
81 FR 86730 - Sunshine Act MeetingPDF
81 FR 86775 - Advisory Committee on Transportation Equity Meeting NoticePDF
81 FR 86749 - Temporary Emergency Committee of the Board of Governors; Sunshine Act MeetingPDF
81 FR 86563 - Privacy Act RegulationsPDF
81 FR 86715 - Change in Bank Control Notices; Acquisitions of Shares of a Bank or Bank Holding CompanyPDF
81 FR 86714 - Formations of, Acquisitions by, and Mergers of Bank Holding CompaniesPDF
81 FR 86571 - Temporary Exports to Mexico Under License Exception TMPPDF
81 FR 86766 - Meeting of Advisory Committee on International Communications and Information PolicyPDF
81 FR 86765 - Notice of Meeting of the International Telecommunication Advisory Committee and Preparations for Upcoming International Telecommunications MeetingsPDF
81 FR 86768 - Agency Information Collection Activities: Requests for Comments; Clearance of Renewed Approval of Information Collection: Mitsubishi MU-2B Series Airplane Special Training, Experience, and Operating ProceduresPDF
81 FR 86770 - Agency Information Collection Activities: Requests for Comments; Clearance of Renewed Approval of Information Collection: Aviation Medical Examiners ProgramPDF
81 FR 86769 - Agency Information Collection Activities: Requests for Comments; Clearance of Renewed Approval of Information Collection: Reduction of Fuel Tank Flammability on Transport Category AirplanesPDF
81 FR 86768 - Applicability of National Environmental Policy Act (NEPA) to Federal Aviation Administration (FAA) Review of Airport Wildlife Hazard Management PlansPDF
81 FR 86769 - Agency Information Collection Activities: Requests for Comments; Clearance of Renewed Approval of Information Collection: Qualification, Service, and Use of Crewmembers and Aircraft DispatchersPDF
81 FR 86770 - Petition for Exemption; Summary of Petition Received; Western Oklahoma State CollegePDF
81 FR 86579 - Muscodor albus Strain SA-13 and the Volatiles Produced on Rehydration; Exemption From the Requirement of a TolerancePDF
81 FR 86711 - Comment Period Extended: General Permit Under the Federal Indian Country Minor NSR ProgramPDF
81 FR 86712 - Information Collection Request Submitted to OMB for Review and Approval; Comment Request; Notice of Supplemental Distribution of a Registered Pesticide ProductPDF
81 FR 86694 - Foreign-Trade Zone (FTZ) 279-Terrebonne Parish, Louisiana; Authorization of Production Activity; Thoma-Sea Marine Constructors, L.L.C. (Shipbuilding); Houma and Lockport, LouisianaPDF
81 FR 86710 - Clean Air Act Operating Permit Program; Action on Petition for Objection to State Operating Permit for Appleton Coated LLCPDF
81 FR 86713 - New Chemicals Review Program Under the Amended Toxic Substances Control Act; Notice of Public Meeting and Opportunity for Public CommentPDF
81 FR 86705 - Advanced Scientific Computing Advisory CommitteePDF
81 FR 86766 - Projects Rescinded for Consumptive Uses of WaterPDF
81 FR 86767 - Projects Approved for Consumptive Uses of WaterPDF
81 FR 86715 - Proposed Data Collection Submitted for Public Comment and RecommendationsPDF
81 FR 86581 - Quizalofop Ethyl; Pesticide TolerancesPDF
81 FR 86724 - Notice of Federal Competitive Coal Lease Sale, Greens Hollow Tract, Utah (Coal Lease Application UTU-84102)PDF
81 FR 86717 - National Vaccine Injury Compensation Program; List of Petitions ReceivedPDF
81 FR 86720 - Notice of Single-Award Deviation From Competition Requirements for the National Technical Resource Center for the Newborn Hearing Screening and Intervention Program at Utah State University-Grant Number U52MC04391PDF
81 FR 86732 - Tennessee Valley Authority; Browns Ferry Nuclear Plant, Units 1, 2, and 3PDF
81 FR 86771 - Application of Cargo Preference Requirements to the Federal Ship Financing ProgramPDF
81 FR 86691 - Notice of Public Meeting of the Wisconsin Advisory Committee for a Meeting To Begin Discussion of a Draft Report Resulting From the Committee's Study of Hate Crime in the StatePDF
81 FR 86691 - Notice of Public Meeting of the Illinois Advisory Committee for a Meeting To Discuss Preparations for a Public Hearing on Civil Rights and Voter Participation in the StatePDF
81 FR 86693 - Submission for OMB Review; Comment RequestPDF
81 FR 86701 - Correction to Notice of Initiation of Five-Year Sunset ReviewPDF
81 FR 86703 - Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Advance Notification of Sunset ReviewsPDF
81 FR 86694 - Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative ReviewPDF
81 FR 86701 - Certain Pasta From Turkey: Final Rescission of Antidumping Duty New Shipper Review; 2014-2015PDF
81 FR 86701 - Steel Concrete Reinforcing Bar From the Republic of Turkey: Postponement of Preliminary Determination in Countervailing Duty InvestigationPDF
81 FR 86687 - Fisheries of the Northeastern United States; Atlantic Deep-Sea Red Crab Fishery; 2017-2019 Atlantic Deep-Sea Red Crab SpecificationsPDF
81 FR 86692 - Submission for OMB Review; Comment RequestPDF
81 FR 86579 - Drawbridge Operation Regulation; New Jersey Intracoastal Waterway (NJICW), Point Pleasant Canal, Point Pleasant, NJPDF
81 FR 86706 - Commission Information Collection Activities (FERC-725V); Comment Request; ExtensionPDF
81 FR 86707 - WBI Energy Transmission, Inc.; Notice of Intent To Prepare an Environmental Assessment for the Planned Valley Expansion Project and Request for Comments on Environmental IssuesPDF
81 FR 86710 - Notice of Intent To File License Application, Filing of Pre-Application Document, and Approving Use of the Traditional Licensing ProcessPDF
81 FR 86706 - William B. Ruger, Jr., 169 Sunapee Street, LLC; Notice of Transfer of ExemptionPDF
81 FR 86704 - Agency Information Collection Activities; Submission to the Office of Management and Budget for Review and Approval; Comment Request; Grants to Charter Management Organizations for Replication and Expansion of High-Quality Charter Schools ProgramPDF
81 FR 86703 - Submission for OMB Review; Proposed Information Collection; Comment Request; Limited Access Death Master File Systems Safeguards Attestation FormsPDF
81 FR 86704 - Record of Decision for the Trinity Parkway From IH-35/SH-183 to US-175/SH-310 Environmental Impact Statement, Dallas County, TXPDF
81 FR 86765 - Nominations for Lead Authors or Review Editors on the First Special Report To Be Undertaken by the Intergovernmental Panel on Climate Change During the Sixth Assessment Report (AR6) CyclePDF
81 FR 86689 - Helena-Lewis and Clark National Forest, Montana; Helena-Lewis and Clark National Forest Plan RevisionPDF
81 FR 86709 - Clear Lake Cogeneration Limited Partnership; Notice of Petition for Temporary WaiverPDF
81 FR 86709 - Combined Notice of Filings #1PDF
81 FR 86722 - Agency Information Collection Activities: Submission to OMB for Review and Approval; Public Comment Request; The Division of Independent Review Grant Reviewer Recruitment FormPDF
81 FR 86721 - Agency Information Collection Activities: Submission to OMB for Review and Approval; Public Comment Request; Scholarships for Disadvantaged Students ApplicationPDF
81 FR 86723 - Endangered Species; Receipt of Applications for PermitPDF
81 FR 86764 - North Carolina Disaster Number NC-00086PDF
81 FR 86764 - Kansas Disaster Number KS-00098PDF
81 FR 86760 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change Relating To Listing and Trading of Shares of the Virtus Enhanced U.S. Equity ETF Under Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3)PDF
81 FR 86764 - Surrender of License of Small Business Investment CompanyPDF
81 FR 86762 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Tier Size Pilot of FINRA Rule 6433 (Minimum Quotation Size Requirements for OTC Equity Securities)PDF
81 FR 86750 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Allowing the Exchange To Trade Pursuant to Unlisted Trading Privileges for Any NMS Stock Listed On Another National Securities Exchange; Establishing Rules for the Trading Pursuant to UTP of Exchange Traded Products and Adopting New Equity Trading Rules Relating to Trading Halts of Securities Traded Pursuant to UTP on the Pillar PlatformPDF
81 FR 86759 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change To Amend the Continued Listing Requirements for Exchange-Traded ProductsPDF
81 FR 86749 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Designation of a Longer Period for Commission Action on Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change Relating to the Listing and Trading of Shares of BlackRock Government Collateral Pledge Unit Under NYSE Arca Equities Rule 8.600PDF
81 FR 86764 - Senior Executive Service: Performance Review Board MembersPDF
81 FR 86699 - 1,1,1,2-Tetrafluoroethane (R-134a) From the People's Republic of China; Amended Preliminary Affirmative Determination of Sales at Less-Than-Fair ValuePDF
81 FR 86664 - Air Plan Approval and Designation of Areas; KY; Redesignation of the Campbell County, 2010 1-Hour Sulfur Dioxide Nonattainment Area to AttainmentPDF
81 FR 86575 - FOIA Improvement Act; Rules of General ApplicationPDF
81 FR 86573 - Regulations Implementing the FOIA Improvement Act of 2016 and Clarifying the FOIA RegulationsPDF
81 FR 86902 - Federal Employees Health Benefits Program: Removal of Ineligible Individuals From Existing EnrollmentsPDF
81 FR 86898 - Removal of Eligible Family Members From Existing Self and Family EnrollmentsPDF
81 FR 86561 - Prevailing Rate Systems; Redefinition of Certain Appropriated Fund Federal Wage System Wage AreasPDF
81 FR 86555 - Recruitment, Selection, and Placement (General) and SuitabilityPDF
81 FR 86577 - Supplemental Information Regarding the Final Rule Imposing the Fifth Special Measure Against FBME Bank, Ltd.PDF
81 FR 86673 - Process for Department of Veterans Affairs (VA) Physicians To Be Added to the National Registry of Certified Medical ExaminersPDF
81 FR 86662 - Approval of California Air Plan Revisions, Yolo-Solano Air Quality Management DistrictPDF
81 FR 86633 - Proposed Amendment of VOR Federal Airways; Eastern United StatesPDF
81 FR 86570 - Amendment of Class C Airspace; El Paso International Airport, TXPDF
81 FR 86643 - Group Registration of PhotographsPDF
81 FR 86656 - Supplementary RegistrationPDF
81 FR 86634 - Group Registration of Contributions to PeriodicalsPDF
81 FR 86567 - Airworthiness Directives; Rolls-Royce plc Turbofan EnginesPDF
81 FR 86627 - Airworthiness Directives; ATR-GIE Avions de Transport Régional AirplanesPDF
81 FR 86771 - Notice of Opportunity for Public Comment on Disposal of 2.96 Acres of Airport Land at Laconia Municipal Airport in Gilford, NHPDF
81 FR 86614 - Supplemental Nutrition Assistance Program: Student Eligibility, Convicted Felons, Lottery and Gambling, and State Verification Provisions of the Agricultural Act of 2014PDF
81 FR 86725 - Cut-to-Length Carbon-Quality Steel Plate From India, Indonesia, and Korea; Institution of Five-Year ReviewsPDF
81 FR 86728 - Stainless Steel Wire Rod From India; Institution of a Five-Year ReviewPDF
81 FR 86774 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel CRACKER JACK; Invitation for Public CommentsPDF
81 FR 86586 - Review of Foreign Ownership Policies for Broadcast, Common Carrier and Aeronautical Radio LicenseesPDF
81 FR 86684 - Federal Motor Vehicle Safety StandardsPDF
81 FR 86630 - Airworthiness Directives; Rolls-Royce plc Turbofan EnginesPDF
81 FR 86778 - Protection of Stratospheric Ozone: New Listings of Substitutes; Changes of Listing Status; and Reinterpretation of Unacceptability for Closed Cell Foam Products Under the Significant New Alternatives Policy Program; and Revision of Clean Air Act Section 608 Venting Prohibition for PropanePDF

Issue

81 231 Thursday, December 1, 2016 Contents Agriculture Agriculture Department See

Food and Nutrition Service

See

Forest Service

Census Bureau Census Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 86692-86693 2016-28853 Centers Disease Centers for Disease Control and Prevention NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 86715-86717 2016-28874 Civil Rights Civil Rights Commission NOTICES Meetings: Illinois Advisory Committee, 86691-86692 2016-28861 Wisconsin Advisory Committee, 86691 2016-28862 Coast Guard Coast Guard RULES Drawbridge Operations: New Jersey Intracoastal Waterway, Point Pleasant Canal, Point Pleasant, NJ, 86579 2016-28852 Commerce Commerce Department See

Census Bureau

See

Foreign-Trade Zones Board

See

Industry and Security Bureau

See

International Trade Administration

See

National Oceanic and Atmospheric Administration

See

National Technical Information Service

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 86693-86694 2016-28860
Copyright Office Copyright Office, Library of Congress PROPOSED RULES Group Registration of Contributions to Periodicals, 86634-86643 2016-28700 Group Registration of Photographs, 86643-86656 2016-28706 Supplementary Registration, 86656-86662 2016-28701 Council Inspectors Council of the Inspectors General on Integrity and Efficiency RULES Privacy Act Regulations, 86563-86567 2016-28897 Defense Department Defense Department See

Engineers Corps

Education Department Education Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Grants to Charter Management Organizations for Replication and Expansion of High-Quality Charter Schools Program, 86704-86705 2016-28847 Energy Department Energy Department See

Federal Energy Regulatory Commission

NOTICES Meetings: Advanced Scientific Computing Advisory Committee, 86705-86706 2016-28877
Engineers Engineers Corps NOTICES Records of Decisions: Trinity Parkway Environmental Impact Statement, Dallas County, TX, 86704 2016-28844 Environmental Protection Environmental Protection Agency RULES Pesticide Tolerances: Quizalofop Ethyl, 86581-86586 2016-28873 Pesticide Tolerances; Exemptions: Muscodor Albus Strain SA-13 and Volatiles Produced on Rehydration, 86579-86581 2016-28884 Protection of Stratospheric Ozone: New Listings of Substitutes; Changes of Listing Status; and Reinterpretation of Unacceptability for Closed Cell Foam Products under Significant New Alternatives Policy Program; and Revision of Clean Air Act Section 608 Venting Prohibition for Propane, 86778-86895 2016-25167 PROPOSED RULES Air Quality State Implementation Plans; Approvals and Promulgations: California Air Plan Revisions, Yolo-Solano Air Quality Management District, 86662-86664 2016-28741 Kentucky; Redesignation of Campbell County, 2010 1-Hour Sulfur Dioxide Nonattainment Area to Attainment, 86664-86673 2016-28821 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Supplemental Distribution of Registered Pesticide Product, 86712 2016-28882 Clean Air Act Operating Permit Program; Petitions: Appleton Coated, LLC, 86710-86711 2016-28880 General Permit under Federal Indian Country Minor New Source Review Program, 86711-86712 2016-28883 Meetings: New Chemicals Review Program under Amended Toxic Substances Control Act, 86713-86714 2016-28878 Federal Aviation Federal Aviation Administration RULES Airworthiness Directives: Rolls-Royce plc Turbofan Engines, 86567-86570 2016-28663 Amendment of Class C Airspace: El Paso International Airport, TX, 86570-86571 2016-28726 PROPOSED RULES Airworthiness Directives: ATR—GIE Avions de Transport Regional Airplanes, 86627-86630 2016-28618 Rolls-Royce plc Turbofan Engines, 86630-86633 2016-27923 VOR Federal Airways: Eastern United States, 86633-86634 2016-28728 NOTICES Aeronautical Properties; Disposals: 2.96 Acres of Airport Land, Laconia Municipal Airport, Gilford, NH, 86771 2016-28544 Agency Information Collection Activities; Proposals, Submissions, and Approvals: Aviation Medical Examiners Program, 86770 2016-28889 Mitsubishi MU-2B Series Airplane Special Training, Experience, and Operating Procedures, 86768-86769 2016-28890 Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers, 86769 2016-28886 Reduction of Fuel Tank Flammability on Transport Category Airplanes, 86769-86770 2016-28888 Airport Wildlife Hazard Management Plans: Applicability of National Environmental Policy Act, 86768 2016-28887 Petitions for Exemption; Summaries: Western Oklahoma State College, 86770-86771 2016-28885 Federal Communications Federal Communications Commission RULES Review of Foreign Ownership Policies for Broadcast, Common Carrier and Aeronautical Radio Licensees, 86586-86613 2016-28198 Federal Election Federal Election Commission NOTICES Meetings; Sunshine Act, 86714 2016-29014 Federal Energy Federal Energy Regulatory Commission RULES Regulations Implementing FOIA Improvement Act of 2016 and Clarifying FOIA Regulations, 86573-86575 2016-28811 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 86706 2016-28851 Combined Filings, 86709 2016-28836 Environmental Assessments; Availability, etc.: WBI Energy Transmission, Inc., Valley Expansion Project, 86707-86709 2016-28850 License Applications: FFP Project 133, LLC, 86710 2016-28849 Petitions for Waivers: Clear Lake Cogeneration Ltd. Partnership, 86709-86710 2016-28837 Transfers of Exemptions: William B. Ruger, Jr.; 169 Sunapee Street, LLC, 86706-86707 2016-28848 Federal Motor Federal Motor Carrier Safety Administration PROPOSED RULES Process for Department of Veterans Affairs Physicians to be Added to National Registry of Certified Medical Examiners, 86673-86684 2016-28746 Federal Reserve Federal Reserve System NOTICES Changes in Bank Control Notices: Acquisitions of Shares of a Bank or Bank Holding Company, 86715 2016-28895 Formations of, Acquisitions by, and Mergers of Bank Holding Companies, 86714-86715 2016-28894 Financial Crimes Financial Crimes Enforcement Network RULES Special Measures: FBME Bank, Ltd., 86577-86579 2016-28752 Fish Fish and Wildlife Service NOTICES Endangered and Threatened Species: Permit Applications, 86723-86724 2016-28833 Food and Nutrition Food and Nutrition Service PROPOSED RULES Supplemental Nutrition Assistance Program: Student Eligibility, Convicted Felons, Lottery and Gambling, and State Verification Provisions of Agricultural Act, 86614-86627 2016-28520 Foreign Claims Foreign Claims Settlement Commission NOTICES Meetings; Sunshine Act, 86730 2016-28991 Foreign Trade Foreign-Trade Zones Board NOTICES Production Activity Authorizations: Thoma-Sea Marine Constructors, LLC (Shipbuilding), Houma and Lockport, LA, Foreign-Trade Zone 279, Terrebonne Parish, LA, 86694 2016-28881 Forest Forest Service NOTICES Environmental Impact Statements; Availability, etc.: Helena-Lewis and Clark National Forest, MT; National Forest Plan Revision, 86689-86690 2016-28838 Health and Human Health and Human Services Department See

Centers for Disease Control and Prevention

See

Health Resources and Services Administration

Health Resources Health Resources and Services Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Division of Independent Review Grant Reviewer Recruitment Form, 86722 2016-28835 Scholarships for Disadvantaged Students Application, 86721 2016-28834 Deviations from Competition Requirements: National Technical Resource Center for Newborn Hearing Screening and Intervention Program at Utah State University, 86720 2016-28866 Petitions: National Vaccine Injury Compensation Program, 86717-86720 2016-28868 Homeland Homeland Security Department See

Coast Guard

Industry Industry and Security Bureau RULES Temporary Exports to Mexico under License Exception TMP, 86571-86573 2016-28893 Interior Interior Department See

Fish and Wildlife Service

See

Land Management Bureau

International Trade Adm International Trade Administration NOTICES Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Advance Notification of Sunset Reviews, 86703 2016-28858 Certain Pasta from Turkey, 86701-86702 2016-28856 Initiation of Five-Year (Sunset) Reviews, 86697-86699 2016-28994 Initiation of Five-Year Sunset Reviews; Correction, 86701 2016-28859 Opportunity to Request Administrative Review, 86694-86697 2016-28857 Steel Concrete Reinforcing Bar from Republic of Turkey, 86701 2016-28855 Determinations of Sales at Less than Fair Value: 1,1,1,2-Tetrafluoroethane (R-134a) from People's Republic of China, 86699-86701 2016-28823 International Trade Com International Trade Commission RULES FOIA Improvement Act; Rules of General Application, 86575-86577 2016-28819 NOTICES Investigations; Determinations, Modifications, and Rulings, etc.: Cut-to-Length Carbon-Quality Steel Plate from India, Indonesia, and Korea; Institution of Five-Year Reviews, 86725-86728 2016-28494 Stainless Steel Wire Rod from India; Institution of Five-Year Review, 86728-86730 2016-28489 Justice Department Justice Department See

Foreign Claims Settlement Commission

Labor Department Labor Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Revision of Confidentiality Pledges under Confidential Information Protection and Statistical Efficiency Act, 86730-86732 2016-29009 Land Land Management Bureau NOTICES Competitive Coal Lease Sales: Greens Hollow Tract, UT, 86724-86725 2016-28869 Library Library of Congress See

Copyright Office, Library of Congress

Maritime Maritime Administration NOTICES Application of Cargo Preference Requirements to Federal Ship Financing Program, 86771-86774 2016-28863 Requests for Administrative Waivers of the Coastwise Trade Laws: Vessel CRACKER JACK, 86774 2016-28212 National Highway National Highway Traffic Safety Administration PROPOSED RULES Federal Motor Vehicle Safety Standards, 86684-86687 2016-28126 National Oceanic National Oceanic and Atmospheric Administration PROPOSED RULES Fisheries of the Northeastern United States: Atlantic Deep-Sea Red Crab Fishery; 2017-2019 Atlantic Deep-Sea Red Crab Specifications, 86687-86688 2016-28854 National Technical National Technical Information Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Limited Access Death Master File Systems Safeguards Attestation Forms, 86703-86704 2016-28846 Nuclear Regulatory Nuclear Regulatory Commission NOTICES Environmental Assessments; Availability, etc.: Tennessee Valley Authority, Browns Ferry Nuclear Plant, Units 1, 2, and 3, 86732-86749 2016-28865 Personnel Personnel Management Office RULES Prevailing Rate System: Redefinition of Certain Appropriated Fund Federal Wage System Wage Areas, 86561-86563 2016-28784 Recruitment, Selection, and Placement (General) and Suitability, 86555-86561 2016-28782 PROPOSED RULES Federal Employees Health Benefits Program: Removal of Ineligible Individuals from Existing Enrollments, 86902-86904 2016-28788 Removal of Eligible Family Members from Existing Self and Family Enrollments, 86898-86900 2016-28787 Postal Service Postal Service NOTICES Meetings; Sunshine Act, 86749 2016-28921 Securities Securities and Exchange Commission NOTICES Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc., 86762-86764 2016-28828 NASDAQ Stock Market, LLC, 86759-86760 2016-28826 NYSE Arca, Inc., 86749-86750, 86760-86762 2016-28825 2016-28830 NYSE MKT, LLC, 86750-86759 2016-28827 Small Business Small Business Administration NOTICES Disaster Declarations: Kansas; Amendment 2, 86764 2016-28831 North Carolina; Amendment 2, 86764-86765 2016-28832 Senior Executive Service: Performance Review Board Members, 86764 2016-28824 Surrender of License of Small Business Investment Companies: EDF Ventures II, LP, 86764 2016-28829 State Department State Department NOTICES Meetings: Advisory Committee on International Communications and Information Policy, 86766 2016-28892 International Telecommunication Advisory Committee, 86765 2016-28891 Requests for Nominations: Lead Authors or Review Editors on First Special Report to be undertaken by Intergovernmental Panel on Climate Change during Sixth Assessment Report Cycle, 86765 2016-28841 Susquehanna Susquehanna River Basin Commission NOTICES Projects Approved for Consumptive Uses of Water, 86767 2016-28875 Projects Rescinded for Consumptive Uses of Water, 86766 2016-28876 Transportation Department Transportation Department See

Federal Aviation Administration

See

Federal Motor Carrier Safety Administration

See

Maritime Administration

See

National Highway Traffic Safety Administration

NOTICES Meetings: Advisory Committee on Transportation Equity, 86775 2016-28965
Treasury Treasury Department See

Financial Crimes Enforcement Network

Separate Parts In This Issue Part II Environmental Protection Agency, 86778-86895 2016-25167 Part III Personnel Management Office, 86898-86900 2016-28787 Part IV Personnel Management Office, 86902-86904 2016-28788 Reader Aids

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.

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81 231 Thursday, December 1, 2016 Rules and Regulations OFFICE OF PERSONNEL MANAGEMENT 5 CFR Parts 330 and 731 RIN 3206-AN25 Recruitment, Selection, and Placement (General) and Suitability AGENCY:

U.S. Office of Personnel Management.

ACTION:

Final rule.

SUMMARY:

The U.S. Office of Personnel Management (OPM) is issuing a final rule revising its regulations pertaining to when, during the hiring process, a hiring agency can request information typically collected during a background investigation from an applicant for Federal employment. OPM is making this change to promote compliance with Merit System Principles as well as the goals of the Federal Interagency Reentry Council and the President's Memorandum of January 31, 2014, “Enhancing Safeguards to Prevent the Undue Denial of Federal Employment Opportunities to the Unemployed and Those Facing Financial Difficulty Through No Fault of Their Own.” In addition, the final rule will help agencies comply with the President's Memorandum of April 29, 2016, “Promoting Rehabilitation and Reintegration of Formerly Incarcerated Individuals.” The intended effect of this rule is to encourage more individuals with the requisite knowledge, skills, and ability to apply for Federal positions by making it more clear that the Government provides a fair opportunity to compete for Federal employment to applicants from all segments of society, including those with prior criminal histories or who have experienced financial difficulty through no fault of their own.

DATES:

Effective date: This final rule is effective January 3, 2017.

Compliance date: March 31, 2017. As discussed below, OPM recognizes that there are legitimate, job/position-related reasons why a hiring agency may need to determine suitability at an earlier stage in the employment process. As such, this rule allows agencies to request from OPM an exception to accommodate such circumstances. Requests for an exception must be submitted to OPM by the agency's Chief Human Capital Officer (or equivalent) at the agency headquarters level. To permit agencies time to request exceptions where appropriate, this rule will have a compliance date of March 31, 2017.

FOR FURTHER INFORMATION CONTACT:

Mr. Mike Gilmore by telephone on (202) 606-2429, by fax at (202) 606-4430, by TTY at (202) 418-3134, or by email at [email protected]

SUPPLEMENTARY INFORMATION:

On May 2, 2016, OPM issued a proposed rule at 81 FR 26173, to amend 5 CFR parts 330 and 731. Specifically, OPM proposed revisions to its regulations that would prohibit a hiring agency from making specific inquiries concerning an applicant's criminal or adverse credit background of the sort asked on the Optional Form (OF) 306, “Declaration for Federal Employment” in its “Background Information” section, or in other forms used to determine suitability or conduct background investigations for Federal employment, until the hiring agency has made a conditional offer of employment to the applicant. The proposed rule also allows agencies to request from OPM an exception to collect background information earlier in the hiring process. OPM recognizes there are legitimate, job/position-related reasons why a hiring agency may need to disqualify candidates with significant issues (including criminal history) from particular types of positions they are seeking to fill or to determine suitability at an earlier stage in the employment process. OPM received a total of 25 sets of comments: 17 from individuals, three from federal agencies, two from professional organizations, one from a trade association, one from a coalition of civic advocacy groups, and one from a private corporation. OPM's responses to the comments are discussed below.

Discussion of Comments Comments Generally Opposed to the Proposed Rule

Several individuals provided general comments opposing the proposed rule (two of these comments were not specific). These comments are as follows:

One individual commented that Federal agencies should always consider an applicant's criminal background, and that all job announcements should advise anyone with a conviction record not to apply. A second commenter likewise stated that all resumes for Federal employment be “unblemished” by criminal history. OPM is not adopting these suggestions.

While OPM agrees that Federal agencies must consider an applicant's criminal background as part of the suitability determination required for positions covered by part 731 of this chapter, agencies should not prohibit the consideration of applications from persons with conviction records during the selection process itself. Moreover, in most cases, the separate suitability determination can and should occur after the selection process and a conditional offer have been made, thereby separating criminal history as an aspect of the suitability determination from the factors that are relevant at the time of the initial assessment process. This aligns actual requirements with what we believe to be the predominant current practice, so that they better comport with the Merit System Principle stating that selection should be based solely on knowledge, skill, and ability, 5 U.S.C. 2301, and thus will encourage more individuals with the requisite knowledge, skills, and ability to apply for Federal positions.

There are some positions for which Federal statute bars the employment of persons convicted of certain offenses. There may also be circumstances where a clean criminal history record must itself be one of the qualifications for a particular position, in light of the duties to be performed, and, therefore, becomes part of the examination for testing applicants for appointment in the competitive service that the President (and, in turn, through presidential redelegation, OPM) is entitled to prescribe. 5 U.S.C. 3301, 3302, 3304; E.O. 10577, as amended. Where criminal history-based disqualifications have a disparate impact, the agency will need to be prepared to demonstrate that they are job-related and consistent with business necessity in order to defend its decisions from a challenge related to equal employment opportunity. Moreover, applicants cannot be found unsuitable on the basis of criminal conduct unless there is a nexus between that conduct and the efficiency of the service. Agencies have ample guidance relating to how to determine that nexus. Consistent with these principles, the proposed rule was intended to provide applicants from all segments of society, including those with prior criminal histories, a fair opportunity to compete for Federal employment.

One commenter stated that some applicants should be eliminated from consideration at the start of the hiring process based on the severity of their criminal offense, the nature of the offense vis-a-vis the duties of the position being filled, and whether the position being filled requires a security clearance. OPM agrees that certain positions may require inquiries into applicants' criminal or adverse credit history to be conducted at the start of the hiring process, and the proposed rule allows agencies to request an exception from OPM to accommodate such circumstances. But OPM cannot agree that it is appropriate, as a general rule, to eliminate applicants from consideration based upon their criminal history, before the assessment process has even occurred. The purpose of this rule is to defer the suitability process, where criminal history must and will be considered as part of an overall assessment of character and conduct, until after the assessment of relative knowledge, skills, and abilities that leads to selection of the best-qualified candidate and the conditional offer of employment. The suitability rules expressly provide for the nature of the position and the nature and seriousness of the offense to be taken into account as additional considerations during the suitability process. See 5 CFR 731.202(c). Permitting agencies to consider criminal history information in isolation, outside of the suitability process, could result in an initial selection process not exclusively based upon each candidate's qualifications and relative level of knowledge, skills, and ability with respect to the position. And it might result in non-selection without the procedural protections that a final suitability action provides, which is not ideal. Accordingly, OPM rejects this comment, in part.

Comments in Support of the Proposed Rule

A coalition representing criminal justice reform groups and civil and human rights advocates strongly supported the proposed rules, stating that when inquiries into criminal history are deferred until the conditional offer of employment, there is more clarity for the agency and the job applicant concerning the reason for a hiring decision based on a background check, and less opportunity for bias in the hiring process.

A professional association cast its general support for the proposed changes, noting that requesting criminal history information on the OF-306, Declaration for Federal Employment, only after a conditional offer of employment has been extended constituted “a sensible compromise” between promoting fair hiring practices and adhering to the suitability requirements pertaining to Federal employment. This organization also supported the proposal to allow OPM to grant limited exceptions to these rules on a position-by-positon basis. We note that OPM would characterize what it is doing not as a “compromise,” but rather as separating more clearly the process for assessing relative knowledge, skills, and abilities from the process for determining suitability for appointment to a position in a position covered by part 731 of this chapter.

Two individuals also provided comments in general support of the proposed rule.

Comments Pertaining to the Safety, Risk, Integrity of the Civil Service, and Hiring Efficiency

Three Federal agency commenters, one professional association, one trade association, and four members of the general public commented that the proposed rule would waste government resources, as well as applicants' time, because the hiring agency must begin the employment process but later may have to rescind a conditional offer of employment upon a determination that the applicant is ineligible for federal employment on the basis of suitability, security, facility access, or qualifications criteria. Some of these commenters noted that this could result in further delays because checks would then have to be performed on remaining candidates, or because other candidates would seek employment elsewhere due to the length of the hiring process. Some of these commenters expressed general concern that delaying applicant background screening could lengthen an already-lengthy Federal hiring process, and could have adverse effects on certain applicants with criminal histories by requiring them to proceed all the way through the application process before learning of their disqualification, and by giving them an unrealistic expectation of their prospects as candidates. In related comments, one individual stated that the proposal would make the federal hiring process more complex and cumbersome.

One of the commenters from a Federal agency had calculated that over 10 percent of its law enforcement applicants who go through its pre-employment screening process are ultimately removed from consideration based on factors such as criminal history, delinquent debt, susceptibility to coercion, illegal use of drugs, and immigration violations, so that deferring the screening process would result in a significant unnecessary expenditure of agency time and resources in examination and qualifications assessment. The agency noted that these expenditures are significant because of its unique, agency- and position-related requirements, including the agency's significant volume of vacancies and applicants; its pre-employment polygraph and medical examination requirements; its law enforcement and national security mission; and its need for its employees to credibly testify in criminal proceedings. Another agency commenter emphasized that the nature, seriousness, recency, and job-relatedness of certain criminal violations would almost certainly be disqualifying for certain positions under OPM's suitability regulations, making deferral of an unfavorable decision especially unfair. The agency cited specific criminal conduct that would render an applicant unsuitable for firefighter, educator, child care worker, motor vehicle operator, or financial/budget positions.

OPM acknowledges there may be instances in which an agency must rescind a job offer based on an applicant's criminal or adverse credit history, and then select another candidate, which could conceivably require that the agency screen and consider additional candidates in certain circumstances. But the commenters present no empirical evidence that changing the timing of background screening will have a general impact on time-to-hire, on the cost of background screening once it occurs, or on the efficiency of the Federal hiring process generally. As noted in the Notice of Proposed Rulemaking (81 FR at 26173), many agencies already wait until the later stages of the hiring process to collect criminal history information. We also note that these comments do not adequately take into account OPM's concern that early inquiries into an applicant's background, including his or her criminal or credit history, could have the effect of discouraging motivated, well-qualified individuals from applying for a Federal job because they have an arrest record, when the arrest did not result in a conviction or when, following a conviction, they have fully complied with the penalty and have been rehabilitated in the eyes of the law. This discouragement also could impose a cost on the hiring process, by presenting hiring officials with a less competitive candidate pool.

OPM does agree there may be limited circumstances or positions for which it is appropriate for a hiring agency to collect information about applicants' criminal or adverse credit history earlier in the hiring process, rather than at the point at which a conditional offer of employment is made to an applicant. The proposed rule allows for agencies to request an exception from OPM to accommodate such circumstances.

With respect to these commenters' concerns about fairness to applicants, the intent of the proposed rule is to conform regulatory requirements to what we believe is the predominant agency practice and thus better serve the broader public policy ideal of providing applicants from all segments of society, including those with prior criminal histories, a fair opportunity to compete for Federal employment. Deferring consideration of this information to the stage at which suitability is adjudicated separates examining and assessment process from suitability, thereby encouraging applicants with criminal history to join the competition for vacant positions. It also means that the agency defers collection of criminal history information until the stage at which the agency is in a position to undertake a suitability determination, which makes the final decision reviewable and provides certain procedural protections.

Two individuals commented that the proposed rule may have adverse national security implications because it could result in convicted felons having access to sensitive information. A third individual opposed the proposed rule and questioned the wisdom of hiring ex-offenders who may then have access to employees' personal information and to sensitive taxpayer records. OPM disagrees, noting that the proposed rule is not eliminating the need for, nor mitigating the thoroughness of, background investigations and appropriate related adjudicative processes for applicants for Federal jobs. The proposed rule simply impacts when during the hiring process inquiries into an applicant's criminal or adverse credit history can begin.

Another individual commented that delaying preliminary background screening could also delay the commencement of the full suitability background investigation required before appointment (or to finalize a contingent appointment) in the competitive service or the national security background investigation required to adjudicate eligibility for access to classified information. It is true that it could, in some cases, defer the commencement of the full investigation, but we believe, based upon earlier discussion with agencies, that most agencies already wait until the end of the selection process to commence those investigations. The proposed rule does not, in fact, change the current standard under 736.201(c) that a personnel background investigation may commence no later than the 14th day after placement, but that if the investigation is for a national security-sensitive position, it must both commence and be completed prior to appointment unless one of the waiver or exception conditions described in 5 CFR 1400.202 applies. The proposed rule is fully consistent with the requirement in E.O. 12968 of Aug. 4, 1995, governing investigations for eligibility for access to classified information, which provides that “[a]pplicants . . . required to provide relevant information pertaining to their background and character for use in investigating and adjudicating their eligibility for access” are those who have “received an authorized conditional offer of employment for a position that requires access to classified information.” E.O. 12968, 3 CFR, 1995 Comp., p. 391, secs. 1.1(b), 3.2(a), reprinted as amended in 5 U.S.C. 3161 note.

One commenter mistakenly believes the proposed rule will weaken background checks, and thus poses a threat to the security of Federal employees, the American people, and U.S. government assets and secrets. The proposed rule does not, in any way, change the need to collect background information after the conditional job offer has been made and to evaluate any known issues prior to appointment (or after an appointment that is contingent upon a favorable adjudication). Similarly, it does not impact the integrity or thoroughness of the background investigation process. The proposed rule only affects the point at which an agency may collect information about an applicant's criminal or adverse credit history.

Another individual believes the proposed rule will give the perception that the Federal government is establishing a hiring preference for ex-convicts or using Federal jobs as a relief-work or program for ex-convicts, which could demoralize the Government's workforce and discourage talented applicants from applying. This comment does not pertain to the merits of the rule but rather, expresses a concern that the rule will be misperceived to the detriment of the Federal hiring process. OPM believes that this concern is speculative. The proposed rule does not provide a hiring or selection priority for ex-convicts, nor does it allow individuals to be appointed who should be adjudicated unsuitable for Federal employment. Similarly, it has no bearing on whether an individual requires eligibility for access to classified information, and, if so, should be deemed eligible under the adjudicative guidelines for such decisions. The rule simply addresses at which point during the selection process an agency may make inquiries into an applicant's background, thereby helping to support a process where selections and conditional offers follow a fair and open competition based on applicants' relative knowledge, skill, and ability. In doing so, the rule is intended to attract all qualified applicants by making it more clear that, subject to certain exceptions, adverse background information will not be collected until after applicants' competencies are assessed, thereby reinforcing the notion that the Federal government is a model employer.

Three commenters supported deferring the collection of applicants' criminal history information until later in the hiring process, but proposed alternative approaches that they believed would achieve a better balance between fairness versus timeliness, and efficiency. A commenter from a Federal agency suggested the rule be modified to allow agencies to administer the OF-306 when an employee is determined to be within reach for selection. Another commenter from a Federal agency suggested that the rule be modified to allow agencies to administer the OF-306 at the time of scheduling an interview, i.e., after preliminary qualifications screening but before selection. A professional association recommended following an example from state government, of conducting criminal history screening after an interview as part of the final selection process. While all of these approaches have merit, OPM is not adopting them at this time because assessment instruments are not uniform across civil service examinations. Some examinations have an interview component while others do not; some employ multiple interviews. Permitting criminal history screening at the time of a conditional offer provides a uniform standard that is not dependent on the specific instruments that are being used in a competitive examination to assess applicant competencies.

Exception Based on Location or Type of Position

A professional organization commented that the process by which agencies may seek exceptions to collect information earlier in the process about applicants' criminal or credit history (on a case-by-case basis) could result in additional delays. OPM will provide further guidance after the publication of this final rule, but notes that an agency will not have to wait until it has a vacant position to request an exception. If there is a position or group of positions within the agency for which there is a legitimate need to collect information earlier in the process, the hiring agency may request an exception at any time. Once an agency receives an exception from OPM to collect background information from applicants for a particular position or group of positions earlier in the hiring process, the agency will not be required to request an exception subsequently, or each time, the position is being filled thereafter.

Another professional organization suggested that OPM make clear in the final rule that exceptions from the proposed changes must be requested prior to the posting of any vacancy announcement to which it will apply. Of course if an agency requests an exception on the ground that it is necessary to ask for certain background information as an aspect of determining whether a particular applicant is qualified for the position, then, the agency, of necessity, would be required to make that clear in advance of posting the job opportunity announcement. OPM agrees with this suggestion, however, even when the exception is to be requested in order to enable the agency to adjudicate suitability in advance, and has amended proposed 5 CFR part 330 subpart M accordingly.

This organization suggested OPM modify 5 CFR 330.1300 by including specific conditions under which OPM may grant an exception to these provisions. OPM is not adopting this suggestion. OPM is not yet in a position to anticipate all of the circumstances that could warrant an exception, and wishes to gain experience with the regulation, and explore further the sorts of situations agencies may bring to its attention, before it limits its discretion to a list of specific conditions. Therefore we prefer, at least for now, to provide examples of the types of factors OPM will consider in determining whether to grant an exception.

The same organization also suggested that the final rule include a provision requiring agencies which are granted an exception to provide notice of the exception in their job announcements for positions for which the exception was granted. OPM agrees that agencies which receive exceptions should provide notice of the exception in their job announcements. Among other things, an agency that receives an exception in order to use background information as an aspect of assessing qualifications will, of necessity, need to disclose the qualifications and how they will be assessed as part of the job opportunity announcement. We do not believe a requirement in the final rule is necessary; OPM will require notice in its approval letters granting such exceptions.

One commenter from an agency and one individual suggested that OPM, in the final rule, specifically exempt from these provisions positions with law enforcement and national security duties. We see no reason why an agency filling a position that is national security sensitive cannot defer the collection of background information until after a putative selection, based upon relative degree of knowledge, skills, and abilities, has been made. Many agencies already do this. Moreover, even as to law enforcement positions, OPM is not adopting this suggestion. Because specific duties and agency requirements may differ, we prefer to rely on the mechanism for exceptions described in the proposed rule which allows agencies to request an exception for specific positions to collect background information pertaining to an applicant's criminal or adverse credit history earlier in the hiring process.

A coalition representing criminal justice reform groups and civil and human rights advocates recommended that OPM permit no exception allowing agencies to collect information about applicants' criminal or adverse credit history prior to a conditional offer of employment. OPM is not adopting this suggestion. OPM leaves open the possibility that for certain positions there may be valid, job and position-related reasons why an agency may seek to disqualify applicants with significant criminal or adverse credit history backgrounds early in the process (such as law enforcement positions requiring the eventual appointee to be in a position to testify in legal proceedings). For these reasons OPM is retaining the exception provision.

The coalition commented that, in the event the exception provision is retained in the final rule, OPM should place the burden of proof on agencies seeking exceptions, should adjudicate requests under a rigorous standard of proof, and should give the public the opportunity to respond in opposition to an agency's request for exception. OPM does not adopt this suggestion. Currently, there are no limitations on the point at which agencies may initiate the collection of background information. The decision to impose the restriction is a policy decision, not a legal requirement. Accordingly, we do not believe that a uniform burden and standard of proof or a public notice-and-comment process is necessary or would assist us in our decision-making process, and it would be likely to unnecessarily delay the hiring process. The manner in which OPM grants exceptions must be flexible.

Other Comments

One agency commented that asking applicants whether they have been fired from a job, as is asked on the OF-306, in connection with competitive hiring is a valid question and that restricting employers from doing so before making a selection hinders the employer from fully evaluating applicants and choosing the best candidate. Another agency commented that it needs to use the OF-306 prior to a conditional offer of employment because it is not just a background screening form, but is also used to collect important applicant information related to an applicant's citizenship, Selective Service registration status, military service and type of discharge, and relatives. This information is needed to ensure that candidates meet legal requirements for appointment in competitive hiring. OPM agrees that inquiries into an applicant's prior employment may have a bearing on his or her fitness for the job and points out that the proposed rule does not restrict agencies from collecting information about an applicant's prior employment prior to making a selection. The context of the proposed rule is information of the sort asked on the OF-306's `Background Information' section specific to an applicant's criminal or adverse credit history. These provisions also do not prevent a hiring agency from collecting information about prior work history earlier in the hiring process. OPM has amended the final rule to provide greater clarity with respect to this issue.

OPM notes in this regard that agencies are not required to sponsor or conduct separate information collections subject to Office of Management and Budget (OMB) clearance in order to ask these kinds of questions to applicants as part of the competitive Civil Service hiring process. Under OMB's regulations implementing the Paperwork Reduction Act (PRA), “[e]xaminations designed to test the aptitude, abilities, or knowledge of the persons tested and the collection of information for identification or classification in connection with such examinations” do not constitute information collections subject to the PRA's requirements. See 5 CFR 1320.3(h)(7).

One individual asked whether the proposed rule was “politically motivated” for an electoral purpose. It was not. The origins of the proposed rule began several years ago. OPM proposed this rule to better harmonize the the requirements concerning the timing and objectives of the merit selection process and the suitability function.

One professional organization supports the proposal to include these rules under 5 CFR part 731 to ensure that any non-selections based on information from the OF-306 are appealable to the Merit Systems Protection Board (MSPB) under 5 CFR part 731.501. It appears the commenter may have misinterpreted the proposed rule. Only suitability actions as defined in 5 CFR part 731.203 (cancellation of eligibility, removal, cancellation of reinstatement rights, and debarment) are appealable to the MSPB. Nonselection is not appealable, as stated in 5 CFR 302.406(g) and 731.203(b).

The same organization recommended that OPM codify in the final rules the mitigating factors described in section 2(b)(i-iii) of the Presidential memorandum titled, “Promoting Rehabilitation and Reintegration of Formerly Incarcerated Individuals” (81 FR 26993, 26995). OPM is not adopting this suggestion because these criteria pertain to occupational licensure, not to whether an individual is suitable for Federal employment. The purpose of the proposed rule is to affect at what point in the hiring process an agency may make inquiries into an applicant's background, not to impact the criteria used to determine an applicant's suitability for employment. However, we note that separate sections of this Memorandum are relevant to this rule. Section 1 formally reconstitutes the Federal Interagency Reentry Council as a Presidentially-established Council; section 1(a)(xvii) formalizes OPM's membership; and section 2(a) directs that “Agencies making suitability determinations for Federal employment shall review their procedures for evaluating an applicant's criminal records to ensure compliance with 5 CFR part 731 and any related, binding guidance issued by the Office of Personnel Management, with the aim of evaluating each individual's character and conduct.” OPM expects that this rule will assist agencies in complying with the President's mandate.

This organization also asked that OPM amend its suitability regulations to require an agency to include a record of any exception granted by OPM, permitting it to conduct suitability screening prior to a conditional offer of employment, as part of the “materials relied upon” in charging an individual. OPM does not accept this recommendation, because the timing of a suitability inquiry is unrelated to the charges brought against an applicant, appointee, or employee in a proposed suitability action.

A coalition representing criminal justice reform groups and civil and human rights advocates recommended that OPM implement a centralized means of collecting data on the impact of the proposed rule by documenting the number of conditional offers and final hiring decisions of persons with prior convictions. The coalition believes this data would help maintain the integrity of the background check process and also help with oversight. OPM is not adopting this suggestion as part of the rulemaking but will oversee agencies' compliance with the rule, as part of the merit system audit and compliance process under Civil Service Rules V and X.

The coalition also suggested the proposed rules should apply to positions filled in the excepted service. OPM notes these provisions do apply to certain positions in the excepted service. OPM is not accepting this recommendation as to all excepted service positions, but notes that under the current suitability regulations at 5 CFR 731.101(b), the definition of “Covered Position” includes a small subset of excepted service positions within OPM's jurisdiction, namely positions in the excepted service “where the incumbent can be noncompetitively converted to the competitive service. . . .”

For other positions in the excepted service, OPM generally lacks the authority to prescribe qualification, fitness, or suitability standards or to regulate the timing of employer inquiries. For those positions excepted from the competitive service by Acts of Congress, hiring procedures and standards for making qualification or fitness determinations may be prescribed by statute. Where the statute is silent, or where the exception from the competitive service is made by the President (or by OPM under presidential delegation), Civil Service Rule VI, § 6.3(b) states that “[t]o the extent permitted by law and the provisions of this part, appointments and position changes in the excepted service shall be made in accordance with such regulations and practices as the head of the agency concerned finds necessary.” See 5 CFR 6.3(b) (codifying this section of the Rule). Agency heads have the discretion to decide whether or not to establish criteria for making fitness determinations and determine whether their standards are equivalent to suitability standards established by OPM (but must consider OPM guidance when exercising this discretion). See Section 3 of E.O. 13488 of January 16, 2009, 3 CFR, 2009 Comp., p. 189.

The coalition notes, in support of its comment, that under Civil Service Rule VI, § 6.3(a), “OPM, in its discretion, may by regulation prescribe conditions under which excepted positions may be filled in the same manner as competitive positions are filled and conditions under which persons so appointed may acquire a competitive status in accordance with the Civil Service Rules and Regulations.” The coalition cites this provision as “clear authority” for OPM to impose identical hiring requirements on the excepted service. However, the cited provision is not authority for OPM to override the discretion given to agencies in filling positions in the excepted service. Rather, it is a mechanism for OPM to permit agencies to hire for the excepted service in the same manner as for the competitive service and upon doing so, to give competitive status (i.e., the ability to be noncompetitively assigned to positions in the competitive service) to excepted service employees who have been hired in that manner. See 5 CFR 212.301, 302.102(c).

The coalition suggested that OPM include language in the final rule that requires agencies to comply with title VII of the Civil Rights Act of 1964, and Equal Employment Opportunity Commission (EEOC) guidelines pertaining to the use of conviction records in hiring decisions, including an individualized assessment of applicants' criminal history. OPM is not adopting this suggestion because these rules only pertain to the timing of inquiries into an applicant's criminal or adverse credit history, not to the selection process for Federal employment, and agencies have an independent obligation to comply with title VII.

Changes to the OF-306

One agency and a coalition representing criminal justice reform groups and civil and human rights advocates suggested OPM also make changes to the OF-306 to facilitate the rule's implementation. OPM is not addressing these comments at this time because the OF-306 and other investigative questionnaires are not promulgated through rulemaking, but through the separate PRA process. The comments may be resubmitted when the information collections are up for renewal under the PRA.

One individual suggested that OPM remove the requirement to provide a Social Security number (SSN) on the OF-306. OPM is not adopting this suggestion because it is beyond the scope of the proposed rule, which pertains to when during the hiring process an agency may collect information about an applicant's criminal or adverse credit history.

Comments Outside the Scope of the Proposed Rule

A private company commented that the proposed rule will inadvertently deter private sector employers from taking advantage of the Work Opportunity Tax Credit (WOTC), which is designed to encourage private employers to hire people with criminal histories, among others. This company requests that OPM clarify in the final rule that private employers can use the WOTC credit without violating these provisions. This comment is beyond the scope of the proposed regulations, which only pertain to Federal employment. OPM suggests private companies consult the Internal Revenue Service for information concerning the WOTC.

The same company suggested that OPM make clear in the final rule that these provisions only pertain to Federal employment. OPM is not adopting this suggestion because we do not believe such clarification is necessary. By statute and under the Civil Service Rules, OPM's jurisdiction in these matters is limited to Federal employment.

One organization similarly expressed concern that the proposed rule may persuade state and local governments to enact regulatory or contractual measures which, in turn, impose burdensome requirements on private investigative and security firms. The comment is not accompanied by a specific recommendation related to the rulemaking, and is speculative, so there is no basis for OPM to consider the comment.

A coalition representing criminal justice reform groups and civil and human rights advocates recommended that OPM also extend these rules to its contractors. OPM cannot adopt this suggestion as part of the rulemaking, which pertains only to competitive Federal hiring, not contracting.

One individual asked whether there is evidence that “many” agencies administer the Optional Form (OF) 306, “Declaration for Federal Employment” prior to the point at which a tentative job offer is made. OPM stated in the Supplementary Information section of the proposed rule that to the contrary “many agencies already . . . wait until the later stages of the hiring process to collect this kind of information.” (81 FR at 26173.) This assertion is based upon the results of a survey we conducted on this matter. This survey was developed and issued to all Chief Human Capital Officers Act agencies. Eighteen (18) agencies/sub-agencies responded to the survey. The comment was not accompanied by a recommendation related to the rulemaking, so there is no basis to consider the comment.

Two commenters opposed the proposed rule in the mistaken belief that the rule's purpose was to improve employment opportunities for individuals who had become criminals “through no fault of their own.” The commenters were apparently confused by a citation, in the proposed rule's Supplementary Information (81 FR at 26174), to a Presidential Memorandum, “Enhancing Safeguards to Prevent the Undue Denial of Federal Employment Opportunities to the Unemployed and Those Facing Financial Difficulty Through No Fault of Their Own (79 FR 7045). OPM cited the memorandum as a basis to defer the collection of certain applicant employment or credit information until the later stages of the hiring process, not for the reasons the commenters suggested. Because the comments were based on a faulty premise, OPM did not consider them.

One commenter asked that OPM revise the proposed rule to improve the formula for cost-of-living allowances for annuities. The comment was outside the scope of the proposal and was not considered.

Executive Order 13563 and Executive Order 12866, Regulatory Review

The Office of Management and Budget has reviewed this rule in accordance with E.O. 13563 and 12866.

Regulatory Flexibility Act

I certify that these regulations will not have a significant economic impact on a substantial number of small entities because the regulations pertain only to Federal agencies and employees.

E.O. 13132, Federalism

This regulation will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant preparation of a Federalism Assessment.

E.O. 12988, Civil Justice Reform

This regulation meets the applicable standard set forth in section 3(a) and (b)(2) of Executive Order 12988.

Unfunded Mandates Reform Act of 1995

This rule will not result in the expenditure by State, local or tribal governments of more than $100 million annually. Thus, no written assessment of unfunded mandates is required.

Congressional Review Act

This action pertains to agency management, personnel and organization and does not substantially affect the rights or obligations of non-agency parties and, accordingly, is not a “rule” as that term is used by the Congressional Review Act (Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)). Therefore, the reporting requirement of 5 U.S.C. 801 does not apply.

Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35)

This final regulatory action will not impose any additional reporting or recordkeeping requirements under the Paperwork Reduction Act.

List of Subjects 5 CFR Part 330

Armed forces reserves, District of Columbia, Government employees.

5 CFR Part 731

Administrative practices and procedures, Government employees.

U.S. Office of Personnel Management Beth F. Cobert, Acting Director.

Accordingly, OPM is amending 5 CFR parts 330 and 731 as follows:

PART 330—RECRUITMENT, SELECTION, AND PLACEMENT (GENERAL) 1. The authority citation for part 330 continues to read as follows: Authority:

5 U.S.C. 1104, 1302, 3301, 3302, 3304, and 3330; E.O. 10577, 3 CFR, 1954-58 Comp., p. 218; Section 330.103 also issued under 5 U.S.C. 3327; Subpart B also issued under 5 U.S.C. 3315 and 8151; Section 330.401 also issued under 5 U.S.C. 3310; Subparts F and G also issued under Presidential Memorandum on Career Transition Assistance for Federal Employees, September 12, 1995; Subpart G also issued under 5 U.S.C. 8337(h) and 8456(b).

2. Add subpart M, consisting of § 330.1300 to read as follows: Subpart M—Timing of Background Investigations
§ 330.1300 Timing of suitability inquiries in competitive hiring.

A hiring agency may not make specific inquiries concerning an applicant's criminal or credit background of the sort asked on the OF-306 or other forms used to conduct suitability investigations for Federal employment (i.e., inquiries into an applicant's criminal or adverse credit history) unless the hiring agency has made a conditional offer of employment to the applicant. Agencies may make inquiries into an applicant's Selective Service registration, military service, citizenship status, or previous work history, prior to making a conditional offer of employment to an applicant.

However, in certain situations, agencies may have a business need to obtain information about the background of applicants earlier in the hiring process to determine if they meet the qualifications requirements or are suitable for the position being filled. If so, agencies must request an exception from the Office of Personnel Management in order to determine an applicant's ability to meet qualifications or suitability for Federal employment prior to making a conditional offer of employment to the applicant(s). OPM will grant exceptions only when the agency demonstrates specific job-related reasons why the agency needs to evaluate an applicant's criminal or adverse credit history earlier in the process or consider the disqualification of candidates with criminal backgrounds or other conduct issues from particular types of positions. OPM will consider such factors as, but not limited to, the nature of the position being filled and whether a clean criminal history record would be essential to the ability to perform one of the duties of the position effectively. OPM may also consider positions for which the expense of completing the examination makes it appropriate to adjudicate suitability at the outset of the process (e.g., a position that requires that an applicant complete a rigorous training regimen and pass an examination based upon the training before his or her selection can be finalized). A hiring agency must request and receive an OPM-approved exception prior to issuing public notice for a position for which the agency will collect background information prior to completion of the assessment process and the making of a conditional offer of employment.

PART 731—SUITABILITY 3. The authority citation for part 731 continues to read as follows: Authority:

5 U.S.C. 1302, 3301, 7301; E.O. 10577, 3 CFR 1954-1958 Comp., p. 218, as amended; E.O. 13467, 3 CFR 2009 Comp., p. 198; E.O. 13488, 3 CFR 2010 Comp., p. 189; 5 CFR parts 1, 2 and 5.

4. In § 731.103, revise paragraph (d) to read as follows:
§ 731.103 Delegation to agencies.

(d)(1) A hiring agency may not make specific inquiries concerning an applicant's criminal or credit background of the sort asked on the OF-306 or other forms used to conduct suitability investigations for Federal employment (i.e., inquiries into an applicant's criminal or adverse credit history) unless the hiring agency has made a conditional offer of employment to the applicant. Agencies may make inquiries into an applicant's Selective Service registration, military service, citizenship status, or previous work history, prior to making a conditional offer of employment to an applicant. However, in certain situations, agencies may have a business need to obtain information about the suitability or background of applicants earlier in the process. If so, agencies must request an exception from the Office of Personnel Management, in accordance with the provisions of 5 CFR part 330 subpart M.

(2) OPM reserves the right to undertake a determination of suitability based upon evidence of falsification or fraud relating to an examination or appointment at any point when information giving rise to such a charge is discovered. OPM must be informed in all cases where there is evidence of material, intentional false statements, or deception or fraud in examination or appointment, and OPM will take a suitability action where warranted.

[FR Doc. 2016-28782 Filed 11-30-16; 8:45 am] BILLING CODE 6325-39-P
OFFICE OF PERSONNEL MANAGEMENT 5 CFR Part 532 RIN 3206-AN38 Prevailing Rate Systems; Redefinition of Certain Appropriated Fund Federal Wage System Wage Areas AGENCY:

U.S. Office of Personnel Management.

ACTION:

Final rule.

SUMMARY:

The U.S. Office of Personnel Management (OPM) is issuing a final rule to redefine the geographic boundaries of several appropriated fund Federal Wage System (FWS) wage areas for pay-setting purposes. Based on reviews of Metropolitan Statistical Area (MSA) boundaries in a number of wage areas, OPM is redefining the following wage areas: Salinas-Monterey, CA; San Francisco, CA; New London, CT; Central and Western Massachusetts; Cincinnati, OH: Dayton, OH, Southeastern Washington-Eastern Oregon; and Spokane, WA.

DATES:

Effective date: This regulation is effective on December 1, 2016.

Applicability date: This change applies on the first day of the first applicable pay period beginning on or after January 3, 2017.

FOR FURTHER INFORMATION CONTACT:

Madeline Gonzalez, by telephone at (202) 606-2858 or by email at [email protected]

SUPPLEMENTARY INFORMATION:

On June 24, 2016, OPM issued a proposed rule (81 FR 41255) to redefine the following counties:

• San Benito County, CA, from the Salinas-Monterey, CA, area of application to the San Francisco, CA, area of application;

• Windham County, CT, from the New London, CT, area of application to the Central and Western Massachusetts area of application;

• Union County, IN; from the Dayton, OH, area of application to the Cincinnati, OH, area of application;

• Columbia County, WA, from the Spokane area of application to the Southeastern Washington-Eastern Oregon area of application.

The Federal Prevailing Rate Advisory Committee, the national labor-management committee responsible for advising OPM on matters concerning the pay of FWS employees, reviewed and recommended these changes by consensus.

The 30-day comment period ended on July 25, 2016. OPM received one comment in support of the proposal and one comment requesting OPM consider moving another county in the State of California, Mendocino County, CA, from the Rest of U.S. (RUS) General Schedule (GS) locality pay area to the San Jose-San Francisco-Oakland, CA GS locality pay area. GS and FWS pay areas are administered under different regulations. The comment is therefore beyond the scope of the proposed rule.

Regulatory Flexibility Act

I certify that these regulations will not have a significant economic impact on a substantial number of small entities because they will affect only Federal agencies and employees.

List of Subjects in 5 CFR Part 532

Administrative practice and procedure, Freedom of information, Government employees, Reporting and recordkeeping requirements, Wages.

U.S. Office of Personnel Management. Beth F. Cobert, Acting Director.

Accordingly, OPM is amending 5 CFR part 532 as follows:

PART 532—PREVAILING RATE SYSTEMS 1. The authority citation for part 532 continues to read as follows: Authority:

5 U.S.C. 5343, 5346; § 532.707 also issued under 5 U.S.C. 552.

2. Appendix C to subpart B is amended by revising the wage area listings for the Salinas-Monterey, CA; San Francisco, CA; New London, CT; Central and Western Massachusetts; Cincinnati, OH: Dayton, OH, Southeastern Washington-Eastern Oregon; and Spokane, WA, wage areas to read as follows: Appendix C to Subpart B of Part 532—Appropriated Fund Wage and Survey Areas *    *    *    *    * CALIFORNIA *    *    *    *    * Salinas-Monterey Survey Area California: Monterey Area of Application. Survey area. *    *    *    *    * San Francisco California: Alameda Contra Costa Marin Napa San Francisco San Mateo Santa Clara Solano Area of Application. Survey area plus: California: Mendocino San Benito Santa Cruz Sonoma *    *    *    *    * CONNECTICUT *    *    *    *    * New London Survey Area Connecticut: New London Area of Application. Survey area. *    *    *    *    * MASSACHUSETTS *    *    *    *    * Central and Western Massachusetts Survey Area Massachusetts: The following cities and towns in: Hampden County Agawam Chicopee East Longmeadow Feeding Hills Hampden Holyoke Longmeadow Ludlow Monson Palmer Southwick Springfield Three Rivers Westfield West Springfield Wilbraham Hampshire County Easthampton Granby Hadley Northampton South Hadley Worcester County Warren West Warren Area of Application. Survey area plus: Connecticut: Windham Massachusetts: Berkshire Franklin Worcester (except Blackstone and Millville) The following cities and towns in: Hampden County Blandford Brimfield Chester Granville Holland Montgomery Russell Tolland Wales Hampshire County Amherst Belchertown Chesterfield Cummington Goshen Hatfield Huntington Middlefield Pelham Plainfield Southampton Ware Westhampton Williamsburg Worthington Middlesex County Ashby Shirley Townsend New Hampshire: Belknap Carroll Cheshire Grafton Hillsborough Merrimack Sullivan Vermont: Addison Bennington Caledonia Essex Lamoille Orange Orleans Rutland Washington Windham Windsor *    *    *    *    * OHIO Cincinnati Survey Area Indiana: Dearborn Kentucky: Boone Campbell Kenton Ohio: Clermont Hamilton Warren Area of Application. Survey area plus: Indiana: Franklin Ohio Ripley Switzerland Union Kentucky: Bracken Carroll Gallatin Grant Mason Pendleton Ohio: Adams Brown Butler Highland *    *    *    *    * Dayton Ohio: Champaign Clark Greene Miami Montgomery Preble Area of Application. Survey area plus: Indiana: Randolph Wayne Ohio: Auglaize Clinton Darke Logan Shelby *    *    *    *    * WASHINGTON *    *    *    *    * Southeastern Washington-Eastern Oregon Survey Area Oregon: Umatilla Washington: Benton Franklin Walla Walla Yakima Area of Application. Survey area plus: Oregon: Baker Grant Harney Malheur Morrow Union Wallowa Wheeler Washington: Columbia Kittitas (Only includes the Yakima Firing Range portion) Spokane Survey Area Washington: Spokane Area of Application. Survey area plus: Idaho: Benewah Bonner Boundary Clearwater Idaho Kootenai Latah Lewis Nez Perce Shoshone Washington: Adams Asotin Chelan (Does not include the North Cascades National Park portion) Douglas Ferry Garfield Grant Kittitas (Does not include the Yakima Firing Range portion) Lincoln Okanogan Pend Oreille Stevens Whitman
[FR Doc. 2016-28784 Filed 11-30-16; 8:45 am] BILLING CODE 6325-39-P
COUNCIL OF THE INSPECTORS GENERAL ON INTEGRITY AND EFFICIENCY 5 CFR Part 9801 RIN 3219-AA00 Privacy Act Regulations AGENCY:

Council of the Inspectors General on Integrity and Efficiency.

ACTION:

Final rule.

SUMMARY:

The Council of the Inspectors General on Integrity and Efficiency (CIGIE) is issuing this final rule to establish its procedures relating to access, maintenance, disclosure, and amendment of records that are in a CIGIE system of records under the Privacy Act of 1974 (Privacy Act). This final rule also establishes rules of conduct for CIGIE personnel who have responsibilities under the Privacy Act.

DATES:

This final rule is effective January 3, 2017.

FOR FURTHER INFORMATION CONTACT:

Atticus J. Reaser, General Counsel, CIGIE, (202) 292-2600.

SUPPLEMENTARY INFORMATION: Background Information

CIGIE published a proposed rule in the Federal Register, 81 FR 61628, September 7, 2016, to provide the procedures and guidelines under which CIGIE will implement the Privacy Act. The proposed rule provided a 60-day comment period, which ended on November 7, 2016. CIGIE received one timely and responsive comment, which was submitted by an individual. The comment supported the regulation and reflected no suggested changes.

CIGIE is making one technical citation format change. The citation to “the Inspector General Act of 1978, Public Law 95-452, 92 Stat. 1101 (codified as amended at 5 U.S.C. app)” reflected in the proposed rule is being changed in this final rule to “the Inspector General Act of 1978, as amended, 5 U.S.C. app.” This is a technical modification and does not reflect a substantive change. There were no other modifications made to the proposed rule. For the reasons set forth herein and in the preamble to the proposed rule, CIGIE is publishing this final rule.

Executive Orders 12866 and 13563

In promulgating this rule, CIGIE has adhered to the regulatory philosophy and the applicable principles of regulation set forth in section 1 of Executive Order 12866, Regulatory Planning and Review. The Office of Management and Budget (OMB) has determined that this rule is not “significant” under Executive Order 12866.

Regulatory Flexibility Act

These regulations will not have a significant economic impact on a substantial number of small entities. Therefore, a regulatory flexibility analysis as provided by the Regulatory Flexibility Act, as amended, is not required.

Paperwork Reduction Act

These regulations impose no additional reporting and recordkeeping requirements. Therefore, clearance by OMB is not required.

Federalism (Executive Order 13132)

This rule does not have Federalism implications, as set forth in Executive Order 13132. 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.

List of Subjects in 5 CFR Part 9801

Information, Privacy, Privacy Act, Records.

For the reasons set forth in the preamble, CIGIE adds part 9801 to title 5 of the Code of Federal Regulations as follows:

PART 9801—PRIVACY ACT REGULATIONS Subpart A—General Provisions Sec. 9801.101 Purpose and scope. 9801.102 CIGIE organization. 9801.103 Definitions. 9801.104 Rules for determining if an individual is the subject of a record. 9801.105 Employee standards of conduct. 9801.106 Use and collection of social security numbers. 9801.107 Other rights and services. Subpart B—Access to Records and Accounting of Disclosures Sec. 9801.201 Requests for access. 9801.202 Response to requests. 9801.203 Granting access. 9801.204 Special procedures: Medical records. 9801.205 Appeals from denials of requests for access to records. 9801.206 Response to appeal of a denial of access. 9801.207 Fees. 9801.208 Requests for accounting of record disclosures. Subpart C—Amendment of Records Sec. 9801.301 Requests for amendment of record. 9801.302 Response to requests. 9801.303 Appeal from adverse determination on amendment. 9801.304 Response to appeal of adverse determination on amendment; disagreement statements. 9801.305 Assistance in preparing request to amend a record or to appeal an initial adverse determination. Authority:

Section 11 of the Inspector General Act of 1978, as amended, 5 U.S.C. app.; 5 U.S.C. 301, 552a; 31 U.S.C. 9701.

Subpart A—General Provisions
§ 9801.101 Purpose and scope.

This part contains the regulations of the Council of the Inspectors General on Integrity and Efficiency (CIGIE) implementing the Privacy Act of 1974, 5 U.S.C. 552a. This part sets forth the basic responsibilities of CIGIE with regard to CIGIE's compliance with the requirements of the Privacy Act and offers guidance to members of the public who wish to exercise any of the rights established by the Privacy Act with regard to records maintained by CIGIE. These regulations should be read in conjunction with the Privacy Act, which explains in more detail individuals' rights.

§ 9801.102 CIGIE organization.

(a) Centralized program. Except as stated in paragraph (b) of this section, CIGIE has a centralized Privacy Act program, with one office receiving and coordinating the processing of all Privacy Act requests to CIGIE.

(b) Integrity Committee records. The Integrity Committee of CIGIE (IC) is the single exception to CIGIE's centralized Privacy Act program. By statute, all records received or created by the IC in fulfilling its responsibilities are collected and maintained separately as IC records by the official of the Federal Bureau of Investigation (FBI) serving on the IC. Currently, all such records are maintained by the FBI in the FBI's Central Records System and are subject to the system of records notices and the Privacy Act policies and regulations applicable to that system. See 28 CFR part 16, subpart D. Accordingly, except as stated in paragraph (c) of this section, because IC records are not maintained by CIGIE, this part does not apply to requests or appeals regarding IC records.

(c) Acceptance of requests and appeals. CIGIE will accept initial requests or appeals regarding CIGIE records and regarding IC records maintained by the FBI on behalf of the FBI. Requests and appeals regarding IC records will be referred to the FBI for processing and direct response to the requester by the FBI.

§ 9801.103 Definitions.

(a) For purposes of this part the terms individual, maintain, record, routine use, and system of records, shall have the meanings set forth in 5 U.S.C. 552a(a).

(b) CIGIE means the Council of the Inspectors General on Integrity and Efficiency and includes its predecessor entities, the Executive Council on Integrity and Efficiency and the President's Council on Integrity and Efficiency.

(c) Days, unless stated as “calendar days,” are working days and do not include Saturdays, Sundays, or Federal holidays.

(d) IC means the CIGIE Integrity Committee established under section 11(d) of the Inspector General Act of 1978, as amended, 5 U.S.C. app. (Inspector General Act).

(e) Request for access to a record means a request made under Privacy Act subsection (d)(1).

(f) Request for amendment of a record means a request made under Privacy Act subsection (d)(2).

(g) Request for an accounting means a request made under Privacy Act subsection (c)(3).

(h) Requester means an individual who makes a request for access, a request for amendment, or a request for an accounting under the Privacy Act.

§ 9801.104 Rules for determining if an individual is the subject of a record.

An individual seeking to determine if a specific CIGIE system of records contains a record pertaining to the individual must follow the procedures set forth for access to records in § 9801.201(a), (b)(1) and (2), (c), and (d). A request to determine if an individual is the subject of a record will ordinarily be responded to within 10 days, except when CIGIE determines otherwise, in which case the request will be acknowledged within 10 days and the individual will be informed of the reasons for the delay and an estimated date by which a response will be issued.

§ 9801.105 Employee standards of conduct.

CIGIE will inform its employees involved in the design, development, operation, or maintenance of any system of records, or in maintaining any record, of the provisions of the Privacy Act, including the Act's civil liability and criminal penalty provisions. Unless otherwise permitted by law, an employee of CIGIE shall:

(a) Collect from individuals only the information that is relevant and necessary to discharge the responsibilities of CIGIE;

(b) Collect information about an individual directly from that individual whenever practicable when the information may result in adverse determinations about an individual's rights, benefits, and privileges under Federal programs;

(c) Inform each individual from whom information is collected of:

(1) The legal authority to collect the information and whether providing it is mandatory or voluntary;

(2) The principal purpose for which CIGIE intends to use the information;

(3) The routine uses CIGIE may make of the information; and

(4) The effects on the individual, if any, of not providing the information;

(d) Maintain no system of record without public notice and notify appropriate CIGIE officials of the existence or development of any system of records that is not the subject of a current or planned public notice;

(e) Maintain all records that are used by CIGIE in making any determination about an individual with such accuracy, relevance, timeliness, and completeness as is reasonably necessary to ensure fairness to the individual in the determination;

(f) Except as to disclosures made to an agency or made under the Freedom of Information Act, 5 U.S.C. 552 (FOIA), make reasonable efforts, prior to disseminating any record about an individual, to ensure that the record is accurate, relevant, timely, and complete;

(g) Maintain no record describing how an individual exercises his or her First Amendment rights, unless it is expressly authorized by statute or by the individual about whom the record is maintained, or is pertinent to and within the scope of an authorized law enforcement activity;

(h) When required by the Privacy Act, maintain an accounting in the specified form of all disclosures of records by CIGIE to persons, organizations, or agencies;

(i) Maintain and use records with care to prevent the unauthorized or inadvertent disclosure of a record to anyone. No record contained in a CIGIE system of record shall be disclosed to another person, or to another agency outside CIGIE, except pursuant to a written request by, or with the prior written consent of, the individual to whom the record pertains, unless the disclosure is otherwise authorized by the Privacy Act; and

(j) Notify the appropriate CIGIE official of any record that contains information that the Privacy Act does not permit CIGIE to maintain.

§ 9801.106 Use and collection of social security numbers.

(a) No denial of right, benefit, or privilege. Individuals may not be denied any right, benefit, or privilege as a result of refusing to provide their social security numbers, unless the collection is required by Federal statute; and

(b) Notification to individual. Individuals requested to provide their social security numbers must be informed of:

(1) Whether providing social security numbers is mandatory or voluntary;

(2) The statutory or regulatory authority that authorizes the collection of social security numbers; and

(3) The uses that will be made of the numbers.

§ 9801.107 Other rights and services.

Nothing in this part shall be construed to entitle any person, as of right, to any service or to the disclosure of any record to which such person is not entitled under the Privacy Act.

Subpart B—Access to Records and Accounting of Disclosures
§ 9801.201 Requests for access.

(a) How addressed. A requester seeking access to records pertaining to the requester in a CIGIE system of records should submit a written request that includes the words “Privacy Act Request” on both the envelope and at the top of the request letter to the Executive Director, Council of the Inspectors General on Integrity and Efficiency, 1717 H Street NW., Suite 825, Washington, DC 20006.

(b) Description of records sought. (1) A request should contain a specific reference to the CIGIE system of records from which access to the records is sought. Notices of CIGIE systems of records subject to the Privacy Act are published in the Federal Register, and copies of the notices are available on CIGIE's Web site at www.ignet.gov, or upon request from CIGIE's Office of General Counsel.

(2) If the written inquiry does not refer to a specific system of records, it must describe the records that are sought in enough detail to enable CIGIE personnel to locate the system of records containing them with a reasonable amount of effort.

(3) The request should state whether the requester wants a copy of the record or wants to examine the record in person.

(c) Verification of identity. A requester seeking access to records pertaining to the requester must verify their identity in their request. The request must state the requester's full name, current address, and date and place of birth. The requester must sign the request and the signature must either be notarized or state, “Under penalty of perjury, I hereby declare that I am the person named above and I understand that any falsification of this statement is punishable under the provisions of Title 18, United States Code (U.S.C.), Section 1001 by a fine of not more than $10,000 or by imprisonment of not more than five years, or both; and that requesting or obtaining any record(s) under false pretenses is punishable under the provisions of Title 5, U.S.C., Section 552a(i)(3) as a misdemeanor and by a fine of not more than $5,000.” In order to help the identification and location of requested records, the requester may optionally include their social security number. No identification shall be required if the records are required by 5 U.S.C. 552 to be released.

(d) Verification of guardianship. When making a request as the parent or guardian of a minor or as the guardian of someone determined by a court to be incompetent for access to records about that individual, the requester must establish:

(1) The identity of the individual who is the subject of the record, by stating the name, current address, date and place of birth, and, at the requester's option, the social security number of the individual;

(2) The requester's identity, as required in paragraph (c) of this section;

(3) That the requester is the parent or guardian of that individual, which may be established by providing a copy of the individual's birth certificate showing the requester's parentage or by providing a court order establishing the requester's guardianship; and

(4) That the requester is acting on behalf of that individual in making the request.

§ 9801.202 Response to requests.

A request for access will ordinarily be responded to within 10 days, except when CIGIE determines otherwise, in which case the request will be acknowledged within 10 days and the requester will be informed of the reasons for the delay and an estimated date by which a response will be issued. A response to a request for access should include the following:

(a) A statement that there is a record or records as requested or a statement that there is not a record in the system of records;

(b) The method of access (if a copy of all the records requested is not provided with the response);

(c) The amount of any fees to be charged for copies of records under § 9801.207, if applicable;

(d) The name and title of the official responsible for the response; and

(e) If the request is denied in whole or in part, or no record is found in the system, a statement of the reasons for the denial, or a statement that no record has been found, and notice of the procedures for appealing the denial or no record finding.

§ 9801.203 Granting access.

(a) Means of access. (1) The methods for allowing access to records, when such access has been granted by CIGIE, are:

(i) Examination in person in a designated office during the hours specified by CIGIE; or

(ii) Providing copies of the records.

(2) When a requester has not indicated whether he wants a copy of the record or wants to examine the record in person, CIGIE may choose the means of granting access. However, the means chosen should not unduly impede the requester's right of access. A requester may elect to receive a copy of the records after having examined them.

(b) Accompanying individual. If the requester is granted in person access to examine the records, the requester may be accompanied by another individual of the requester's choice during the course of the examination of the records. CIGIE may require the requester to submit a signed statement authorizing the accompanying individual's access to the records.

(c) Certified copies. CIGIE will not furnish certified copies of records. When copies are to be furnished, they may be provided as determined by CIGIE.

(d) Original records. When the requester seeks to obtain original documentation, CIGIE reserves the right to limit the request to copies of the original records.

§ 9801.204 Special procedures: Medical records.

In the event CIGIE receives a request pursuant to § 9801.201 for access to medical records (including psychological records) whose disclosure CIGIE determines would be harmful to the individual to whom they relate, it may refuse to disclose the records directly to the requester but shall transmit them to a physician designated by the requester.

§ 9801.205 Appeals from denials of requests for access to records.

(a) How addressed. A requester may submit a written appeal of the decision by CIGIE to deny an initial request for access to records or a no record response to the Chairperson, Council of the Inspectors General on Integrity and Efficiency, 1717 H Street NW., Suite 825, Washington, DC 20006. The words “Privacy Act Appeal” should be included on the envelope and at the top of the letter of appeal.

(b) Deadline and content. The appeal must be received by CIGIE within 60 days of the date of the letter denying the access request or reflecting the no record finding and should contain a brief description of the records involved or copies of the relevant correspondence from CIGIE. The appeal should attempt to refute the reasons given by CIGIE in support of its decision to deny the initial request for access or no record finding.

§ 9801.206 Response to appeal of a denial of access.

(a) Access granted. If the Chairperson or the Chairperson's designee determines that access to the records should be granted, the response will state how access will be provided if the records are not included with the response.

(b) Denial affirmed. Any decision that either partially or fully affirms the initial decision to deny access or no record finding shall inform the requester of the right to seek judicial review of the decision in accordance with the Privacy Act (5 U.S.C. 552a(g)).

(c) When appeal is required. If a requester wishes to seek review by a court of any adverse determination or denial of a request, the requester must first appeal it under § 9801.205.

§ 9801.207 Fees.

(a) No fees for most services. Services for which fees will not be charged:

(1) The search and review time expended by CIGIE to produce a record;

(2) The first copy of the records provided; and

(3) CIGIE making the records available to be personally reviewed by the requester.

(b) Fees for additional copies. When a requester requests additional copies of records, CIGIE will assess the requester a fee of $.20 per page. CIGIE will bill requester in arrears for such fees, except as follows:

(1) If the total fee for additional copies amounts to more than $25.00, the requester will be notified of the fee amount. Except as specified in paragraph (b)(2) of this section, upon requester's written agreement to pay the assessed fees, CIGIE will provide the additional copies without prepayment of such fees (i.e., payment will be accepted in arrears).

(2) An advance payment before additional copies of the records are made will be required if:

(i) CIGIE determines that the total fee to be assessed under this section exceeds $250.00. When such a determination is made, the requester will be notified of the determination and will be required to submit an advance payment of an amount up to the total fee. The amount of the advanced payment will be at the sole discretion of CIGIE and will be based, in part, on whether requester has a history of prompt payment of Privacy Act fees. If the required advanced payment is an amount less than the total fee, requester will be required to submit a written agreement to pay any fees not paid in advance; or

(ii) The requester has previously failed to pay a previously assessed Privacy Act fee in a timely fashion (i.e., within 30 days of the date of the billing). In such cases, the requester will be required to pay the full amount outstanding plus any applicable interest as provided by paragraph (c) of this section and to make an advance payment of the full amount of the determined fee before CIGIE begins to process a new request for additional copies.

(c) Interest charges. For additional copies provided to requester that result in fees assessed, CIGIE will begin levying interest charges on an unpaid balance starting on the 31st day following the day on which the billing was sent. Interest will be assessed at the rate prescribed under 31 U.S.C. 3717 and will accrue from the date of the billing.

(d) Payment address. Payment of fees should be made by either a personal check, bank draft or a money order that is payable to the Department of the Treasury of the United States and mailed or delivered to: Privacy Officer, Council of the Inspectors General on Integrity and Efficiency, 1717 H Street NW., Suite 825, Washington, DC 20006.

§ 9801.208 Requests for accounting of record disclosures.

(a) How made and addressed. Except where accountings of disclosures are not required to be kept (as stated in paragraph (b) of this section), a requester may request an accounting of any disclosure that has been made by CIGIE to another person, organization, or agency of any record about the requester. This accounting contains the date, nature, and purpose of each disclosure, as well as the name and address of the person, organization, or agency to which the disclosure was made. A requester seeking an accounting of record disclosures must follow the procedures set forth for access to records in § 9801.201(a), (b)(1) and (2), (c), and (d).

(b) Where accountings are not required. CIGIE is not required to provide accountings to requesters where they relate to:

(1) Disclosures for which accountings are not required to be kept, including disclosures that are made to officers and employees of CIGIE and disclosures that are made under the FOIA. For purposes of this part, officers and employees of CIGIE includes, in part, CIGIE's membership, as addressed in section 11 of the Inspector General Act, when such members are acting in their capacity as CIGIE members;

(2) Disclosures made to law enforcement agencies for authorized law enforcement activities in response to written requests from those law enforcement agencies specifying the law enforcement activities for which the disclosures are sought; or

(3) Disclosures made from law enforcement systems of records that have been exempted from accounting requirements.

Subpart C—Amendment of Records
§ 9801.301 Requests for amendment of record.

(a) How addressed. A requester seeking to amend a record or records pertaining to requester in a CIGIE system of records should submit a written request that includes the words “Privacy Act Amendment Request” on both the envelope and at the top of the request letter to the Executive Director, Council of the Inspectors General on Integrity and Efficiency, 1717 H Street NW., Suite 825, Washington, DC 20006. Records not subject to the Privacy Act will not be amended in accordance with these provisions.

(b) Contents of request. A request to amend a record in a CIGIE system of records must include:

(1) The name of the system of records and a brief description of the record proposed for amendment. In the event the request to amend the record is the result of the requester having gained access to the record in accordance with the provisions concerning access to records as set forth in subpart B of this part, copies of previous correspondence between the requester and CIGIE will serve in lieu of a separate description of the record.

(2) The exact portion of the record the requester seeks to have amended should be indicated clearly. If possible, proposed alternative language should be set forth, or, at a minimum, the reasons why the requester believes the record is not accurate, relevant, timely, or complete should be set forth with enough particularity to permit CIGIE to not only to understand the requester's basis for the request, but also to make an appropriate amendment to the record.

(c) Burden of proof. The requester has the burden of proof when seeking the amendment of a record. The requester must furnish sufficient facts to persuade the appropriate system manager of the inaccuracy, irrelevance, untimeliness, or incompleteness of the record.

(d) Identification requirement. When the requester's identity has been previously verified pursuant to § 9801.201, further verification of identity is not required as long as the communication does not suggest a need for verification. If the requester's identity has not been previously verified, the appropriate system manager may require identification validation as described in § 9801.201.

§ 9801.302 Response to requests.

(a) Time limit for acknowledging a request for amendment. To the extent possible, CIGIE will acknowledge receipt of a request to amend a record or records within 10 working days.

(b) Determination on an amendment request. The decision of CIGIE in response to a request for amendment of a record in a system of records may grant in whole or deny any part of the request to amend the record.

(1) If CIGIE grants the request, the appropriate system manager will amend the record(s) and provide a copy of the amended record(s) to the requester. To the extent an accounting of disclosure has been maintained, the system manager shall advise all previous recipients of the record that an amendment has been made and give the substance of the amendment. Where practicable, the system manager shall send a copy of the amended record to previous recipients.

(2) If CIGIE denies the request in whole or in part, the reasons for the denial will be stated in the response letter. In addition, the response letter will state:

(i) The name and address of the official with whom an appeal of the denial may be lodged; and

(ii) A description of any other procedures which may be required of the requester in order to process the appeal.

§ 9801.303 Appeal from adverse determination on amendment.

(a) How addressed. A requester may submit a written appeal of the decision by CIGIE to deny an initial request to amend a record in a CIGIE system of records to the Chairperson, Council of the Inspectors General on Integrity and Efficiency, 1717 H Street NW., Suite 825, Washington, DC 20006. The words “Privacy Act Appeal” should be included on the envelope and at the top of the letter of appeal.

(b) Deadline and content. The appeal must be received by CIGIE within 60 days of the date of the letter denying the request and should contain a brief description of the record(s) involved or copies of the correspondence from CIGIE and the reasons why the requester believes that the disputed information should be amended.

§ 9801.304 Response to appeal of adverse determination on amendment; disagreement statements.

(a) Response timing. The Chairperson should make a final determination in writing not later than 30 days from the date the appeal was received. The 30-day period may be extended for good cause. Notice of the extension and the reasons therefor will be sent to the requester within the 30-day period.

(b) Amendment granted. If the Chairperson determines that the record(s) should be amended in accordance with the requester's request, the Chairperson will take the necessary steps to advise the requester and to direct the appropriate system manager:

(1) To amend the record(s); and

(2) To notify previous recipients of the record(s) for which there is an accounting of disclosure that the record(s) have been amended.

(c) Denial affirmed. If the appeal decision does not grant in full the request for amendment, the decision letter will notify the requester that the requester may:

(1) Obtain judicial review of the decision in accordance with the terms of the Privacy Act at 5 U.S.C. 552a(g); and

(2) File a statement setting forth their reasons for disagreeing with the decision.

(d) Requester's disagreement statement. A requester's disagreement statement must be concise. CIGIE has the authority to determine the “conciseness” of the statement, taking into account the scope of the disagreement and the complexity of the issues.

(e) Provision of requester's disagreement statement. In any disclosure of information about which an individual has filed a proper statement of disagreement, CIGIE will clearly note any disputed portion(s) of the record(s) and will provide a copy of the statement to persons or other agencies to whom the disputed record or records has been disclosed and for whom an accounting of disclosure has been maintained. A concise statement of the reasons for not making the amendments requested may also be provided.

§ 9801.305 Assistance in preparing request to amend a record or to appeal an initial adverse determination.

Requesters may seek assistance in preparing a request to amend a record or an appeal of an initial adverse determination, or to learn further of the provisions for judicial review, by contacting CIGIE's Privacy Officer by email at [email protected] or by mail at Privacy Officer, Council of the Inspectors General on Integrity and Efficiency, 1717 H Street NW., Suite 825, Washington, DC 20006.

Dated: November 23, 2016. Michael E. Horowitz, Chairperson of the Council of the Inspectors General on Integrity and Efficiency.
[FR Doc. 2016-28897 Filed 11-30-16; 8:45 am] BILLING CODE 6820-C9-P
DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6692; Directorate Identifier 2016-NE-13-AD; Amendment 39-18725; AD 2016-24-08] RIN 2120-AA64 Airworthiness Directives; Rolls-Royce plc Turbofan Engines AGENCY:

Federal Aviation Administration (FAA), DOT.

ACTION:

Final rule.

SUMMARY:

We are adopting a new airworthiness directive (AD) for all Rolls-Royce plc (RR) RB211-Trent 875-17, RB211-Trent 877-17, RB211-Trent 884-17, RB211-Trent 884B-17, RB211-Trent 892-17, RB211-Trent 892B-17, and RB211-Trent 895-17 turbofan engines. This AD requires repetitive inspections of the engine upper bifurcation fairing and repairing or replacing any fairing that fails inspection. This AD was prompted by a report of cracking and material release from an engine upper bifurcation fairing. We are issuing this AD to prevent failure of the engine fire protection system, engine fire, and damage to the airplane.

DATES:

This AD becomes effective January 5, 2017.

ADDRESSES:

For service information identified in this final rule, contact Rolls-Royce plc, Corporate Communications, P.O. Box 31, Derby, England, DE24 8BJ; phone: 011-44-1332-242424; fax: 011-44-1332-249936; email: http://www.rolls-royce.com/contact/civil_team.jsp; Internet: https://customers.rolls-royce.com/public/rollsroycecare. 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.

Examining the AD Docket

You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6692; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the mandatory continuing airworthiness information (MCAI), the regulatory evaluation, any comments received, and other information. The address for the Docket Office (phone: 800-647-5527) is Document Management Facility, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT:

Wego Wang, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7134; fax: 781-238-7199; email: [email protected]

SUPPLEMENTARY INFORMATION:

Discussion

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 Federal Register on July 15, 2016 (81 FR 46000). The NPRM proposed to correct an unsafe condition for the specified products. The MCAI states:

Inspection of in-service Rolls-Royce RB211 Trent 800 engines has identified cracking and/or material release from the upper bifurcation fairing. This fairing hardware mates to the aeroplane thrust reverser upper bifurcation forward fire seal. Both sets of hardware create the engine firewall to isolate the engine compartment fire zone, which is a firewall feature of the aeroplane type design. Damage (missing materials and holes/openings) to the upper bifurcation fairing creates a breach of the engine fire wall, which may decrease the effectiveness of the engine fire detection and suppression systems due to excess fan air entering the engine compartment fire zone. This could delay or prevent the fire detection and suppression system from functioning properly, and can result in an increased risk of prolonged burning, potentially allowing a fire to reach unprotected areas of the engine, strut and wing.

You may obtain further information by examining the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6692.

Comments

We gave the public the opportunity to participate in developing this AD. We considered the comment received.

Request To Remove Reference to Guidance in Compliance

American Airlines, Inc. (AAL) requested that paragraph (e)(3)(ii) in this AD be revised to eliminate the references to Aircraft Maintenance Manual (AMM) Task 70-20-02 and to OMat 632. AAL indicated that AMM 70-20-02 requires the use of OMat 653 and TAM (PSM-5) TST panels for testing fluorescent penetrants for contamination and effectiveness. AAL noted that the Overhaul Material Manual (OMat 6) allows the use of any products specified in the SAE-AMS-2644 Qualified Product List Group 1A2 as an alternative to OMat 653.

We disagree. Paragraph (e)(3)(ii) in this AD refers to AMM Task 70-20-02 and OMat 632 as guidance that operators may use when performing fluorescent penetrant inspection. This AD does not require that AMM TASK 70-20-02 or OMat 632 be followed when performing fluorescent penetrant inspection. We did not change this AD.

Conclusion

We reviewed the relevant data, considered the comment received, and determined that air safety and the public interest require adopting this AD as proposed except for minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

Related Service Information

RR has issued Alert Non-Modification Service Bulletin (NMSB) RB.211-72-AJ165, dated March 31, 2016. The NMSB describes procedures for inspecting and, if necessary, repairing or replacing the engine upper bifurcation fairing.

Costs of Compliance

We estimate that this AD affects 125 engines installed on airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

Estimated Costs Action Labor cost Parts cost Cost per
  • product
  • Cost on U.S.
  • operators
  • Inspection 3.25 work-hours × $85 per hour = $276.25 $0 $276.25 $34,531

    We estimate the following costs to do any necessary replacements that would be required based on the results of the proposed inspection. We estimate that 5 engines will need this repair and 5 engines will need this replacement:

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Repair of engine upper bifurcation fairing 8 work-hours × $85 per hour = $680 $500 $1,180 Replacement of engine upper bifurcation fairing 30 work hours × $85 per hour = $2,550 500 3,050
    Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

    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.

    Regulatory Findings

    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.

    List of Subjects in 14 CFR Part 39

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

    Adoption of the Amendment

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

    PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority:

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): 2016-24-08 Rolls-Royce plc: Amendment 39-18725; Docket No. FAA-2016-6692; Directorate Identifier 2016-NE-13-AD. (a) Effective Date

    This AD becomes effective January 5, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Rolls-Royce plc (RR) RB211-Trent 875-17, RB211-Trent 877-17, RB211-Trent 884-17, RB211-Trent 884B-17, RB211-Trent 892-17, RB211-Trent 892B-17, and RB211-Trent 895-17 turbofan engines.

    (d) Reason

    This AD was prompted by a report of cracking and material release from an engine upper bifurcation fairing. We are issuing this AD to prevent failure of the engine fire protection system, engine fire, and damage to the airplane.

    (e) Actions and Compliance

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

    (1) Within 7,500 engine flight hours (FHs) time since new, or since last inspection, or within 150 flight cycles (FCs) after the effective date of this AD, whichever occurs later, inspect the engine upper bifurcation fairing for cracks or missing material. Use paragraph (e)(3) of this AD to perform the inspections.

    (2) Repeat the inspection required by this AD within every 7,500 engine FHs time since last inspection.

    (3) Inspect the engine upper bifurcation fairing as follows. Refer to Figure 1 of RR Alert Non-Modification Service Bulletin (NMSB) RB.211-72-AJ165, dated March 31, 2016, for guidance on upper bifurcation fairing inspection locations.

    (i) Visually inspect upper bifurcation fairing seal face 22, seal support 23, and zone A for any cracks or material loss on the right side.

    (A) If fairing seal face 22 is found to have released material, repair or replace the fairing before further flight.

    (B) If there is a single crack found on fairing seal face 22, shorter than 6 mm, repair or replace the fairing within 100 engine flight cycles, or at the next shop visit, whichever occurs sooner.

    (C) If there is a single crack, longer than 6 mm, found on fairing seal face 22, repair or replace the fairing within 15 engine FCs or at the next shop visit, whichever occurs sooner.

    (D) If there are two or more cracks found on fairing seal face 22, replace the fairing within 15 engine FCs or at next shop visit, whichever occurs sooner.

    (E) If there is any cracking or material loss found on seal support 23, replace the fairing within 15 engine FCs or at next shop visit, whichever occurs sooner.

    (ii) If the visual inspection required by paragraph (e)(3)(i) of this AD does not detect any crack, fluorescent penetrant inspect zone A. Refer to AMM TASK 70-20-02, Water Washable Fluorescent Penetrant Inspection (Maintenance Process 213), or OMat 632, high sensitivity fluorescent penetrant inspection, for guidance on fluorescent penetrant inspection.

    (A) If a crack shorter than 6 mm is detected, repair or replace the fairing within 100 engine FCs, or at the next shop visit, whichever occurs sooner.

    (B) If a crack longer than 6 mm is detected, repair or replace the fairing within 15 engine FCs or at the next shop visit, whichever occurs sooner.

    (f) Definition

    For the purpose of this AD, a “shop visit” is defined as induction of an engine into the shop for maintenance involving the separation of pairs of major mating engine flanges, except that the separation of engine flanges solely for the purposes of transportation without subsequent engine maintenance does not constitute an engine shop visit.

    (g) Alternative Methods of Compliance (AMOCs)

    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: [email protected]

    (h) Related Information

    (1) For more information about this AD, contact Wego Wang, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7134; fax: 781-238-7199; email: [email protected]

    (2) Refer to MCAI European Aviation Safety Agency AD 2016-0084, dated April 28, 2016, for more information. You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating it in Docket No. FAA-2016-6692.

    (3) RR Alert NMSB RB.211-72-AJ165, dated March 31, 2016, which is not incorporated by reference in this AD, 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, Corporate Communications, P.O. Box 31, Derby, England, DE24 8BJ; phone: 011-44-1332-242424; fax: 011-44-1332-249936; email: http://www.rolls-royce.com/contact/civil_team.jsp; Internet: https://customers.rolls-royce.com/public/rollsroycecare.

    (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.

    (i) Material Incorporated by Reference

    None.

    Issued in Burlington, Massachusetts, on November 16, 2016. Colleen M. D'Alessandro, Manager, Engine & Propeller Directorate, Aircraft Certification Service.
    [FR Doc. 2016-28663 Filed 11-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2016-7417; Airspace Docket No. 16-AWA-4] RIN 2120-AA66 Amendment of Class C Airspace; El Paso International Airport, TX AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    This action amends Class C airspace at El Paso International Airport, El Paso, TX, by removing a cutout from the Class C airspace area that excludes the airspace within a 2-mile radius of West Texas Airport and the airspace beyond an 8-mile arc from the El Paso International Airport beginning at the 115° bearing from the airport clockwise to the Rio Grande River. Additionally, this rule removes West Texas Airport from the Class C airspace description as the airport is closed, and amends the El Paso International Airport geographic coordinates to coincide with the FAA's aeronautical database. The FAA is taking this action to enable more efficient operations at El Paso International Airport.

    DATES:

    Effective date 0901 UTC, February 2, 2017. The Director of the Federal Register approves this incorporation by reference action under Title 1, Code of Federal Regulations, part 51, subject to the annual revision of FAA Order 7400.11 and publication of conforming amendments.

    ADDRESSES:

    FAA Order 7400.11A, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at http://www.faa.gov/air_traffic/publications/. For further information, you can contact the Airspace Policy Group, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone: (202) 267-8783. The Order is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of FAA Order 7400.11A at NARA, call (202) 741-6030, or go to http://www.archives.gov/federal_register/code_of_federal-regulations/ibr_locations.html.

    FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

    FOR FURTHER INFORMATION CONTACT:

    Colby Abbott, Airspace Policy Group, Office of Airspace Services, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone: (202) 267-8783.

    SUPPLEMENTARY INFORMATION: Authority for This Rulemaking

    The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. 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. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends the El Paso, TX, Class C airspace area to preserve the safe and efficient flow of air traffic in the El Paso, TX, area.

    History

    On August 17, 2016, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to modify the Class C airspace at El Paso International Airport, El Paso, TX (81 FR 54752), Docket No. FAA-2016-7417. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal. One comment was received supporting the FAA's proposed action.

    Availability and Summary of Documents for Incorporation by Reference

    This document amends FAA Order 7400.11A, Airspace Designations and Reporting Points, dated August 3, 2016, and effective September 15, 2016. FAA Order 7400.11A is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11A lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

    The Rule

    The FAA is amending Title 14, Code of Federal Regulations (14 CFR) part 71 by modifying the El Paso International Airport, El Paso, TX, Class C airspace area. This action removes the cutout and reduced perimeter boundary arc that excludes the airspace extending upward from 5,200 feet MSL to and including 8,000 feet MSL within a 2-mile radius of the West Texas Airport, and the airspace beyond an 8-mile arc from the El Paso International Airport beginning at the 115° bearing from the airport clockwise to the Rio Grande River. Since West Texas Airport (renamed Horizon Airport in 2004) is permanently closed and the property sold for non-aviation uses, the purpose for the exclusions no longer exists. Thus, the FAA is removing the words “. . . that airspace beyond an 8-mile arc from the El Paso International Airport beginning at the 115° bearing from the airport clockwise to the Rio Grande River, and that airspace within a 2-mile radius of the West Texas Airport, and . . .” from the regulatory text. The West Texas Airport name and geographic coordinate references are also removed from the Class C airspace description.

    Additionally, this action amends the exclusion language pertaining to the Class C airspace extending upward from 5,200 feet MSL to and including 8,000 feet MSL from “. . . that airspace within Mexico, and that airspace west of long 106°27′02″ W.” to “. . . that airspace west of long. 106°27′02″ W., and that airspace within Mexico.” This change is editorial for format and clarity to standardize the exclusion information associated with the Class C airspace surface area and shelf.

    Lastly, this action updates the El Paso International Airport geographic coordinates to reflect the current airport reference point information in the FAA's aeronautical database from “lat. 31°48′24″ N., long. 106°22′40″ W.” to “lat. 31°48′26″ N., long. 106°22′35″ W.”

    Class C airspace areas are published in paragraph 4000 of FAA Order 7400.11A, dated August 3, 2016, and effective September 15, 2016, which is incorporated by reference in 14 CFR 71.1. The Class C airspace area modification in this document will be published subsequently in the Order.

    Regulatory Notices and Analyses

    The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

    Environmental Review

    The FAA has determined that this action of modifying the El Paso International Airport, El Paso, TX, Class C airspace area by removing a cutout from the Class C airspace area that excludes the airspace within a 2-mile radius of West Texas Airport (now closed) and the airspace beyond an 8-mile arc from the El Paso International Airport beginning at the 115° bearing from the airport clockwise to the Rio Grande River, removing the West Texas Airport and geographic coordinate references from the Class C airspace description, and amending the El Paso International Airport geographic coordinates to reflect the current airport reference point information contained in the FAA's aeronautical database qualifies for categorical exclusion under the National Environmental Policy Act and its implementing regulations at 40 CFR part 1500, and in accordance with FAA Order 1050.1F. Environmental Impacts: Policies and Procedures, Paragraph 5-6.5a, which categorically excludes from further environmental review [R]ulemaking actions that designate or modify classes of airspace areas, airways, routes, and reporting points. This action is not expected to cause any potentially significant environmental impacts. In accordance with FAA Order 1050.1F, paragraph 5-2 regarding Extraordinary Circumstances, this action has been reviewed for factors and circumstances in which a normally categorically excluded action may have a significant environmental impact requiring further analysis, and it is determined that no extraordinary circumstances exist that warrant preparation of an environmental assessment.

    List of Subjects in 14 CFR Part 71

    Airspace, Incorporation by reference, Navigation (air).

    Adoption of the Amendment

    In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:

    PART 71—DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 1. The authority citation for part 71 continues to read as follows: Authority:

    49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.

    § 71.1 [Amended]
    2. The incorporation by reference in 14 CFR 71.1 of the FAA Order 7400.11A, Airspace Designations and Reporting Points, dated August 3, 2016, and effective September 15, 2016, is amended as follows: Paragraph 4000 Subpart C—Class C Airspace. ASW TX C El Paso International Airport, TX [Amended] El Paso International Airport, TX (Lat. 31°48′26″ N., long. 106°22′35″ W.)

    That airspace extending upward from the surface to and including 8,000 feet MSL within a 5-mile radius of the El Paso International Airport, excluding that airspace west of long. 106°27′02″ W., and that airspace within Mexico; and that airspace extending upward from 5,200 feet MSL to and including 8,000 feet MSL within a 10-mile radius of the El Paso International Airport, excluding that airspace west of long. 106°27′02″ W., and that airspace within Mexico.

    Issued in Washington, DC, on November 22, 2016. Leslie M. Swann, Acting Manager, Airspace Policy Group.
    [FR Doc. 2016-28726 Filed 11-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF COMMERCE Bureau of Industry and Security 15 CFR Part 740 [160519443-6999-02] RIN 0694-AG97 Temporary Exports to Mexico Under License Exception TMP AGENCY:

    Bureau of Industry and Security, Commerce.

    ACTION:

    Final rule.

    SUMMARY:

    This final rule aligns the time limit of License Exception Temporary Imports, Exports, Reexports, and Transfers (in-country) (TMP), which authorizes, among other things, certain temporary exports to Mexico, with the time limit of Mexico's Decree for the Promotion of Manufacturing, Maquiladora and Export Services (IMMEX) program. Currently, TMP allows for the temporary export and reexport of various items subject to the Export Administration Regulations (EAR), as long as the items are returned no later than one year after export, reexport, or transfer if not consumed or destroyed during the period of authorized use. Other than a four-year period for certain personal protective equipment, the one-year limit extends to all items shipped under license exception TMP. However, the one-year period does not align with the time constraints of Mexico's IMMEX program, which allows imports of items for manufacturing operations on a time limit that may exceed 18 months. This rule amends TMP to complement the timeline of the IMMEX program. Under this amendment, items temporarily exported or reexported under license exception TMP and imported under the provisions of the IMMEX program would be authorized to remain in Mexico for up to four years from the date of export or reexport.

    DATES:

    Effective: January 3, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Regulatory Policy Division, Office of Exporter Services, Bureau of Industry and Security, by telephone (202) 482-2440 or email: [email protected]

    SUPPLEMENTARY INFORMATION: Overview

    Mexico's Decree for the Promotion of Manufacturing, Maquiladora and Export Services, known as IMMEX, is a platform used by U.S. and foreign manufacturers to lower production costs by temporarily importing production materials into Mexico. Created in 2006, IMMEX is the product of the merger of two previous Mexican economic policies: The Maquiladora program, which was designed to attract foreign investment by exempting temporary imports from taxes, and the Temporary Import Program to Promote Exports (PITEX), which incentivized Mexican companies to grow and compete in foreign markets by providing temporary import benefits. Under IMMEX, companies located in Mexico are not subject to quotas and do not have to pay taxes on items temporarily imported and manufactured, transformed, or repaired before reexport.

    Under IMMEX, the length of time that imports may remain in Mexico is commodity dependent, with some items allowed to remain in-country for 18 months or more. These time allotments are greater than the time limits for License Exception Temporary Imports, Exports, Reexports, and Transfers (in-country) (TMP) allowed under § 740.9(a)(14) of the EAR. With few exceptions, items exported under TMP, if not consumed or destroyed during the authorized use abroad, must be returned to the United States one year after the date of export. The discrepancy between the time periods of IMMEX and TMP reduces the efficacy of both policies, thereby hindering the shipment of items subject to the EAR to and from Mexico.

    U.S. companies that produce items subject to the EAR and ship those items to Mexico under IMMEX have notified the Bureau of Industry and Security of this discrepancy and have requested that BIS amend the EAR to increase compatibility with IMMEX. Considering the strength of Mexico's export control regime, as exemplified by its accession as a member to the Wassenaar Arrangement, the Australia Group, and the Nuclear Suppliers Group, BIS published the proposed rule 81 FR 57505 on August 23, 2016 (known hereafter as the August 23 rule) proposing to amend § 740.9(a) to account for IMMEX's time limit. For the purpose of simplicity, BIS did not propose to match the various time periods instituted by IMMEX. Instead, the rule proposed to revise § 740.9(a)(8) to allow temporary exports and reexports to remain in Mexico for up to four years, which accommodates the maximum available time that temporarily imported items may remain in Mexico under IMMEX and is in parallel with the validity period of BIS's licenses. Additionally, the August 23 rule proposed to revise introductory paragraph § 740.9(a)(14) to include a reference to § 740.9(a)(8) as an exception to the one-year time limit of TMP. BIS received only one comment regarding the rule, in which the user expressed support for the potential change in the regulations. Because BIS received only one comment, which was positive, regarding the August 23 rule, this final rule implements the proposed rule without change.

    Export Administration Act

    Although the Export Administration Act of 1979, as amended, expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of August 4, 2016, 81 FR 52585 (August 4, 2016), has continued the EAR in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222.

    Rulemaking Requirements

    1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been determined to be not significant for the purposes of Executive Order 12866.

    2. Notwithstanding any other provision of law, no person is required to respond to, nor is subject to a penalty for failure to comply with, a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This rule does not contain any collections of information.

    3. This rule does not contain policies with Federalism implications as that term is defined in Executive Order 13132.

    4. The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et seq., generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to the notice and comment rulemaking requirements under the Administrative Procedure Act (5 U.S.C. 553) or any other statute. Under section 605(b) of the RFA, however, if the head of an agency certifies that a rule will not have a significant economic impact on a substantial number of small entities, the statute does not require the agency to prepare a regulatory flexibility analysis. Pursuant to section 605(b), the Chief Counsel for Regulation, Department of Commerce, certified to the Chief Counsel for Advocacy, Small Business Administration at the proposed rule stage that this rule would not have a significant economic impact on a substantial number of small entities.

    Number of Small Entities

    The Bureau of Industry and Security (BIS) does not collect data on the size of entities that apply for and are issued export licenses. Although BIS is unable to estimate the exact number of small entities that would be affected by this rule, it acknowledges that this rule would affect some unknown number.

    Economic Impact

    BIS believes that this final rule will not have a significant economic impact because exporters are already using other provisions of the EAR to participate in IMMEX. Currently, exporters participating in IMMEX are using TMP for exports of a one-year duration. If the item is to remain in Mexico longer than one year, exporters are required to either use another license exception or apply for a license that will address a specific time limit. This final rule merely extends the eligibility period for TMP to four years to complement the lengthy IMMEX time limit which could be 18 months or more, depending on circumstances. Extending the time limit of TMP to four years provides exporters flexibility in complying with the EAR and allows them to take fuller advantage of the privileges granted by IMMEX. While such a provision should reduce the paperwork burden to exporters, BIS does not believe increasing the time limit will lead to a significant increase in exports to Mexico. Rather, this final rule is consistent with the principle of the EAR in easing the unnecessary regulatory burden to exporters.

    List of Subjects in 15 CFR Part 740

    Administrative practice and procedure, Exports, Reporting and recordkeeping requirements.

    Accordingly, 15 CFR part 740 of the EAR (15 CFR parts 730-774) is amended as follows:

    PART 740—[AMENDED] 1. The authority citation for part 740 continues to read as follows: Authority:

    50 U.S.C. 4601 et seq.; 50 U.S.C. 1701 et seq.; 22 U.S.C. 7201 et seq.; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 4, 2016, 81 FR 52587 (August 8, 2016).

    2. Section 740.9 is amended by revising paragraph (a)(8) and the introductory text of paragraph (a)(14) to read as follows:
    § 740.9 Temporary imports, exports, reexports, and transfers (in-country) (TMP).

    (a) * * *

    (8) Assembly in Mexico. Commodities may be exported to Mexico under Customs entries that require return to the United States after processing, assembly, or incorporation into end products by companies, factories, or facilities participating in Mexico's in-bond industrialization program (IMMEX) under this paragraph (a)(8), provided that all resulting end-products (or the commodities themselves) are returned to the United States as soon as practicable but no later than four years after the date of export or reexport.

    (14) Return or disposal of items. With the exception of items described in paragraphs (a)(8) and (11) of this section, all items exported, reexported, or transferred (in-country) under this section must, if not consumed or destroyed in the normal course of authorized temporary use abroad, be returned to the United States or other country from which the items were so transferred as soon as practicable but no later than one year after the date of export, reexport, or transfer (in-country). Items not returned shall be disposed of or retained in one of the following ways:

    Kevin J. Wolf, Assistant Secretary for Export Administration.
    [FR Doc. 2016-28893 Filed 11-30-16; 8:45 am] BILLING CODE 3510-33-P
    DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Parts 375 and 388 [Docket No. RM17-5-000; Order No.832] Regulations Implementing the FOIA Improvement Act of 2016 and Clarifying the FOIA Regulations AGENCY:

    Federal Energy Regulatory Commission, Department of Energy.

    ACTION:

    Final rule.

    SUMMARY:

    On June 30, 2016, President Obama signed the Freedom of Information Act Improvement Act of 2016. The Act requires agencies to revise their regulations within 180 days to account for the new statutory mandates. After undertaking a review of Commission regulations in accordance with Section 3 of the Act, the Commission is revising its FOIA regulations to incorporate the statutory mandates. Additionally, this rule updates the delegation regulations with respect to determinations made by the General Counsel in response to FOIA administrative appeals.

    DATES:

    This rule will become effective January 3, 2017.

    FOR FURTHER INFORMATION CONTACT: Mark Hershfield, Office of the General Counsel, 888 First Street NE., Washington, DC 20426, (202) 502-8597, [email protected].

    Christopher MacFarlane, Office of the General Counsel, 888 First Street NE., Washington, DC 20426, (202) 502-6761, [email protected].

    SUPPLEMENTARY INFORMATION: ORDER NO. 832 FINAL RULE I. Introduction

    1. On June 30, 2016, President Obama signed the Freedom of Information Act (FOIA) Improvement Act of 2016 (FOIA Improvement Act or the Act).1 The Act directs agencies to: (1) Make information that has been requested and disclosed three times publically accessible in an electronic format; 2 (2) institute a sunset period of 25 years on records protected under the deliberative process privilege; (3) codify the Department of Justice's foreseeability of harm standard when rendering FOIA determinations; 3 (4) take reasonable steps to segregate exempt information from nonexempt information; (5) limit fees in unusual circumstances when the agency response is delayed; and (6) provide additional notice requirements to FOIA requesters in agency determination letters.

    1 FOIA Improvement Act of 2016, Public Law 114-185, 130 Stat. 538 (June 2016). The Act also requires several actions that do not necessitate a revising of the regulations such as FOIA officers offering additional FOIA training.

    2See Proactive Disclosure of Non-Exempt Agency Information: Making Information Available Without the Need to File a FOIA Request, OIP Guidance (Oct. 5, 2015), https://www.justice.gov/oip/oip-guidance-5.

    3See 5 U.S.C. 552(b)(5)(2012) (incorporating various privileges including the deliberative process privilege covering “inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency.”)

    2. Section 3 of the Act requires agencies to revise their regulations to account for the new statutory mandates. The Act provides that agencies must revise their rules within 180 days to incorporate the statutory changes. Accordingly, the Commission is revising its regulations to implement the FOIA Improvement Act. Consistent with the FOIA administrative appeal provisions in section 388.110, the Commission also is clarifying under section 375.309 that the General Counsel or a designee may issue final determinations on administrative FOIA appeals.

    II. Discussion

    3. After undertaking a review of Commission regulations in accordance with Section 3 of the Act, the Commission is revising its FOIA regulations in 18 CFR 388.106-388.10, as follows.

    A. Revisions to Section 375.309

    4. The FOIA administrative appeal provisions in section 388.110 provide that a FOIA administrative appeal must be directed to the General Counsel for determination, and that the General Counsel or the General Counsel's designee will make a determination on that appeal within the statutory timeframe.4 Consistent with the Commission's FOIA administrative appeal provisions in section 388.110, the Commission is clarifying, in section 375.309, that the General Counsel or a designee will provide determinations in response to FOIA administrative appeals.

    4See 5 U.S.C. 552(a)(6)(A)(ii) (2012).

    B. Revisions to Section 388.106

    5. The FOIA Improvement Act requires agencies to “make available for public inspection in an electronic format” records that have been released and “that have been requested 3 or more times.” Section 388.106 concerns Commission records available in the public reference room at the Commission's headquarters or on the Commission's Web site. The Commission is revising that section to codify this requirement.

    C. Revisions to Section 388.107

    6. The FOIA Improvement Act provides that the deliberative process privilege no longer exempts a document that is 25 years or older. Section 388.107 describes material that is exempt from public disclosure under the Commission's regulations, and a provision in that section describes material that would traditionally fall under the protection of deliberative process privilege. The Commission is revising section 338.107(e) to reflect the 25 year limitation on material that would otherwise be exempt under the deliberative process privilege.

    D. Revisions to Section 388.108

    7. The FOIA Improvement Act requires agencies to codify the Department of Justice's foreseeable harm standard. Under that standard, agencies “shall withhold information” under the FOIA “only if the agency reasonably foresees that disclosure would harm an interest protected by an exemption” or “disclosure is prohibited by law.” The standard does not require the release of material “that is otherwise prohibited from disclosure by law, or otherwise exempted from disclosure under [Exemption] 3.” The Act also directs agencies to make reasonable efforts to segregate and release nonexempt material. Consistent with Section 3 of the Act, the Commission revises section 388.108 to codify these practices.

    E. Revisions to Section 388.109

    8. The Act directs agencies to waive processing fees, under certain unusual circumstances, where the agency's response was delayed.5 The Commission is revising its regulations on FOIA processing fees, section 388.109, to provide for fee waivers in the unusual circumstances described in the Act.

    5See Prohibition on Assessing Certain Fees When the FOIA's Time Limits Are Not Met, OIP Guidance (Oct. 19, 2016), https://www.justice.gov/oip/oip-guidance/prohibition_on_assessing_certain_fees_when_foia_time_limits_not_met.

    F. Revisions to Section 388.110

    9. The FOIA Improvement Act also provides changes to administrative appeals and provides mandatory language that must go in initial response letters. The Act requires that all determination letters must notify the requester that they can seek assistance from the FOIA Public Liaison. Each adverse FOIA determination letter must notify the requester of the option to seek dispute resolution services from Office of Government Information Services (OGIS).

    10. The Act also directs Agencies to extend the timeframe to file an administrative appeal from 45 days to at least 90 days. Additionally, the Act mandates that agencies advise requesters that they may seek the assistance of OGIS when the agency extends the response time by ten or more days for unusual circumstances. The Commission will take these steps and revises section 388.110 of its regulations to codify this practice.

    III. Information Collection Statement

    11. Office of Management and Budget (OMB) regulations require OMB to approve certain information collection requirements imposed by agency rule.6 However, this instant Final Rule does not contain any information collection requirements. Therefore, compliance with OMB regulations is not required.

    6 5 CFR 1320.12 (2016).

    IV. Environmental Analysis

    12. The Commission is required to prepare an Environmental Assessment or an Environmental Impact Statement for any action that may have a significant adverse effect on the human environment.7 Issuance of this Final Rule does not represent a major federal action having a significant adverse effect on the human environment under the Commission's regulations implementing the National Environmental Policy Act of 1969. Part 380 of the Commission's regulations lists exemptions to the requirement to draft an Environmental Analysis or Environmental Impact Statement. Included is an exemption for procedural, ministerial, or internal administrative actions.8 This rulemaking is exempt under that provision.

    7Regulations Implementing the National Environmental Policy Act of 1969, Order No. 486, (Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783 (1987).

    8 18 CFR 380.4(a)(1) (2016).

    V. Regulatory Flexibility Act

    13. The Regulatory Flexibility Act of 1980 (RFA) 9 generally requires a description and analysis of final rules that will have significant economic impact on a substantial number of small entities. This Final Rule makes procedural modifications as directed by statute. The Commission certifies that it will not have a significant economic impact upon participants in Commission proceedings. An analysis under the RFA is not required.

    9 5 U.S.C. 601-12 (2012).

    VI. Document Availability

    14. In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through the Commission's Home Page (http://www.ferc.gov) and in the Commission's Public Reference Room during normal business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A, Washington, DC 20426.

    15. From the Commission's Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field.

    16. User assistance is available for eLibrary and the Commission's Web site during normal business hours from FERC Online Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at [email protected], or the Public Reference Room at (202) 502-8371, TTY (202) 502-8659. Email the Public Reference Room at [email protected].

    VII. Effective Date

    17. The Commission is issuing this rule as a Final Rule without a period for public comment. Under 5 U.S.C. 553(b)(3)(A), notice and comment procedures are unnecessary for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice . . .” This rule merely makes modification to existing procedures as directed by statute. The rule will not significantly affect regulated entities or the general public.

    18. These regulations are effective January 3, 2017.

    List of Subjects 18 CFR Part 375

    Authority delegations (Government agencies), Seals and insignia, Sunshine Act.

    18 CFR Part 388

    Confidential business information, Freedom of information.

    By the Commission.

    Issued: November 17, 2016. Nathaniel J. Davis, Sr., Deputy Secretary.

    In consideration of the foregoing, the Commission amends parts 375 and 388, Chapter I, Title 18, Code of Federal Regulations, as follows:

    PART 375—THE COMMISSION 1. The authority citation for part 375 continues to read as follows: Authority:

    5 U.S.C. 551-557; 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 791-825r, 2601-2645; 42 U.S.C. 7101-7352.

    2. In § 375.309, paragraph (h) is added and reserved, and paragraph (i) is added to read as follows
    § 375.309 Delegations to the General Counsel.

    (h) [Reserved]

    (i) Deny or grant, in whole or in part, an appeal of a Freedom of Information Act determination by the Director of the Office of External Affairs.

    PART 388—INFORMATION AND REQUESTS 3. The authority citation for part 388 continues to read as follows: Authority:

    5 U.S.C. 301-305, 551, 552 (as amended), 553-557; 42 U.S.C. 7101-7352.

    4. Amend § 388.106 by adding paragraph (b)(24) to read as follows
    § 388.106 Requests for Commission records available in the Public Reference Room and from the Commission's Web site, http://www.ferc.gov.

    (b) * * *

    (24) Records that have been requested three or more times and determined eligible for public disclosure will be made publicly available on the Commission's Web site or through other electronic means.

    5. Amend § 388.107 by revising paragraph (e) to read as follows
    § 388.107 Commission records exempt from public disclosure.

    (e) Interagency or intraagency memoranda or letters which would not be available by law to a party other than an agency in litigation with the agency, except that the deliberative process privilege shall not exempt any record 25 years or older.

    6. Amend § 388.108 by revising paragraph (c)(4) and adding paragraph (c)(5) to read as follows:
    § 388.108 Requests for Commission records not available through the Public

    Reference Room (FOIA requests).

    (c) * * *

    (4) The Director will consider whether partial disclosure of information is possible whenever it is determined that a document is exempt and will take reasonable steps to segregate and release nonexempt information.

    (5) The Director will only withhold information where it is reasonably foreseeable that disclosure would harm an interest protected by an exemption or disclosure is prohibited by law or otherwise exempted from disclosure under FOIA Exemption 3.

    7. Amend § 388.109 by adding paragraph (f) to read as follows
    § 388.109 Fees for record requests.

    (f) The Commission will not charge search fees (or duplication fees for requesters with preferred fee status) where, after extending the time limit for unusual circumstances, as described in § 388.110, the Director does not provide a timely determination.

    (1) If there are unusual circumstances, as described in § 388.110, and there are more than 5,000 responsive pages to the request, the Commission may charge search fees (or, for requesters in preferred fee status, may charge duplication fees) where the requester received timely written notice and the Commission has discussed with the requester via written mail, electronic mail, or telephone (or made not less than 3 good-faith attempts to do so) how the requester could effectively limit the scope of the request; or

    (2) If a court determines that exceptional circumstances exist, the Commission's failure to comply with a time limit will be excused for the length of time provided by the court order.

    8. Amend § 388.110 by revising paragraph (a) and adding paragraph (b)(5) to read as follows:
    § 388.110 Procedure for appeal of denial of requests for Commission records not publicly available or not available through the Public Reference Room, denial of . . . fee waiver or reduction, and denial of requests for expedited processing.

    (a)(1) Determination letters shall indicate that a requester may seek assistance from the FOIA Public Liaison. A person whose request for records, request for fee waiver, or request for expedited processing is denied in whole or in part may seek dispute resolution services from the Office of Government Information Services, or may appeal the determination to the General Counsel or General Counsel's designee within 90 days of the determination.

    (2) Appeals filed pursuant to this section must be in writing, addressed to the General Counsel of the Commission, and clearly marked “Freedom of Information Act Appeal.” Such an appeal received by the Commission not addressed and marked as indicated in this paragraph will be so addressed and marked by Commission personnel as soon as it is properly identified and then will be forwarded to the General Counsel. Appeals taken pursuant to this paragraph will be considered to be received upon actual receipt by the General Counsel.

    (3) The General Counsel or the General Counsel's designee will make a determination with respect to any appeal within 20 working days after the receipt of such appeal. An appeal of the denial of expedited processing will be considered as expeditiously as possible within the 20 working day period. If, on appeal, the denial of the request for records, fee reduction, or expedited processing is upheld in whole or in part, the General Counsel or the General Counsel's designee will notify the person making the appeal of the provisions for judicial review of that determination.

    (b) * * *

    (5) Whenever the Commission extends the time limit, pursuant to paragraph (b)(1) of this section, by more than ten additional working days, the written notice will notify the requester of the right to seek dispute resolution services from the Office of Government Information Services.

    [FR Doc. 2016-28811 Filed 11-30-16; 8:45 am] BILLING CODE 6717-01-P
    INTERNATIONAL TRADE COMMISSION 19 CFR Part 201 FOIA Improvement Act; Rules of General Application AGENCY:

    United States International Trade Commission.

    ACTION:

    Final rule.

    SUMMARY:

    The United States International Trade Commission (“Commission”) issues a final rule amending its Rules of Practice and Procedure concerning rules of general application to reflect amendments to the Freedom of Information Act (“FOIA”) made by the FOIA Improvement Act of 2016 (“Improvement Act”). Among other things, the Improvement Act requires the Commission to amend its FOIA regulations to extend the deadline for administrative appeals for FOIA decisions, to add information on dispute resolution services, and to amend the way the Commission charges fees for FOIA requests.

    DATES:

    This regulation is effective January 3, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Lisa R. Barton, Secretary, telephone (202) 205-2000 or Brian R. Battles, Esquire, Office of the General Counsel, United States International Trade Commission, telephone (202) 708-4737. Hearing-impaired individuals are advised that information on this matter can be obtained by contacting the Commission's TDD terminal at 202-205-1810. General information concerning the Commission may also be obtained by accessing its Web site at https://www.usitc.gov.

    SUPPLEMENTARY INFORMATION:

    The preamble below is designed to assist readers in understanding these amendments to the Commission's Rules of Practice and Procedure.

    Background

    Section 335 of the Tariff Act of 1930 (19 U.S.C. 1335) authorizes the Commission to adopt such reasonable procedures, rules, and regulations as it deems necessary to carry out its functions and duties.

    This rulemaking amends the Commission's existing Rules of Practice and Procedure and reflects changes to the FOIA by the Improvement Act. The Improvement Act addresses a range of procedural issues. Among other things, it requires that agencies establish a minimum of 90 days for requesters to file an administrative appeal and that they provide dispute resolution services at various times throughout the FOIA process. The Improvement Act also updates how fees are charged.

    The United States International Trade Commission amends 19 CFR part 201 as follows:

    • By amending § 201.18:

    ○ To change the appeals deadline from sixty days to ninety days;

    ○ To indicate that the Commission's FOIA Public Liaison is available to offer dispute resolution services and to provide contact information for the Commission's FOIA Public Liaison and the Office of Government Information Services.

    • By amending § 201.20, to add new paragraphs (c)(5), (c)(6), and (c)(7) to provide additional limitations on the fees charged by the Commission.

    Good Cause for Final Adoption

    The Commission ordinarily promulgates amendments to the Code of Federal Regulations in accordance with the notice-and-comment rulemaking procedure in section 553 of the Administrative Procedure Act (APA) (5 U.S.C. 553). That procedure entails publication of notice of proposed rulemaking in the Federal Register that solicits public comment on the proposed amendments, consideration by the Commission of public comments on the content of the amendments, and publication of the final amendments at least 30 days prior to their effective date.

    In this instance, however, the Commission has determined that the notice and public comment procedure is unnecessary. Section 553(b)(3)(B) of the APA authorizes agencies to dispense with notice and comment procedures for rules when the agency finds that there is “good cause” in concluding that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without seeking comment prior to the rulemaking. The proposed amendments are required by statute, do not involve Commission discretion, and provide additional protections to the public. Given these factors, the Commission finds good cause to conclude that the notice and public comment procedure are unnecessary.

    Regulatory Analysis of Proposed Amendments to the Commission's Rules

    The Commission has determined that these rules do not meet the criteria described in section 3(f) of Executive Order 12866 (58 FR 51735, October 4, 1993) and thus do not constitute a “significant regulatory action” for purposes of the Executive Order.

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) is inapplicable to this rulemaking because it is not one for which a notice of proposed rulemaking is required under 5 U.S.C. 553(b) or any other statute.

    These rules do not contain federalism implications warranting the preparation of a federalism summary impact statement pursuant to Executive Order 13132 (64 FR 43255, August 4, 1999).

    No actions are necessary under title II of the Unfunded Mandates Reform Act of 1995, Pubic Law 104-4 (2 U.S.C. 1531-1538) because the rules will not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year (adjusted annually for inflation), and will not significantly or uniquely affect small governments.

    These rules are not “major rules” as defined by section 251 of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.). Moreover, they are exempt from the reporting requirements of that Act because they contain rules of agency organization, procedure, or practice that do not substantially affect the rights or obligations of non-agency parties.

    These rules are not subject to section 3504(h) of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), since they do not contain any new information collection requirements.

    List of Subjects in 19 CFR Part 201

    Administrative practice and procedure, Claims, Classified information, Confidential business information, Freedom of information, Privacy, Reporting and recordkeeping requirements.

    As stated in the preamble, part 201 of chapter II, title 19 of the Code of Federal Regulations is amended as follows:

    PART 201—RULES OF GENERAL APPLICATION 1. The authority citation for part 201 continues to read as follows: Authority:

    19 U.S.C. 1335; 19 U.S.C. 2482, unless otherwise noted.

    2. In § 201.18, paragraphs (b) and (f) are revised to read as follows:
    § 201.18 Denial of requests, appeals from denial.

    (b) An appeal from a denial of a request must be received within ninety days of the date of the letter of denial and shall be made to the Commission and addressed to the Chairman, United States International Trade Commission, 500 E Street SW., Washington, DC 20436. Any such appeal shall be in writing, and shall indicate clearly in the appeal, and if the appeal is in paper form on the envelope, that it is a “Freedom of Information Act Appeal.” An appeal may be made either in paper form, or electronically by contacting the Commission at http://www.usitc.gov/foia.htm.

    (f) A response to an appeal will advise the requester that the Commission's FOIA Public Liaison officer and the Office of Government Information Services both offer mediation services to resolve disputes between FOIA requesters and Federal agencies as a non-exclusive alternative to litigation. The requester may contact the Commission's FOIA Public Liaison officer by telephone (202-205-2595) or email ([email protected]) or the Office of Government Information Services at National Archives and Records Administration, 8601 Adelphi Road—OGIS, College Park, Maryland 20740-6001.

    3. In § 201.20, add paragraphs (c)(5) through (7) to read as follows:
    § 201.20 Fees.

    (c) * * *

    (5) The Commission will not charge fees if it fails to comply with any time limit under the FOIA or these regulations, and if it has not timely notified the requester, in writing, that an unusual circumstance exists. If an unusual circumstance exists, and timely written notice is given to the requester, the Commission will have an additional 10 working days to respond to the request before fees are automatically waived under this paragraph.

    (6) If the Commission determines that unusual circumstances apply and that more than 5,000 pages are necessary to respond to a request, it may charge fees if it has provided a timely written notice to the requester and discusses with the requester via mail, Email, or telephone how the requester could effectively limit the scope of the request (or make at least three good faith attempts to do so).

    (7) If a court has determined that exceptional circumstances exist, a failure to comply with time limits imposed by these regulations or FOIA shall be excused for the length of time provided by court order.

    By order of the Commission.

    Issued: November 25, 2016. Katherine M. Hiner, Acting Supervisory Attorney.
    [FR Doc. 2016-28819 Filed 11-30-16; 8:45 am] BILLING CODE 7020-02-P
    DEPARTMENT OF THE TREASURY Financial Crimes Enforcement Network 31 CFR Part 1010 RIN 1506-AB27 Supplemental Information Regarding the Final Rule Imposing the Fifth Special Measure Against FBME Bank, Ltd. AGENCY:

    Financial Crimes Enforcement Network (“FinCEN”).

    ACTION:

    Supplement to final rule.

    SUMMARY:

    In its September 20, 2016 order, the U.S. District Court for the District of Columbia remanded to FinCEN the final rule imposing a prohibition on covered financial institutions from opening or maintaining correspondent accounts for, or on behalf of, FBME Bank, Ltd. In its memorandum opinion accompanying that order, the Court stated that the agency had not responded meaningfully to FBME's comments regarding the agency's treatment of aggregate Suspicious Activity Report (SAR) data. The Court found that those comments challenged FinCEN's interpretation of SAR data on at least four distinct grounds. In this supplement to the final rule, FinCEN provides further explanation addressing FBME's comments.

    DATES:

    December 1, 2016.

    FOR FURTHER INFORMATION CONTACT:

    The FinCEN Resource Center at (800) 767-2825 or [email protected]

    SUPPLEMENTARY INFORMATION:

    I. Background

    In its September 20, 2016 order, the U.S. District Court for the District of Columbia remanded to FinCEN the final rule imposing a prohibition on covered financial institutions from opening or maintaining correspondent accounts for, or on behalf of, FBME Bank, Ltd. (FBME). In its memorandum opinion accompanying that order, the Court stated that the agency had not responded meaningfully to FBME's comments regarding the agency's treatment of aggregate SAR data. In this supplement to the final rule, FinCEN notes that FBME's comments regarding FinCEN's use of SARs in the rulemaking process reflect a misunderstanding of SARs generally and how FinCEN analyzed and used SARs in this rulemaking.

    As an initial matter, FBME overstates the centrality of the use of SARs in FinCEN's determination that FBME is of primary money laundering concern. As reflected in the agency's Notice of Finding (NOF), Final Rule, and Administrative Record, far from being the only evidence that informed FinCEN's determination that FBME is of primary money laundering concern, the agency's analysis of SARs simply affirmed FinCEN's concern surrounding FBME's involvement in money laundering that was informed by other information in the Administrative Record. For instance, as detailed in the NOF, this information included: (1) An FBME customer's receipt of a deposit of hundreds of thousands of dollars from a financier for Lebanese Hezbollah; (2) providing financial services to a financial advisor for a major transnational organized crime figure; (3) FBME's facilitation of funds transfers to an FBME account involved in fraud against a U.S. person, with the FBME customer operating the alleged fraud scheme later being indicted in the United States District Court for the Northern District of Ohio; and (4) FBME's facilitation of U.S. sanctions evasion through its extensive customer base of shell companies, including at least one FBME customer that was a front company for a U.S.-sanctioned Syrian entity, the Scientific Studies and Research Center, which used its FBME account to process transactions through the U.S. financial system.

    Set forth below are summaries of FBME's four arguments in its comments surrounding FinCEN's interpretation of SARs and the agency's responses.

    1. FBME argues that SARs are so over-inclusive—“sweeping in [so many] transactions that are perfectly legitimate”—that “categorically” viewing SARs as indicative of illicit transactions is “invalid and improper.”

    In its January 26, 2016 comments, FBME asserted that:

    To paint FBME as posing a significant threat to U.S. and other financial institutions, FinCEN relies on limited and misleading statistical data regarding “suspicious wire transfers” as well as biased reports from financial institutions seeking to offload responsibility for their own actions. During the hearing before Judge Cooper, FinCEN revealed that the statistical data relied upon in the NOF was based on SARs. But such reliance is categorically invalid and improper. To begin, we know of no instance, prior to this proceeding, in which FinCEN has equated any particular SARs data or rate as indicative of a problem under Section 311 [of the USA PATRIOT Act]. Nor is such use valid. To the contrary, it ignores the purpose of a SAR, which involves a designedly low threshold for the sake of erring on the side of over-inclusion—sweeping in transactions that are perfectly legitimate, simply to ensure there is scrutiny of them to ensure against any issue. It is spurious in this light to take a SAR or any number of them as evidencing the illegitimacy of any transaction or set thereof—not to mention as evidence that a particular bank is one of “primary money laundering concern” under Section 311.1

    1 FBME's January 26, 2016 Comments, pp. 50-51.

    Contrary to FBME's assumptions, FinCEN analyzed the SARs as qualitative evidence of activity conducted by FBME that reflected one of FinCEN's primary concerns about FBME—specifically, a “[s]ignificant [v]olume” of “[o]bscured [t]ransactions” as indicated in part by the size and number of “[w]ire transfers related to suspected shell company activities.” NOF, 79 FR at 42640. While FinCEN recognizes that actual wrongdoing does not necessarily underlie the suspicious activity described in any particular SAR, many of the SARs relating to FBME described typical indicators of shell company activity. As FinCEN has explained, it is particularly concerned, among other things, by the lack of transparency associated with transactions by FBME's shell company customers, and the high volume of U.S. dollar transactions conducted by these shell companies with no apparent business purpose. March 31, 2016 Final Rule, 81 FR at 18487. Therefore, when reviewing SARs associated with such activity, FinCEN appropriately concluded that they were indicative of potential money laundering. In addition to the SARs as well as other information available to FinCEN discussed in the NOF and Final Rule, the agency's concerns were supported by FBME's own acknowledgement in its January 26, 2016 comment that it transacted with shell companies.

    Moreover, with respect to FBME's claim that SARs are over-inclusive, based on FinCEN's extensive experience with SAR filings and the other illicit conduct at FBME detailed in the NOF, Final Rule, and Administrative Record, FinCEN assesses it more likely that the SARs understate the size and frequency of shell company and other suspicious activity conducted by FBME. The SARs include only the information that financial institutions identified and reported to FinCEN; they do not necessarily reflect all suspicious transactions engaged in by FBME. FinCEN assesses that such is the case here given FinCEN's determination that FBME has sought to evade anti-money laundering (AML) regulations, has ignored the Central Bank of Cyprus' AML directives, and that following the issuance of the NOF, FBME employees took various measures to obscure information, all of which may have undermined the ability of U.S. financial institutions to detect and report all of FBME's suspicious activity.

    2. FBME argues that while the absolute dollar amounts of transactions tagged as “suspicious” might appear high on the surface, they represented a small proportion of FBME's overall transactions.

    FBME notes that while the NOF highlighted “at least 4,500 suspicious wire transfers through U.S. correspondent accounts that totaled at least $875 million between November 2006 and March 2013,” that figure represented, according to FBME, “only 0.55% of the total amount of transfers and 0.81% of the [U.S. dollar] amount of transfers conducted by FBME during this period.” 2 In other words, FBME asserts without supporting evidence that the SARs reflect a small portion of the bank's total transactions. But the final rule never suggested otherwise; FinCEN may identify a bank as a financial institution of primary money laundering concern pursuant to Section 311 even if it has extensive legitimate activities.

    2 FBME's January 26, 2016 Comments, p. 52.

    FinCEN considered the volume of suspicious transactions in absolute terms—not whether such money laundering was a greater percentage of FBME's activities than that suggested in FBME's comments. FBME's comment incorrectly assumes that FinCEN's focus in the NOF was, or should have been, based upon a percentage of suspicious activity by FBME's customers. To the contrary, FinCEN made clear it was concerned by the substantial volume of all suspicious activity at the bank, including the suspicious activity reported in SARs and that described in other sources available to the agency and included in the Administrative Record. The overall amount of such activity informed FinCEN's evaluation of the “extent to which” FBME has been “used to facilitate or promote money laundering” 3 and its conclusion that “FBME facilitated a substantial volume of money laundering through the bank for many years.” 4 FinCEN finds the opportunity for money laundering of such a magnitude and through so many transactions to be “substantial” because, in absolute terms, it poses a significant threat to the U.S. and international financial systems, potentially allowing large amounts of funding to pass to terrorist or criminal activity. FinCEN does not find that the size of a bank that facilitates a substantial amount of money laundering is determinative of the threat posed by that activity. Adopting such an assumption would essentially permit significant volumes of money to pass through large banks. In any event, for the reasons described in the preceding section, FinCEN assesses that it is more likely that, if anything, the SARs understate the size and frequency of suspicious activity conducted by FBME.

    3 31 U.S.C. 5318A(c)(2)(B)(i).

    4 79 FR 42639 (July 22, 2014).

    3. FBME criticizes FinCEN for “fail[ing] to consider alternative bases for the increase in SARs involving FBME * * * between April 2013 and April 2014,” particularly the “Cypriot financial crisis and attendant controls.”

    FinCEN recognizes that suspicious activity and reports of such activity could be influenced by a number of factors, including financial developments within a country or internationally, but FinCEN views this scenario as inapplicable in this case. SARs typically deal with suspicious activity by individuals and entities conducting transactions, not systemic issues involving debt defaults and liquidity challenges by financial institutions. FinCEN did not rely on any suggestion that the number of SAR filings involving FBME increased during the Cypriot financial crisis as compared to past periods in the analysis. In addition, FinCEN finds no reason to assume that any renewed focus on Cypriot financial controls would decrease rather than increase the credibility of SAR filings as to FBME, let alone decrease the credibility of those filings to such an extent as to undermine its finding of a substantial volume of shell company activity at FBME. Finally, the NOF highlighted suspected shell company activities accounting for hundreds of millions of dollars between 2006-2014; 5 such activity was not limited to the period of the Cypriot financial crisis.

    5 79 FR 42639 at 42640 (July 22, 2014).

    4. FBME faults FinCEN for failing to provide either a “point of comparison between FBME and other * * * banks that [the agency] considers similarly situated but less deserving of suspicion given their SAR statistics,” or “any baseline for the SARs statistics it considers standard or acceptable for an international bank like FBME.”

    Again, FBME misunderstands the role that SARs played in FinCEN's analysis, incorrectly assuming that the analysis necessarily depended on a relative comparison to other banks. FBME appears to assume that SAR filings, or the absolute number and size of suspicious transactions described in such filings, are not in themselves relevant, but instead that only relative SAR rates among banks can be an indication of significant suspicious activity. FinCEN finds this assumption unwarranted. FinCEN found that the SAR filings discussed in the NOF informative of significant shell company activity at FBME to be “substantial” because, in absolute terms, it poses a significant threat to the U.S. and international financial system, potentially allowing large amounts of funding to pass to terrorist or criminal activity. This conclusion did not depend on comparison with other banks.

    In addition, as noted in the NOF and Final Rule, FinCEN concluded that FBME has sought to evade AML regulations, has ignored the Central Bank of Cyprus' AML directives, and that following the issuance of the NOF, FBME employees took various measures to obscure information. These facts distinguish FBME from other Cypriot banks and may have undermined the ability of U.S. financial institutions to detect all of FBME's suspicious activity, underscoring the high likelihood that SARs involving FBME are actually under-inclusive. Given FinCEN's concern regarding FBME's willingness to evade AML regulations that may have inhibited the identification of suspicious activity by U.S. financial institutions, a comparison of SARs filed on FBME compared to other Cypriot financial institutions would not necessarily portray the relevant risk posed by FBME.

    More broadly, FinCEN notes that setting a benchmark as FBME suggests could simply set a target for banks or customers wishing to evade money laundering controls. Instead, the agency reviews relevant information and determines whether all of that information, taken together, justifies action under Section 311. FinCEN is daily immersed in the global flow of financial intelligence, including SARs, and is tasked as a policy matter with identifying concerns within that intelligence stream. As discussed above, FinCEN assesses that the volume of shell company activity reflected in the Administrative Record, including SARs filed on FBME, is substantial.

    Dated: November 23, 2016. Jamal El-Hindi, Deputy Director, Financial Crimes Enforcement Network.
    [FR Doc. 2016-28752 Filed 11-30-16; 8:45 am] BILLING CODE 4810-02-P
    DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [Docket No. USCG-2016-1015] Drawbridge Operation Regulation; New Jersey Intracoastal Waterway (NJICW), Point Pleasant Canal, Point Pleasant, NJ AGENCY:

    Coast Guard, DHS.

    ACTION:

    Notice of deviation from drawbridge regulation.

    SUMMARY:

    The Coast Guard has issued a temporary deviation from the operating schedule that governs the S.R. 88/Veterans Memorial Bridge across the NJICW (Point Pleasant Canal), mile 3.0, at Point Pleasant, NJ. The deviation is necessary to facilitate and complete urgent bridge maintenance. This deviation allows the bridge to remain in the closed-to-navigation position.

    DATES:

    The deviation is effective 9 p.m. on Wednesday, December 7, 2016 to 6 a.m. on Thursday, December 8, 2016.

    ADDRESSES:

    The docket for this deviation, [USCG-2016-1015] is available at http://www.regulations.gov. Type the docket number in the “SEARCH” box and click “SEARCH”. Click on Open Docket Folder on the line associated with this deviation.

    FOR FURTHER INFORMATION CONTACT:

    If you have questions on this temporary deviation, call or email Mr. Michael Thorogood, Bridge Administration Branch Fifth District, Coast Guard, telephone 757-398-6557, email [email protected]

    SUPPLMENTARY INFORMATION:

    The New Jersey Department of Transportation, who owns the S.R. 88/Veterans Memorial Bridge, has requested a temporary deviation from the current operating schedule is set out in 33 CFR 117.5, to facilitate replacement of a defective coupling and floating shaft of the bridge.

    Under this temporary deviation, the bridge will be in the closed-to-navigation position at 9 p.m. December 7, 2016 to 6 a.m. December 8, 2016. The bridge is a vertical lift bridge and has a vertical clearance in the closed-to-navigation position of 31 feet above mean high water.

    The Point Pleasant Canal is used by a variety of vessels including, recreational vessels and tug and barge traffic. The Coast Guard has carefully considered the nature and volume of vessel traffic on the waterway in publishing this temporary deviation.

    Vessels able to pass through the bridge in the closed-to-navigation position may do so at any time. The bridge will not be able to open for emergencies and there is no immediate alternative route for vessels to pass in the closed position. The Coast Guard will also inform the users of the waterway through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessel operators can arrange their transits to minimize any impact caused by the temporary deviation.

    In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.

    Dated: November 28, 2016. Hal R. Pitts, Bridge Program Manager, Fifth Coast Guard District.
    [FR Doc. 2016-28852 Filed 11-30-16; 8:45 am] BILLING CODE 9110-04-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 180 [EPA-HQ-OPP-2014-0919; FRL-9952-88] Muscodor albus Strain SA-13 and the Volatiles Produced on Rehydration; Exemption From the Requirement of a Tolerance AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    This regulation establishes an exemption from the requirement of a tolerance for residues of Muscodor albus strain SA-13 and the volatiles produced on rehydration in and on all food commodities when used in accordance with label directions and good agricultural practices. Marrone Bio Innovations, Inc. submitted a petition to EPA under the Federal Food, Drug, and Cosmetic Act (FFDCA), requesting an exemption from the requirement of a tolerance. This regulation eliminates the need to establish a maximum permissible level for residues of Muscodor albus strain SA-13 and the volatiles produced on rehydration under FFDCA.

    DATES:

    This regulation is effective December 1, 2016. Objections and requests for hearings must be received on or before January 30, 2017, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION).

    ADDRESSES:

    The docket for this action, identified by docket identification (ID) number EPA-HQ-OPP-2014-0919, is available at http://www.regulations.gov or at the Office of Pesticide Programs Regulatory Public Docket (OPP Docket) in the Environmental Protection Agency Docket Center (EPA/DC), West William Jefferson Clinton Bldg., Rm. 3334, 1301 Constitution Ave. NW., Washington, DC 20460-0001. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the OPP Docket is (703) 305-5805. Please review the visitor instructions and additional information about the docket available at http://www.epa.gov/dockets.

    FOR FURTHER INFORMATION CONTACT:

    Robert McNally, Biopesticides and Pollution Prevention Division (7511P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001; main telephone number: (703) 305-7090; email address: [email protected]

    SUPPLEMENTARY INFORMATION: I. General Information A. Does this action apply to me?

    You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

    • Crop production (NAICS code 111).

    • Animal production (NAICS code 112).

    • Food manufacturing (NAICS code 311).

    • Pesticide manufacturing (NAICS code 32532).

    B. How can I get electronic access to other related information?

    You may access a frequently updated electronic version of 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

    C. How can I file an objection or hearing request?

    Under FFDCA section 408(g), 21 U.S.C. 346a(g), any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2014-0919 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before January 30, 2017. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

    In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2014-0919, by one of the following methods:

    Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute.

    Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001.

    Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at http://www.epa.gov/dockets/contacts.html. Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at http://www.epa.gov/dockets.

    II. Background

    In the Federal Register of January 28, 2015 (80 FR 4527) (FRL-9921-55), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide tolerance petition (PP 4F8271) by Marrone Bio Innovations, Inc. (MBI), 2121 Second Street, Suite B-107, Davis, CA 95618. The petition requested that 40 CFR part 180 be amended by establishing an exemption from the requirement of a tolerance for residues of sterile grain inoculated with Muscodor albus strain SA-13 in or on all food commodities. That document referenced a summary of the petition prepared by the petitioner MBI, which is available in the docket via http://www.regulations.gov. There were no comments received in response to this notice of filing.

    EPA revised the active ingredient name from “sterile grain inoculated with Muscodor albus strain SA-13” to “Muscodor albus strain SA-13 and the volatiles produced on rehydration.” The reason for this change is explained in Unit III.C.

    III. Final Rule A. EPA's Safety Determination

    Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is “safe.” Section 408(c)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings but does not include occupational exposure. Pursuant to FFDCA section 408(c)(2)(B), in establishing or maintaining in effect an exemption from the requirement of a tolerance, EPA must take into account the factors set forth in FFDCA section 408(b)(2)(C), which require EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance or tolerance exemption and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue . . . .” Additionally, FFDCA section 408(b)(2)(D) requires that EPA consider “available information concerning the cumulative effects of “[a particular pesticide's]” . . . residues and other substances that have a common mechanism of toxicity.”

    EPA evaluated the available toxicity and exposure data on Muscodor albus strain SA-13 and the volatiles produced on rehydration and considered its validity, completeness, and reliability, as well as the relationship of this information to human risk. A full explanation of the data upon which EPA relied and its risk assessment based on that data can be found within the November 8, 2016, document entitled “Federal Food, Drug, and Cosmetic Act (FFDCA) Considerations for Muscodor albus Strain SA-13 and the Volatiles Produced on Rehydration.” This document, as well as other relevant information, is available in the docket for this action as described under ADDRESSES.

    Based upon its evaluation, EPA concludes that Muscodor albus strain SA-13 is not toxic, is not pathogenic, and is not infective. Further, the volatiles produced by Muscodor albus strain SA-13 are not toxic. Although there may be some exposure to residues of Muscodor albus strain SA-13 when used as a fungicide, nematocide, insecticide or bactericide on food, there is no potential for adverse effects due to the lack of toxicity, pathogenicity, or infectivity. EPA also determined that retention of the Food Quality Protection Act Safety Factor (FQPA SF) was not necessary as part of the qualitative assessment conducted for Muscodor albus strain SA-13 and the volatiles produced on rehydration.

    Based upon its evaluation, EPA concludes that there is a reasonable certainty that no harm will result to the U.S. population, including infants and children, from aggregate exposure to residues of Muscodor albus strain SA-13 and the volatiles produced on rehydration. Therefore, an exemption from the requirement of a tolerance is established for residues of Muscodor albus strain SA-13 and the volatiles produced on rehydration in or on all food commodities when used in accordance with label directions and good agricultural practices.

    B. Analytical Enforcement Methodology

    An analytical method is not required for enforcement purposes because EPA is establishing an exemption from the requirement of a tolerance without any numerical limitation.

    C. Revision to the Requested Tolerance Exemption

    One modification has been made to the requested tolerance exemption. When MBI first submitted this petition in 2014, it described the pesticide chemical as “sterile grain inoculated with Muscodor albus strain SA-13.” After conducting a review of this petition and evaluating a tolerance exemption established in 2005 for another strain of Muscodor albus (QST 20799) (70 FR 56569), which has the same mode of action as Muscodor albus strain SA-13, EPA is changing the pesticide chemical name to “Muscodor albus strain SA-13 and the volatiles produced on rehydration.” This revision better reflects the possible residues that may occur on food commodities and the data/information submitted to support the petition.

    IV. Statutory and Executive Order Reviews

    This action establishes a tolerance exemption under FFDCA section 408(d) in response to a petition submitted to EPA. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq., nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

    Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance exemption in this action, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) do not apply.

    This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes. As a result, this action does not alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, EPA has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, EPA has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501 et seq.).

    This action does not involve any technical standards that would require EPA's consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).

    V. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

    List of Subjects in 40 CFR Part 180

    Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements.

    Dated: November 15, 2016. Jack Housenger, Director, Office of Pesticide Programs.

    Therefore, 40 CFR chapter I is amended as follows:

    PART 180—[AMENDED] 1. The authority citation for part 180 continues to read as follows: Authority:

    21 U.S.C. 321(q), 346a and 371.

    2. Add § 180.1340 to subpart D to read as follows:
    § 180.1340 Muscodor albus strain SA-13 and the volatiles produced on rehydration; exemption from the requirement of a tolerance.

    An exemption from the requirement of a tolerance is established for residues of Muscodor albus strain SA-13 and the volatiles produced on rehydration in or on all food commodities when used in accordance with label directions and good agricultural practices.

    [FR Doc. 2016-28884 Filed 11-30-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 180 [EPA-HQ-OPP-2015-0412; FRL-9950-89] Quizalofop Ethyl; Pesticide Tolerances AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    This regulation establishes tolerances for residues of quizalofop ethyl in or on crayfish and rice grain. Nissan Chemical Industries, Ltd. requested these tolerances under the Federal Food, Drug, and Cosmetic Act (FFDCA).

    DATES:

    This regulation is effective December 1, 2016. Objections and requests for hearings must be received on or before January 30, 2017, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION).

    ADDRESSES:

    The docket for this action, identified by docket identification (ID) number EPA-HQ-OPP-2015-0412, is available at http://www.regulations.gov or at the Office of Pesticide Programs Regulatory Public Docket (OPP Docket) in the Environmental Protection Agency Docket Center (EPA/DC), West William Jefferson Clinton Bldg., Rm. 3334, 1301 Constitution Ave. NW., Washington, DC 20460-0001. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the OPP Docket is (703) 305-5805. Please review the visitor instructions and additional information about the docket available at http://www.epa.gov/dockets.

    FOR FURTHER INFORMATION CONTACT:

    Michael Goodis, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001; main telephone number: (703) 305-7090; email address: [email protected]

    SUPPLEMENTARY INFORMATION: I. General Information A. Does this action apply to me?

    You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

    • Crop production (NAICS code 111).

    • Animal production (NAICS code 112).

    • Food manufacturing (NAICS code 311).

    • Pesticide manufacturing (NAICS code 32532).

    B. How can I get electronic access to other related information?

    You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl. To access the OCSPP test guidelines referenced in this document electronically, please go to http://www.epa.gov/test-guidelines-pesticides-and-toxic-substances.

    C. How can I file an objection or hearing request?

    Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2015-0412 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before January 30, 2017. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

    In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2015-0412, by one of the following methods:

    Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute.

    Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001.

    Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at http://www.epa.gov/dockets/contacts.html.

    Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at http://www.epa.gov/dockets.

    II. Summary of Petitioned-For Tolerance

    In the Federal Register of August 26, 2015 (80 FR 51759) (FRL-9931-74), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 5F8367) by Lewis and Harrison, LLC, 122 C St. NW., Suite 505, Washington, DC 20001 (on behalf of Nissan Chemical Industries, Ltd., 7-1, 3-chome, Kanda-Nishiki-cho, Chiyoda-ku, Tokyo 101-0054, Japan). The petition requested that 40 CFR 180.441 be amended by establishing tolerances for residues of the herbicide quizalofop-p-ethyl ester, ethyl-(R)-(2-(4-((6-chloroquinoxalin-2-yl)oxy)phenoxy)propanoate), and its acid metabolite quizalofop-P, R-(2-(4-((6-quinoxalin-2-yl)oxy)phenoxy)propanoic acid, and the S enantiomers of both the ester and the acid, all expressed as quizalofop-P-ethyl ester, in or on crayfish at 0.04 parts per million (ppm) and rice, grain at 0.05 ppm. That document referenced a summary of the petition prepared by Nissan Chemical Industries, Ltd., the registrant, which is available in the docket, http://www.regulations.gov. There were no comments received in response to the notice of filing.

    Based upon review of the data supporting the petition, EPA changed the tolerance expression for rice grain and corrected the commodity definition for crayfish. The reasons for these changes are explained in Unit IV.C.

    III. Aggregate Risk Assessment and Determination of Safety

    Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue . . .”

    Consistent with FFDCA section 408(b)(2)(D), and the factors specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for quizalofop ethyl, including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with quizalofop ethyl follows.

    A. Toxicological Profile

    EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children.

    Quizalofop ethyl is a 50/50 racemic mixture of R- and S-enantiomers. Quizalofop-P-ethyl, the purified R-enantiomer, is the pesticidally-active isomer. Since the toxicological profiles of quizalofop ethyl and quizalofop-P-ethyl are similar, the available toxicity studies are adequate to support both compounds. For the purposes of this final rule, both quizalofop ethyl and quizalofop-P-ethyl are collectively referred to as “quizalofop ethyl”.

    Quizalofop ethyl has very low acute toxicity via the oral, dermal, and inhalation routes of exposure, is not an eye or skin irritant, and is not a skin sensitizer. There were no adverse effects observed in the oral toxicity studies that could be attributable to a single-dose exposure.

    Repeated-dose toxicity studies indicate the liver as the target organ, as evidenced by increased liver weights and histopathological changes. Following oral administration, quizalofop ethyl is rapidly excreted via urine and feces. In the subchronic oral toxicity rat study, effects of decreased body weight gains, increased liver weight, and centrilobular liver cell enlargement were observed. In the subchronic oral toxicity dog study, an increased incidence of testicular atrophy was observed. In the combined chronic toxicity/carcinogenicity study in rats, an increased incidence of centrilobular liver cell enlargement was observed in both sexes and mild anemia in males.

    No dermal toxicity effects were observed in the subchronic dermal toxicity rabbit study at up to the limit dose. Subchronic inhalation toxicity is assumed to be equivalent to oral toxicity. In the chronic oral toxicity dog study, no toxicity effects were observed at the highest dose tested (HDT).

    In the rat and rabbit developmental toxicity studies, maternal effects including decreased body weight gains and food consumption were observed; no developmental effects were observed at up to the HDT. In the two-generation reproduction toxicity study in rats, maternal effects including decreased body weight and body weight gains were observed at the same dose level that resulted in prenatal and postnatal effects (decreased percentage of pups born alive and decreased pup weights).

    Although tumors were observed in male and female mice after exposure to quizalofop, the overall evidence for carcinogenicity is weak, as discussed in supporting documents. Additionally, the point of departure used for establishing the chronic reference dose for quizalofop is significantly lower (30X) than the dose that induced tumors in male and female mice. EPA has determined that quantification of cancer risk using a non-linear approach would adequately account for all chronic toxicity, including carcinogenicity, which could result from exposure to quizalofop ethyl.

    Quizalofop ethyl does not show evidence of neurotoxicity, based on no evidence of neurotoxicity or neuropathology in the available toxicology studies. There was also no evidence of adverse effects on the functional development of pups observed in the rat reproduction toxicity study. Quizalofop ethyl showed no evidence of immunotoxicity.

    Specific information on the studies received and the nature of the adverse effects caused by quizalofop ethyl as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies can be found at http://www.regulations.gov in document, “Quizalofop-P-ethyl. Human Health Risk Assessment in Support of the Proposed New Use on Rice” in docket ID number EPA-HQ-OPP-2015-0412.

    B. Toxicological Points of Departure/Levels of Concern

    Once a pesticide's toxicological profile is determined, EPA identifies toxicological points of departure (POD) and levels of concern to use in evaluating the risk posed by human exposure to the pesticide. For hazards that have a threshold below which there is no appreciable risk, the toxicological POD is used as the basis for derivation of reference values for risk assessment. PODs are developed based on a careful analysis of the doses in each toxicological study to determine the dose at which the NOAEL and the LOAEL are identified. Uncertainty/safety factors (UF) are used in conjunction with the POD to calculate a safe exposure level—generally referred to as a population-adjusted dose (PAD) or a reference dose (RfD)—and a safe margin of exposure (MOE). For non-threshold risks, the Agency assumes that any amount of exposure will lead to some degree of risk. Thus, the Agency estimates risk in terms of the probability of an occurrence of the adverse effect expected in a lifetime. For more information on the general principles EPA uses in risk characterization and a complete description of the risk assessment process, see http://www.epa.gov/pesticides-science-and-assessing-pesticide-risks/assessing-human-health-risk-pesticides.

    A summary of the toxicological endpoints for quizalofop ethyl used for human risk assessment is shown in Table 1 of this unit.

    Table 1—Summary of Toxicological Doses and Endpoints for Quizalofop Ethyl for Use in Human Health Risk Assessment Exposure/scenario Point of departure and
  • uncertainty/safety factors
  • RfD, PAD, LOC for risk
  • assessment
  • Study and
  • toxicological effects
  • Acute dietary (all populations) No hazard attributable to a single-dose exposure was identified. Chronic dietary (all populations) NOAEL = 0.9 mg/kg/day
  • UFA = 10x
  • UFH = 10x
  • FQPA SF = 1x
  • Chronic RfD = 0.009 mg/kg/day
  • cPAD = 0.009 mg/kg/day
  • Combined Chronic Toxicity/Carcinogenicity Rat Study
  • LOAEL = 3.7 mg/kg/day based on mild anemia in males and increased number of liver masses and centrilobular enlargement of the liver in both sexes
  • FQPA SF = Food Quality Protection Act Safety Factor. LOAEL = lowest-observed-adverse-effect-level. mg/kg/day = milligram/kilogram/day. NOAEL = no-observed-adverse-effect-level. PAD = population adjusted dose (a = acute, c = chronic). RfD = reference dose. UF = uncertainty factor. UFA = extrapolation from animal to human (interspecies). UFH = potential variation in sensitivity among members of the human population (intraspecies).
    C. Exposure Assessment

    1. Dietary exposure from food and feed uses. In evaluating dietary exposure to quizalofop ethyl, EPA considered exposure under the petitioned-for tolerances as well as all existing quizalofop ethyl tolerances in 40 CFR 180.441. EPA assessed dietary exposures from quizalofop ethyl in food as follows:

    i. Acute exposure. Quantitative acute dietary exposure and risk assessments are performed for a food-use pesticide, if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a one-day or single exposure. No such effects were identified in the toxicological studies for quizalofop ethyl; therefore, a quantitative acute dietary exposure assessment is unnecessary.

    ii. Chronic exposure. In conducting the chronic dietary exposure assessment EPA used the food consumption data from the USDA 2003-2008 National Health and Nutrition Examination Survey, What We Eat in America (NHANES/WWEIA). As to residue levels in food, EPA incorporated tolerance-level residues, 100 percent crop treated (PCT) for all commodities, and default processing factors for all processed commodities except sunflower oil.

    iii. Cancer. Based on the data summarized in Unit III.A., EPA has concluded that quizalofop ethyl does not pose a cancer risk to humans. Therefore, a dietary exposure assessment for the purpose of assessing cancer risk is unnecessary.

    iv. Anticipated residue and percent crop treated (PCT) information. EPA did not use anticipated residue and/or PCT information in the dietary assessment for quizalofop ethyl. Tolerance level residues and/or 100 PCT were assumed for all food commodities.

    2. Dietary exposure from drinking water. The Agency used screening level water exposure models in the dietary exposure analysis and risk assessment for quizalofop ethyl in drinking water. These simulation models take into account data on the physical, chemical, and fate/transport characteristics of quizalofop ethyl. Further information regarding EPA drinking water models used in pesticide exposure assessment can be found at http://www.epa.gov/pesticide-science-and-assessing-pesticide-risks/about-water-exposure-models-used-pesticide.

    Based on the Modified Tier 1 Rice Model and Pesticide Root Zone Model Ground Water (PRZM GW) model, the estimated drinking water concentrations (EDWCs) of quizalofop ethyl for chronic exposures for non-cancer assessments are estimated to be 127 parts per billion (ppb) for surface water and 89 ppb for ground water.

    Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model. For chronic dietary risk assessment, the water concentration value of 127 ppb was used to assess the contribution to drinking water.

    3. From non-dietary exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Quizalofop ethyl is not registered for any specific use patterns that would result in residential exposure.

    4. Cumulative effects from substances with a common mechanism of toxicity. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”

    EPA has not found quizalofop ethyl to share a common mechanism of toxicity with any other substances, and quizalofop ethyl does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that quizalofop ethyl does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's Web site at http://www.epa.gov/pesticide-science-and-assessing-pesticide-risks/cumulative-assessment-risk-pesticides.

    D. Safety Factor for Infants and Children

    1. In general. Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold (10X) margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the Food Quality Protection Act Safety Factor (FQPA SF). In applying this provision, EPA either retains the default value of 10X, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor.

    2. Prenatal and postnatal sensitivity. As summarized in Unit III.A., results from the rat and rabbit developmental toxicity and the two-generation rat reproduction toxicity studies indicated no qualitative or quantitative evidence of increased susceptibility in developing fetuses or in the offspring following prenatal and/or postnatal exposure to quizalofop ethyl.

    3. Conclusion. EPA has determined that reliable data show the safety of infants and children would be adequately protected if the FQPA SF were reduced to 1X. That decision is based on the following findings:

    i. The toxicity database for quizalofop ethyl is complete.

    ii. There is no indication that quizalofop ethyl is a neurotoxic chemical and there is no need for a developmental neurotoxicity study or additional UFs to account for neurotoxicity.

    iii. There is no qualitative or quantitative evidence that quizalofop ethyl results in increased susceptibility in in utero rats or rabbits in the prenatal developmental studies or in young rats in the two-generation reproduction study.

    iv. There are no residual uncertainties identified in the exposure databases. The dietary food exposure assessments were performed based on 100 PCT and tolerance-level residues. EPA made conservative (protective) assumptions in the ground and surface water modeling used to assess exposure to quizalofop ethyl in drinking water. These assessments will not underestimate the exposure and risks posed by quizalofop ethyl.

    E. Aggregate Risks and Determination of Safety

    EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the acute PAD (aPAD) and chronic PAD (cPAD). For linear cancer risks, EPA calculates the lifetime probability of acquiring cancer given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate PODs to ensure that an adequate MOE exists. Since there are no residential uses for quizalofop ethyl, the aggregate risk assessment only includes exposure estimates from dietary consumption of food and drinking water.

    1. Acute risk. An acute aggregate risk assessment takes into account acute exposure estimates from dietary consumption of food and drinking water. No adverse effect resulting from a single-dose exposure was identified and no acute dietary endpoint was selected. Therefore, quizalofop ethyl is not expected to pose an acute risk.

    2. Chronic risk. Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that chronic exposure to quizalofop ethyl from food and water will utilize 97% of the cPAD for all infants less than 1 year old, the population group receiving the greatest exposure.

    3. Short- and intermediate-term risk. Short- and intermediate-term aggregate exposure takes into account short- and intermediate-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level). Because there are no residential uses, quizalofop ethyl is not expected to pose short- or intermediate-term risk.

    4. Aggregate cancer risk for U.S. population. Based on the lack of evidence of carcinogenicity in two adequate rodent carcinogenicity studies, quizalofop ethyl is not expected to pose a cancer risk to humans.

    5. Determination of safety. Based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general population, or to infants and children from aggregate exposure to quizalofop ethyl residues.

    IV. Other Considerations A. Analytical Enforcement Methodology

    Adequate enforcement methodologies (Modified Meth-147, liquid chromatography-mass spectrometry/mass spectrometry (LC-MS/MS) for plant commodities including rice; Modified BASF Method Number D1416 (LC-MS/MS) for crustaceans; and AMR-515-86, AMR-623-86, AMR-627-86, AMR-845-87, and AMR-846-87, all High Performance Liquid Chromotography (HPLC) methods using ultraviolet detection for livestock commodities) are available to enforce the tolerance expression.

    The methods may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number: (410) 305-2905; email address: [email protected]

    B. International Residue Limits

    In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level. The Codex has not established a MRL for quizalofop ethyl.

    C. Revisions to Petitioned-For Tolerances

    EPA changed the proposed tolerance expression for rice grain from the detection of “quizalofop-P-ethyl and its acid metabolite quizalofop-P, and the S enantiomers of both the ester and the acid, all expressed as quizalofop-P-ethyl ester” to “quizalofop ethyl residues convertible to 2-methoxy-6-chloroquinoxaline, expressed as the stoichiometric equivalent of quizalofop ethyl” to match the expression of the other existing plant commodities since the same common moiety analytical method is used for enforcement. EPA also changed the proposed commodity name from “crayfish” to the correct definition of “fish-shellfish, crustacean”.

    V. Conclusion

    Therefore, tolerances are established for residues of quizalofop ethyl in or on fish-shellfish, crustacean at 0.04 ppm and rice, grain at 0.05 ppm.

    VI. Statutory and Executive Order Reviews

    This action establishes tolerances under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.), nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

    Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) do not apply.

    This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA)(2 U.S.C. 1501 et seq.).

    This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA)(15 U.S.C. 272 note).

    VII. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

    List of Subjects in 40 CFR Part 180

    Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements.

    Dated: November 10, 2016. Michael Goodis, Acting Director, Registration Division, Office of Pesticide Programs.

    Therefore, 40 CFR chapter I is amended as follows:

    PART 180—[AMENDED] 1. The authority citation for part 180 continues to read as follows: Authority:

    21 U.S.C. 321(q), 346a and 371.

    2. In § 180.441: a. Add alphabetically the commodity in the table in paragraph (a)(1). b. Add paragraph (a)(3).

    The additions read as follows:

    § 180.441 Quizalofop ethyl; tolerances for residues.

    (a) * * *

    (1) * * *

    Commodity Parts per
  • million
  • *    *    *    *    * Rice, grain 0.05 *    *    *    *    *

    (3) Tolerances are established for residues of the herbicide quizalofop-P-ethyl, including its metabolites and degradates, in or on the commodities in the following table. Compliance with the tolerance levels specified in the following table is to be determined by measuring quizalofop ethyl and quizalofop acid, expressed as the stoichiometric equivalent of quizalofop ethyl, in or on the commodity.

    Commodity Parts per
  • million
  • Fish-shellfish, crustacean 0.04
    [FR Doc. 2016-28873 Filed 11-30-16; 8:45 am] BILLING CODE 6560-50-P
    FEDERAL COMMUNICATIONS COMMISSION 47 CFR Parts 1, 25, 73 and 74 [GN Docket No. 15-236; FCC 16-128] Review of Foreign Ownership Policies for Broadcast, Common Carrier and Aeronautical Radio Licensees AGENCY:

    Federal Communications Commission.

    ACTION:

    Final rule.

    SUMMARY:

    In this Report and Order, the Federal Communications Commission (Commission) extends its streamlined foreign ownership rules and procedures that apply to common carrier and certain aeronautical licensees under Section 310(b)(4) of the Communications Act of 1934, as amended (the “Act”) to broadcast licensees, with certain modifications to tailor them to the broadcast context. The Commission also reforms the methodology used by both common carrier and broadcast licensees that are, or are controlled by, U.S. public companies to assess compliance with the 20 percent foreign ownership limit in Section 310(b)(3), and the 25 percent foreign ownership benchmark in Section 310(b)(4) of the Act, in order to reduce regulatory burdens on applicants and licensees. Finally, the Commission makes certain technical corrections and clarifications to its foreign ownership rules.

    DATES:

    Effective January 30, 2017, except for the amendments to 47 CFR 1.5000 through 1.5004, 25.105, 73.1010 and 74.5 which will be effective upon approval of information collection requirements by the Office of Management and Budget (OMB). The Commission will publish a separate document in the Federal Register announcing the effective date of these rule changes.

    ADDRESSES:

    Federal Communications Commission, 445 12th Street SW., Washington, DC 20554. The Commission will seek comments from the Office of Management and Budget (OMB), other Federal agencies and the general public on the Paperwork Reduction Act (PRA) information collection requirements contained herein in a separate notice to be published in Federal Register.

    FOR FURTHER INFORMATION CONTACT:

    Kimberly Cook or Francis Gutierrez, Telecommunications and Analysis Division, International Bureau, FCC, (202) 418-1480 or via email to [email protected], [email protected] On PRA matters, contact Cathy Williams, Office of the Managing Director, FCC, (202) 418-2918 or via email to [email protected]

    SUPPLEMENTARY INFORMATION:

    This is a summary of the Commission's Report and Order in GN Docket No. 15-236, FCC 16-128, adopted September 29, 2016 and released on September 30, 2016. The full text of the Report and Order is available for inspection and copying during normal business hours in the FCC Reference Center, 445 12th Street SW., Washington, DC 20554. The document also is available for download over the Internet at http://transition.fcc.gov/Daily_Releases/Daily_Business/2016/db0930/FCC-16-128A1.pdf.

    Synopsis of Report and Order

    1. The Report and Order modifies the foreign ownership filing and review process for broadcast licensees by extending the streamlined rules and procedures developed for foreign ownership reviews for common carrier and certain aeronautical licensees under Section 310(b)(4) of the Communications Act of 1934, as amended (the “Act”), to the broadcast context with certain limited exceptions.1 Recognizing the difficulty U.S. public companies face in ascertaining their foreign ownership, this Report and Order also reforms the methodology used by both common carrier and broadcast licensees that are, or are controlled by, U.S. public companies to assess compliance with the foreign ownership limits in Sections 310(b)(3) and 310(b)(4) of the Act, respectively. In particular, the reformed methodology provides a framework for a publicly traded licensee or controlling U.S. parent to ascertain its foreign ownership using information that is “known or reasonably should be known” to the company in the ordinary course of business, thereby eliminating the need for shareholder surveys.2

    1 For ease of reference, this Report and Order refers to broadcast, common carrier, aeronautical en route and aeronautical fixed radio station applicants and licensees (including broadcast permittees) and to common carrier spectrum lessees collectively as “licensees” unless the context warrants otherwise. This Report and Order also uses the term “common carrier” or “common carrier licensees” to encompass common carrier, aeronautical en route and aeronautical fixed radio station applicants and licensees unless the context applies only to common carrier licensees. “Spectrum lessees” are defined in Section 1.9003 of Part 1, Subpart X (“Spectrum Leasing”). 47 CFR 1.9003. This Report and Order also refers to aeronautical en route and aeronautical fixed licensees collectively as “aeronautical” licensees. In using this shorthand, this Report and Order does not include other types of aeronautical radio station licenses issued by the Commission.

    2 For ease of reference, this Report and Order refers to “shareholders” and “interest holders” interchangeably. A “shareholder” (or “stockholder”) refers generally to an individual or entity that owns one or more of a company's shares and in whose name the share certificate is issued. Most shares of U.S. publicly traded companies today are held in the name of an intermediary bank or broker on behalf of a client account. The voting rights (if any) associated with a particular share of a company may be held by one or more persons/entities. This Report and Order refers to any person or entity that holds the right to vote or to direct the voting of a share of a company's stock as a “beneficial owner.” The beneficial owner(s) of a share may or may not hold the equity (i.e., the pecuniary) interest in the share. This Report and Order refers to any person or entity that has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, a share as the “equity interest holder.”

    2. The Commission believes these changes will facilitate investment from new sources of capital at a time of growing need for investment in this important sector of the nation's economy, while continuing to satisfy the requirements of Section 310 and the policies reflected in this Report and Order. The Commission also finds that adopting a standardized filing and review process for broadcast licensees' requests to exceed the 25 percent foreign ownership benchmark in Section 310(b)(4), as the Commission has done for common carrier licensees, will provide the broadcast sector with greater transparency and more predictability, and reduce regulatory burdens and costs. As is the case with common carrier licensees, this standardized filing and review process will provide a clearer path for foreign investment in broadcast licensees that is more consistent with the U.S. domestic investment process, while continuing to protect important interests related to national security, law enforcement, foreign policy, trade policy, and other public policy goals.3

    3 The new rules adopted in this Report and Order will be codified in Part 1, Subpart T, Sections 1.5000 through 1.5004 of the Commission's rules and are appended to the Report and Order.

    3. Section 310 of the Act requires the Commission to review foreign investment in radio station licensees.4 This section imposes specific restrictions on who may hold certain types of radio licenses. The provisions of Section 310 apply to applications for initial radio licenses, applications for assignments and transfers of control of radio licenses, and spectrum leasing arrangements under the Commission's secondary market rules.5 Section 310(b)(3) prohibits foreign individuals, governments, and corporations from owning more than 20 percent of the capital stock of a broadcast, common carrier, or aeronautical radio station licensee.6 Section 310(b)(4) establishes a 25 percent benchmark for investment by foreign individuals, governments, and corporations in U.S.-organized entities that directly or indirectly control a U.S. broadcast, common carrier, or aeronautical radio licensee. A foreign individual, government, or entity may own, directly or indirectly, more than 25 percent (and up to 100 percent) of the stock of a U.S.-organized entity that holds a controlling interest in a broadcast, common carrier, or aeronautical radio licensee, unless the Commission finds that the public interest will be served by refusing to permit such foreign ownership.

    4 A “station license” is defined in the Act as “that instrument of authorization required by [the] Act or the rules and regulations of the Commission made pursuant to [the] Act, for the use or operation of apparatus for transmission of energy, or communications, or signals by radio by whatever name the instrument may be designated by the Commission.” 47 U.S.C. 153(49). For example, the Commission issues radio station licenses for the provision of broadcast, wireless personal communications services, cellular, microwave, aeronautical en route, and mobile satellite services. See also 47 U.S.C. 319 (construction permits). For ease of reference, this Report and Order refers to “radio station licenses” as “licenses” unless the context warrants otherwise.

    5 Under the Commission's secondary market rules, spectrum lessees (and spectrum sublessees) providing common carrier service are subject to the same foreign ownership requirements that apply to common carrier licensees under Sections 310(a) and (b) of the Act. Spectrum leasing is not currently permitted under the broadcast service rules.

    6 In the 2012 Foreign Ownership First Report and Order, the Commission determined to forbear from applying the foreign ownership limits in Section 310(b)(3) to the class of common carrier licensees in which the foreign investment is held in the licensee through U.S.-organized entities that do not control the licensee, to the extent the Commission determines such foreign ownership is consistent with the public interest under the policies and procedures that apply to the Commission's public interest review of foreign ownership subject to Section 310(b)(4) of the Act. The Commission codified the forbearance approach in the 2013 Foreign Ownership Second Report and Order. The Commission's forbearance authority does not extend to broadcast or aeronautical radio station licensees covered by Section 310(b)(3). See 47 U.S.C. 160.

    4. Licensees may request Commission approval of their controlling U.S. parents' foreign ownership under Section 310(b)(4) by filing a petition for declaratory ruling.7 Licensees must obtain Commission approval before direct or indirect foreign ownership of their U.S. parent companies exceeds 25 percent. When presented with a petition for declaratory ruling, the Commission assesses, in each particular case, whether the foreign interests presented for approval by the licensee are in the public interest, consistent with the Commission's Section 310(b)(4) policy framework. The Commission's public interest analysis also considers national security, law enforcement, foreign policy, or trade policy issues that may be raised by the foreign ownership. The Commission coordinates as necessary and appropriate with the relevant Executive Branch agencies and accords deference to their expertise in identifying and interpreting issues of concern related to these matters. The Commission evaluates concerns raised by the Executive Branch agencies in light of all the issues raised by a particular Section 310(b)(4) petition, and the Commission makes an independent decision on whether the foreign interests presented for approval by the licensee are in the public interest.

    7 Under the Commission's Section 310(b)(3) forbearance approach applicable to common carrier licensees, common carrier licensees have the option to file a petition for declaratory ruling requesting prior Commission approval to exceed the 20 percent foreign ownership limits in Section 310(b)(3) where the foreign ownership interests would be held in the licensee through intervening U.S.-organized entities that do not control the licensee. For ease of reference, and because the Commission's forbearance authority does not extend to broadcast or aeronautical licensees covered by Section 310(b)(3), this Report and Order generally refers to petitions for declaratory ruling filed under Section 310(b)(4) of the Act, unless the context warrants otherwise.

    5. This Report and Order modifies the foreign ownership filing and review process for broadcast licensees and the revised methodology broadcast and common carrier licensees that are, or are controlled by, U.S. public companies will use to determine and certify their compliance with the statutory foreign ownership limits. The Commission replaces the ad hoc case-by-case procedures for requesting approval of foreign ownership of broadcast licensees with specific rules that incorporate the same streamlined procedures used for common carrier licensees—with limited broadcast-specific provisions—except those procedures associated with Section 310(b)(3) forbearance. Second, the Commission adopts a new methodology for broadcast and common carrier licensees that are, or are controlled by, U.S. public companies to use in determining and certifying compliance with Sections 310(b)(3) and 310(b)(4), respectively. The methodology relies on information that is known or reasonably should be known to the publicly traded licensee or U.S. parent company in the ordinary course of business. This Report and Order discusses issues related to how frequently the public company must review its foreign ownership, as well as compliance requirements for publicly traded licensees and U.S. parent companies to remedy a breach of the foreign ownership limits in Sections 310(b)(3) and 310(b)(4) or of conditions in a licensee's Section 310(b)(4) ruling. These compliance requirements take into account that certain breaches may be due to circumstances beyond the licensee's control that were not reasonably foreseeable to or known by the licensee with the exercise of the required due diligence. The Report and Order addresses the compliance obligations of privately held entities. Finally, the Commission adopts certain corrections and clarifications to its existing foreign ownership rules, and discusses transition issues.

    Extending Streamlined Common Carrier Foreign Ownership Procedures to Broadcast Licensees

    6. The Commission adopts the 2015 Foreign Ownership NPRM proposal to apply the foreign ownership rules and procedures applicable to common carrier licensees to broadcast licensees, with certain exceptions and modifications further discussed below. It is clear from the Commission's experience that the common carrier rules for reviewing foreign ownership petitions create an efficient process that benefits filers without harm to the public. The process also helps ensure that the Commission is able to fulfill its obligations under Section 310(b) with respect to foreign ownership, while coordinating applications and petitions with the relevant Executive Branch agencies, as needed. Notably, among other changes, broadcast petitioners will now be able to request: (1) Approval of up to and including 100 percent aggregate foreign ownership (voting and/or equity) by unnamed and future foreign investors in the controlling U.S. parent of a broadcast licensee, subject to certain conditions; (2) approval for any named foreign investor that proposes to acquire a less than 100 percent controlling interest to increase the interest to 100 percent at some future time; and (3) approval for any non-controlling named foreign investor to increase its voting and/or equity interest up to and including a non-controlling interest of 49.99 percent at some future time.8 Other routine common carrier terms and conditions will also apply to broadcast rulings, such as those involving subsidiaries and affiliates and the insertion of new foreign-organized companies into the controlling U.S. parent's vertical ownership chain. There is significant support for these proposals in the record, and the Commission finds that the public interest will be served by applying these rules to broadcast petitions for declaratory ruling filed pursuant to Section 310(b)(4).

    8 For example, under the common carrier foreign ownership rules that the Commission is extending to broadcasters, a licensee filing a Section 310(b)(4) petition to allow foreign ownership of its controlling U.S. parent to exceed 25 percent may include in its petition a request that the Commission specifically approve a named foreign investor's acquisition of up to and including a non-controlling 49.99 percent interest in the U.S. parent at some future time. If, after grant of the initial petition, the foreign investor seeks to acquire any additional equity or voting interests in the U.S. parent above 49.99 percent interests, i.e., the thresholds approved in the initial ruling, the licensee must file a new Section 310(b)(4) petition to obtain Commission approval before the foreign investor acquires any additional interests. Commission grant of the licensee's new petition would constitute a modification of the licensee's initial ruling.

    7. In addition, the Commission adopts its proposal that broadcast petitioners need to obtain specific approval only for foreign investors (i.e., foreign individuals, entities, or a “group” of foreign individuals or entities) that hold or would hold, directly or indirectly, more than 5 percent, and in certain circumstances, more than 10 percent of the U.S. parent's voting and/or equity interests, or a controlling interest in the U.S. parent. The 2013 Foreign Ownership Second Report and Order details the policy objectives under Section 310(b) that informed the selection of these specific approval criteria. The Commission, in that item, sought to balance a number of factors in identifying the types of foreign investments that warrant specific approval. Ultimately, the Commission determined that the specific approval thresholds it adopted struck an important balance between the agency's twin objectives of reducing the regulatory costs and burdens associated with foreign investment in common carriers and protecting important interests related to national security, law enforcement, and public safety. The Commission further held that the specific approval thresholds it adopted were tailored to those foreign investors that the company should reasonably be able to identify and whose interests rise to the level that may be relevant to the actual concerns applicable to the Section 310(b) review of foreign ownership in the common carrier context. The Commission finds this reasoning equally applicable to broadcast petitioners, and conclude that the public interest is best served by harmonizing the specific approval requirements, thereby providing consistency in the application of Section 310(b) to all subject licensees, regardless of service.

    8. As indicated in the 2015 Foreign Ownership NPRM, the Commission finds that there are instances in which it is appropriate to distinguish between broadcast licensees and common carrier licensees to minimize disruption to broadcasters. Based on the Commission's review of the record, the Commission adopts its proposal to modify particular rules as they would apply to broadcast petitioners to reflect the distinct nature and precedent of the broadcast service, as discussed below.

    Specific Modifications for Broadcast Licensees

    9. Disclosable Interest Holders. Under the existing rules, common carrier licensees filing petitions for declaratory ruling regarding proposed foreign investments under Section 310(b) must include the name, address, citizenship, and principal business(es) of any individual or entity, regardless of citizenship, that directly or indirectly holds or would hold, after effectuation of any planned ownership changes described in the petition, at least 10 percent of the equity or voting interests in the controlling U.S. parent of the petitioning common carrier licensee or a controlling interest.9 The 10 percent threshold was adopted to ensure consistency with the ownership disclosure requirements that apply to most common carrier applicants under the existing licensing rules, while preserving a meaningful opportunity for the Executive Branch agencies to review petitions for national security, law enforcement, foreign policy, and trade policy concerns.

    9 Similarly, when a foreign individual or foreign-organized entity requires specific approval under Section 1.991(i) of the rules, the petition must include the information specified in Section 1.991(j), including the name and citizenship of any individual or entity that holds, or would hold, directly and/or indirectly, through one or more intervening entities, 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the foreign entity for which the petitioner requests specific approval.

    10. Consistent with the record, the Commission adopts its proposal to utilize the attribution rules and policies applicable to broadcasters to determine those U.S. and foreign interests that must be disclosed in Section 310(b)(4) petitions involving broadcast stations.10 The disclosure requirement is designed to ensure that the Commission has sufficient information to understand the licensee's ownership structure and to verify the identity and ultimate control of the foreign investor for which the petitioner seeks specific approval. Accordingly, in the common carrier context, the Commission relies on the ownership disclosure requirements applicable to most common carriers. The Commission finds that it is similarly appropriate to rely on the attribution rules and policies applicable to broadcast licensees in adopting the broadcast ownership disclosure requirements.

    10 The Commission finds that excluding certain attributable interest holders would hinder the Commission's ability to determine the locus of control of a petitioner's U.S. parent company and the potential impact of proposed foreign investment of the management and operations of the broadcast licensee; therefore, the Commission declines to pursue NAB's recommendations. NAB also recommends re-evaluating the broadcast attribution standards. The Commission determines that any consideration of modification of our attribution rules and policies is beyond the scope of the instant proceeding.

    11. This approach provides regulatory certainty and ease of compliance while minimizing disruption to broadcasters. The attribution rules represent longstanding broadcast policy, and broadcasters are familiar with these rules, as they are used in the application and disclosure of multiple ownership, among other requirements. Broadcasters have also structured their organizations in reliance on the attribution standards. Applying the common carrier disclosure requirements to broadcasters would result in undue hardship without producing any discernable public interest benefits. Thus, the Commission does not believe that the public interest would be served by requiring broadcasters to conform to the foreign ownership rules regarding disclosable interests applicable to common carriers.11

    11 The Commission reminds broadcasters that the term “disclosable interest holder” in the foreign ownership context is not coterminous with the use of that term in the auction context. See, e.g., 47 CFR 1.2112(a)(6).

    12. Specific Approval of Named Foreign Investors. The Commission extends to broadcast licensees the specific approval rules in Section 1.991(i)-(j), applicable to common carrier licensees, with certain modifications as proposed in the 2015 Foreign Ownership NPRM. First, broadcast licensees will use the insulation criteria set forth in the broadcast attribution rules for purposes of determining whether a licensee's petition for declaratory ruling must include a request for specific approval of one or more foreign investors because the investor holds, or would hold, directly and/or indirectly, more than 5 percent (or, in certain situations, more than 10 percent) of the controlling U.S. parent's equity or voting interests.12

    12 The Commission will issue foreign ownership rulings to broadcast licensees—as the Commission does now in the common carrier context—subject to routine terms and conditions, including the requirement that licensees file a new petition before any previously unapproved foreign investor acquires an interest that requires specific approval.

    13. Second, to the extent a broadcast licensee identifies a foreign entity that requires specific approval under Section 1.5001(i) of the new rules, the petition must include the information specified in Section 1.5001(j), including the name and citizenship of any individual or entity that holds, or would hold, directly and/or indirectly, through one or more intervening entities, an attributable interest in the foreign entity for which the petitioner requests specific approval. The Commission does not believe it would be appropriate to require broadcast petitioners to use the 10 percent standard that applies (and will continue to apply under the new rules) to petitions filed by common carrier licensees. No commenter disagreed with this proposed approach.

    14. Several commenters, at times, appeared to conflate the broadcast attribution criteria that the Commission proposed broadcast petitioners use for purposes of identifying their “disclosable U.S. and foreign interest holders” with the specific approval criteria that were proposed to extend to broadcast licensees. The broadcast attribution criteria, however, are not co-extensive with the specific approval requirements that apply to common carrier licensees. These specific approval requirements, as proposed, will apply to broadcast licensees under the new rules—with the limited exception allowing broadcast licensees to calculate whether a foreign investor requires specific approval using the insulation criteria that such licensees use in calculating their attributable interests under Section 73.3555. As noted above, the specific approval rules for Section 310(b)(4) petitions require petitioners to request specific approval for any foreign investor that holds, or would hold, directly or indirectly, more than 5 percent, and in certain circumstances, more than 10 percent of the controlling U.S. parent's total outstanding capital stock (equity) and/or voting stock (or a controlling interest). In contrast, the broadcast attribution rules, with limited exception, do not apply to non-voting equity interests. In this respect, the specific approval requirements are broader in scope than the broadcast attribution rules, consistent with Commission precedent that reads Section 310(b) to evince Congress' separate concern with the scope of foreign equity interests in a licensee and any controlling U.S. parent company. The Commission also notes that, because it may be a source of confusion, the general specific approval requirement applies to interests of more than 5 percent, not interests of 5 percent or more as under the broadcast attribution rules. The Commission set the specific approval thresholds in the 2013 Foreign Ownership Second Report and Order so they are aligned with the SEC's beneficial ownership reporting requirements.

    15. Insulation Criteria. The Commission's current rules specify the methodology for calculating the foreign equity and voting interests in the controlling U.S. parent of a common carrier licensee that require specific approval under Section 1.991(i) of the rules. This methodology will now be applicable to broadcast licensees. The 2015 Foreign Ownership NPRM, however, sought comment on the appropriate insulation criteria for broadcasters for purposes of calculating the percentage of foreign voting interests held indirectly in the controlling U.S. parent through one or more intervening partnerships or limited liability companies (LLCs).

    16. The Commission will rely on the insulation criteria applicable to broadcast licensees rather than those applicable to common carriers. Broadcast entities are familiar with these criteria, and many broadcast interests have relied upon and have executed their organizational documents based on these insulation criteria. The Commission agrees with commenters that modifying these agreements would be difficult and costly, and is unable to identify any corresponding public interest benefits in requiring such modification. Therefore, the Commission finds that imposing common carrier insulation criteria on broadcasters for purposes of calculating foreign voting interests for Section 310(b) purposes would create an undue hardship. Ultimately, the Commission finds that consistency with its broadcast insulation rules and policies is appropriate in these circumstances.

    17. Service- and Geographic-Specific Rulings. Consistent with the common carrier rules, the Commission will not issue broadcast rulings on a service-specific or geographic-specific basis.13 Licensees will not be required to file new petitions for each broadcast station acquisition. Except as noted below, licensees, including any covered affiliates or subsidiaries, that have rulings for foreign investment in the broadcast service may apply those rulings to after-acquired broadcast licenses, regardless of the broadcast service or the geographic area in which the stations are located. The Commission believes this approach will provide the greatest amount of regulatory flexibility possible, is consistent with the existing common carrier practice, and will encourage investment in the domestic transactional market, infusing capital into the industry.14 The transfer and assignment of individual broadcast station licenses, however, will continue to be subject to petitions to deny and informal objections, where interested parties may comment on whether the particular transaction, including its foreign ownership, is consistent with the public interest.15

    13 While this will apply as a routine term and condition under the rules, the Commission retains the discretion to limit the scope of any petition grant based on the facts and circumstances presented in a particular case.

    14 The Commission emphasizes that rulings are granted to petitioning licensees (and their subsidiaries and affiliates as defined in the rules) pursuant to Final Rules (§ 1.5004(b)), and not to the foreign individuals/entities that are specifically approved in the ruling to hold specified levels of equity and voting interests in the licensee's U.S. parent. Thus, the specifically approved foreign investor cannot rely on the licensee's ruling for purposes of acquiring a controlling or non-controlling interest in an unaffiliated company.

    15 This also affords the relevant Executive Branch agencies opportunity to raise applicable national security, law enforcement, foreign policy, or trade policy concerns.

    18. The Commission will, however, limit its foreign ownership rulings to common carrier and broadcast services, as applicable. Entities that have obtained a broadcast ruling may not use that ruling to cover an after-acquired common carrier—and vice versa. As observed in the 2015 Foreign Ownership NPRM, the Commission has noted previously the important distinctions between common carrier services and broadcast media in the context of the public interest analysis under Section 310(b)(4). Given these considerations, the Commission believes it is appropriate to adopt the tentative conclusion in the 2015 Foreign Ownership NPRM and require licensees to separately file common carrier petitions from broadcast petitions. However, if the licensee specifically requests approval as both a common carrier and broadcaster, the Commission will entertain such petitions, provided that the petitioner includes all the relevant common carrier and broadcast petition information. If approved, such a ruling would apply to subsequent acquisitions of common carrier and broadcast licenses, subject to any limitations adopted in the particular ruling.16

    16 The transfer and assignment of individual licenses will continue to be subject to the appropriate Commission approval processes.

    19. Filing and Processing of Broadcast Petitions. The 2015 Foreign Ownership NPRM proposed that broadcast petitions for declaratory ruling be filed electronically as an attachment to the underlying applications for a construction permit, assignment, or transfer of control that are electronically filed through the Commission's Consolidated Database System (CDBS) or any successor database. Additionally, for those broadcast petitions filed without an underlying broadcast construction permit, assignment, or transfer of control application, the 2015 Foreign Ownership NPRM proposed that the broadcast petitioner would file its petition for declaratory ruling electronically with the Commission's Office of the Secretary via the Commission's Electronic Comment Filing System (ECFS) as a non-docketed filing.

    20. The Commission will adopt the processes described in the 2015 Foreign Ownership NPRM for the filing and processing of broadcast petitions.17 Thus, broadcast petitions for declaratory ruling must be filed electronically as an attachment to the underlying applications for a construction permit, assignment, or transfer of control that are electronically filed with the Commission. As proposed in the 2015 Foreign Ownership NPRM, such applications, if otherwise acceptable for filing, will be placed on public notice denoting that the application is “accepted for filing.” This public notice initiates the formal processing of the application, triggers the legal timeframe for the filing of petitions to deny, and provides notice to interested members of the public who may wish to comment on the application. A foreign ownership petition, filed as part of an underlying application, will separately receive a docket number, and the Commission will issue a separate public notice to solicit comment on the petition. A broadcast petition filed in the absence of an underlying broadcast construction permit, assignment, or transfer of control application shall be initially submitted electronically with the Commission's Office of the Secretary via ECFS as a non-docketed filing. The petition will subsequently receive a docket number and a public notice seeking comment will be released. Broadcasters are familiar with filing applications/petitions in the relevant filing systems, and the Commission finds that that these procedures will promote regulatory consistency.18 The Commission will continue to coordinate applications and petitions with the relevant Executive Branch agencies, as necessary and appropriate.

    17 An applicant shall inform the Commission that it is covered by an existing ruling and that it is in compliance with that ruling if the applicant seeks approval for a subsequent assignment/transfer of control pursuant to the terms and conditions of that ruling.

    18 In circumstances in which a petition involves common carrier and broadcast licenses, filers should comply with all applicable filing requirements for those services. The Commission will tailor the public notice and comment process, as appropriate.

    Methodology for Assessing Compliance With Section 310(b)

    21. The Commission adopts a methodology for U.S. public companies to assess compliance with the foreign ownership limits in Sections 310(b)(3) and 310(b)(4) of the Act. The Commission adopts the approach proposed in the 2015 Foreign Ownership NPRM to permit a broadcast or common carrier licensee that is controlled by a U.S. public company to rely on ownership information that is known or reasonably should be known to the public company to determine its aggregate levels of foreign ownership. The Commission adopts the same approach for licensees' determinations of compliance with Section 310(b)(3) to the extent the licensee is a public company. The Commission finds that adopting such a rule for “eligible” publicly traded licensees and U.S. parent companies 19 is supported by the record developed in this proceeding and will provide licensees with greater certainty and reduced burdens in determining their aggregate levels of foreign ownership given the difficulties of ascertaining the identity and citizenship of widely dispersed public company shareholders.

    19 An “eligible” U.S. public company is defined in the new rules as a U.S.-organized company that has issued a class of equity securities for which beneficial ownership reporting is required by security holders and other beneficial owners under sections 13(d) or 13(g) of the Exchange Act and corresponding Exchange Act Rule 13d-1, 17 CFR 240.13d-1. See Final Rules (§ 1.5000(d)). This definition tracks the definition of “public company” in Section 1.990(g)(9) (to be renumbered as Section 1.5000(g)(9)) except that it is limited to U.S.-organized public companies. The Securities and Exchange Commission (SEC) rules and forms referenced in this Report and Order may be eliminated, redesignated, or otherwise modified in the future by the SEC. To ensure that the Commission's rules continue to refer to the correct SEC rules and forms, the Commission delegates to the International Bureau the authority to make technical and ministerial edits to the rules adopted in this Report and Order for this purpose.

    22. The methodology will eliminate the need for publicly traded licensees and U.S. parent companies to attempt to conduct surveys or random samplings of their shares and apply presumptions about the citizenship of their unknown shareholders, based on the informal staff guidance routinely provided to applicants and licensees since the early 1970s. At the same time, the Commission finds that this methodology will allow publicly traded licensees and U.S. parent companies to identify those foreign interest holders likely to have the ability to influence company policies and operations. The methodology recognizes the realities of today's marketplace for the equity securities of public companies by allowing companies to focus their compliance efforts and resources on identifying and determining the citizenship of those shareholders that may present a realistic potential to influence or control the company, rather than on those interests that are not influential.

    23. The difficulties associated with ascertaining the foreign ownership of U.S. public companies arise, in large part, out of the changing nature of stock ownership in the United States. As commenters note, most shares of publicly traded companies are now held in “street name” (i.e., in the name of an intermediary bank or broker holding legal title to a share on behalf of a third party). In 1934, when Congress adopted the provisions of Section 310(b)(4), only about 10 percent of shares in U.S. markets were held by an individual or institution on behalf of someone else; it has been estimated that at least 85 percent of shares are now held this way. Moreover, as noted below, it has proven increasingly difficult to ascertain the identity, much less the citizenship, of a public company's shareholders.

    Identification of Interest Holders

    24. Known or Reasonably Should Be Known Standard. Based on the record, the Commission concludes that a U.S. public company knows, or reasonably should know, in the exercise of due diligence, the identity and citizenship of certain individuals and entities that hold, directly and/or indirectly, equity and/or voting interests in the U.S. public company as described in further detail below. Accordingly, the rules will permit a licensee that is, or is controlled by, a U.S. public company to rely on such information to ascertain the company's foreign equity and voting interests under Sections 310(b)(3) and 310(b)(4).

    25. The Commission finds record support for its conclusion that U.S. public companies should know the identity of shareholders that report their beneficial ownership, or other persons who may be identified in such report as holding a pecuniary interest, in the equity securities of the company pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Exchange Act Rule 13d-1. In general, Exchange Act Rule 13d-1 requires a person or “group” that becomes, directly or indirectly, the “beneficial owner” of more than 5 percent of a class of equity securities registered under Section 12 of the Exchange Act to report the acquisition to the SEC.20 The absence of a reporting requirement under Exchange Act Rule 13d-1 for beneficial owners of 5 percent or less of a class of equity securities also means that the identity and citizenship of such smaller shareholders may not be readily available to the issuing company.21

    20 For purposes of Exchange Act Rule 13d-1, Exchange Act Rule 13d-3(a) defines a beneficial owner of a security to include any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares voting power, which includes the power to vote, or to direct the voting of, such security; and/or investment power, which includes the power to dispose, or to direct the disposition of, such security. 17 CFR 240.13d-3(a). Exchange Act Rule 13d-1(i) defines the term “equity security” as any equity security of a class which is registered pursuant to Section 12 of that Act as well as certain equity securities of insurance companies and equity securities issued by closed-end investment companies registered under the Investment Company Act of 1940. The term “equity security,” however, does not include securities of a class of non-voting securities. Id. § 240.13d-1(i).

    21 The Commission agrees with commenters that small, unknown interest holders that hold 5 percent or less of a U.S. public company's outstanding shares or qualified institutional investors that hold interests of 10 percent or less, as a general rule, do not have the ability or pose a realistic potential to exert influence or control over that U.S. public company.

    26. The rules adopted today will require that licensees or their controlling U.S. parents that are eligible U.S. public companies within the meaning of the rules review the beneficial ownership reports, Schedules 13D and 13G, filed with the SEC, and monitor other widely available sources of information about institutional ownership of U.S. publicly traded equity securities, specifically, information derived from SEC Form 13F reports, as the Commission expects they do now in the ordinary course of business.22 Generally, Schedule 13D is required to be filed by any person who acquires, directly or indirectly, beneficial ownership exceeding 5 percent of a class of an issuer's equity securities (as defined by Exchange Act Rule 13d-1(i)). Schedule 13D must be filed with the SEC within 10 days after the acquisition that triggered the reporting requirement and must include, among other things, the identity and citizenship of the direct and indirect beneficial owners of the equity securities and the purpose of the transaction—including whether it is to acquire control.

    22 For example, various SEC forms filed by issuers, including their annual reports (or proxy statements) and quarterly reports, require the issuer to include a beneficial ownership table that contains, inter alia, the name and address of any individual or entity, or “group” (as that term is used in Section 13(d)(3) of the Exchange Act), who is known to the issuer to be the beneficial owner of more than 5 percent of any class of the issuer's voting securities (not limited to securities registered pursuant to Section 12 of the Exchange Act) and the percentage of the class held. Thus, Item 403 requires that issuers include beneficial ownership of any class of their voting securities regardless of whether the securities are registered under Section 12 of the Exchange Act (in contrast to the requirements of Exchange Act Rule 13d-1, which requires reporting of beneficial ownership of an issuer's equity securities (defined in Section 13d-1(i) as generally including only registered, voting securities). Pursuant to Item 403 of Regulation S-K, issuers must determine their beneficial ownership in accordance with Exchange Act Rule 13d-3 (applicable as well to Schedules 13D and 13G). For purposes of Item 403, the issuer “shall be deemed to know the contents of any statements filed with [the SEC] pursuant to Section 13(d) or 13(g) of the Exchange Act.” When applicable, the issuer may rely upon information set forth in such statements unless it “knows or has reason to believe that such information is not complete or accurate or that a statement or amendment should have been filed and was not.”

    27. Qualified institutional investors may use an abbreviated “short-form” disclosure statement, known as Schedule 13G, pursuant to Exchange Act Rule 13d-1(b), to report their beneficial ownership in excess of 5 percent of a class of equity securities, including amounts in excess of 10 percent, to the SEC, when the institutional investor acquires its shares “in the ordinary course of [its] business and not with the purpose nor with the effect of changing or influencing the control of the issuer. . . .” Where an institutional investor's beneficial ownership exceeds 5 percent, but not 10 percent, of a class of equity securities in a given calendar year, the Schedule 13G need not be filed until 45 days after the end of the calendar year (and only then if the investor or “group” continues to own more than 5 percent at year end). Exchange Act Rule 13d-1(b) covers a broad range of institutional investors, such as registered brokers and dealers, banks, insurance companies, investment companies, investment advisers, employee benefit plans, and savings associations.

    28. Both the Schedule 13D and 13G include citizenship information for the beneficial owner. In the case of a Schedule 13D that is filed by a general or limited partnership, syndicate or other group, which group could include a limited liability company, the schedule also requires, inter alia, the identity and citizenship of each partner of a general partnership, each partner who is denominated as a general partner or who functions as a general partner of such limited partnership, each member of such syndicate or group, and each person controlling such partner or member. When the Schedule 13D is filed by a corporation, the schedule similarly requires, inter alia, the identity and citizenship of each executive officer and director, each person controlling the corporation, and each executive officer and director of any corporation or other person ultimately in control of such corporation. Thus, U.S. public companies should review Schedules 13D and 13G to identify their interest holders (and to determine their citizenship).

    29. In addition, licensees and controlling U.S. parents should assess the ownership of their publicly traded equity securities more broadly through additional sources of information; specifically, institutional equity ownership information about U.S. publicly traded companies which is available from a variety of entities, including, for example: (i) Internet-based news and other sources; and (ii) data gatherers that compile and distribute information and analysis about ownership of publicly traded equity securities for a fee. A considerable amount of such equity ownership information is based on the quarterly Form 13F reports that are required under Section 13(f) of the Exchange Act and the rules thereunder. Form 13F is required to be filed with the SEC within 45 days of the end of each calendar quarter by an institutional investment manager, including a foreign-organized manager, with investment discretion over an aggregate value of $100 million or more in U.S. exchange-traded equity securities. Such securities, referred to as “Section 13(f) securities,” generally are the common stock of issuers that are listed and traded on the primary U.S. stock exchanges.23 Each Form 13F report discloses, as of the end of the calendar quarter, the number of shares in each reportable Section 13(f) security over which the Form 13F reporting manager exercised investment discretion. While a Form 13F report does not necessarily reveal the ultimate beneficial owner of a company's U.S. exchange-traded stock, it provides material insight into the holders of such stock, and can be an important element in determining ultimate voting control.24 The Commission finds that information available in the Form 13F about the institutional ownership of its shares reasonably should be known to the company in the ordinary course of business.

    23 Form 13F identifies, among other things, the total number of a public company's Section 13(f) securities for which the filer (and sometimes its related parties) exercises investment discretion. The Form 13F also identifies voting authority for such positions, although its specialized reporting instruction captures voting authority only over “non-routine” matters (e.g., a contested election of directors; a merger or sale of substantially all of the issuer's assets).

    24 A Form 13F report also can assist in identifying the citizenship of an equity owner because, as a starting point for determining citizenship, the cover page of Form 13F requires that the filing manager's name and address be provided. Form 13F reports are filed on the SEC's EDGAR database, and list holdings to facilitate the utility to end users of the reported U.S. equity holdings data. Because a material number of institutional investment managers that file Form 13F are registered under the Investment Advisers Act of 1940, the investment adviser registration form, Form ADV, may be useful in this context. For example, Form ADV may have information relevant to determining the citizenship of a registered investment adviser that may be identified in a Schedule 13D/G or Form 13F as holding investment discretion and voting authority for such positions in a public company.

    30. A U.S. public company also can avail itself of certain other sources of reliable information about the ownership of its publicly traded stock, available in the ordinary course of business. First, U.S. public companies should know the ownership of the shares registered with the company and the shares held by officers and directors. Second, U.S. public companies should know the citizenship of at least some of the shareholders of the company's securities that are not publicly traded (e.g., non-registered securities (whether voting or non-voting) held by pre-IPO founders of the company and non-registered voting shares held by beneficial owners required to be identified in a company's annual reports (or proxy statements) and quarterly reports). Third, other shareholders and their citizenship may be known to the public company, including those identified as a result of shareholder litigation, financing transactions, and proxies voted at annual or other meetings. Fourth, shareholders whose interests and citizenship are actually known to the company by whatever source, whether the interests exceed 5 percent or not, will be considered “known” under the new rules, and companies will be required to include such equity and/or voting interests in calculating the percentages of their foreign voting interests and their foreign equity interests under Section 310(b). For example, information gleaned from Schedules 13D and 13G may indicate that the company has foreign beneficial owners holding interests in excess of 5 percent of a particular class of voting stock that does not equate to an interest exceeding 5 percent of the company's total outstanding shares of voting stock. Nevertheless, the rules will treat these interests as “known.” The Commission requires U.S. public companies to include all of the above-mentioned information in their foreign ownership calculations.25

    25 As more information regarding the citizenship of beneficial owners becomes available as a result of improved, revised or increased disclosure requirements, registries or databases, the Commission expects U.S. public companies to include such information for purposes of determining their foreign ownership levels.

    31. The methodology adopted in this Report and Order generally will not require U.S. public companies to identify de minimis interest holders. NOBO shareholders that are not otherwise identifiable (as through SEC filings) are such de minimis interest holders. Nonetheless, Comcast and NAB recommend that the Commission deem any information that, upon reasonable inquiry, a company receives from NOBOs to be reasonably identifiable. The Commission declines to require U.S. public companies, as a matter of course, to send out NOBO letters to obtain citizenship information, as was required in the Pandora Declaratory Ruling. Based on the Commission's experience and the comments received, the Commission does not believe such letters consistently generate responses from addressees. Therefore, any information gleaned directly through NOBO letters may be incomplete or redundant, and thus potentially difficult to reconcile with the citizenship information obtained using the methodology adopted in this Report and Order.26

    26 However, to the extent a U.S. public company has identified an interest holder under our methodology, direct inquiries—including by letter—are encouraged as noted below.

    32. The Commission recognizes that SEC Schedules 13D and 13G provide limited information as to those persons or entities that hold the pecuniary interests associated with a public company's voting shares that are subject to reporting under Exchange Act Rule 13d-1.27 Notwithstanding the limited information that may be publicly available as to a company's equity interest holders, the Commission does not believe that Section 310(b) allows the Commission to limit its foreign ownership review to include only those investors that possess voting rights in a company. The Commission therefore declines to adopt a methodology that focuses only on voting power.28

    27 Information as to those persons holding the pecuniary interest in the company's voting, equity securities is limited: A beneficial owner required to report under Section 13d-1 by filing the requisite Schedule 13D or Schedule 13G is required to state whether any other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such securities. If such interests relate to more than 5 percent of the class being reported, however, the Schedule 13D or Schedule 13G requires that such person be identified. However, a listing of the shareholders of an investment company registered under the Investment Company Act of 1940 or the beneficiaries of an employee benefit plan, pension fund, or endowment fund is not required.

    28 The methodology the Commission is adopting takes into account that it may not be possible for a publicly traded licensee or U.S. parent, even with the exercise of the required diligence, to identify the individuals or entities that ultimately have the pecuniary interest in voting shares of the company that are subject to reporting by the beneficial owner under Exchange Act Rule 13d-1 (and that therefore should reasonably be known to the company).

    33. Surveys. Publicly traded companies have, in the past, attempted to undertake surveys or random sampling of their shareholders' equity and voting interests to determine whether they are in compliance with Section 310(b). As noted above, the methodology adopted in this Report and Order will eliminate the need for a publicly held licensee or controlling U.S. parent to attempt to use surveys or random sampling techniques for purposes of ensuring that the licensee is able to certify compliance with Section 310(b) or obtain the Commission's approval, under Section 310(b)(4), before the U.S. public company's foreign equity and/or voting interests exceed 25 percent.

    34. SEG-100. The 2015 Foreign Ownership NPRM sought comment on whether a public company's participation in the Depository Trust Company's (DTC) SEG-100 program, or an equivalent program, would provide the Commission with sufficient information to discharge its public interest obligations pertaining to foreign ownership in broadcast licensees. Several parents of broadcast licensees participate in SEG-100 or similar programs which allow for the deposit of foreign-owned shares into a segregated account for monitoring foreign owned shares.

    35. When an issuer requests to be included in the SEG-100 program, DTC notifies its participating banks/brokers that they must apply SEG-100 procedures to future trades of stock. The issuer may provide specific instructions to DTC to forward to participating banks/brokers regarding how to determine citizenship of potential purchasers of the issuer's stock. DTC participants are obligated to make inquiries of their client account holders and to place the shares of such holders who are non-citizens in the DTC participant's segregated account. Such a process allows issuers, through their transfer agents, to monitor changes in foreign ownership levels and, if the threshold is exceeded, to notify DTC of the number of shares that must be transferred out of SEG-100 accounts.

    36. While the Commission finds that participation in SEG-100 serves as a useful check on monitoring foreign ownership levels and may be used as a tool to prevent transactions that would render a licensee noncompliant with foreign ownership thresholds, the Commission is not persuaded that the SEG-100 program can be used as a standalone method for demonstrating compliance with Section 310(b). The Commission declines, in part, because there are many variables that might impact the effectiveness of the program in any given circumstance. For example, the instructions issuers provide DTC to guide DTC participants in making inquiries could have varying degrees of accuracy and detail. Furthermore, the effectiveness of the program would be impacted by the extent to which participants apply the guidelines in the instructions when making client inquiries to determine their citizenship. The Commission also hesitates to require U.S. public companies that are not currently participating in SEG-100 to enroll in the program. The Commission believes that relying on the methodology outlined above is a more uniform approach that can be implemented consistently. Nonetheless, the Commission recognizes that many companies, broadcasters in particular, participate in SEG-100 and have found its services useful for a range of purposes, including monitoring of compliance with foreign ownership restrictions. Thus, while the Commission will not permit participation in SEG-100 to serve as a standalone compliance methodology, it is not the Commission's intention to discourage the use of this program to the extent that companies find it valuable.

    Determining Citizenship

    37. Based on the record and the Commission's experience with foreign ownership, the Commission provides the following guidance as to the criteria Section 310(b) licensees can use to determine the citizenship of their identifiable interest holders.29 As discussed above with respect to identifying an eligible U.S. public company's interest holders, the Commission expects licensees will exercise due diligence in determining the citizenship of their identifiable interest holders.

    29 The Commission uses the term “identifiable” interest holders to refer to those individuals and entities identified by the licensee using the methodology described in the Report and Order as holding equity and/or voting interests in the publicly traded licensee or controlling U.S. parent.

    38. Under the new framework, Section 310(b) licensees must make a determination in the first instance as to whether an identifiable interest holder should be deemed “foreign.” The Commission finds that, for purposes of determining the citizenship of their directors, officers, and employees, U.S. public companies should obtain citizenship information through direct inquiry. If the company has other registered shareholders (other than directors, officers, employees), it should rely on publicly available information (if any), and/or attempt to query these interest holders directly to the extent citizenship is not included in the share registry.

    39. The Commission also finds that companies are entitled to rely on publicly available information with respect to non-registered identifiable interest holders, including information gleaned from SEC filings that were used to identify the shareholder, other SEC filings made by the interest holder (e.g., a Form ADV where the interest holder is a registered investment adviser), information specifically known to the company, and/or information received by the company through direct inquiries. The Commission finds direct inquiries by the U.S. public company of its identifiable interest holders constitutes a reasonable measure,30 particularly in circumstances where: (1) The U.S. public company knows or has reason to believe that information reported to the SEC is not complete or accurate or that a statement or amendment should have been, but was not, filed; or (2) the U.S. public company's otherwise known or should be known aggregate foreign equity or voting interests are approaching the statutory limits.

    30 A reporting person filing a Schedule 13G as a “parent holding company/control person” pursuant to Sections 13d-1(b)(ii)(G), 13d-1(c), or 13d-1(d), is required to identify the subsidiary(ies) that acquired the shares being reported by the parent/control person. Unless the subsidiary is itself deemed to hold a reportable interest in some or all of same shares (in which case the subsidiary would be required to report, inter alia, its identity, citizenship, and number/percentage of shares over which it has sole or shared voting power), the Schedule 13G filed by the parent/control person will not necessarily specify the number/percentage of shares held by the subsidiary or its citizenship. The Commission finds it reasonable to expect that, in these circumstances, the public company will inquire directly with the parent/control person as to the number/percentage of shares over which the subsidiary has voting power (if any). If the subsidiary has the right to vote or direct the voting of the shares, the company should inquire as to subsidiary's place of organization. If the subsidiary is foreign-organized, the company should treat the voting interests in the shares as identifiable foreign voting interests, regardless of the number/percentage of shares held.

    40. If the identifiable interest holder is itself a U.S. public company, some ownership information as to that company should be publicly available, such as in the company's annual reports (or proxy statements) and quarterly reports that it files with the SEC. The Commission finds it reasonable to expect the licensee to make direct inquiries of the U.S. public company where the licensee determines that direct inquiries are necessary to assess the effect that the investing company's foreign ownership may have on the publicly traded licensee's or U.S. parent's aggregate levels of foreign ownership. Depending on the publicly traded licensee's or U.S. parent's individual circumstances, the Commission would expect it to consider whether additional measures are necessary to ensure compliance with the applicable statutory limit, e.g., obtaining the agreement of the U.S. public company investor to assess its own known or reasonably should be known aggregate foreign equity and/or voting interests and to advise the licensee or U.S. parent when such interests reach a level—to be determined by the licensee or U.S. parent—that could render the licensee or U.S. parent non-compliant with Section 310(b). To address instances where the investor may not agree, a licensee (or U.S. parent, as relevant) may choose, but is not required, to have the ability, under its governance documents, to redeem the investor's shares or take other action if necessary to enable the licensee or U.S. parent to remain in compliance with the statutory limits.

    41. For purposes of classifying a U.S. public company's identifiable beneficial ownership (voting) interests and equity interests as “U.S.” or “foreign,” licensees should apply the following guidelines:

    42. A licensee may classify beneficial ownership (voting) interests as “U.S.” where the licensee has established a reasonable basis for concluding that the beneficial owner and all individuals and entities in the beneficial owner's vertical chain of control are U.S. citizens and/or U.S.-organized entities that are ultimately controlled by U.S. citizens.

    43. By contrast, where the beneficial owner is itself a foreign-organized entity, or where there is a foreign-organized entity in the beneficial owner's vertical chain of control, the licensee should classify the voting interest in the shares held by the beneficial owner as “foreign” even where the beneficial owner is ultimately controlled by U.S. citizens.31

    31 For example, assume that a Schedule 13D is filed with the SEC with respect to shares of a licensee's publicly traded U.S. parent. The Schedule 13D is filed on behalf of two reporting persons (the beneficial owners), each of which reports holding sole voting power with respect to 7 percent of the U.S. parent's single class of common stock: A foreign-organized limited partnership (described as an investment fund) and a U.S. citizen who is the general partner of the foreign limited partnership. In this example, the block of shares must be counted as foreign voting interests even though a U.S. citizen may have the power to independently vote the foreign-organized investment fund's shares.

    44. Where the licensee has identified more than one person as beneficially owning the same shares (e.g., where a SEC Schedule 13G is filed on behalf of more than one reporting person with sole or shared power to vote the same shares), and at least one of such persons is foreign, the licensee should classify the voting interests in those shares as foreign even if the other beneficial owner's interests would otherwise warrant treatment as “U.S.”

    45. With respect to a U.S. public company's identifiable equity interests, the licensee may classify such equity interests as “U.S.” where the licensee has established a reasonable basis for concluding that the ultimate beneficiary or beneficiaries of the shares are U.S. citizens or U.S.-organized entities that are controlled by U.S. citizens.32

    32 As an example, assume that a Schedule 13G is filed with the SEC by a U.S. university's endowment fund to report its beneficial ownership of 7 percent of a publicly traded U.S. parent's single class of common stock. The Schedule 13G states that the endowment fund also holds the pecuniary interest in the reported shares, which constitute 7 percent of the U.S. parent's total outstanding shares. The Schedule 13G and the endowment fund's annual report (which confirms that U.S. citizens control the endowment fund) provide a reasonable basis for treating the equity interests associated with the common stock as “U.S.” By contrast, assume that a Schedule 13G is filed by two reporting persons: A qualified institutional investor that is organized in a foreign country in a form equivalent to a Delaware limited liability company; and, the sole member of the limited liability company, who is a U.S. citizen that is also a qualified institutional investor (e.g., an investment adviser). The Schedule 13G states that the reported interests are held on behalf of numerous client accounts and that no person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such securities. In this example, the U.S. parent would treat the voting interests (which constitute 8 percent of the U.S. parent's total outstanding shares of stock) as “foreign;” however, the U.S. parent would not include the 8 percent equity interest associated with the reported shares in its calculation of foreign equity interests. The Commission finds it reasonable for the U.S. parent to conclude in these circumstances that no person holds the equity interest in the reported shares in an amount exceeding 5 percent of the company's total capital stock.

    46. There should be very few instances where a widely held, publicly traded licensee or U.S. parent will need to conduct an up-the-chain analysis under the revised methodology for identifying interests that will be subject to a citizenship determination. The relevant interests will be limited to those that are known or reasonably should be known to the public company in the ordinary course of business. Similarly, where a licensee has received a Section 310(b)(4) ruling and is monitoring its foreign ownership to ensure compliance with the specific approval requirements in Rule 1.5004(a)(1), the licensee will not need to engage in an up-the-chain analysis of an identifiable interest holder's direct or indirect interest holders, except to the extent any such interest holder could be calculated as holding an equity or voting interest in the U.S. parent in an amount requiring specific approval.33 The Commission also finds that these guidelines prescribe a reasonable means for licensees to look up the chain of ownership to capture indirect foreign interests. These new guidelines enable companies to use information that reasonably should be known (or that can be, or is, in fact, known) to the companies.

    33 For example, assume that a broadcast licensee with a publicly traded controlling U.S. parent has received a Section 310(b)(4) ruling. As part of its on-going monitoring, the licensee's U.S. parent determines from an SEC Schedule 13D that a private equity fund (“Delaware Fund I,” which is organized as a Delaware limited liability company) is the beneficial owner of 6 percent of a class of the U.S. parent's equity securities. The parent is able to determine from the Schedule 13D that a U.S. citizen, who is also deemed a reporting person as to the same shares, controls the fund indirectly through another Delaware limited liability company (“Delaware Fund II”) that is the sole managing member of Delaware Fund I and is deemed a reporting person as to the same shares. Through direct inquiry with the controlling fund principal, the U.S. parent determines that, with the exception of the sole managing member, Delaware Fund II, all of Delaware Fund I's members are insulated consistent with the broadcast insulation requirements and none holds an equity interest in the fund in an amount that, when multiplied by the fund's 6 percent interest in the U.S. parent, exceeds 5 percent. The U.S. parent need not make any inquiries with respect to the citizenship of the fund's insulated members.

    47. The Commission declines, however, to allow the use of shareholder addresses to establish the citizenship of identifiable interest holders. The 2015 Foreign Ownership NPRM asked if the Commission should accept shareholder addresses, alone, as a proxy for citizenship.

    48. The Commission finds that use of a shareholder's address of record is not, by itself, a reasonable measure to determine citizenship and is unnecessary where, as here, the number of citizenship inquiries will be limited and other sources of information, including direct inquiries, should be available to the public company.34 It is quite possible that a citizen of a foreign country may have or use a U.S. address for mailing purposes. A foreign-organized company may have a U.S. address if the company has a subsidiary or some of its operations in the United States. A foreign company may also have a U.S. address for purposes of its dealings, sales or investments in the United States. In any event, having a U.S. address of record does not provide reasonable assurance that an individual is a U.S. citizen or that an entity with a U.S. address should be treated as a U.S.-organized and U.S.-controlled entity for compliance purposes under Section 310(b). However, if a public company's share registry or other information available to the company identifies a beneficial owner or equity interest holder only with reference to a foreign address, the interests held should be counted as foreign unless the public company conducts a further inquiry to determine that the individual is a U.S. citizen or the entity is a U.S.-organized entity controlled by U.S. citizens.

    34 Under the methodology adopted here for determining the citizenship of a public company's identifiable interest holders, a publicly traded licensee's or U.S. parent's citizenship inquiry will be limited to those individuals or entities that are known or reasonably should be known to the public company in the ordinary course of business and thus will exclude interests of 5 percent or less (or 10 percent or less in the case of a qualified institutional investor) unless such interests are in fact known to the company. In such cases, the company is likely to know the citizenship of the interest holder, which may be an officer, director, employee, or former employee of the company.

    49. The new rules provide U.S. public companies the flexibility to use relevant and publicly available information for purposes of determining the citizenship of their identifiable interest holders. To the extent the public company cannot obtain some of the information, the company should make direct inquiries with its identifiable interest holders to inform the company's citizenship analysis. The Commission encourages licensees and their controlling U.S. parents to keep the Commission apprised of the extent to which direct inquiries of beneficial owners are, or are not, productive. This will allow the Commission to gauge the effectiveness of the new rules and to adjust this approach as licensees implement the rules in practice.

    50. Finally, the 2015 Foreign Ownership NPRM requested comment on whether the Commission should limit the percentage of a U.S. public company's foreign officers and directors in connection with the Commission's proposed methodology for U.S. public companies. Comcast argues that there should be no requirement that a certain percentage of officers and directors are U.S. citizens. The Commission agrees and declines to establish a specific limit on the percentage of a U.S. public company's foreign officers or directors.35

    35 The Commission's proposed methodology rule for U.S. public companies also included an eligibility requirement that the company be headquartered in the United States. The Commission declines to adopt this proposed restriction in the absence of comment on it, and because the restriction may conflict with other federal rules and policies.

    Calculating Foreign Ownership Levels

    51. As discussed above, the Commission finds that only those interests that are known or reasonably should be known to a U.S. public company in the ordinary course of business need to be included for purposes of calculating the company's aggregate levels of foreign ownership under Section 310(b). Thus, for purposes of calculating aggregate levels of foreign ownership under Section 310(b), a licensee that is, or is controlled by, an eligible U.S. public company will base its foreign ownership calculations on the public company's known or reasonably should be known foreign equity and voting interests as specified above. The licensee will then aggregate the public company's known or reasonably should be known foreign voting interests and separately aggregate its known or reasonably should be known foreign equity interests. If the public company's known or reasonably should be known foreign voting interests and its known or reasonably should be known foreign equity interests do not exceed 25 percent (20 percent in the case of a publicly traded licensee subject to Section 310(b)(3)) of the company's total outstanding voting shares or 25 percent (20 percent in the case of a publicly traded licensee subject to Section 310(b)(3)) of the company's total outstanding shares (whether voting or non-voting), respectively, then the company shall be deemed compliant under the Commission's rules with the applicable statutory limit.

    52. As an example of how the methodology would work, assume that a licensee's controlling U.S. parent is an eligible U.S. public company. The publicly traded U.S. parent has one class of stock consisting of 100 total outstanding shares of common voting stock. The licensee (and/or the U.S. parent on its behalf) has exercised the required due diligence in following the above-described methodology for identifying and determining the citizenship of the U.S. parent's known or reasonably should be known interest holders. The U.S. public company has identified one foreign shareholder that owns 6 shares (i.e., 6 percent of the total outstanding shares) and another foreign shareholder that owns 4 shares (i.e., 4 percent of the total outstanding shares). The licensee would add the U.S. parent's known foreign shares and divide the sum by the number of the U.S. parent's total outstanding shares. In this example, the licensee's U.S. parent would be calculated as having an aggregate 10 percent foreign equity interests and 10 percent foreign voting interests (6 + 4 foreign shares = 10 foreign shares; 10 foreign shares divided by 100 total outstanding shares = 10 percent). Thus, in this example, the licensee would be deemed compliant with Section 310(b)(4).

    53. The extrapolation approach supported by several commenters would assume that the percentage of unknown equity and voting interests that are foreign is the same as the percentage of known equity and voting interests that are foreign. The Commission finds it unnecessary to apply any presumed percentage of foreign ownership to the unidentifiable shareholders of a U.S. public company in light of the Commission's finding that small, unknown interest holders, as a general rule, do not have the ability or pose a realistic potential to exert influence of control over such company.36

    36 Likewise, the Commission declines to adopt an approach that would apply another multiple to the remaining unknown equity and voting interests.

    54. The Commission also asked whether the public interest would be served by permitting a U.S. public company to have up to an aggregate less than 50 percent (or some higher level) non-controlling foreign investment, even with individual investments that may be required to be reported under the Exchange Act Rule 13d-1, without individual review and approval. The Commission declines to do so in this Report and Order. The Commission's actions in this Report and Order provide a more carefully tailored approach that addresses the commenters' concerns in a way that is consistent with the Commission's statutory obligations. The Commission intends to monitor how the rules respond to the needs and concerns of interested parties, and may review these issues again at a later date once the effectiveness of the new rules is evaluated and assessed.

    55. Finally, the Commission declines to adopt 21st Century Fox's suggestion that the Commission permit broadcast licensees to determine compliance with the foreign voting prong of Section 310(b)(4) by counting shares of stock actually voted, rather than voting shares merely held by non-U.S. shareholders. The Commission finds that a foreign beneficial owner of U.S. public company shares that is known to the company may have the ability, in a particular case, to exert influence over the company regardless of whether the beneficial owner decides to vote its shares on any given matter that requires shareholder approval. The Commission finds that the calculation approach adopted here will rationalize the process for licensees' determinations of compliance with Section 310(b)—with concomitant reductions in the costs and burdens associated with determinations of compliance—without disturbing the substantive standards for its public interest review of foreign ownership.

    Compliance Procedures

    56. The Commission concludes that monitoring is a reasonable approach to ensure compliance with the statute and individual foreign ownership rulings. As discussed in below, the Commission formalizes the current equitable practice of recognizing a licensee's good faith efforts to comply with the Section 310(b) requirements, the terms and conditions of a licensee's Section 310(b)(4) ruling, and the Commission's rules.

    57. Monitoring Compliance. The Commission declines to adopt the periodic compliance and monitoring options proposed by commenters. The Commission finds that limiting monitoring of foreign ownership levels to two- or four-year intervals would not adequately ensure that entities are maintaining compliance with Section 310(b) and/or any relevant foreign ownership rulings. In light of significant steps taken in this Report and Order to simplify the process for U.S. public companies in determining their foreign ownership levels, however, the Commission finds that it is reasonable and appropriate to require companies to ensure their foreign ownership levels are in compliance with the statutory foreign ownership limits and/or their relevant foreign ownership rulings.37

    37 The Commission finds that it is reasonable to require privately held entities to monitor their foreign ownership levels, but also continue to consider mitigating circumstances in that context.

    58. This approach is consistent with Commission practice and precedent. In the 2013 Foreign Ownership Second Report and Order, the Commission stated that licensees that receive a foreign ownership ruling have an obligation to monitor and stay ahead of changes in their foreign ownership levels to ensure that the licensee obtains Commission approval before a change in foreign ownership renders the licensee out of compliance with its ruling(s) or the Commission's rules. The Commission determined that, in the context of common carrier wireless licensees, it would not require periodic certification of compliance with its foreign ownership rulings, but would require certification whenever a licensee files an application with the Commission for a new license, a transfer of control, or an assignment of license that does not also require the filing of a petition for declaratory ruling under the Commission's Section 310(b)(3) forbearance approach or under Section 310(b)(4), as well as certification in renewal applications.38

    38 Several common carrier and broadcast forms require periodic certification regarding compliance with the foreign ownership limits (e.g., FCC Forms 312, 314-316, 601, 603, 608).

    59. The Commission reiterates that licensees, their controlling parent companies, and other entities in the licensee's vertical ownership chain may choose, but are not required, to place restrictions in their bylaws or other organizational documents to enable the licensee to ensure continued compliance with the terms of its ruling. Finally, the Commission encourages broadcast and common carrier licensees to observe the specific monitoring 39 and compliance tools identified in the 2015 Pandora Declaratory Ruling. 40

    39 However, the Commission declines to require U.S. public companies, as a matter of course, to send out NOBO letters to obtain citizenship information, as was required in the Pandora Declaratory Ruling.

    40 Although the Commission declines to impose a specific periodic certification requirement here, the Commission or the Bureaus may consider such requirements and conditions where appropriate based on specific facts and circumstances in a particular case, in order to ensure continuing compliance with the statute, the Commission's rules, procedures and policies.

    60. Remedial Procedures. Under the methodology set forth in the rules adopted in this Report and Order, U.S. public companies will rely on ownership information that is known or reasonably should be known to the U.S. public company in the ordinary course of business, including information obtained from SEC filings, to assess compliance with Section 310(b)(3) and Section 301(b)(4). In certain situations, a company relying on information gleaned from SEC filings in the ordinary course of business to make its foreign ownership determination may not become aware of new investments in the company until after a transaction has occurred and an investor discloses the interest in accordance with the SEC's reporting requirements.

    61. Discussed below are certain limited situations relevant to the Commission's new rules and consistent with existing Commission practice, where a broadcast or common carrier licensee may file a petition for declaratory ruling in the exercise of its required due diligence to remedy its inadvertent non-compliance with the foreign ownership benchmark in Section 310(b)(4) or the terms and conditions of the company's existing Section 310(b)(4) ruling with reasonable assurance that the Commission will not take enforcement action. In providing the following clarifications, the Commission formalizes in the limited context of U.S. public company compliance with Section 310(b) what has been the equitable practice of the Commission in recognizing a licensee's good faith efforts to comply with the Section 310(b) statutory requirements, the terms and conditions of a licensee's Section 310(b)(4) ruling, and the Commission's rules.41

    41 The clarification is consistent with the Commission's long-held view that the 25 percent foreign ownership benchmark in Section 310(b)(4) may be exceeded only after the Commission affirmatively finds that the aggregate foreign ownership of a licensee's controlling U.S. parent company in excess of that amount is in the public interest.

    62. Where a licensee's controlling U.S. parent is an eligible U.S. public company, the licensee may file a remedial petition for declaratory ruling under Section 310(b)(4) seeking approval of the U.S. parent's above-benchmark, aggregate foreign ownership interests or approval of any particular foreign equity and/or voting interests that require specific approval under the licensee's existing Section 310(b)(4) ruling. Alternatively, the U.S. parent has the option to remedy the non-compliance by, for example, redeeming the foreign interest(s) that rendered the licensee non-compliant with Section 310(b)(4) or the licensee's existing Section 310(b)(4) ruling. In either case, the Commission does not, as a general rule, expect to take enforcement action related to the non-compliance provided that: (1) The licensee notifies the relevant Bureau by letter no later than 10 days after learning of the investment(s) that rendered the licensee non-compliant and specifies in the letter that it will file a petition for declaratory ruling or, alternatively, take remedial action to come into compliance within 30 days of the date it learned of the non-compliant foreign interest(s); and (2) the licensee demonstrates in its petition for declaratory ruling (or in a letter notifying the relevant Bureau that the non-compliance has been timely remedied) that the licensee's non-compliance with the Section 310(b)(4) benchmark or the terms of the licensee's existing Section 310(b)(4) ruling was due solely to circumstances beyond the licensee's control that were not reasonably foreseeable to or known by the licensee with the exercise of the required due diligence.

    63. Where the licensee has opted to file a Section 310(b)(4) petition, the Commission will not require that the licensee's U.S. parent redeem the non-compliant foreign interest(s) or take other action to remedy the non-compliance during the pendency of its petition. If the Commission ultimately declines to approve the petition, however, the licensee must have a mechanism available to come into compliance with Section 310(b)(4) or the terms of its existing ruling, as relevant, within 30 days following the Commission's decision. The Commission reserves the right to require immediate remedial action by the licensee where the Commission finds in a particular case that the public interest requires such action—for example, where the Commission finds, after consultation with the relevant Executive Branch agencies, that the foreign interest presents national security or other significant concerns that require immediate mitigation.

    64. The Commission also clarifies that a publicly traded broadcast licensee that is, or becomes, non-compliant with the 20 percent statutory limit in Section 310(b)(3) must take steps to come into compliance immediately upon learning of the non-compliance. The Commission does not expect to take enforcement action related to the broadcast licensee's non-compliance provided that: (1) The licensee notifies the relevant Bureau by letter no later than 10 days after learning of the investment(s) that rendered the licensee non-compliant with Section 310(b)(3) and specifies in the letter that it will take remedial action to come into compliance within 30 days of the date it learned of the non-compliant foreign interest(s); and (2) the licensee sufficiently explains that its non-compliance with Section 310(b)(3) was due solely to circumstances beyond the licensee's control that were not reasonably foreseeable to or known by the licensee with the exercise of the required due diligence. In the case of a publicly traded common carrier licensee that is, or becomes, non-compliant with Section 310(b)(3), the common carrier licensee may be eligible to file a petition for declaratory ruling under the Commission's Section 310(b)(3) forbearance approach. In such a case, the common carrier licensee will have the option of following the remedial procedures specified above with respect to publicly traded U.S. parent companies.

    65. The Commission does not expect the Commission to take enforcement action related to a licensee's non-compliance with the statutory foreign ownership limits or the terms of a licensee's existing foreign ownership ruling where the Commission finds that the broadcast or common carrier licensee has satisfied the burden of demonstrating that: (1) The licensee exercised due diligence in monitoring its foreign ownership or the foreign ownership of its controlling U.S. parent, as relevant, including whether there are stock redemption provisions in the licensee's or controlling U.S. parent's corporate charter and/or other provisions to promptly remedy foreign ownership violations; and (2) enforcement action by the Commission is not warranted because the licensee's non-compliance with the statutory foreign ownership limits or the terms of the licensee's existing foreign ownership ruling was due solely to circumstances beyond the licensee's control that were not reasonably foreseeable to or known by the licensee with the exercise of the requisite diligence. By avoiding the implications of changes in citizenship of the unidentifiable shareholders of a U.S. public company, the Commission's new rules will substantially reduce the risk that such a situation will occur.

    66. The Commission does not in this Report and Order change Commission policy requiring all licensees, including those who use this methodology, to obtain Commission approval before their aggregate direct or indirect foreign ownership exceeds the relevant statutory limits in Section 310(b)(3) or 310(b)(4). All licensees have an affirmative duty to monitor their foreign equity and voting interests. All licensees must calculate these interests in accordance with the Commission's foreign ownership rules and policies. Further, all licensees must otherwise ensure continuing compliance with the provisions of Section 310(b) of the Act.

    Privately Held Entities

    67. The Commission affirms its tentative finding in the 2015 Foreign Ownership NPRM that privately held entities should have knowledge of all of their owners, including their citizenship, and should be able to track their foreign ownership levels relatively easily. These entities do not face the same challenges in identifying shareholders/interest holders as publicly traded companies (e.g., shares held largely in the name of a bank or broker), and they have greater flexibility to enact controls—such as restrictions on the transfer of ownership interests—necessary to ensure continued compliance with Section 310(b). Accordingly, the Commission finds that it is reasonable to require privately held entities to continue to account for the ownership of all their voting and non-voting equity interests consistent with the Commission's policies and procedures.

    68. However, a privately held entity may use the methodology adopted in this Report and Order that is applicable to U.S. publicly traded companies, e.g., if, in a particular case, there are significant impediments that prevent a privately held entity from conducting an up-the-chain analysis to ascertain all of its indirect ownership interests, including non-voting equity interests held by remote, insulated investors.42

    42 Commission staff frequently works with private entities to address and resolve impediments to identifying ownership interests, and the Commission expects that this collaborative process will continue as private entities explore whether it is appropriate to rely on the revised methodology the Commission adopts today for U.S. publicly traded companies.

    Legal Authority Under Section 310(b)

    69. As required by Sections 310(b)(3) and 310(b)(4), the Commission assesses whether more than 20 percent of the capital stock of the licensee or whether more than 25 percent of the capital stock of the licensee's direct or indirect controlling U.S. parent is owned of record or voted by aliens or their representatives or by a foreign government or representative thereof or by any corporation organized under the laws of a foreign country. The Commission has long held that any equity or voting interest held by an individual other than a U.S. citizen or by a foreign government or an entity organized under the laws of a foreign government must be counted in the application of the statutory limits. The list of cognizable interests includes nearly all forms of equity and voting interests held in the licensee and its controlling U.S. parent. Specifically, in applying the statutory foreign ownership limits, the Commission has interpreted the term “capital stock,” as it applies to non-corporate entities, to encompass the many alternative means by which equity and voting interests are held in these entities, including partnership interests, policyholders of mutual insurance companies, church members, union members, and beneficiaries of irrevocable trusts.

    70. The Commission has long recognized the difficulty licensees or their controlling U.S. parents face in ascertaining their ownership for purposes of complying with Section 310(b). In 1974, the Commission's Broadcast Bureau recognized that it is impossible to identify the citizenship of all of the shares issued by a widely held public company. Based on the current record, the Commission believes that the methodology adopted in this Report and Order with respect to U.S. public companies is a reasonable approach to implementing the provisions of Sections 310(b)(3) and 310(b)(4), which establish limits of 20 percent and 25 percent, respectively, of the capital stock “owned of record” or voted by foreign investors. The Commission's approach is consistent with the history and purpose of that phrase as adopted in the Communications Act of 1934.

    71. The provisions that became Section 310(b)(3) and 310(b)(4) in their current form were enacted as part of the Communications Act of 1934. The Radio Act of 1927 had included a version of what is now Section 310(b)(3)—which applies to interests held in the licensee—but not to holding companies. During the Senate hearings, the President of International Telephone & Telegraph Corporation identified the challenges associated with “practical compliance” with such a requirement for a public company. He noted that “no corporation is ever in a position to know who are the real owners of its stock.” As he explained, “All it knows is who are registered as such on its transfer books.” Thus, the language of the bill then before the committee, which covered all shares “owned” or voted by foreign investors, was in his view “totally impractical in its present form.”

    72. Senator Dill, the Chairman of the committee and floor manager of what became the Act, suggested as a solution that the words “as of record” be added to the bill. While he recognized that this would not directly address the problem of “ownership of record . . . in one place and the beneficial and real ownership . . . in an entirely different place,” he responded: “I do not know any other way.” He rejected the alternative of “set[ting] up a secret service system to follow down every ownership of stock.” Following this discussion, the bill was amended to change the word “owned”—in what has become Section 310(b)(3) and also in what has become Section 310(b)(4)—to the phrase “owned of record.”

    73. The Commission's methodology is consistent with the recognition by Congress, even as early as 1934, of these practical difficulties in ascertaining the ownership of the shares of U.S. public companies. While at that time only about 10 percent of shares were held on behalf of another person, as noted above it is estimated that at least 85 percent of shares are held in this way today. Thus, as commenters have noted, the owner of record for most shares may be (or be holding on behalf of) an intermediary bank or broker for the ultimate beneficiary. The Commission's methodology requires the licensee to exercise due diligence, including but not limited to review and necessary follow-up based on SEC filings, to ascertain the ultimate ownership and citizenship of its shares. But Congress did not intend for public companies to “set up a secret service system to follow down every ownership of stock,” and the Commission does not require them to do so. The Commission thereby gives reasonable meaning to the terms of the Act, and avoid unreasonable consequences. Indeed, the Commission has previously recognized that in calculating compliance with the Section 310(b) limits, licensees must “take reasonable steps” to ensure such compliance. In the past, for public companies such steps have included periodic surveys and random sampling of shareholders, but the Commission has also permitted public companies to use other methods. The Commission's overarching principle has been, and continues to be, that a public company should include foreign ownership information “that [it] has reason to know.” Based on the record of this proceeding demonstrating the impracticabilities of using surveys and random sampling to identify foreign ownership when an estimated 85 percent of shares are now held of record on behalf of other persons, the Commission believes that its methodology, which includes a due diligence standard, is a reasonable one that is consistent with its prior guidance.43

    43 For the reasons stated above, the Commission agrees that it is inappropriate to rely on mailing addresses as a proxy for citizenship. But the Commission believes that its methodology, which includes a due diligence standard, constitutes a reasonable methodology for use by public companies, and the Commission agrees with the views of commenters that it is not necessary or appropriate to require any methodology for identifying foreign ownership of shares in public companies that hold or control broadcast licenses that differs from that applicable in the common carrier context.

    74. In any event, as a separate and independent basis for adopting the process described in this Report and Order for demonstrating compliance with Section 310(b)(4), Section 310(b)(4) provides the Commission discretion to allow foreign ownership of a licensee's direct or indirect controlling U.S. parent to exceed 25 percent unless the Commission finds that such ownership is inconsistent with the public interest. The 2015 Foreign Ownership NPRM requested comment on whether there is a legal and policy basis for concluding that the public interest would be served by permitting small foreign equity and/or voting interests in U.S. public companies—e.g., equity or voting interests that are not required to be reported under Exchange Act Rule 13d-1—without Commission review and approval, even in circumstances where the U.S. public company may have aggregate foreign ownership (or aggregate foreign and unknown ownership) exceeding 25 percent. Pursuant to the discretion afforded by Section 310(b)(4), the Commission determines, on a blanket basis, that unknown equity or voting interests held directly or indirectly in a licensee's publicly traded U.S. parent by a single foreign investor in an amount no greater than 5 percent (or no greater than 10 percent, in the case of such interests held by a qualified institutional investor) do not raise public interest concerns sufficient to outweigh the difficulties of identifying them. Thus, licensees subject to Section 310(b)(4) will no longer be required to seek Commission approval for proposed foreign ownership, except when the aggregate foreign ownership by greater than 5 percent interest holders (or, in the case of qualified institutional investors, greater than 10 percent interest holders), together with any other known or reasonably should be known foreign shareholders, exceeds 25 percent of the U.S. parent's capital stock.

    75. The disclosure requirements of Section 13(d) of the Exchange Act informed the Commission's decision, in the 2013 Foreign Ownership Second Report and Order, to require Section 310(b)(4) petitions filed by common carrier licensees to identify and request specific approval only for those foreign investors that hold or would hold, directly or indirectly, more than 5 percent, and in the case of a qualified institutional investor, more than 10 percent of the U.S. parent's equity and/or voting interests, or a controlling interest. The Commission found that it could exclude a company's 5 percent or less interest holders from the specific approval requirements with little risk of overlooking a foreign investor that possesses a realistic potential for influencing or controlling a licensee. The Commission believes this determination applies with equal force for purposes of the Section 310(b)(4) public interest finding made here.

    76. Based on the Commission's understanding of the realities of today's marketplace for the equity securities of public companies and its experience in assessing foreign ownership of common carrier licensees, the Commission acknowledges that smaller, unknown interest holders that hold 5 percent or less of a U.S. public company's outstanding shares or qualified institutional investors that hold interests of 10 percent or less are tracked somewhat less directly, based largely on information obtained from Form 13F reports that are filed quarterly with the SEC by certain institutional investment managers. Such institutional ownership information about U.S. publicly traded equities is available from various sources, and typically is monitored in the ordinary course of business by a company whose stock trades publicly on U.S. securities exchanges.

    77. The Commission also recognizes and find that interests that are not known to a U.S. public company (generally because they are not subject to reporting requirements under the U.S. federal securities laws and the regulations thereunder), and that the public company cannot reasonably be expected to know in the ordinary course of business, are not contrary to the public interest in the absence of countervailing evidence and do not need to be included for purposes of calculating a licensee's aggregate levels of foreign ownership under Section 310(b). However, the Commission remains concerned that voting and non-voting equity investors that are known to a public company may have the ability in a particular case to exert influence over the affairs of the company.44

    44 In adopting the equity/debt plus (EDP) rule in the context of the broadcast attribution rules, the Commission observed, inter alia, that preferred stockholders which do not have voting rights in a company “might exert significant influence through contractual rights or other methods of access to a licensee,” such as negotiating for the right to select the persons who will run for the board of directors. While such opportunities may be more limited in the case of a public company, as compared to a privately held company, the Commission believes such opportunities may nonetheless exist, particularly where a company has one or more classes of stock that are not registered under Section 12 of the Exchange Act.

    78. The Commission believes that the public interest benefits of disregarding such smaller foreign interests that cannot be identified consistent with the methodology herein outweigh any potential costs of doing so and will allow companies to focus their efforts on ascertaining the citizenship of those foreign interests that may present a realistic potential to influence or control the company, rather than on those interests that are not influential. In addition, the methodology will provide certainty and consistency in implementation of the statute, while reducing the burdens associated with a public company's ascertainment of its foreign equity and voting interests. Commenters have stated that this will, in turn, promote public company financing that has access to foreign investment, and may encourage reciprocal trade benefits.

    Corrections and Clarifications of Existing Rules

    79. The Commission adopts corrections and clarifications to the rules. First, in Section 1.5001 of the final rules, which lists the required contents of petitions for declaratory ruling, the Commission adopts its proposal to include a cross-reference to Section 1.5000(c), which imposes the requirement that each applicant, licensee, or spectrum lessee filing a Section 310(b) petition for declaratory ruling certify to the information contained in the petition in accordance with the provisions of Section 1.16 of the Commission's rules.45 As indicated in the 2015 Foreign Ownership NPRM, the Commission's experience is that it is not uncommon for petitions to be filed without the required certification and a cross-reference to the certification requirement will highlight to filers this critical aspect of our rules.

    45 The certification requirement at Section 1.990(c) of the Commission's rules is now recodified at Section 1.5000(c). The certification requires a statement that the applicant, licensee and/or spectrum lessee has calculated the ownership interests disclosed in its petition based upon its review of the Commission's rules and that the interests disclosed satisfy each of the pertinent standards and criteria set forth in the rules.

    80. Second, the Commission adopts its proposal to include two Notes in Section 1.5001(i) of the rules to clarify that certain foreign interests of 5 percent or less may require specific approval in circumstances where there is direct or indirect foreign investment in the U.S. parent in the form of uninsulated partnership interests or uninsulated interests held by members of an LLC. Many limited partners and LLC members hold small equity interests in their respective companies with control of these companies residing in the general partner or managing member, respectively. However, for purposes of identifying foreign interests that require specific approval (and for determining a common carrier licensee's disclosable U.S. and foreign interest holders), uninsulated partners and uninsulated LLC members are deemed to hold the same voting interest as the partnership or LLC holds in the company situated in the next lower tier of the licensee's vertical ownership chain. Depending on the particular ownership structure presented in the petition, an uninsulated foreign limited partner or uninsulated LLC member may require specific approval because the voting interest it is deemed to hold in the U.S. parent exceeds 5 percent and, because it is an uninsulated voting interest, it does not qualify as exempt from the specific approval requirements. The Commission finds that these two Notes will improve the clarity of the specific approval requirements.

    81. Third, the Commission sought comment on whether Commission precedent supports the inclusion of additional permissible voting or consent rights in the list of investor protections where the rights do not, in themselves, result in a limited partnership or LLC interest being deemed uninsulated within Section 1.5003 of the proposed rules. The Commission similarly requested comment on the inclusion of additional permissible minority shareholder protections in Section 1.5001(i)(5) of the proposed rules. Because no comments were received, the Commission declines to adopt additional permissible voting or consent rights, or additional permissible minority shareholder protections in this proceeding.

    82. Finally, the Commission corrects two cross-references, and makes additional clarifying changes as identified in the 2015 Foreign Ownership NPRM.

    Transition Issues

    83. Consistent with the process adopted in the 2013 Foreign Ownership Second Report and Order, the 2015 Foreign Ownership NPRM proposed to apply prospectively any changes adopted in this proceeding. This approach is appropriate in order to afford the Commission and the relevant Executive Branch agencies an opportunity to evaluate the potential effects of the new rules on licensees that are subject to existing rulings and on pending petitions. No commenter objected to the Commission's tentative proposal. Thus, licensees subject to an existing ruling as of the effective date of the rules adopted in this proceeding will be required to continue to comply with any general and specific terms and conditions of their rulings, including Commission rules and policies in effect at the time the ruling was issued.46 Further, licensees may request a new ruling under the revised rules adopted herein; however, they are not required to do so. Petitions for declaratory ruling that are pending before the Commission as of the effective date of the rules adopted in this Report and Order will be decided based on the new rules.47

    46 Licensees with an existing foreign ownership ruling have an obligation to seek a new ruling under any revised rules before exceeding the scope of their rulings. Failure to meet a condition of a foreign ownership ruling may result in monetary sanctions or other enforcement action by the Commission.

    47 If necessary, parties will be given an opportunity to amend any pending foreign ownership petitions to address the revised rules adopted herein.

    Conclusion

    84. In this Report and Order, the Commission adopts a tailored application of the existing rules for review of foreign ownership of common carrier licensees to foreign ownership of broadcast licensees. The Commission also reforms the methodology used by common carrier and broadcast licensees that are, or are controlled by, U.S. public companies to assess compliance with the foreign ownership limits in Sections 310(b)(3) and 310(b)(4) of the Act. As discussed above, the Commission determines that these actions are in the public interest and will continue to protect important interests related to national security, law enforcement, foreign policy, and trade policy, while reducing regulatory burdens and costs, providing greater transparency and predictability, and facilitating investment in U.S. broadcast and telecommunications infrastructure.

    Regulatory Flexibility Act

    85. As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory Flexibility Certification was incorporated into the 2015 Foreign Ownership NPRM. Pursuant to the Regulatory Flexibility Act of 1980, as amended, the Commission's Final Regulatory Flexibility Certification relating to this Report and Order is included below.

    Paperwork Reduction Act of 1995

    86. This Report and Order contains new or modified 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 new or modified information collection requirements contained in this proceeding. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission previously sought specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees. In the Report and Order, we extend the streamlined rules and procedures developed for foreign ownership reviews for common carrier and certain aeronautical licensees under Section 310(b)(4) of the Act to broadcast licensees, with certain modifications to tailor them to the broadcast context. We also reform the methodology used by common carrier and broadcast licensees that are, or are controlled by, U.S. public companies to assess compliance with the foreign ownership limits in Sections 310(b)(3) and 310(b)(4) of the Act. We have assessed the effects of the new rules on small business concerns. We find that the streamlined rules and procedures adopted in the Report and Order will minimize the information collection burden on licensees subject to Section 310(b), including small businesses.

    87. In this Report and Order, the Commission extends the streamlined rules and procedures developed for foreign ownership reviews for common carrier and certain aeronautical licensees under Section 310(b)(4) of the Act to the broadcast context. The Commission also reforms the methodology used by common carrier and broadcast licensees that are, or are controlled by, U.S. public companies to assess compliance with the foreign ownership limits in Sections 310(b)(3) and 310(b)(4) of the Act. The Commission has assessed the effects of the new rules on small business concerns. The Commission finds that the streamlined rules and procedures adopted here will minimize the information collection burden on licensees subject to 310(b), including small businesses.

    Congressional Review Act

    88. The Commission will include a copy of this Report and Order in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act. See 5 U.S.C. 801(a)(1)(A).

    Final Regulatory Flexibility Certification

    89. In this Report and Order, the Commission modifies the foreign ownership filing and review process for broadcast licensees by extending the streamlined rules and procedures developed for foreign ownership reviews for common carrier and certain aeronautical licensees under Section 310(b)(4) of the Act to the broadcast context with certain limited exceptions. Recognizing the difficulty U.S. public companies face in ascertaining their foreign ownership, the Commission also reforms the methodology used by common carrier and broadcast licensees that are, or are controlled by U.S. public companies to assess compliance with the foreign ownership limits in Sections 310(b)(3) and 310(b)(4) of the Act, respectively. In particular, the reformed methodology provides a framework for a publicly traded licensee or controlling U.S. parent to ascertain its foreign ownership using information that is “known or reasonably should be known” to the company in the ordinary course of business, thereby eliminating the need for costly shareholder surveys.

    90. The new rules are designed to provide the industry with greater transparency and reduce to the extent possible the regulatory costs and burdens that our current foreign ownership policies and procedures impose on broadcast, wireless common carrier and aeronautical applicants, licensees, and spectrum lessees. In particular, as is the case with common carrier licensees, the new standardized filing and review process will provide a clearer path for foreign investment in broadcast licensees that is more consistent with the U.S. domestic investment process, while continuing to protect important interests related to national security, law enforcement, foreign policy, and trade policy.

    91. The Commission estimates that the rule changes will facilitate the filing of Section 310(b)(4) petitions for declaratory ruling by broadcast licensees while reducing the time and expense associated with such filings. For example, U.S. parent companies of broadcast licensees that seek Commission approval to exceed the 25 percent foreign ownership benchmark in Section 310(b)(4) will be allowed to include in their petitions requests for specific approval of only those foreign investors that hold or would hold a direct or indirect equity and/or voting interest in the U.S. parent that exceeds 5 percent (or exceeds 10 percent in certain circumstances), or a controlling interest in the U.S. parent. As another example, the new rules will allow the U.S. parent to request specific approval for any non-controlling foreign investors named in the Section 310(b)(4) petition to increase their direct or indirect equity and/or voting interests in the U.S. parent at any time after issuance of the Section 310(b)(4) ruling, up to and including a non-controlling 49.99 percent equity and/or voting interest. Similarly, under the new rules the U.S. parent will be permitted to request specific approval for any named foreign investor that proposed to acquire a controlling interest of less than 100 percent to increase the interest to 100 percent at some future time.

    92. The Commission requested comment on measures the Commission can take to reduce the costs and burdens associated with licensees' efforts to ensure that they remain in compliance with the statutory foreign ownership requirements. Although it did not receive comments specifically addressing the costs and burdens on small business concerns, the Commission has recognized in the past that the current requirements impose significant costs and burdens. Similarly, by extending the streamlined rules and procedures developed for foreign ownership reviews for common carrier to broadcast, the new rules will reduce the costs and burdens of broadcast licensees. Also, the methodology we adopt will facilitate compliance with the statutory foreign ownership limits and the filing of petitions for declaratory ruling by publicly-traded licensees while reducing the time and expense associated with such filings.

    93. Overall, the new rules will reduce costs and burdens currently imposed on licensees, including those licensees that are small entities, and streamline and accelerate the foreign ownership review process, while continuing to ensure that the Commission has the information it needs to carry out our statutory obligations. Moreover, the new rules will improve regulatory flexibility for broadcast and common carrier licensees for purposes of compliance with Section 310(b)(3) and 310(b)(4) of the Act and provide an incentive for enhanced investment in U.S. broadcast and telecommunications infrastructure. Therefore, the Commission certifies that the rules adopted in this Report and Order will not have a significant economic impact on a substantial number of small entities.48 The Commission will send a copy of this Report and Order, including a copy of this Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the SBA. This final certification will also be published in the Federal Register.

    48 In the proceeding in which sections 1.990-1.994 were adopted, the Commission certified that the rules and procedures for analyzing foreign ownership of common carrier and aeronautical radio licensees under Section 310(b)(4), which this Report and Order applies with certain modifications to broadcast licensees, would not have a significant economic impact on a substantial number of small entities.

    Ordering Clauses

    94. Accordingly, it is ordered pursuant to Sections 1, 2, 4(i), 4(j), 303(r), 309, and 310 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 154(j), 303(r), 309, and 310 this Report and Order is adopted.

    95. It is further ordered that parts 1, 25, 73 and 74 of the Commission's rules are amended as set forth in the Final Rules.

    96. It is further ordered that, pursuant to 47 U.S.C. 155(c) and 47 CFR 0.261, the Chief of the International Bureau is granted delegated authority to make technical and ministerial edits to the rules adopted in this Report and Order consistent with any technical and ministerial modifications made by the Securities and Exchange Commission to its rules and forms.

    97. It is further ordered that this Report and Order shall be effective 60 days after publication in the Federal Register, except those provisions that contain new or modified information collection requirements that require approval by the Office of Management and Budget under the Paperwork Reduction Act will become effective after the Commission publishes a notice in the Federal Register announcing such approval and the relevant effective date.

    98. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

    99. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order, including the Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business Administration.

    List of Subjects in 47 CFR Parts 1, 25, 73 and 74

    Communications common carriers, Radio, Reporting and recordkeeping requirements, Satellites, Telecommunications.

    Federal Communications Commission. Marlene H. Dortch, Secretary. Final Rules

    For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 1, 25, 73 and 74 as follows:

    PART 1—PRACTICE AND PROCEDURE 1. The authority citation for part 1 is revised to read as follows: Authority:

    15 U.S.C. 79, et seq.; 47 U.S.C. 151, 154(i), 154(j), 155, 157, 160, 201, 225, 227, 303, 309, 310, 332, 1403, 1404, 1451, 1452, and 1455.

    §§ 1.990 through 1.994 [Removed]
    2. In Subpart F, remove the undesignated center heading “Foreign Ownership of Common Carrier, Aeronautical en Route, and Aeronautical Fixed Radio Station Licensees” and §§ 1.990 through 1.994. 3. Add subpart T to part 1 to read as follows: Subpart T—Foreign Ownership of Broadcast, Common Carrier, Aeronautical En Route, and Aeronautical Fixed Radio Station Licensees Sec. 1.5000 Citizenship and filing requirements under section 310(b) of the Communications Act of 1934, as amended. 1.5001 Contents of petitions for declaratory ruling under section 310(b) of the Communications Act of 1934, as amended. 1.5002 How to calculate indirect equity and voting interests. 1.5003 Insulation criteria for interests in limited partnerships, limited liability partnerships, and limited liability companies. 1.5004 Routine terms and conditions. Subpart T—Foreign Ownership of Broadcast, Common Carrier, Aeronautical En Route, and Aeronautical Fixed Radio Station Licensees
    § 1.5000 Citizenship and filing requirements under section 310(b) of the Communications Act of 1934, as amended.

    The rules in this subpart establish the requirements and conditions for obtaining the Commission's prior approval of foreign ownership in broadcast, common carrier, aeronautical en route, and aeronautical fixed radio station licensees and common carrier spectrum lessees that would exceed the 25 percent benchmark in section 310(b)(4) of the Act. These rules also establish the requirements and conditions for obtaining the Commission's prior approval of foreign ownership in common carrier (but not broadcast, aeronautical en route or aeronautical fixed) radio station licensees and spectrum lessees that would exceed the 20 percent limit in section 310(b)(3) of the Act. These rules also establish the methodology applicable to eligible U.S. public companies for purposes of determining and ensuring their compliance with the foreign ownership limitations set forth in sections 310(b)(3) and 310(b)(4) of the Act.

    (a)(1) A broadcast, common carrier, aeronautical en route or aeronautical fixed radio station licensee or common carrier spectrum lessee shall file a petition for declaratory ruling to obtain Commission approval under section 310(b)(4) of the Act, and obtain such approval, before the aggregate foreign ownership of any controlling, U.S.-organized parent company exceeds, directly and/or indirectly, 25 percent of the U.S. parent's equity interests and/or 25 percent of its voting interests. An applicant for a broadcast, common carrier, aeronautical en route or aeronautical fixed radio station license or common carrier spectrum leasing arrangement shall file the petition for declaratory ruling required by this paragraph at the same time that it files its application.

    (2) A common carrier radio station licensee or spectrum lessee shall file a petition for declaratory ruling to obtain approval under the Commission's section 310(b)(3) forbearance approach, and obtain such approval, before aggregate foreign ownership, held through one or more intervening U.S.-organized entities that hold non-controlling equity and/or voting interests in the licensee, along with any foreign interests held directly in the licensee or spectrum lessee, exceeds 20 percent of its equity interests and/or 20 percent of its voting interests. An applicant for a common carrier radio station license or spectrum leasing arrangement shall file the petition for declaratory ruling required by this paragraph at the same time that it files its application. Foreign interests held directly in a licensee or spectrum lessee, or other than through U.S.-organized entities that hold non-controlling equity and/or voting interests in the licensee or spectrum lessee, shall not be permitted to exceed 20 percent.

    Note 1 to paragraph (a):

    Paragraph (a)(1) of this section implements the Commission's foreign ownership policies under section 310(b)(4) of the Act, 47 U.S.C. 310(b)(4), for broadcast, common carrier, aeronautical en route, and aeronautical fixed radio station licensees and common carrier spectrum lessees. It applies to foreign equity and/or voting interests that are held, or would be held, directly and/or indirectly in a U.S.-organized entity that itself directly or indirectly controls a broadcast, common carrier, aeronautical en route, or aeronautical fixed radio station licensee or common carrier spectrum lessee. A foreign individual or entity that seeks to hold a controlling interest in such a licensee or spectrum lessee must hold its controlling interest indirectly, in a U.S.-organized entity that itself directly or indirectly controls the licensee or spectrum lessee. Such controlling interests are subject to section 310(b)(4) and the requirements of paragraph (a)(1) of this section. The Commission assesses foreign ownership interests subject to section 310(b)(4) separately from foreign ownership interests subject to section 310(b)(3).

    Note 2 to paragraph (a):

    Paragraph (a)(2) of this section implements the Commission's section 310(b)(3) forbearance approach adopted in the First Report and Order in IB Docket No. 11-133, FCC 12-93 (released Aug. 17, 2012), 77 FR 50628 (Aug. 22, 2012). The section 310(b)(3) forbearance approach applies only to foreign equity and voting interests that are held, or would be held, in a common carrier licensee or spectrum lessee through one or more intervening U.S.-organized entities that do not control the licensee or spectrum lessee. Foreign equity and/or voting interests that are held, or would be held, directly in a licensee or spectrum lessee, or indirectly other than through an intervening U.S.-organized entity, are not subject to the Commission's section 310(b)(3) forbearance approach and shall not be permitted to exceed the 20 percent limit in section 310(b)(3) of the Act, 47 U.S.C. 310(b)(3). The Commission's forbearance approach does not apply to broadcast, aeronautical en route or aeronautical fixed radio station licenses.

    Example 1.

    U.S.-organized Corporation A is preparing an application to acquire a common carrier radio license by assignment from another licensee. U.S.-organized Corporation A is wholly owned and controlled by U.S.-organized Corporation B. U.S.-organized Corporation B is 51 percent owned and controlled by U.S.-organized Corporation C, which is, in turn, wholly owned and controlled by foreign-organized Corporation D. The remaining non-controlling 49 percent equity and voting interests in U.S.-organized Corporation B are held by U.S.-organized Corporation X, which is, in turn, wholly owned and controlled by U.S. citizens. Paragraph (a)(1) of this section requires that U.S.-organized Corporation A file a petition for declaratory ruling to obtain Commission approval of the 51 percent foreign ownership of its controlling, U.S.-organized parent, Corporation B, by foreign-organized Corporation D, which exceeds the 25 percent benchmark in section 310(b)(4) of the Act for both equity interests and voting interests. Corporation A is also required to identify and request specific approval in its petition for any foreign individual or entity, or “group,” as defined in paragraph (d) of this section, that holds directly and/or indirectly more than 5 percent of Corporation B's total outstanding capital stock (equity) and/or voting stock, or a controlling interest in Corporation B, unless the foreign investment is exempt under § 1.5001(i)(3).

    Example 2.

    U.S.-organized Corporation A is preparing an application to acquire a common carrier radio license by assignment from another licensee. U.S.-organized Corporation A is 51 percent owned and controlled by U.S.-organized Corporation B, which is, in turn, wholly owned and controlled by U.S. citizens. The remaining non-controlling 49 percent equity and voting interests in U.S.-organized Corporation A are held by U.S.-organized Corporation X, which is, in turn, wholly owned and controlled by foreign-organized Corporation Y. Paragraph (a)(2) of this section requires that U.S.-organized Corporation A file a petition for declaratory ruling to obtain Commission approval of the non-controlling 49 percent foreign ownership of U.S.-organized Corporation A by foreign-organized Corporation Y through U.S.-organized Corporation X, which exceeds the 20 percent limit in section 310(b)(3) of the Act for both equity interests and voting interests. U.S.-organized Corporation A is also required to identify and request specific approval in its petition for any foreign individual or entity, or “group,” as defined in paragraph (d) of this section, that holds an equity and/or voting interest in foreign-organized Corporation Y that, when multiplied by 49 percent, would exceed 5 percent of U.S.-organized Corporation A's equity and/or voting interests, unless the foreign investment is exempt under § 1.5001(i)(3).

    Example 3.

    U.S.-organized Corporation A is preparing an application to acquire a common carrier radio license by assignment from another licensee. U.S.-organized Corporation A is 51 percent owned and controlled by U.S.-organized Corporation B, which is, in turn, wholly owned and controlled by foreign-organized Corporation C. The remaining non-controlling 49 percent equity and voting interests in U.S.-organized Corporation A are held by U.S.-organized Corporation X, which is, in turn, wholly owned and controlled by foreign-organized Corporation Y. Paragraphs (a)(1) and (a)(2) of this section require that U.S.-organized Corporation A file a petition for declaratory ruling to obtain Commission approval of foreign-organized Corporation C's 100 percent ownership interest in U.S.-organized parent, Corporation B, and of foreign-organized Corporation Y's non-controlling, 49 percent foreign ownership interest in U.S.-organized Corporation A through U.S-organized Corporation X, which exceed the 25 percent benchmark and 20 percent limit in sections 310(b)(4) and 310(b)(3) of the Act, respectively, for both equity interests and voting interests. U.S-organized Corporation A's petition also must identify and request specific approval for ownership interests held by any foreign individual, entity, or “group,” as defined in paragraph (d) of this section, to the extent required by § 1.5001(i).

    (b) Except for petitions involving broadcast stations only, the petition for declaratory ruling required by paragraph (a) of this section shall be filed electronically through the International Bureau Filing System (IBFS) or any successor system thereto. For information on filing a petition through IBFS, see part 1, subpart Y and the IBFS homepage at http://www.fcc.gov/ib. Petitions for declaratory ruling required by paragraph (a) of this section involving broadcast stations only shall be filed electronically on the Internet through the Media Bureau's Consolidated Database System (CDBS) or any successor system thereto when submitted to the Commission as part of an application for a construction permit, assignment, or transfer of control of a broadcast license; if there is no associated construction permit, assignment or transfer of control application, petitions for declaratory ruling should be filed with the Office of the Secretary via the Commission's Electronic Comment Filing System (ECFS).

    (c)(1) Each applicant, licensee, or spectrum lessee filing a petition for declaratory ruling required by paragraph (a) of this section shall certify to the information contained in the petition in accordance with the provisions of § 1.16 and the requirements of this paragraph. The certification shall include a statement that the applicant, licensee and/or spectrum lessee has calculated the ownership interests disclosed in its petition based upon its review of the Commission's rules and that the interests disclosed satisfy each of the pertinent standards and criteria set forth in the rules.

    (2) Multiple applicants and/or licensees shall file jointly the petition for declaratory ruling required by paragraph (a) of this section where the entities are under common control and contemporaneously hold, or are contemporaneously filing applications for, broadcast, common carrier licenses, common carrier spectrum leasing arrangements, or aeronautical en route or aeronautical fixed radio station licenses. Where joint petitioners have different responses to the information required by § 1.5001, such information should be set out separately for each joint petitioner, except as otherwise permitted in § 1.5001(h)(2).

    (i) Each joint petitioner shall certify to the information contained in the petition in accordance with the provisions of § 1.16 with respect to the information that is pertinent to that petitioner. Alternatively, the controlling parent of the joint petitioners may certify to the information contained in the petition.

    (ii) Where the petition is being filed in connection with an application for consent to transfer control of licenses or spectrum leasing arrangements, the transferee or its ultimate controlling parent may file the petition on behalf of the licensees or spectrum lessees that would be acquired as a result of the proposed transfer of control and certify to the information contained in the petition.

    (3) Multiple applicants and licensees shall not be permitted to file a petition for declaratory ruling jointly unless they are under common control.

    (d) The following definitions shall apply to this section and §§ 1.5001 through 1.5004.

    (1) Aeronautical radio licenses refers to aeronautical en route and aeronautical fixed radio station licenses only. It does not refer to other types of aeronautical radio station licenses.

    (2) Affiliate refers to any entity that is under common control with a licensee, defined by reference to the holder, directly and/or indirectly, of more than 50 percent of total voting power, where no other individual or entity has de facto control.

    (3) Control includes actual working control in whatever manner exercised and is not limited to majority stock ownership. Control also includes direct or indirect control, such as through intervening subsidiaries.

    (4) Entity includes a partnership, association, estate, trust, corporation, limited liability company, governmental authority or other organization.

    (5) Group refers to two or more individuals or entities that have agreed to act together for the purpose of acquiring, holding, voting, or disposing of their equity and/or voting interests in the relevant licensee, controlling U.S. parent, or entity holding a direct and/or indirect equity and/or voting interest in the licensee or U.S. parent.

    (6) Individual refers to a natural person as distinguished from a partnership, association, corporation, or other organization.

    (7) Licensee as used in §§ 1.5000 through 1.5004 includes a spectrum lessee as defined in § 1.9003.

    (8) Privately held company refers to a U.S.- or foreign-organized company that has not issued a class of equity securities for which beneficial ownership reporting is required by security holders and other beneficial owners under sections 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. 78a et seq. (Exchange Act), and corresponding Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a substantially comparable foreign law or regulation.

    (9) Public company refers to a U.S.- or foreign-organized company that has issued a class of equity securities for which beneficial ownership reporting is required by security holders and other beneficial owners under sections 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. 78a et seq. (Exchange Act) and corresponding Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a substantially comparable foreign law or regulation.

    (10) Subsidiary refers to any entity in which a licensee owns or controls, directly and/or indirectly, more than 50 percent of the total voting power of the outstanding voting stock of the entity, where no other individual or entity has de facto control.

    (11) Voting stock refers to an entity's corporate stock, partnership or membership interests, or other equivalents of corporate stock that, under ordinary circumstances, entitles the holders thereof to elect the entity's board of directors, management committee, or other equivalent of a corporate board of directors.

    (12) Would hold as used in §§ 1.5000 through 1.5004 includes interests that an individual or entity proposes to hold in an applicant, licensee, or spectrum lessee, or their controlling U.S. parent, upon consummation of any transactions described in the petition for declaratory ruling filed under paragraphs (a)(1) or (2) of this section.

    (e)(1) This section sets forth the methodology applicable to broadcast, common carrier, aeronautical en route, and aeronautical fixed radio station licensees and common carrier spectrum lessees that are, or are directly or indirectly controlled by, an eligible U.S. public company for purposes of monitoring the licensee's or spectrum lessee's compliance with the foreign ownership limits set forth in sections 310(b)(3) and 310(b)(4) of the Act and with the terms and conditions of a licensee's or spectrum lessee's foreign ownership ruling issued pursuant to paragraph (a)(1) or (2) of this section. For purposes of this section:

    (i) An “eligible U.S. public company” is a company that is organized in the United States; whose stock is traded on a stock exchange in the United States; and that has issued a class of equity securities for which beneficial ownership reporting is required by security holders and other beneficial owners under sections 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. 78a et seq. (Exchange Act) and corresponding Exchange Act Rule 13d-1, 17 CFR 240.13d-1;

    (ii) A “beneficial owner” of a security refers to any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares voting power, which includes the power to vote, or to direct the voting of, such security; and

    (iii) An “equity interest holder” refers to any person or entity that has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, a share.

    (2) An eligible U.S. public company shall use information that is known or reasonably should be known by the company in the ordinary course of business, as described in this paragraph, to identify the beneficial owners and equity interest holders of its voting and non-voting stock:

    (i) Information recorded in the company's share register;

    (ii) Information as to shares held by officers, directors, and employees;

    (iii) Information reported to the Securities and Exchange Commission (SEC) in Schedule 13D (17 CFR 240.13d-101) and in Schedule 13G (17 CFR 240.13d-102), including amendments filed by or on behalf of a reporting person, and company-specific information derived from SEC Form 13F (17 CFR 249.325);

    (iv) Information as to beneficial owners of shares required to be identified in a company's annual reports (or proxy statements) and quarterly reports;

    (v) Information as to the identify and citizenship of a beneficial owner and/or equity interest holder where such information is actually known to the public company as a result of shareholder litigation, financing transactions, and proxies voted at annual or other meetings; and

    (vi) Information as to the identity and citizenship of a beneficial owner and/or equity interest holder where such information is actually known to the company by whatever source.

    (3) An eligible U.S. public company shall use information that is known or reasonably should be known by the company in the ordinary course of business to determine the citizenship of the beneficial owners and equity interest holders, identified pursuant to paragraph (e)(2) of this section, including information recorded in the company's shareholder register, information required to be disclosed pursuant to rules of the Securities and Exchange Commission, other information that is publicly available to the company, and information received by the company through direct inquiries with the beneficial owners and equity interest holders where the company determines that direct inquiries are necessary to its compliance efforts.

    (4) A licensee or spectrum lessee that is, or is directly or indirectly controlled by, an eligible U.S. public company, shall exercise due diligence in identifying and determining the citizenship of such public company's beneficial owners and equity interest holders.

    (5) To calculate aggregate levels of foreign ownership, a licensee or spectrum lessee that is, or is directly or indirectly controlled by, an eligible U.S. public company, shall base its foreign ownership calculations on such public company's known or reasonably should be known foreign equity and voting interests as described in paragraphs (e)(2) and (3) of this section. The licensee shall aggregate the public company's known or reasonably should be known foreign voting interests and separately aggregate the public company's known or reasonably should be known foreign equity interests. If the public company's known or reasonably should be known foreign voting interests and its known or reasonably should be known foreign equity interests do not exceed 25 percent (20 percent in the case of an eligible publicly traded licensee subject to section 310(b)(3)) of the company's total outstanding voting shares or 25 percent (20 percent in the case of an eligible publicly traded licensee subject to Section 310(b)(3)) of the company's total outstanding shares (whether voting or non-voting), respectively, the company shall be deemed compliant, under this section, with the applicable statutory limit.

    Example.

    Assume that a licensee's controlling U.S. parent is an eligible U.S. public company. The publicly traded U.S. parent has one class of stock consisting of 100 total outstanding shares of common voting stock. The licensee (and/or the U.S. parent on its behalf) has exercised the required due diligence in following the above-described methodology for identifying and determining the citizenship of the U.S. parent's “known or reasonably should be known” interest holders and has identified one foreign shareholder that owns 6 shares (i.e., 6 percent of the total outstanding shares) and another foreign shareholder that owns 4 shares (i.e., 4 percent of the total outstanding shares). The licensee would add the U.S. parent's known foreign shares and divide the sum by the number of the U.S. parent's total outstanding shares. In this example, the licensee's U.S. parent would be calculated as having an aggregate 10 percent foreign equity interests and 10 percent foreign voting interests (6 + 4 foreign shares = 10 foreign shares; 10 foreign shares divided by 100 total outstanding shares = 10 percent). Thus, in this example, the licensee would be deemed compliant with Section 310(b)(4).

    § 1.5001 Contents of petitions for declaratory ruling under section 310(b) of the Communications Act of 1934, as amended.

    The petition for declaratory ruling required by § 1.5000(a)(1) and/or (2) shall contain the following information:

    (a) With respect to each petitioning applicant or licensee, provide its name; FCC Registration Number (FRN); mailing address; place of organization; telephone number; facsimile number (if available); electronic mail address (if available); type of business organization (e.g., corporation, unincorporated association, trust, general partnership, limited partnership, limited liability company, trust, other (include description of legal entity)); name and title of officer certifying to the information contained in the petition.

    (b) If the petitioning applicant or licensee is represented by a third party (e.g., legal counsel), specify that individual's name, the name of the firm or company, mailing address and telephone number/electronic mail address.

    (c)(1) For each named licensee, list the type(s) of radio service authorized (e.g., broadcast service, cellular radio telephone service; microwave radio service; mobile satellite service; aeronautical fixed service). In the case of broadcast licensees, also list the call sign, facility identification number (if applicable), and community of license or transmit site for each authorization covered by the petition.

    (2) If the petition is filed in connection with an application for a radio station license or a spectrum leasing arrangement, or an application to acquire a license or spectrum leasing arrangement by assignment or transfer of control, specify for each named applicant:

    (i) The File No(s). of the associated application(s), if available at the time the petition is filed; otherwise, specify the anticipated filing date for each application; and

    (ii) The type(s) of radio services covered by each application (e.g., broadcast service, cellular radio telephone service; microwave radio service; mobile satellite service; aeronautical fixed service).

    (d) With respect to each petitioner, include a statement as to whether the petitioner is requesting a declaratory ruling under § 1.5000(a)(1) and/or (2).

    (e) Disclosable interest holders—direct U.S. or foreign interests in the controlling U.S. parent. Paragraphs (e)(1) through (4) of this section apply only to petitions filed under § 1.5000(a)(1) and/or (2) for common carrier, aeronautical en route, and aeronautical fixed radio station applicants or licensees, as applicable. Petitions filed under § 1.5000(a)(1) for broadcast licensees shall provide the name of any individual or entity that holds, or would hold, directly, an attributable interest in the controlling U.S. parent of the petitioning broadcast station applicant(s) or licensee(s), as defined in the Notes to § 73.3555 of this chapter. Where no individual or entity holds, or would hold, directly, an attributable interest in the controlling U.S. parent (for petitions filed under § 1.5000(a)(1)), the petition shall specify that no individual or entity holds, or would hold, directly, an attributable interest in the U.S. parent, applicant(s), or licensee(s).

    (1) Direct U.S. or foreign interests of ten percent or more or a controlling interest. With respect to petitions filed under § 1.5000(a)(1), provide the name of any individual or entity that holds, or would hold, directly 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the controlling U.S. parent of the petitioning common carrier or aeronautical radio station applicant(s) or licensee(s) as specified in paragraphs (e)(4)(i) through (iv) of this section.

    (2) Direct U.S. or foreign interests of ten percent or more or a controlling interest. With respect to petitions filed under § 1.5000(a)(2), provide the name of any individual or entity that holds, or would hold, directly 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in each petitioning common carrier applicant or licensee as specified in paragraphs (e)(4)(i) through (iv) of this section.

    (3) Where no individual or entity holds, or would hold, directly 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the controlling U.S. parent (for petitions filed under § 1.5000(a)(1)) or in the applicant or licensee (for petitions filed under § 1.5000(a)(2)), the petition shall state that no individual or entity holds or would hold directly 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the U.S. parent, applicant or licensee.

    (4)(i) Where a named U.S. parent, applicant, or licensee is organized as a corporation, provide the name of any individual or entity that holds, or would hold, 10 percent or more of the outstanding capital stock and/or voting stock, or a controlling interest.

    (ii) Where a named U.S. parent, applicant, or licensee is organized as a general partnership, provide the names of the partnership's constituent general partners.

    (iii) Where a named U.S. parent, applicant, or licensee is organized as a limited partnership or limited liability partnership, provide the name(s) of the general partner(s) (in the case of a limited partnership), any uninsulated partner, regardless of its equity interest, and any insulated partner with an equity interest in the partnership of at least 10 percent (calculated according to the percentage of the partner's capital contribution). With respect to each named partner (other than a named general partner), the petitioner shall state whether the partnership interest is insulated or uninsulated, based on the insulation criteria specified in § 1.5003.

    (iv) Where a named U.S. parent, applicant, or licensee is organized as a limited liability company, provide the name(s) of each uninsulated member, regardless of its equity interest, any insulated member with an equity interest of at least 10 percent (calculated according to the percentage of its capital contribution), and any non-equity manager(s). With respect to each named member, the petitioner shall state whether the interest is insulated or uninsulated, based on the insulation criteria specified in § 1.5003, and whether the member is a manager.

    Note to paragraph (e):

    The Commission presumes that a general partner of a general partnership or limited partnership has a controlling (100 percent) voting interest in the partnership. A general partner shall in all cases be deemed to hold an uninsulated interest in the partnership.

    (f) Disclosable interest holders—indirect U.S. or foreign interests in the controlling U.S. parent. Paragraphs (f)(1) through (3) of this section apply only to petitions filed under § 1.5000(a)(1) and/or § 1.5000(a)(2) for common carrier, aeronautical en route, and aeronautical fixed radio station applicants or licensees, as applicable. Petitions filed under § 1.5000(a)(1) for broadcast licensees shall provide the name of any individual or entity that holds, or would hold, indirectly, an attributable interest in the controlling U.S. parent of the petitioning broadcast station applicant(s) or licensee(s), as defined in the Notes to § 73.3555 of this chapter. Where no individual or entity holds, or would hold, indirectly, an attributable interest in the controlling U.S. parent (for petitions filed under § 1.5000(a)(1)), the petition shall specify that no individual or entity holds, or would hold, indirectly, an attributable interest in the U.S. parent, applicant(s), or licensee(s).

    (1) Indirect U.S. or foreign interests of 10 percent or more or a controlling interest. With respect to petitions filed under § 1.5000(a)(1), provide the name of any individual or entity that holds, or would hold, indirectly, through one or more intervening entities, 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the controlling U.S. parent of the petitioning common carrier or aeronautical radio station applicant(s) or licensee(s). Equity interests and voting interests held indirectly shall be calculated in accordance with the principles set forth in § 1.5002.

    (2) Indirect U.S. or foreign interests of 10 percent or more or a controlling interest. With respect to petitions filed under § 1.5000(a)(2), provide the name of any individual or entity that holds, or would hold, indirectly, through one or more intervening entities, 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the petitioning common carrier radio station applicant(s) or licensee(s). Equity interests and voting interests held indirectly shall be calculated in accordance with the principles set forth in § 1.5002.

    (3) Where no individual or entity holds, or would hold, indirectly 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the controlling U.S. parent (for petitions filed under § 1.5000(a)(1)) or in the petitioning applicant(s) or licensee(s) (for petitions filed under § 1.5000(a)(2)), the petition shall specify that no individual or entity holds indirectly 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the U.S. parent, applicant(s), or licensee(s).

    Note to paragraph (f):

    The Commission presumes that a general partner of a general partnership or limited partnership has a controlling interest in the partnership. A general partner shall in all cases be deemed to hold an uninsulated interest in the partnership.

    (g)(1) Citizenship and other information for disclosable interests in common carrier, aeronautical en route, and aeronautical fixed radio station applicants and licensees. For each 10 percent interest holder named in response to paragraphs (e) and (f) of this section, specify the equity interest held and the voting interest held (each to the nearest one percent); in the case of an individual, his or her citizenship; and in the case of a business organization, its place of organization, type of business organization (e.g., corporation, unincorporated association, trust, general partnership, limited partnership, limited liability company, trust, other (include description of legal entity)), and principal business(es).

    (2) Citizenship and other information for disclosable interests in broadcast station applicants and licensees. For each attributable interest holder named in response to paragraphs (e) and (f) of this section, describe the nature of the attributable interest and, if applicable, specify the equity interest held and the voting interest held (each to the nearest one percent); in the case of an individual, his or her citizenship; and in the case of a business organization, its place of organization, type of business organization (e.g., corporation, unincorporated association, trust, general partnership, limited partnership, limited liability company, trust, other (include description of legal entity)), and principal business(es).

    (h)(1) Estimate of aggregate foreign ownership. For petitions filed under § 1.5000(a)(1), attach an exhibit that provides a percentage estimate of the controlling U.S. parent's aggregate direct and/or indirect foreign equity interests and its aggregate direct and/or indirect foreign voting interests. For petitions filed under § 1.5000(a)(2), attach an exhibit that provides a percentage estimate of the aggregate foreign equity interests and aggregate foreign voting interests held directly in the petitioning applicant(s) and/or licensee(s), if any, and the aggregate foreign equity interests and aggregate foreign voting interests held indirectly in the petitioning applicant(s) and/or licensee(s). The exhibit required by this paragraph must also provide a general description of the methods used to determine the percentages, and a statement addressing the circumstances that prompted the filing of the petition and demonstrating that the public interest would be served by grant of the petition.

    (2) Ownership and control structure. Attach an exhibit that describes the ownership and control structure of the applicant(s) and/or licensee(s) that are the subject of the petition, including an ownership diagram and identification of the real party-in-interest disclosed in any companion applications. The ownership diagram should illustrate the petitioner's vertical ownership structure, including the controlling U.S. parent named in the petition (for petitions filed under § 1.5000(a)(1)) and either:

    (i) For common carrier, aeronautical en route, and aeronautical fixed radio station applicants and licensees, the direct and indirect ownership (equity and voting) interests held by the individual(s) and/or entity(ies) named in response to paragraphs (e) and (f) of this section; or

    (ii) For broadcast station applicants and licensees, the attributable interest holders named in response to paragraphs (e) and (f) of this section. Each such individual or entity shall be depicted in the ownership diagram and all controlling interests labeled as such. Where the petition includes multiple petitioners, the ownership of all petitioners may be depicted in a single ownership diagram or in multiple diagrams.

    (i) Requests for specific approval. Provide, as required or permitted by this paragraph, the name of each foreign individual and/or entity for which each petitioner requests specific approval, if any, and the respective percentages of equity and/or voting interests (to the nearest one percent) that each such foreign individual or entity holds, or would hold, directly and/or indirectly, in the controlling U.S. parent of the petitioning broadcast, common carrier or aeronautical radio station applicant(s) or licensee(s) for petitions filed under § 1.5000(a)(1), and in each petitioning common carrier applicant or licensee for petitions filed under § 1.5000(a)(2).

    (1) Each petitioning broadcast, common carrier or aeronautical radio station applicant or licensee filing under § 1.5000(a)(1) shall identify and request specific approval for any foreign individual, entity, or group of such individuals or entities that holds, or would hold, directly and/or indirectly, more than 5 percent of the equity and/or voting interests, or a controlling interest, in the petitioner's controlling U.S. parent unless the foreign investment is exempt under paragraph (i)(3) of this section. Equity and voting interests held indirectly in the petitioner's controlling U.S. parent shall be calculated in accordance with the principles set forth in §§ 1.5002 and 1.5003. Equity and voting interests held directly in a petitioner's controlling U.S. parent that is organized as a partnership or limited liability company shall be calculated in accordance with Note 1 to paragraph (i)(3)(ii)(C) of this section.

    Note to paragraph (i)(1):

    Solely for the purpose of identifying foreign interests that require specific approval under this paragraph (i), broadcast station applicants and licensees filing petitions under § 1.5000(a)(1) should calculate equity and voting interests in accordance with the principles set forth in §§ 1.5002 and 1.5003 and not as set forth in the Notes to § 73.3555 of this chapter, to the extent that there are any differences in such calculation methods. Notwithstanding the foregoing, the insulation of limited partnership, limited liability partnership, and limited liability company interests for broadcast applicants and licensees shall be determined in accordance with Note 2(f) of § 73.3555 of this chapter.

    (2) Each petitioning common carrier radio station applicant or licensee filing under § 1.5000(a)(2) shall identify and request specific approval for any foreign individual, entity, or group of such individuals or entities that holds, or would hold, directly, and/or indirectly through one or more intervening U.S.-organized entities that do not control the applicant or licensee, more than 5 percent of the equity and/or voting interests in the applicant or licensee unless the foreign investment is exempt under paragraph (i)(3) of this section. Equity and voting interests held indirectly in the applicant or licensee shall be calculated in accordance with the principles set forth in §§ 1.5002 and 1.5003. Equity and voting interests held directly in an applicant or licensee that is organized as a partnership or limited liability company shall be calculated in accordance with Note 1 to paragraph (i)(3)(ii)(C) of this section.

    Note 1 to paragraphs (i)(1) and (2):

    Certain foreign interests of 5 percent or less may require specific approval under paragraphs (i)(1) and (2). See Note 2 to paragraph (i)(3)(ii)(C) of this section.

    Note 2 to paragraphs (i)(1) and (2):

    Two or more individuals or entities will be treated as a “group” when they have agreed to act together for the purpose of acquiring, holding, voting, or disposing of their equity and/or voting interests in the licensee and/or controlling U.S. parent of the licensee or in any intermediate company(ies) through which any of the individuals or entities holds its interests in the licensee and/or controlling U.S. parent of the licensee.

    (3) A foreign investment is exempt from the specific approval requirements of paragraphs (i)(1) and (2) of this section where:

    (i) The foreign individual or entity holds, or would hold, directly and/or indirectly, no more than 10 percent of the equity and/or voting interests of the U.S. parent (for petitions filed under § 1.5000(a)(1)) or the petitioning applicant or licensee (for petitions filed under § 1.5000(a)(2)); and

    (ii) The foreign individual or entity does not hold, and would not hold, a controlling interest in the petitioner or any controlling parent company, does not plan or intend to change or influence control of the petitioner or any controlling parent company, does not possess or develop any such purpose, and does not take any action having such purpose or effect. The Commission will presume, in the absence of evidence to the contrary, that the following interests satisfy this criterion for exemption from the specific approval requirements in paragraphs (i)(1) and (2) of this section:

    (A) Where the petitioning applicant or licensee, controlling U.S. parent, or entity holding a direct or indirect equity and/or voting interest in the applicant/licensee or U.S. parent is a “public company,” as defined in § 1.5000(d)(9), provided that the foreign holder is an institutional investor that is eligible to report its beneficial ownership interests in the company's voting, equity securities in excess of 5 percent (not to exceed 10 percent) pursuant to Exchange Act Rule 13d-1(b), 17 CFR 240.13d-1(b), or a substantially comparable foreign law or regulation. This presumption shall not apply if the foreign individual, entity or group holding such interests is obligated to report its holdings in the company pursuant to Exchange Act Rule 13d-1(a), 17 CFR 240.13d-1(a), or a substantially comparable foreign law or regulation.

    Example.

    Common carrier applicant (“Applicant”) is preparing a petition for declaratory ruling to request Commission approval for foreign ownership of its controlling, U.S.-organized parent (“U.S. Parent”) to exceed the 25 percent benchmark in section 310(b)(4) of the Act. Applicant does not currently hold any FCC licenses. Shares of U.S. Parent trade publicly on the New York Stock Exchange. Based on a review of its shareholder records, U.S. Parent has determined that its aggregate foreign ownership on any given day may exceed an aggregate 25 percent, including a 6 percent common stock interest held by a foreign-organized mutual fund (“Foreign Fund”). U.S. Parent has confirmed that Foreign Fund is not currently required to report its interest pursuant to Exchange Act Rule 13d-1(a) and instead is eligible to report its interest pursuant to Exchange Act Rule 13d-1(b). U.S. Parent also has confirmed that Foreign Fund does not hold any other interests in U.S. Parent's equity securities, whether of a class of voting or non-voting securities. Applicant may, but is not required to, request specific approval of Foreign Fund's 6 percent interest in U.S. Parent.

    Note to paragraph (i)(3)(ii)(A):

    Where an institutional investor holds voting, equity securities that are subject to reporting under Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a substantially comparable foreign law or regulation, in addition to equity securities that are not subject to such reporting, the investor's total capital stock interests may be aggregated and treated as exempt from the 5 percent specific approval requirement in paragraphs (i)(1) and (2) of this section so long as the aggregate amount of the institutional investor's holdings does not exceed 10 percent of the company's total capital stock or voting rights and the investor is eligible to certify under Exchange Act Rule 13d-1(b), 17 CFR 240.13d-1(b), or a substantially comparable foreign law or regulation that it has acquired its capital stock interests in the ordinary course of business and not with the purpose nor with the effect of changing or influencing the control of the company. In calculating foreign equity and voting interests, the Commission does not consider convertible interests such as options, warrants and convertible debentures until converted, unless specifically requested by the petitioner, i.e., where the petitioner is requesting approval so those rights can be exercised in a particular case without further Commission approval.

    (B) Where the petitioning applicant or licensee, controlling U.S. parent, or entity holding a direct and/or indirect equity and/or voting interest in the applicant/licensee or U.S. parent is a “privately held” corporation, as defined in § 1.5000(d)(8), provided that a shareholders' agreement, or similar voting agreement, prohibits the foreign holder from becoming actively involved in the management or operation of the corporation and limits the foreign holder's voting and consent rights, if any, to the minority shareholder protections listed in paragraph (i)(5) of this section.

    (C) Where the petitioning applicant or licensee, controlling U.S. parent, or entity holding a direct and/or indirect equity and/or voting interest in the licensee or U.S. parent is “privately held,” as defined in § 1.5000(d)(8), and is organized as a limited partnership, limited liability company (“LLC”), or limited liability partnership (“LLP”), provided that the foreign holder is “insulated” in accordance with the criteria specified in § 1.5003.

    Note 1 to paragraph (i)(3)(ii)(C):

    For purposes of identifying foreign interests that require specific approval, where the petitioning applicant, licensee, or controlling U.S. parent is itself organized as a partnership or LLC, a general partner, uninsulated limited partner, uninsulated LLC member, and non-member LLC manager shall be deemed to hold a controlling (100 percent) voting interest in the applicant, licensee, or controlling U.S. parent.

    Note 2 to paragraph (i)(3)(ii)(C):

    For purposes of identifying foreign interests that require specific approval, where interests are held indirectly in the petitioning applicant, licensee, or controlling U.S. parent through one or more intervening partnerships or LLCs, a general partner, uninsulated limited partner, uninsulated LLC members, and non-member LLC managers shall be deemed to hold the same voting interest as the partnership or LLC holds in the company situated in the next lower tier of the petitioner's vertical ownership chain and, ultimately, the same voting interest as the partnership or LLC is calculated as holding in the controlling U.S. parent (for petitions filed under § 1.5000(a)(1)) or in the applicant or licensee (for petitions filed under § 1.5000(a)(2)). See § 1.5002(b)(2)(ii)(A) and (b)(2)(iii)(A). Where a limited partner or LLC member is insulated, the limited partner's or LLC member's voting interest in the controlling U.S. parent (for petitions filed under § 1.5000(a)(1)), or in the applicant or licensee (for petitions filed under § 1.5000(a)(2)) is calculated as equal to the limited partner's or LLC member's equity interest in the U.S. parent or in the applicant or licensee, respectively. See § 1.5002(b)(2)(ii)(B) and (b)(2)(iii)(B). Thus, depending on the particular ownership structure presented in the petition, a foreign general partner, uninsulated limited partner, LLC member, or non-member LLC manager of an intervening partnership or LLC may be deemed to hold an indirect voting interest in the controlling U.S. parent or in the petitioning applicant or licensee that requires specific approval because the voting interest exceeds the 5 percent amount specified in paragraphs (i)(1) and (2) of this section and, unless the voting interest is otherwise insulated at a lower tier of the petitioner's vertical ownership chain, the voting interest would not qualify as exempt from specific approval under this paragraph (i)(3)(ii)(C) even in circumstances where the voting interest does not exceed 10 percent.

    (4) A petitioner may, but is not required to, request specific approval for any other foreign individual or entity that holds, or would hold, a direct and/or indirect equity and/or voting interest in the controlling U.S. parent (for petitions filed under § 1.5000(a)(1)) or in the petitioning applicant or licensee (for petitions filed under § 1.5000(a)(2)).

    (5) The minority shareholder protections referenced in paragraph (i)(3)(ii)(B) of this section consist of the following rights:

    (i) The power to prevent the sale or pledge of all or substantially all of the assets of the corporation or a voluntary filing for bankruptcy or liquidation;

    (ii) The power to prevent the corporation from entering into contracts with majority shareholders or their affiliates;

    (iii) The power to prevent the corporation from guaranteeing the obligations of majority shareholders or their affiliates;

    (iv) The power to purchase an additional interest in the corporation to prevent the dilution of the shareholder's pro rata interest in the event that the corporation issues additional instruments conveying shares in the company;

    (v) The power to prevent the change of existing legal rights or preferences of the shareholders, as provided in the charter, by-laws or other operative governance documents;

    (vi) The power to prevent the amendment of the charter, by-laws or other operative governance documents of the company with respect to the matters described in paragraph (i)(5)(i) through (v) of this section.

    (6) The Commission reserves the right to consider, on a case-by-case basis, whether voting or consent rights over matters other than those listed in paragraph (i)(5) of this section shall be considered permissible minority shareholder protections in a particular case.

    (j) For each foreign individual or entity named in response to paragraph (i) of this section, provide the following information:

    (1) In the case of an individual, his or her citizenship and principal business(es);

    (2) In the case of a business organization:

    (i) Its place of organization, type of business organization (e.g., corporation, unincorporated association, trust, general partnership, limited partnership, limited liability company, trust, other (include description of legal entity)), and principal business(es);

    (ii)(A) For common carrier, aeronautical en route, and aeronautical fixed radio station applicants and licensees, the name of any individual or entity that holds, or would hold, directly and/or indirectly, through one or more intervening entities, 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the foreign entity for which the petitioner requests specific approval. Specify for each such interest holder, his or her citizenship (for individuals) or place of legal organization (for entities). Equity interests and voting interests held indirectly shall be calculated in accordance with the principles set forth in § 1.5002.

    (B) For broadcast applicants and licensees, the name of any individual or entity that holds, or would hold, directly and/or indirectly, through one or more intervening entities, an attributable interest in the foreign entity for which the petitioner requests specific approval. Specify for each such interest holder, his or her citizenship (for individuals) or place of legal organization (for entities). Attributable interests shall be calculated in accordance with the principles set forth in the Notes to § 73.3555 of this chapter.

    (iii)(A) For common carrier, aeronautical en route, and aeronautical fixed radio station applicants and licensees, where no individual or entity holds, or would hold, directly and/or indirectly, 10 percent or more of the equity interests and/or voting interests, or a controlling interest, the petition shall specify that no individual or entity holds, or would hold, directly and/or indirectly, 10 percent or more of the equity interests and/or voting interests, or a controlling interest, in the foreign entity for which the petitioner requests specific approval.

    (B) For broadcast applicants and licensees, where no individual or entity holds, or would hold, directly and/or indirectly, an attributable interest in the foreign entity, the petition shall specify that no individual or entity holds, or would hold, directly and/or indirectly, an attributable interest in the foreign entity for which the petitioner requests specific approval.

    (k) Requests for advance approval. The petitioner may, but is not required to, request advance approval in its petition for any foreign individual or entity named in response to paragraph (i) of this section to increase its direct and/or indirect equity and/or voting interests in the controlling U.S. parent of the broadcast, common carrier or aeronautical radio station licensee, for petitions filed under § 1.5000(a)(1), and/or in the common carrier licensee, for petitions filed under § 1.5000(a)(2), above the percentages specified in response to paragraph (i) of this section. Requests for advance approval shall be made as follows:

    (1) Petitions filed under § 1.5000(a)(1). Where a foreign individual or entity named in response to paragraph (i) of this section holds, or would hold upon consummation of any transactions described in the petition, a de jure or de facto controlling interest in the controlling U.S. parent, the petitioner may request advance approval in its petition for the foreign individual or entity to increase its interests, at some future time, up to any amount, including 100 percent of the direct and/or indirect equity and/or voting interests in the U.S. parent. The petitioner shall specify for the named controlling foreign individual(s) or entity(ies) the maximum percentages of equity and/or voting interests for which advance approval is sought or, in lieu of a specific amount, state that the petitioner requests advance approval for the named controlling foreign individual or entity to increase its interests up to and including 100 percent of the U.S. parent's direct and/or indirect equity and/or voting interests.

    (2) Petitions filed under § 1.5000(a)(1) and/or (2). Where a foreign individual or entity named in response to paragraph (i) of this section holds, or would hold upon consummation of any transactions described in the petition, a non-controlling interest in the controlling U.S. parent of the licensee, for petitions filed under § 1.5000(a)(1), or in the licensee, for petitions filed under § 1.5000(a)(2), the petitioner may request advance approval in its petition for the foreign individual or entity to increase its interests, at some future time, up to any non-controlling amount not to exceed 49.99 percent. The petitioner shall specify for the named foreign individual(s) or entity(ies) the maximum percentages of equity and/or voting interests for which advance approval is sought or, in lieu of a specific amount, shall state that the petitioner requests advance approval for the named foreign individual(s) or entity(ies) to increase their interests up to and including a non-controlling 49.99 percent equity and/or voting interest in the licensee, for petitions filed under § 1.5000(a)(2), or in the controlling U.S. parent of the licensee, for petitions filed under § 1.5000(a)(1).

    (l) Each applicant, licensee, or spectrum lessee filing a petition for declaratory ruling shall certify to the information contained in the petition in accordance with the provisions of § 1.16 and the requirements of § 1.5000(c)(1).

    § 1.5002 How to calculate indirect equity and voting interests.

    (a) The criteria specified in this section shall be used for purposes of calculating indirect equity and voting interests under § 1.5001.

    (b)(1) Equity interests held indirectly in the licensee and/or controlling U.S. parent. Equity interests that are held by an individual or entity indirectly through one or more intervening entities shall be calculated by successive multiplication of the equity percentages for each link in the vertical ownership chain, regardless of whether any particular link in the chain represents a controlling interest in the company positioned in the next lower tier.

    Example (for rulings issued under § 1.5000(a)(1)).

    Assume that a foreign individual holds a non-controlling 30 percent equity and voting interest in U.S.-organized Corporation A which, in turn, holds a non-controlling 40 percent equity and voting interest in U.S.-organized Parent Corporation B. The foreign individual's equity interest in U.S.-organized Parent Corporation B would be calculated by multiplying the foreign individual's equity interest in U.S.-organized Corporation A by that entity's equity interest in U.S.-organized Parent Corporation B. The foreign individual's equity interest in U.S.-organized Parent Corporation B would be calculated as 12 percent (30% × 40% = 12%). The result would be the same even if U.S.-organized Corporation A held a de facto controlling interest in U.S.-organized Parent Corporation B.

    (2) Voting interests held indirectly in the licensee and/or controlling U.S. parent. Voting interests that are held by any individual or entity indirectly through one or more intervening entities will be determined depending upon the type of business organization(s) in which the individual or entity holds a voting interest as follows:

    (i) Voting interests that are held through one or more intervening corporations shall be calculated by successive multiplication of the voting percentages for each link in the vertical ownership chain, except that wherever the voting interest for any link in the chain is equal to or exceeds 50 percent or represents actual control, it shall be treated as if it were a 100 percent interest.

    Example (for rulings issued under § 1.5000(a)(1)).

    Assume that a foreign individual holds a non-controlling 30 percent equity and voting interest in U.S.-organized Corporation A which, in turn, holds a controlling 70 percent equity and voting interest in U.S.-organized Parent Corporation B. Because U.S.-organized Corporation A's 70 percent voting interest in U.S.-organized Parent Corporation B constitutes a controlling interest, it is treated as a 100 percent interest. The foreign individual's 30 percent voting interest in U.S.-organized Corporation A would flow through in its entirety to U.S. Parent Corporation B and thus be calculated as 30 percent (30% × 100% = 30%).

    (ii) Voting interests that are held through one or more intervening partnerships shall be calculated depending upon whether the individual or entity holds a general partnership interest, an uninsulated partnership interest, or an insulated partnership interest as specified in paragraphs (b)(2)(ii)(A) and (B) of this section.

    (A) General partnership and other uninsulated partnership interests. A general partner and uninsulated partner shall be deemed to hold the same voting interest as the partnership holds in the company situated in the next lower tier of the vertical ownership chain. A partner shall be treated as uninsulated unless the limited partnership agreement, limited liability partnership agreement, or other operative agreement satisfies the insulation criteria specified in § 1.5003.

    (B) Insulated partnership interests. A partner of a limited partnership (other than a general partner) or partner of a limited liability partnership that satisfies the insulation criteria specified in § 1.5003 shall be treated as an insulated partner and shall be deemed to hold a voting interest in the partnership that is equal to the partner's equity interest.

    Note to paragraph (b)(2)(ii):

    The Commission presumes that a general partner of a general partnership or limited partnership has a controlling interest in the partnership. A general partner shall in all cases be deemed to hold an uninsulated interest in the partnership.

    (iii) Voting interests that are held through one or more intervening limited liability companies shall be calculated depending upon whether the individual or entity is a non-member manager, an uninsulated member or an insulated member as specified in paragraphs (b)(2)(iii)(A) and (B) of this section.

    (A) Non-member managers and uninsulated membership interests. A non-member manager and an uninsulated member of a limited liability company shall be deemed to hold the same voting interest as the limited liability company holds in the company situated in the next lower tier of the vertical ownership chain. A member shall be treated as uninsulated unless the limited liability company agreement satisfies the insulation criteria specified in § 1.5003.

    (B) Insulated membership interests. A member of a limited liability company that satisfies the insulation criteria specified in § 1.5003 shall be treated as an insulated member and shall be deemed to hold a voting interest in the limited liability company that is equal to the member's equity interest.

    § 1.5003 Insulation criteria for interests in limited partnerships, limited liability partnerships, and limited liability companies.

    (a) A limited partner of a limited partnership and a partner of a limited liability partnership shall be treated as uninsulated within the meaning of § 1.5002(b)(2)(ii)(A) unless the partner is prohibited by the limited partnership agreement, limited liability partnership agreement, or other operative agreement from, and in fact is not engaged in, active involvement in the management or operation of the partnership and only the usual and customary investor protections are contained in the partnership agreement or other operative agreement. These criteria apply to any relevant limited partnership or limited liability partnership, whether it is the licensee, a controlling U.S.-organized parent, or any partnership situated above them in the vertical chain of ownership. Notwithstanding the foregoing, the insulation of limited partnership and limited liability partnership interests for broadcast applicants and licensees shall be determined in accordance with Note 2(f) of § 73.3555 of this chapter.

    (b) A member of a limited liability company shall be treated as uninsulated for purposes of § 1.5002(b)(2)(iii)(A) unless the member is prohibited by the limited liability company agreement from, and in fact is not engaged in, active involvement in the management or operation of the company and only the usual and customary investor protections are contained in the agreement. These criteria apply to any relevant limited liability company, whether it is the licensee, a controlling U.S.-organized parent, or any limited liability company situated above them in the vertical chain of ownership. Notwithstanding the foregoing, the insulation of limited liability company interests for broadcast applicants and licensees shall be determined in accordance with Note 2(f) of § 73.3555 of this chapter.

    (c) The usual and customary investor protections referred to in paragraphs (a) and (b) of this section shall consist of:

    (1) The power to prevent the sale or pledge of all or substantially all of the assets of the limited partnership, limited liability partnership, or limited liability company or a voluntary filing for bankruptcy or liquidation;

    (2) The power to prevent the limited partnership, limited liability partnership, or limited liability company from entering into contracts with majority investors or their affiliates;

    (3) The power to prevent the limited partnership, limited liability partnership, or limited liability company from guaranteeing the obligations of majority investors or their affiliates;

    (4) The power to purchase an additional interest in the limited partnership, limited liability partnership, or limited liability company to prevent the dilution of the partner's or member's pro rata interest in the event that the limited partnership, limited liability partnership, or limited liability company issues additional instruments conveying interests in the partnership or company;

    (5) The power to prevent the change of existing legal rights or preferences of the partners, members, or managers as provided in the limited partnership agreement, limited liability partnership agreement, or limited liability company agreement, or other operative agreement;

    (6) The power to vote on the removal of a general partner, managing partner, managing member, or other manager in situations where such individual or entity is subject to bankruptcy, insolvency, reorganization, or other proceedings relating to the relief of debtors; adjudicated insane or incompetent by a court of competent jurisdiction (in the case of a natural person); convicted of a felony; or otherwise removed for cause, as determined by an independent party;

    (7) The power to prevent the amendment of the limited partnership agreement, limited liability partnership agreement, or limited liability company agreement, or other organizational documents of the partnership or limited liability company with respect to the matters described in paragraph (c)(1) through (c)(6) of this section.

    (d) The Commission reserves the right to consider, on a case-by-case basis, whether voting or consent rights over matters other than those listed in paragraph (c) of this section shall be considered usual and customary investor protections in a particular case.

    § 1.5004 Routine terms and conditions.

    Foreign ownership rulings issued pursuant to §§ 1.5000 through 1.5004 shall be subject to the following terms and conditions, except as otherwise specified in a particular ruling:

    (a)(1) Aggregate allowance for rulings issued under § 1.5000(a)(1). In addition to the foreign ownership interests approved specifically in a licensee's declaratory ruling issued pursuant to § 1.5000(a)(1), the controlling U.S.-organized parent named in the ruling (or a U.S.-organized successor-in-interest formed as part of a pro forma reorganization) may be 100 percent owned, directly and/or indirectly through one or more U.S- or foreign-organized entities, on a going-forward basis (i.e., after issuance of the ruling) by other foreign investors without prior Commission approval. This “100 percent aggregate allowance” is subject to the requirement that the licensee seek and obtain Commission approval before any foreign individual, entity, or “group” not previously approved acquires, directly and/or indirectly, more than 5 percent of the U.S. parent's outstanding capital stock (equity) and/or voting stock, or a controlling interest, with the exception of any foreign individual, entity, or “group” that acquires an equity and/or voting interest of 10 percent or less, provided that the interest is exempt under § 1.5001(i)(3).

    (2) Aggregate allowance for rulings issued under § 1.5000(a)(2). In addition to the foreign ownership interests approved specifically in a licensee's declaratory ruling issued pursuant to § 1.5000(a)(2), the licensee(s) named in the ruling (or a U.S.-organized successor-in-interest formed as part of a pro forma reorganization) may be 100 percent owned on a going forward basis (i.e., after issuance of the ruling) by other foreign investors holding interests in the licensee indirectly through U.S.-organized entities that do not control the licensee, without prior Commission approval. This “100 percent aggregate allowance” is subject to the requirement that the licensee seek and obtain Commission approval before any foreign individual, entity, or “group” not previously approved acquires directly and/or indirectly, through one or more U.S.-organized entities that do not control the licensee, more than 5 percent of the licensee's outstanding capital stock (equity) and/or voting stock, with the exception of any foreign individual, entity, or “group” that acquires an equity and/or voting interest of 10 percent or less, provided that the interest is exempt under § 1.5001(i)(3). Foreign ownership interests held directly in a licensee shall not be permitted to exceed an aggregate 20 percent of the licensee's equity and/or voting interests.

    Note to paragraph (a):

    Licensees have an obligation to monitor and stay ahead of changes in foreign ownership of their controlling U.S.-organized parent companies (for rulings issued pursuant to § 1.5000(a)(1)) and/or in the licensee itself (for rulings issued pursuant to § 1.5000(a)(2)), to ensure that the licensee obtains Commission approval before a change in foreign ownership renders the licensee out of compliance with the terms and conditions of its declaratory ruling(s) or the Commission's rules. Licensees, their controlling parent companies, and other entities in the licensee's vertical ownership chain may need to place restrictions in their bylaws or other organizational documents to enable the licensee to ensure compliance with the terms and conditions of its declaratory ruling(s) and the Commission's rules.

    Example 1 (for rulings issued under § 1.5000(a)(1)).

    U.S. Corp. files an application for a common carrier license. U.S. Corp. is wholly owned and controlled by U.S. Parent, which is a newly formed, privately held Delaware Corporation in which no single shareholder has de jure or de facto control. A shareholder's agreement provides that a five-member board of directors shall govern the affairs of the company; five named shareholders shall be entitled to one seat and one vote on the board; and all decisions of the board shall be determined by majority vote. The five named shareholders and their respective equity interests are as follows: Foreign Entity A, which is wholly owned and controlled by a foreign citizen (5 percent); Foreign Entity B, which is wholly owned and controlled by a foreign citizen (10 percent); Foreign Entity C, a foreign public company with no controlling shareholder (20 percent); Foreign Entity D, a foreign pension fund that is controlled by a foreign citizen and in which no individual or entity has a pecuniary interest exceeding one percent (21 percent); and U.S. Entity E, a U.S. public company with no controlling shareholder (25 percent). The remaining 19 percent of U.S. Parent's shares are held by three foreign-organized entities as follows: F (4 percent), G (6 percent), and H (9 percent). Under the shareholders' agreement, voting rights of F, G, and H are limited to the minority shareholder protections listed in § 1.5001(i)(5). Further, the agreement expressly prohibits G and H from becoming actively involved in the management or operation of U.S. Parent and U.S. Corp.

    As required by the rules, U.S. Corp. files a section 310(b)(4) petition concurrently with its application. The petition identifies and requests specific approval for the ownership interests held in U.S. Parent by Foreign Entity A and its sole shareholder (5 percent equity and 20 percent voting interest); Foreign Entity B and its sole shareholder (10 percent equity and 20 percent voting interest), Foreign Entity C (20 percent equity and 20 percent voting interest), and Foreign Entity D (21 percent equity and 20 percent voting interest) and its fund manager (20 percent voting interest). The Commission's ruling specifically approves these foreign interests. The ruling also provides that, on a going-forward basis, U.S. Parent may be 100 percent owned in the aggregate, directly and/or indirectly, by other foreign investors, subject to the requirement that U.S. Corp. seek and obtain Commission approval before any previously unapproved foreign investor acquires more than 5 percent of U.S. Parent's equity and/or voting interests, or a controlling interest, with the exception of any foreign investor that acquires an equity and/or voting interest of ten percent or less, provided that the interest is exempt under § 1.991(i)(3).

    In this case, foreign entities F, G, and H would each be considered a previously unapproved foreign investor (along with any new foreign investors). However, prior approval for F, G and H would only apply to an increase of F's interest above 5 percent (because the ten percent exemption under § 1.5001(i)(3) does not apply to F) or to an increase of G's or H's interest above 10 percent (because G and H do qualify for this exemption). U.S. Corp. would also need Commission approval before Foreign Entity D appoints a new fund manager that is a non-U.S. citizen and before Foreign Entities A, B, C, or D increase their respective equity and/or voting interests in U.S. Parent, unless the petition previously sought and obtained Commission approval for such increases (up to non-controlling 49.99 percent interests). (See § 1.5001(k)(2).) Foreign shareholders of Foreign Entity C and U.S. Entity E would also be considered previously unapproved foreign investors. Thus, Commission approval would be required before any foreign shareholder of Foreign Entity C or U.S. Entity E acquires (1) a controlling interest in either company; or (2) a non-controlling equity and/or voting interest in either company that, when multiplied by the company's equity and/or voting interests in U.S. Parent, would exceed 5 percent of U.S. Parent's equity and/or voting interests, unless the interest is exempt under § 1.5001(i)(3).

    Example 2 (for rulings issued under § 1.5000(a)(2)).

    Assume that the following three U.S.-organized entities hold non-controlling equity and voting interests in common carrier Licensee, which is a privately held corporation organized in Delaware: U.S. corporation A (30 percent); U.S. corporation B (30 percent); and U.S. corporation C (40 percent). Licensee's shareholders are wholly owned by foreign individuals X, Y, and Z, respectively. Licensee has received a declaratory ruling under § 1.5000(a)(2) specifically approving the 30 percent foreign ownership interests held in Licensee by each of X and Y (through U.S. corporation A and U.S. corporation B, respectively) and the 40 percent foreign ownership interest held in Licensee by Z (through U.S. corporation C). On a going-forward basis, Licensee may be 100 percent owned in the aggregate by X, Y, Z, and other foreign investors holding interests in Licensee indirectly, through U.S.-organized entities that do not control Licensee, subject to the requirement that Licensee obtain Commission approval before any previously unapproved foreign investor acquires more than 5 percent of Licensee's equity and/or voting interests, with the exception of any foreign investor that acquires an equity and/or voting interest of 10 percent or less, provided that the interest is exempt under § 1.5001(i)(3). In this case, any foreign investor other than X, Y, and Z would be considered a previously unapproved foreign investor. Licensee would also need Commission approval before X, Y, or Z increases its equity and/or voting interests in Licensee unless the petition previously sought and obtained Commission approval for such increases (up to non-controlling 49.99 percent interests). (See § 1.5001(k)(2).)

    (b) Subsidiaries and affiliates. A foreign ownership ruling issued to a licensee shall cover it and any U.S.-organized subsidiary or affiliate, as defined in § 1.5000(d), whether the subsidiary or affiliate existed at the time the ruling was issued or was formed or acquired subsequently, provided that the foreign ownership of the licensee named in the ruling, and of the subsidiary and/or affiliate, remains in compliance with the terms and conditions of the licensee's ruling and the Commission's rules.

    (1) The subsidiary or affiliate of a licensee named in a foreign ownership ruling issued under § 1.5000(a)(1) may rely on that ruling for purposes of filing its own application for an initial broadcast, common carrier or aeronautical license or spectrum leasing arrangement, or an application to acquire such license or spectrum leasing arrangement by assignment or transfer of control provided that the subsidiary or affiliate, and the licensee named in the ruling, each certifies in the application that its foreign ownership is in compliance with the terms and conditions of the foreign ownership ruling and the Commission's rules.

    (2) The subsidiary or affiliate of a licensee named in a foreign ownership ruling issued under § 1.5000(a)(2) may rely on that ruling for purposes of filing its own application for an initial common carrier radio station license or spectrum leasing arrangement, or an application to acquire such license or spectrum leasing arrangement by assignment or transfer of control provided that the subsidiary or affiliate, and the licensee named in the ruling, each certifies in the application that its foreign ownership is in compliance with the terms and conditions of the foreign ownership ruling and the Commission's rules.

    (3) The certifications required by paragraphs (b)(1) and (2) of this section shall also include the citation(s) of the relevant ruling(s) (i.e., the DA or FCC Number, FCC Record citation when available, and release date).

    (c) Insertion of new controlling foreign-organized companies. (1) Where a licensee's foreign ownership ruling specifically authorizes a named, foreign investor to hold a controlling interest in the licensee's controlling U.S.-organized parent, for rulings issued under § 1.5000(a)(1), or in an intervening U.S.-organized entity that does not control the licensee, for rulings issued under § 1.5000(a)(2), the ruling shall permit the insertion of new, controlling foreign-organized companies in the vertical ownership chain above the controlling U.S. parent, for rulings issued under § 1.5000(a)(1), or above an intervening U.S.-organized entity that does not control the licensee, for rulings issued under § 1.5000(a)(2), without prior Commission approval provided that any new foreign-organized company(ies) are under 100 percent common ownership and control with the foreign investor approved in the ruling.

    (2) Where a previously unapproved foreign-organized entity is inserted into the vertical ownership chain of a licensee, or its controlling U.S.-organized parent, without prior Commission approval pursuant to paragraph (c)(1) of this section, the licensee shall file a letter to the attention of the Chief, International Bureau, within 30 days after the insertion of the new, foreign-organized entity. The letter must include the name of the new, foreign-organized entity and a certification by the licensee that the entity complies with the 100 percent common ownership and control requirement in paragraph (c)(1) of this section. The letter must also reference the licensee's foreign ownership ruling(s) by IBFS File No. and FCC Record citation, if available. This letter notification need not be filed if the ownership change is instead the subject of a pro forma application or pro forma notification already filed with the Commission pursuant to the relevant broadcast service rules, wireless radio service rules or satellite radio service rules applicable to the licensee.

    Note to paragraph (c)(2):

    For broadcast stations, in order to insert a previously unapproved foreign-organized entity that is under 100 percent common ownership and control with the foreign investor approved in the ruling into the vertical ownership chain of the licensee's controlling U.S.-organized parent, as described in paragraph (c)(1) of this section, the licensee must always file a pro forma application requesting prior consent of the FCC pursuant to section 73.3540(f) of this chapter.

    (3) Nothing in this section is intended to affect any requirements for prior approval under 47 U.S.C. 310(d) or conditions for forbearance from the requirements of 47 U.S.C. 310(d) pursuant to 47 U.S.C. 160.

    Example (for rulings issued under § 1.5000(a)(1)).

    Licensee of a common carrier license receives a foreign ownership ruling under § 1.5000(a)(1) that authorizes its controlling, U.S.-organized parent (“U.S. Parent A”) to be wholly owned and controlled by a foreign-organized company (“Foreign Company”). Foreign Company is minority owned (20 percent) by U.S.-organized Corporation B, with the remaining 80 percent controlling interest held by Foreign Citizen C. After issuance of the ruling, Foreign Company forms a wholly-owned, foreign-organized subsidiary (“Foreign Subsidiary”) to hold all of Foreign Company's shares in U.S. Parent A. There are no other changes in the direct or indirect foreign ownership of U.S. Parent A. The insertion of Foreign Subsidiary into the vertical ownership chain between Foreign Company and U.S. Parent A would not require prior Commission approval, except for any approval otherwise required pursuant to section 310(d) of the Communications Act and not exempt therefrom as a pro forma transfer of control under § 1.948(c)(1).

    Example (for rulings issued under § 1.5000(a)(2)).

    An applicant for a common carrier license receives a foreign ownership ruling under § 1.5000(a)(2) that authorizes a foreign-organized company (“Foreign Company”) to hold a non-controlling 44 percent equity and voting interest in the applicant through Foreign Company's wholly-owned, U.S.-organized subsidiary, U.S. Corporation A, which holds the non-controlling 44 percent interest directly in the applicant. The remaining 56 percent of the applicant's equity and voting interests are held by its controlling U.S.-organized parent, which has no foreign ownership. After issuance of the ruling, Foreign Company forms a wholly-owned, foreign-organized subsidiary to hold all of Foreign Company's shares in U.S. Corporation A. There are no other changes in the direct or indirect foreign ownership of U.S. Corporation A. The insertion of the foreign-organized subsidiary into the vertical ownership chain between Foreign Company and U.S. Corporation A would not require prior Commission approval.

    (d) Insertion of new non-controlling foreign-organized companies. (1) Where a licensee's foreign ownership ruling specifically authorizes a named, foreign investor to hold a non-controlling interest in the licensee's controlling U.S.-organized parent, for rulings issued under § 1.5000(a)(1), or in an intervening U.S.-organized entity that does not control the licensee, for rulings issued under § 1.5000(a)(2), the ruling shall permit the insertion of new, foreign-organized companies in the vertical ownership chain above the controlling U.S. parent, for rulings issued under § 1.5000(a)(1), or above an intervening U.S.-organized entity that does not control the licensee, for rulings issued under § 1.5000(a)(2), without prior Commission approval provided that any new foreign-organized company(ies) are under 100 percent common ownership and control with the foreign investor approved in the ruling.

    Note to paragraph (d)(1):

    Where a licensee has received a foreign ownership ruling under § 1.5000(a)(2) and the ruling specifically authorizes a named, foreign investor to hold a non-controlling interest directly in the licensee (subject to the 20 percent aggregate limit on direct foreign investment), the ruling shall permit the insertion of new, foreign-organized companies in the vertical ownership chain of the approved foreign investor without prior Commission approval provided that any new foreign-organized companies are under 100 percent common ownership and control with the approved foreign investor.

    Example (for rulings issued under § 1.5000(a)(1)).

    Licensee receives a foreign ownership ruling under § 1.5000(a)(1) that authorizes a foreign-organized company (“Foreign Company”) to hold a non-controlling 30 percent equity and voting interest in Licensee's controlling, U.S.-organized parent (“U.S. Parent A”). The remaining 70 percent equity and voting interests in U.S. Parent A are held by U.S.-organized entities which have no foreign ownership. After issuance of the ruling, Foreign Company forms a wholly-owned, foreign-organized subsidiary (“Foreign Subsidiary”) to hold all of Foreign Company's shares in U.S. Parent A. There are no other changes in the direct or indirect foreign ownership of U.S. Parent A. The insertion of Foreign Subsidiary into the vertical ownership chain between Foreign Company and U.S. Parent A would not require prior Commission approval.

    Example (for rulings issued under § 1.5000(a)(2)).

    Licensee receives a foreign ownership ruling under § 1.5000(a)(2) that authorizes a foreign-organized entity (“Foreign Company”) to hold approximately 24 percent of Licensee's equity and voting interests, through Foreign Company's non-controlling 48 percent equity and voting interest in a U.S.-organized entity, U.S. Corporation A, which holds a non-controlling 49 percent equity and voting interest directly in Licensee. (A U.S. citizen holds the remaining 52 percent equity and voting interests in U.S. Corporation A, and the remaining 51 percent equity and voting interests in Licensee are held by its U.S.-organized parent, which has no foreign ownership. After issuance of the ruling, Foreign Company forms a wholly-owned, foreign-organized subsidiary (“Foreign Subsidiary”) to hold all of Foreign Company's shares in U.S. Corporation A. There are no other changes in the direct or indirect foreign ownership of U.S. Corporation A. The insertion of Foreign Subsidiary into the vertical ownership chain between Foreign Company and U.S. Corporation A would not require prior Commission approval.

    (2) Where a previously unapproved foreign-organized entity is inserted into the vertical ownership chain of a licensee, or its controlling U.S.-organized parent, without prior Commission approval pursuant to paragraph (d)(1) of this section, the licensee shall file a letter to the attention of the Chief, International Bureau, within 30 days after the insertion of the new, foreign-organized entity; or in the case of a broadcast licensee, the licensee shall file a letter to the attention of the Chief, Media Bureau, within 30 days after the insertion of the new, foreign-organized entity. The letter must include the name of the new, foreign-organized entity and a certification by the licensee that the entity complies with the 100 percent common ownership and control requirement in paragraph (d)(1) of this section. The letter must also reference the licensee's foreign ownership ruling(s) by IBFS File No. and FCC Record citation, if available; or, if a broadcast licensee, the letter must reference the licensee's foreign ownership ruling(s) by CDBS File No., Docket No., call sign(s), facility identification number(s), and FCC Record citation, if available. This letter notification need not be filed if the ownership change is instead the subject of a pro forma application or pro forma notification already filed with the Commission pursuant to the relevant broadcast service, wireless radio service rules or satellite radio service rules applicable to the licensee.

    (e) New petition for declaratory ruling required. A licensee that has received a foreign ownership ruling, including a U.S.-organized successor-in-interest to such licensee formed as part of a pro forma reorganization, or any subsidiary or affiliate relying on such licensee's ruling pursuant to paragraph (b) of this section, shall file a new petition for declaratory ruling under § 1.5000 to obtain Commission approval before its foreign ownership exceeds the routine terms and conditions of this section, and/or any specific terms or conditions of its ruling.

    (f) Continuing compliance. (1) Except as specified in paragraph (f)(3) of this section, if at any time the licensee, including any successor-in-interest and any subsidiary or affiliate as described in paragraph (b) of this section, knows, or has reason to know, that it is no longer in compliance with its foreign ownership ruling or the Commission's rules relating to foreign ownership, it shall file a statement with the Commission explaining the circumstances within 30 days of the date it knew, or had reason to know, that it was no longer in compliance therewith. Subsequent actions taken by or on behalf of the licensee to remedy its non-compliance shall not relieve it of the obligation to notify the Commission of the circumstances (including duration) of non-compliance. Such licensee and any controlling companies, whether U.S.- or foreign-organized, shall be subject to enforcement action by the Commission for such non-compliance, including an order requiring divestiture of the investor's direct and/or indirect interests in such entities.

    (2) Any individual or entity that, directly or indirectly, creates or uses a trust, proxy, power of attorney, or any other contract, arrangement, or device with the purpose or effect of divesting itself, or preventing the vesting, of an equity interest or voting interest in the licensee, or in a controlling U.S. parent company, as part of a plan or scheme to evade the application of the Commission's rules or policies under section 310(b) shall be subject to enforcement action by the Commission, including an order requiring divestiture of the investor's direct and/or indirect interests in such entities.

    (3) Where the controlling U.S. parent of a broadcast, common carrier, aeronautical en route, or aeronautical fixed radio station licensee or common carrier spectrum lessee is an eligible U.S. public company within the meaning of § 1.5000(e), the licensee may file a remedial petition for declaratory ruling under § 1.5000(a)(1) seeking approval of particular foreign equity and/or voting interests that are non-compliant with the licensee's foreign ownership ruling or the Commission's rules relating to foreign ownership; or, alternatively, the licensee may remedy the non-compliance by, for example, redeeming the foreign interest(s) that rendered the licensee non-compliant with the licensee's existing foreign ownership ruling. In either case, the Commission does not expect to take enforcement action related to the non-compliance subject to the requirements specified in paragraphs (f)(3)(i) and (ii) of this section and except as otherwise provided in paragraph (f)(3)(iii) of this section.

    (i) The licensee shall notify the relevant Bureau by letter no later than 10 days after learning of the investment(s) that rendered the licensee non-compliant with its foreign ownership ruling or the Commission's rules relating to foreign ownership and specify in the letter that it will file a petition for declaratory ruling under § 1.5000(a)(1) or, alternatively, take remedial action to come into compliance within 30 days of the date it learned of the non-compliant foreign interest(s).

    (ii) The licensee shall demonstrate in its petition for declaratory ruling (or in a letter notifying the relevant Bureau that the non-compliance has been timely remedied) that the licensee's non-compliance with the terms of the licensee's existing foreign ownership ruling or the foreign ownership rules was due solely to circumstances beyond the licensee's control that were not reasonably foreseeable to or known by the licensee with the exercise of the required due diligence.

    (iii) Where the licensee has opted to file a petition for declaratory ruling under § 1.5000(a)(1), the Commission will not require that the licensee's U.S. parent redeem the non-compliant foreign interest(s) or take other action to remedy the non-compliance during the pendency of the licensee's petition. If the Commission ultimately declines to approve the petition, however, the licensee must have a mechanism available to come into compliance with the terms of its existing ruling within 30 days following the Commission's decision. The Commission reserves the right to require immediate remedial action by the licensee where the Commission finds in a particular case that the public interest requires such action—for example, where, after consultation with the relevant Executive Branch agencies, the Commission finds that the non-compliant foreign interest presents national security or other significant concerns that require immediate mitigation.

    (4) Where a publicly traded common carrier licensee is an eligible U.S. public company within the meaning of § 1.5000(e), the licensee may file a remedial petition for declaratory ruling under § 1.5000(a)(2) seeking approval of particular foreign equity and/or voting interests that are non-compliant with the licensee's foreign ownership ruling or the Commission's rules relating to foreign ownership; or, alternatively, the licensee may remedy the non-compliance by, for example, redeeming the foreign interest(s) that rendered the licensee non-compliant with the licensee's existing foreign ownership ruling. In either case, the Commission does not, as a general rule, expect to take enforcement action related to the non-compliance subject to the requirements specified in paragraphs (f)(3)(i) and (f)(3)(ii) of this section and except as otherwise provided in paragraph (f)(3)(iii) of this section.

    Note 1 to paragraph (f)(4):

    For purposes of this paragraph, the provisions in paragraphs (f)(3)(i) through (f)(3)(iii) that refer to petitions for declaratory ruling under § 1.5000(a)(1) shall be read as referring to petitions for declaratory ruling under § 1.5000(a)(2).

    PART 25—SATELLITE COMMUNICATIONS
    4. The authority citation for part 25 is revised to read as follows: Authority:

    Interprets or applies 47 U.S.C. 154, 301, 302, 303, 307, 309, 310, 319, 332, 605, and 721. unless otherwise noted.

    5. Section 25.105 is revised to read as follows:
    § 25.105 Citizenship.

    The rules that establish the requirements and conditions for obtaining the Commission's prior approval of foreign ownership in common carrier licensees that would exceed the 20 percent limit in section 310(b)(3) of the Communications Act (47 U.S.C. 310(b)(3)) and/or the 25 percent benchmark in section 310(b)(4) of the Act (47 U.S.C. 310(b)(4)) are set forth in §§ 1.5000 through 1.5004 of this chapter.

    PART 73—RADIO BROADCAST SERVICES
    6. The authority citation for part 73 is revised to read as follows: Authority:

    47 U.S.C. 154, 303, 309, 310, 334, 336, and 339.

    7. Section 73.1010 is amended by revising paragraph (a)(9) and adding paragraph (a)(10) to read as follows:
    § 73.1010 Cross reference to rules in other parts.

    (a) * * *

    (9) Subpart T, “Foreign Ownership of Broadcast, Common Carrier, Aeronautical En Route, and Aeronautical Fixed Radio Station Licensees”. (§§ 1.5000 to 1.5004).

    (10) Part 1, Subpart W of this chapter, “FCC Registration Number”. (§§ 1.8001-1.8005).

    PART 74—EXPERIMENTAL RADIO, AUXILIARY, SPECIAL BROADCAST AND OTHER PROGRAM DISTRIBUTIONAL SERVICES 8. The authority citation for part 74 is revised to read as follows: Authority:

    47 U.S.C. 154, 302a, 303, 307, 309, 310, 336 and 554.

    9. Section 74.5 is amended by revising paragraph (a)(8) and adding paragraph (a)(9) to read as follows:
    § 74.5 Cross reference to rules in other parts.

    (a) * * *

    (8) Subpart T, “Foreign Ownership of Broadcast, Common Carrier, Aeronautical En Route, and Aeronautical Fixed Radio Station Licensees”. (§§ 1.5000 to 1.5004).

    (9) Part 1, Subpart W of the chapter, “FCC Registration Number”. (§§ 1.8001-1.8005).

    [FR Doc. 2016-28198 Filed 11-30-16; 8:45 am] BILLING CODE 6712-01-P
    81 231 Thursday, December 1, 2016 Proposed Rules DEPARTMENT OF AGRICULTURE Food and Nutrition Service 7 CFR Parts 271, 272 and 273 [FNS 2015-0038] RIN 0584-AE41 Supplemental Nutrition Assistance Program: Student Eligibility, Convicted Felons, Lottery and Gambling, and State Verification Provisions of the Agricultural Act of 2014 AGENCY:

    Food and Nutrition Service (FNS), USDA.

    ACTION:

    Proposed rule.

    SUMMARY:

    The proposed action would implement four sections of the Agricultural Act of 2014, (2014 Farm Bill), affecting eligibility, benefits, and program administration requirements for the Supplemental Nutrition Assistance Program (SNAP). Section 4007 clarifies that participants in a SNAP Employment & Training (E&T) program are eligible for benefits if they are enrolled or participate in specific programs that will assist SNAP recipients in obtaining the skills needed for the current job market. Section 4008 prohibits anyone convicted of Federal aggravated sexual abuse, murder, sexual exploitation and abuse of children, sexual assault, or similar State laws, and who are also not in compliance with the terms of their sentence or parole or are a fleeing felon, from receiving SNAP benefits. Section 4009 prohibits households containing a member with substantial lottery and gambling winnings from receiving SNAP benefits, until the household meets the allowable financial resources and income eligibility requirements of the program. Section 4009 also provides that State SNAP agencies are required, to the maximum extent practicable, to establish cooperative agreements with gaming entities in the State to identify SNAP recipients with substantial winnings. Section 4015 requires all State agencies to have a system in place to verify income, eligibility and immigration status.

    DATES:

    Written comments must be received on or before January 30, 2017 to be assured of consideration.

    ADDRESSES:

    The Food and Nutrition Service, USDA, invites interested persons to submit written comments on this proposed rule. Comments may be submitted in writing by one of the following methods:

    Preferred Method: Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting comments.

    Fax: Submit comments by facsimile transmission to: Sasha Gersten-Paal, Certification Policy Branch, Fax number 703-305-2486.

    Mail: Send comments to Sasha Gersten-Paal, Branch Chief, Certification Policy Branch, Program Development Division, FNS, 3101 Park Center Drive, Alexandria, Virginia 22302, 703-305-2507.

    All written comments submitted in response to this proposed rule will be included in the record and made available to the public. Please be advised that the substance of comments and the identity of individuals or entities submitting the comments will be subject to public disclosure. FNS will make written comments publicly available online at http://www.regulations.gov.

    FOR FURTHER INFORMATION CONTACT:

    Sasha Gersten-Paal, Branch Chief, Certification Policy Branch, Program Development Division, Food and Nutrition Service, 3101 Park Center Drive, Alexandria, Virginia 22302, 703-305-2507.

    SUPPLEMENTARY INFORMATION:

    Background Section 4007: Student Eligibility Disqualifications

    Students enrolled at least half-time in an institution of higher education are ineligible to participate in SNAP under section 6(e)(3)(B) of the Food and Nutrition Act of 2008 (the Act), as amended, and 7 CFR 273.5(a). There are several exemptions to this prohibition, one of which is for students assigned to or placed in an institution of higher education under a SNAP E&T program.

    Section 4007 of the 2014 Farm Bill (Public Law 113-79) amends Section 6(e)(3)(B) of the Act by providing additional detail as to what SNAP E&T-assigned education programs and/or courses satisfy the exemption for higher education under a SNAP E&T program. In particular, section 4007 provides that the exemption is limited to those who are enrolled in a course or program of study that is part of a program of career and technical education (as defined in Section 3 of the Carl D. Perkins Career and Technical Education Act of 2006) (the Perkins Act) that may be completed in not more than 4 years at an institution of higher education (as defined in section 102 of the Higher Education Act of 1965), or enrolled in courses for remedial education, basic adult education, literacy, or English as a second language.

    Currently, individuals enrolled at least half-time in an institution of higher education are not eligible for SNAP benefits unless the individual meets at least one of the exemption criteria under 7 CFR 273.5(b), including section 273.5(b)(11)(ii), which exempts individuals assigned to an E&T program under section 273.7. The E&T exception to the student rule, as described at section 273.7(e)(1)(vi), includes educational programs or activities to improve basic skills or otherwise improve employability including educational programs determined by the State agency to expand the job search abilities or employability of those subject to the program. The State must establish a link between the education and job-readiness.

    The Department of Agriculture (the Department) is proposing to revise section 273.5(b)(11)(ii) to incorporate section 4007's modifications to the eligibility requirements for students who are participating in an E&T education component. The additional language would essentially track the language in Section 4007. Criteria contained at section 273.7(e)(1)(vi) are also proposed to be revised to include courses or programs of study that are part of a program of career and technical education (as defined in section 3 of the Perkins Act). Other criteria contained at section 273.7(e)(1)(vi) would remain unchanged. For example, individuals participating in remedial courses, basic adult education, literacy instruction or English as a second language would also continue to qualify for the student exemption. The purpose of this exemption is to connect participants to programs that lead to employment and economic self-sufficiency. The Department strives to ensure that SNAP E&T programs are aligned with effective practices in workforce development. As such, for the purpose of this exemption, courses or programs of study that are part of a program of career and technical education may be offered concurrently or contextually with remedial courses, basic adult education, literacy instruction or English as a second language.

    Section 3 of the Perkins Act provides a general definition of the term “career and technical education.” The Department understands that States have some discretion to determine what courses meet that general definition. That is, while all States have adopted the basic definition, they also have State-specific criteria as well. For example, States may choose to include more rigorous requirements or specific courses, among other individually-tailored standards. The Department also notes that the program does not have to be receiving Perkins funding, it would just need to meet the general definition. For these reasons, the Department believes that State agencies are in the best position to determine what courses or programs of study are parts of a program that meets the definition of career and technical education under the Perkins Act for SNAP as well. The Department is interested in receiving comments on following this approach.

    Section 4007 provides that the course or program of study may be completed in not more than four years. The Department notes that many students pursuing four-year degrees are unable to finish in that time. Therefore, the Department is proposing that students participating in qualifying courses or programs of study that are designed to be completed in up to four years, but actually take longer than four years to complete, satisfy the new requirement.

    Thirty-four States offered education components through their E&T programs in FY 2015. These States would need to evaluate whether those components meet the student eligibility criteria proposed in this rule. However, the Department believes that the cost implications of this proposed rule for those States are minimal and the provisions do not materially alter the rights and obligations of SNAP recipients because there would continue to be work requirement exemptions for students enrolled more than half-time in an institution of higher education under section 273.7(b)(viii).

    Section 4008: Eligibility Disqualifications for Certain Convicted Felons

    Section 4008 of the 2014 Farm Bill added new section 6(r)(1) to the Act to prohibit anyone convicted of certain sexual crimes, child abuse, and murder who are also not in compliance with the terms of their sentence, or who are fleeing felons or parole or probation violators as described in section 6(k) of the Act, from receiving SNAP benefits. The listed offenses in section 4008 include the following: (i) Aggravated sexual abuse under section 2241 of Title 18, United States Code, (ii) murder under section 1111 of Title 18, United States Code, (iii) sexual exploitation and other abuse of children under chapter 110 of Title 18, United States Code, (iv) a Federal or State offense involving sexual assault, as defined in section 40002(a) of the Violence Against Women Act of 1994 (42 U.S.C. 13925(a)), or (v) an offense under State law determined by the United States Attorney General to be substantially similar to the offenses in (i) through (iii) above.

    Section 4008 also imposes a new requirement that individuals applying for SNAP benefits must attest whether the applicant, or any other member of the household, was convicted of any of the listed Federal offenses or substantially similar State offenses. The provisions in section 4008 do not apply to convictions for conduct occurring on or before the date of enactment of the 2014 Farm Bill, February 7, 2014.

    Section 4008 also provides that although those disqualified from receiving SNAP benefits under this provision are not SNAP-eligible members of the household, their income and resources are to be considered in determining the eligibility and value of the benefits for the rest of the household.

    Disqualification

    The Department is proposing to revise the regulations at section 273.11 by adding a new subsection (section 273.11(s)) to include the language contained in section 4008. The regulatory provision would essentially track the language in the statute, and would specify that the provision would not apply to convictions for conduct occurring on or before February 7, 2014. Fleeing felons and probation or parole violators covered in section 273.11(n) are also cited in proposed section 273.11(s) as ineligible for SNAP benefits.

    The Department notes that before passage of the 2014 Farm Bill, section 6(k) of the Act, (reflected at section 273.11(n)), already prohibited certain fleeing felons and probation and parole violators from receiving SNAP benefits. The Department published a proposed rule, Clarification of Eligibility of Fleeing Felons (76 FR 51907), on August 19, 2011, and the final rule (80 FR 54410) on September 10, 2015, to implement section 4112 of the Food, Conservation, and Energy Act of 2008, Public Law 110-246, which required the Secretary of Agriculture to define the terms “fleeing” and “actively seeking.”

    Section 4008 does not affect the existing prohibition that precludes fleeing felons and probation or parole violators from obtaining SNAP benefits under section 6(k) of the Act. The proposed § 273.11(s) would extend SNAP ineligibility to those individuals with convictions for Federal or State offenses as described in section 4008 who are also out of compliance with the terms of their sentence. The intent of the proposed subsection(s) is not to exclude individuals who have been convicted of such a crime but who have complied with the terms of their sentence, probation or parole.

    This regulatory provision would apply to adults and to minors convicted as adults. It would not apply to minors who are under 18 unless they are convicted as adults. The Department understands that under Federal Law, juvenile offenses are penalized through “juvenile delinquencies” or “juvenile adjudications” rather than convictions and sentences, and that States have similar distinctions. Therefore, the Department believes that Congress did not intend to include such individuals in the prohibition.

    Relatedly, section 273.2(j)(2)(vii) lists households that must never be considered categorically eligible for SNAP benefits. Section 273.2(j)(2)(vii)(D) already prohibits a household from being categorically eligible if any member of the household is ineligible under § 273.11(m) by virtue of a conviction for a drug-related felony. In this rule, the Department proposes to revise section 273.2(j)(2)(vii)(D) to add convicted felons under section 273.11(s) and fleeing felons and probation or parole violators under section 273.11(n) to this subsection. This prohibition from categorical eligibility would apply to households containing individuals disqualified as a result of having certain convictions and not being in compliance with the sentence as provided in proposed section 273.11(s). It also would apply to households containing a fleeing felon or individual violating parole or probation, a prohibition which was inadvertently not captured in the Department's September 10, 2015 rule, Clarification of Eligibility of Fleeing Felons (80 FR 54410).

    State agencies are reminded that Privacy Act restrictions and confidentiality provisions found at section 11(e)(8) of the Act remain intact for individuals who would be covered by this proposed rule. A request for information about a SNAP recipient or applicant by law enforcement officials must be made during the proper exercise of an official duty. Information about potential convicted felons covered by section 4008 of the 2014 Farm Bill whether it is alleged that they have been convicted for Federal or State crimes listed in section 4008 and are violating their sentences, or who are fleeing felons or parole or probation violators, must not be released to other persons such as bounty hunters, who are not official law enforcement representatives of a Federal or State entity.

    State agencies would be required to establish clear and consistent standards for determining whether an individual is not in compliance with the terms of his or her sentence. Those standards must not be arbitrary or capricious. Standards for determining whether someone is a fleeing felon or probation or parole violator are addressed in the final rule titled Clarification of Eligibility of Fleeing Felons (80 FR 54410) published on September 10, 2015.

    Section 4008 gives the United States Attorney General the authority to determine what statutory crimes and sentences convictions are substantially similar under State law. The U.S. Department of Justice (DOJ) may establish guidelines for determining which State offenses are substantially similar to the Federal offenses listed in section 4008. More information on the matter is forthcoming, through either regulations or guidance from DOJ.

    Attestation

    Section 4008 also requires every person applying for SNAP benefits to attest whether the individual, or any member of the household of the individual, has been convicted for a crime covered by this section. The Department proposes to add the attestation requirement to the regulations at new paragraph section 273.2(o). In addition to the language contained in section 4008 regarding attestation, the Department also proposes to incorporate other specific standards and procedures for the attestation into the regulation. Although State agencies do have some discretion with the attestation requirement, basic standards will help ensure consistency across State agencies. Those standards are proposed as follows below.

    Specifically, the individual applying for benefits would be responsible for attesting whether he or she, or any other household member, has been convicted as an adult of the crimes in section 4008. As part of that attestation, the Department would also require that the household attest as to whether any convicted member is complying with the terms of the sentence. The Department does not believe it is feasible for each individual member of the household to attest. If the SNAP household uses an authorized representative, the authorized representative would complete the attestation. State agencies would be required to update their application process to include the attestation requirement. It may be done in writing, verbally, or both, provided that the attestation is legally binding in the State. States could accomplish this by, for example, adding the attestation to the application for benefits, or by updating their interview process to include the attestation. The Department expects that the attestation would take place during the interview process, and anticipates that most attestations will be in writing. If an applicant is not present in person to hand in an application along with the attestation, the Department prefers that the State agency accept a written as opposed to verbal attestation and not require individuals to come into the office solely for the purpose of completing an attestation. To do otherwise could place an undue burden on the household and have a negative effect on program access. The attestation would be documented in the case file. Whatever procedure a State chooses to implement would need to be reasonable and consistent for all households applying for SNAP benefits, and would need to be part of certification and recertification procedures. The Department believes this discretion provides State agencies the flexibility to determine a standard that best suits their needs and administrative structures, while still supporting uniformity and legal enforceability.

    The State agency would be required to verify any attestation that no member of the household has been convicted as an adult of the crimes in this section if its veracity is questionable. The State agency would have the discretion to determine what makes an attestation questionable. In the event an attestation is questionable, the State agency would have to evaluate each case separately, using a reasonable standard established by the State to ensure consistency for all cases, and document the case file accordingly. At a minimum, the Department expects that State agencies would verify each element of the attestation—that the individual has been convicted of a crime listed in section 4008, and that the individual is not in compliance with the terms of their sentence.

    The Department is also proposing that the State agency must verify when the household attests that there is a disqualified felon not in compliance with the sentence to avoid any unnecessary confusion on the part of the household. That is, if a SNAP applicant attests to being a convicted felon not in compliance with the sentence, or attests that another member of the household is a convicted felon not in compliance with the sentence, the State agency would be responsible for verifying the disqualified felon status of the individual. The Department believes the State agency is in a better position than applicants to understand the specific requirements of the attestation and to obtain appropriate verification. Also, an applicant who attests for other members of the household may not have all of the information or a clear understanding of the situation involving that household member, and the State agency would be able to more reliably confirm felon status and whether the individual is complying with the sentence. The State agency would need to establish a reasonable standard to ensure consistency for all cases, and document the case file accordingly, in order to properly conduct this verification. The Department proposes to codify this requirement at section 273.2(f)(5)(i). The Department reminds State agencies that under section 273.2(f)(3) they have the option to implement mandatory verification where appropriate.

    Section 4009: Lottery and Gambling Winners

    Section 4009 of the Farm Bill directs the Department to institute new regulations regarding the receipt of substantial lottery or gambling winnings among SNAP households. It provides that any household that receives substantial lottery or gambling winnings, as determined by the Secretary, must lose eligibility for benefits immediately upon receipt of winnings. It also requires that those households remain ineligible until they again meet the allowable financial resources and income eligibility requirements of the Act. Section 4009 also requires the Secretary to set standards for each State agency to establish agreements, to the maximum extent practicable, with entities responsible for the regulation or sponsorship of gaming in the State to identify SNAP individuals with substantial winnings.

    Disqualification for Substantial Lottery or Gambling Winnings

    Section 4009 requires that households that have received substantial lottery or gambling winnings shall immediately lose eligibility for SNAP benefits, and gives the Secretary authority to define what amount constitutes substantial winnings. In order to implement section 4009, the Department is proposing a new 7 CFR 273.11(r) to codify the disqualification and definition. Substantial lottery or gambling winnings would be defined as a cash prize won in a single game equal to or greater than $25,000 before taxes or other amounts are withheld. If multiple individuals shared in the purchase of a ticket, hand, or similar bet, then only the portion of the winnings allocated to the member of the SNAP household would be counted toward the eligibility determination. Non-cash prizes are not included in the definition of substantial winnings.

    FNS based its definition of substantial winnings on the amount that would cause a significant lifestyle change for a majority of SNAP households. Small amounts of winnings that would be quickly spent by a household for common expenses like paying down debt, making car repairs, saving for an apartment security deposit, or buying long put-off necessities would not meet the definition of substantial. One way to understand substantial winnings that would result in a significant lifestyle change is an amount that would push a household's income above the SNAP gross income limits for a household of three considered annually for a given fiscal year. Gross income limits for a household of three would be used to set the threshold because the average SNAP household size is between two and three.

    In fiscal year 2017, the gross monthly income limit for a household of three is $2,184. This value multiplied by 12 and rounded to the nearest five thousand equals $25,000. FNS proposes rounding to the nearest $5000 to allow for ease in administration and communication with gaming entities and SNAP recipients. Every new fiscal year the threshold would be re-calculated using the new value for the gross monthly income limit for a household of three for that fiscal year rounded to the nearest five thousand dollars. FNS would provide the adjusted threshold amount to State agencies along with the SNAP income and resource limits each year. FNS asks for comments on this proposed definition of substantial winnings.

    All households certified to receive SNAP benefits would be subject to this rule. If a member of a SNAP household wins a substantial amount, the entire SNAP household would lose eligibility for the program. Section 4009 requires that households disqualified by this provision shall remain ineligible for SNAP until that household meets the allowable financial resources and income eligibility requirements under subsections (c), (d), (e), (f), (g), (i), (k), (l), (m) and (n) of section 5 of the Act.

    Cooperative Agreements

    The Department proposes to add a new section 272.17 to codify the requirement in section 4009 by setting standards for States' establishment of cooperative agreements with entities responsible for the regulation or sponsorship of gaming in the State, in order to identify individuals with substantial winnings, as defined by this rule, within their State. Gaming entities would be those entities responsible for the regulation or sponsorship of gaming in the State. Examples include, but are not limited to, State lotteries, casinos, race tracks that permit wagering, off-track betting facilities, State gambling oversight boards, and other entities that regulate gambling in public or private organizations in the State or on Tribal lands. Gaming entities that do not pay-out cash winnings equal to or greater than the substantial amount defined above would not be subject to this rule.

    State agencies will not be required to establish cooperative agreements with gaming entities within their State if all gaming activities are deemed illegal by State and Federal law. However, if a State agency becomes aware of a member of a SNAP household receiving benefits within their State who wins substantial lottery or gambling winnings, as defined by this rule, either within or outside their State, then the State agency would be required to enforce this rule for that individual and the individual's household even if gambling is illegal in the State where the household is receiving benefits.

    Gaming entities that enter into cooperative agreements with State agencies to identify SNAP recipients with substantial winnings would be responsible for meeting the terms of these agreements. The cooperative agreements would solely allow for the gaming entities to transmit information to State agencies; State agencies would be prohibited from sharing any information about SNAP households with gaming entities. Gaming entities would not be authorized to use data matches to receive or view information on SNAP households. In addition, section 4009 does not require gaming entities to withhold winnings of a substantial amount, as defined by this rule, from a winner. The Department anticipates gaming entities would only share information with the State agency on individuals who win an amount equal to or greater than a substantial amount, as defined by this rule. The State agency would only use the information obtained through the data matches with gaming entities to identify individuals with substantial winnings, as defined by this rule.

    The Department anticipates that a cooperative agreement established between the State agency and a gaming entity would specify that the gaming entity, either directly or through a third party, will share information about individuals with substantial winnings, as defined by this rule, over an agreed upon time period with the State agency. As contained in proposed section 273.17(b), at a minimum these agreements would need to specify the type of information to be shared by the gaming entity, the procedures used to share information, the frequency of sharing information, and the job titles of individuals who would have access to the data. Cooperative agreements should also include safeguards limiting release or disclosure of personally identifiable information to parties outside those included in the agreement.

    Because the types of lottery and gambling activities allowed within a State, and the administration and oversight of these games, vary from State to State, State agencies would have discretion in determining which types of games and gaming entities will be subject to this rule; however, the Department expects State agencies to include as many gaming entities in their implementation of this rule as is practicable. State agencies should make a good faith effort to enter into cooperative agreements with entities within their State responsible for the regulation or sponsorship of gaming. If a State agency and a gaming entity cannot come to an agreement after the State agency makes a good faith effort, then the State agency need not continue to pursue an agreement with that gaming entity at that time.

    State agencies have some discretion to determine how often matches are made to identify winners. FNS expects State agencies to perform matches as frequently as is feasibly possible to identify SNAP recipients with substantial winnings, as defined in this rule. However, at a minimum, matches would be conducted when a recipient files a periodic report and at recertification. The Department proposes to codify this requirement at new section 272.17(d). States would be required to include in their State Plan of Operations the names of gaming entities with whom they have cooperative agreements, the frequency of data matches with these entities, and if the State considers information from the data matches verified upon receipt. The Department proposes to codify this requirement at new section 272.17(e).

    Self-Reporting

    SNAP recipients would be required to self-report substantial winnings, as defined in this rule, to the State agency administering the household's benefits within 10 days of collecting the winnings regardless of the State where the winnings were won, in accordance with the 10 day reporting timeframes outlined in section 273.12(a)(2). SNAP recipients would be required to report substantial winnings, as defined in this rule, from State lotteries and other gaming entities both in the State where they receive benefits and in other States, as well as any substantial winnings from multi-state lotteries. If a State agency learns through self-reporting that a SNAP recipient received substantial winnings, as defined by this rule, the State agency must act immediately by closing the entire household's case. Before closing a household's case, the State agency may verify information about self-reported substantial winnings, as defined in this rule, if the information is questionable. The Department proposes to codify the reporting requirements surrounding this disqualification at new section 273.12(a)(1)(viii) and section 273.12(a)(5)(vi)(B)(5). The Department also proposes to add to section 273.12(a)(5)(iii)(E) the requirement that households report when a member of the household wins substantial lottery or gambling winnings in accordance with new section 273.11(r).

    State agencies must inform SNAP households upon certification that, should any member of the household win substantial lottery or gambling winnings, as defined in this rule, they must contact the State agency within 10 days to reassess their eligibility for SNAP. Section 4009 only applies to eligibility determinations of enrolled SNAP households, not households who are applying to receive benefits. As a result it would not be necessary to include a question on the initial SNAP application asking applicants if anyone in the household has ever won substantial winnings. However, it is at the discretion of the State agency to determine whether to include a question on the SNAP periodic report or recertification forms asking if anyone in the recipient household has won substantial lottery or gambling winnings, as defined by this rule, since the time of the household's most recent certification. In making this decision States should consider the potential increase in response burden for SNAP households relative to the number of households likely to report substantial winnings.

    The Department notes that its rule, Supplemental Nutrition Assistance Program (SNAP): Eligibility, Certification, and Employment and Training Provisions of the Food, Conservation and Energy Act of 2008, is currently in the process to be published as a final rule. That rule also references sections of section 273.12. Assuming that final rule is published by the time this rule is in the final rule process, the Department may be required to re-designate paragraph citations accordingly.

    Verification of Data Matches

    Data received through cooperative agreements with gaming entities may come from a wide variety of gaming entities (e.g. public or private entities; local, statewide or national entities) with varying degrees of reliability. Although verification of information about substantial winnings, as defined in this rule, is required, the Department will leave to State discretion whether information received through data matches will be considered verified upon receipt, and if not, how the State will verify that information. States should establish and apply consistent procedures for verifying substantial lottery and gambling winnings in accordance with sections 273.12(a)(5)(vi)(B) and§ 273.2(f). The Department proposes to codify the requirement that the State agency verify information that a member of the household has won substantial lottery or gambling winnings in accordance with new sections 272.17(c) and 273.12(a)(5)(vi)(B).

    If a State agency identifies a SNAP recipient who has received substantial winnings, as defined by this rule, before the recipient reports the collection of winnings, the State would need to verify that information, if it is not considered verified upon receipt. Procedures established in new section 272.17(c) require that if a household is found to have received, during their certification period, substantial winnings, as defined in this rule, prior to any action to terminate the household's benefits, the State agency shall provide the household notice, in accordance with the provisions on notices of adverse action appearing in section 273.13. For households that are found to have received substantial winnings at the time of their case's recertification, the State agency shall provide these households with a notice of denial, in accordance with section 273.10(g)(2). The State agency shall also establish claims as appropriate.

    The Department recognizes that some States will consider information received through data matches verified upon receipt, whereas other States will need to pursue verification regardless of how the State has chosen to act on changes. Upon receipt of a positive data match, all States would need to take immediate action to either to pursue verification, as needed, and close the case, if appropriate, regardless of whether the State has chosen to act on all changes or to act only on certain changes.

    Eligibility for Previously Disqualified SNAP Households

    Section 4009 does not require SNAP applicants to be screened for eligibility based on past lottery or gambling winnings. The only exception would be applicant households containing a member who was previously disqualified for substantial winnings, as defined by this rule, since section 4009 requires that such households remain ineligible until they meet the income and eligibility requirements in the Act detailed in sections 273.8 and 273.9.. The eligibility determinations for these households at the time of re-application would need to be based on the requirements in sections 273.8 and 273.9. To identify members of applicant households previously disqualified for substantial winnings, as defined in this rule, SNAP eligibility workers could conduct a search of past case records or question the household during the interview. The Department feels that including a question on the SNAP application about past disqualification for substantial winnings, as defined in this rule, will unnecessarily burden the vast majority of SNAP applicants not subject to this rule. Other methods, such as those noted above, may be more effective in obtaining the necessary information without adding burden to all SNAP applicants.

    Section 4015: Mandating Certain Verification Systems

    Section 4015 of the 2014 Farm Bill amends section 11(p) of the Act by providing that a State agency must use an immigration status verification system established under section 1137 of the Social Security Act (SSA) and an income and eligibility verification system. Before the 2014 Farm Bill, use of these verification systems was optional. In particular, section 11(p) of the Act previously provided that State agencies were not required to use an income and eligibility or immigration status verification system established under section 1137 of the SSA.

    Immigration Status Verification System

    The Department proposes to amend the regulations at 7 CFR 273.2(f)(1)(ii) to largely reflect the statutory language in section 4015 by requiring States to use an immigration status verification system established under section 1137 of the SSA (42 U.S.C. 1320b-7) when verifying immigration status of SNAP applicants.

    Section 1137(d)(3) of the SSA (42 U.S.C. 1320b-7(d)(3)) requires verification of immigration status “through an automated or other system” designated by the Immigration and Naturalization Service (INS) for use by the States. INS ceased to exist as a result of the Homeland Security Act of 2002, P.L. 107-296, on March 1, 2003, and its functions were transferred from the Department of Justice to the newly-created Department of Homeland Security (DHS). Three agencies were established within DHS—including the U.S. Citizenship and Immigration Services (USCIS).

    USCIS administers the Systematic Alien Verification for Entitlements (SAVE) Program to help Federal, State and local agencies authorized to use the service to verify the immigration status of public benefits applicants. SAVE is an inter-governmental web-based service that provides timely immigration status information, thereby allowing those user agencies to ensure that they are issuing public benefits only to individuals entitled to receive them.

    USCIS has confirmed with the Department that there are only two ways a SNAP State agency can verify immigration status with USCIS. Both ways are through the SAVE system—either through an electronic search or a manual G-845 paper form search (there is also a G-845 Supplement form if the State agency would like to request more detailed information on immigration status, citizenship and sponsorship). USCIS offers no other options for a SNAP State agency to verify immigration status, and either method would satisfy the immigration verification requirements of section 4015. Typically, the manual search is available after an initial electronic search if additional verification is needed. Whether using the electronic search or manual G-845 forms search, the State agency must sign a memorandum of agreement with USCIS to conduct the verification.

    Current SNAP regulations at section 273.2(f)(1)(ii) require that States verify the immigration status of non-citizens who apply for SNAP, but do not mandate the use of SAVE to do so. As Section 4015 now mandates that all States use an immigration status verification system established under Section 1137 of the SSA, in effect, it now requires the use of SAVE to verify immigration status. Therefore, the Department is proposing to revise references to SAVE throughout §§ 272 and 273 to reflect this new mandatory requirement.

    Since SAVE is administered by another Federal agency that could change the name or other details of the service, the Department proposes to revise section 273.2(f)(1)(ii) to reflect the broader language of section 4015 in the event USCIS makes any changes to that system. Provisions regarding the optional use of SAVE to verify the validity of documents are available at sections 272.11(a) and 273.2(f)(10) and are proposed to be updated only to reflect the new mandatory requirement that the system be one established under section 1137 of the SSA. Other provisions contained at section 272.11 involve necessary logistical steps for the use of SAVE, such as establishing agreements with INS (now USCIS), and administrative requirements such as use of the data, and are unaffected by this proposed rule. Similarly, other requirements at section 273.2(f)(10), regarding procedures in verifying the validity of documents provided by alien applicants, are unaffected by this proposed rule.

    All 53 State agencies (including the District of Columbia, Guam and the Virgin Islands) have indicated to FNS that they currently use the SAVE database, so the Department does not believe the requirement will have a big impact on most States. Because SAVE is the system used by USCIS for immigration status verification, State SNAP agencies' use of SAVE would satisfy the immigration verification requirement in section 4015. Ensuring that all States use an immigration status verification system established under section 1137 of the SSA helps ensure State agencies follow consistent standards in verifying immigration status. The Department may require the State agency to provide written confirmation from USCIS that the system used by the State is an immigration status verification system established under section 1137 of the SSA.

    Although section 4015 does not specifically require State agencies to use the electronic SAVE search, USCIS has indicated its preference for the electronic search over the paper-based G-845 SAVE search. This is because the electronic SAVE search is faster and more efficient. The Department also understands that an electronic SAVE search is more cost effective per search than the paper-based process. For these reasons, the Department encourages State agencies to use an electronic before a manual SAVE search.

    As a related matter, the Department is taking this opportunity to propose an update of the terminology used in the current regulations for the Federal agency that handles immigration status issues. Current SNAP regulations refer to the Department of Justice (DOJ) Immigration and Naturalization Service (INS) as the entity responsible for fulfilling Federal immigration functions. As previously noted, INS no longer exists and USCIS now oversees lawful immigration to the United States and naturalization of new American citizens, including the management of SAVE. The Department proposes to update references from INS to USCIS throughout sections 271, 272 and 273 accordingly.

    To further clarify existing requirements, this proposed rule would more explicitly include in the regulatory text the requirement that State agencies must verify the immigration status of all non-citizens applying for SNAP benefits. Although an applicant must provide documentation of his or her status when applying for benefits, such as a green card, doing so does not negate the State agency's responsibility to verify that status with DHS. This is essential because SNAP eligibility workers do not have the expertise to confirm the validity of those documents. Such confirmation must come from the Federal agency charged with overseeing immigration status issues—DHS' USCIS. This clarification is proposed at sections 273.2(f)(1)(ii) and (f)(10).

    Finally, the Department reminds commenters that section 5(i) of the Act and section 273.4(c)(4) of the regulations require that the income and resources of sponsors be deemed to sponsored non-citizens when they apply for SNAP (with exceptions for particular vulnerable populations as listed at section 273.4(c)(3)). Sponsored non-citizens applying for SNAP are required to provide information and documentation about their sponsor's income and resources. The Department understands that SAVE search results provide information on whether or not a non-citizen has a sponsor. The Department proposes to add section 273.2(f)(10)(vi) to allow State agencies to use SAVE to confirm whether an affidavit of support has been executed in accordance with the deeming requirements at section 273.4(c)(2) Since the electronic or manual SAVE searches provide information on whether an individual has an executed affidavit of support (USCIS Form I-864 or I-864A), and sponsor deeming is required, State agencies may use that information as a means to check whether an applicant has a sponsor.

    Income and Eligibility Verification System (IEVS)

    Section 4015 also requires States to use an income and eligibility verification system established under Section 1137 of the SSA in accordance with standards set by the Secretary. Standards for IEVS already exist at section 272.8(a)(1), section 273.2(b)(2) and section 273.2(f)(9). Except for updating these provisions to remove the optional use of IEVS, the Department proposes to maintain current requirements without change. States would need to maintain a system that ensures compliance with the applicant verification standards in section 273.2(f). Those standards contain procedures on, for example, items requiring mandatory verification and verification when questionable, describes sources of verification, among other standards.

    Procedural Matters Executive Order 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

    This proposed rule has been determined to be not significant and was not reviewed by the Office of Management and Budget (OMB) in conformance with Executive Order 12866.

    Regulatory Impact Analysis

    This rule has been designated as not significant by the Office of Management and Budget, therefore, no Regulatory Impact Analysis is required.

    Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires Agencies to analyze the impact of rulemaking on small entities and consider alternatives that would minimize any significant impacts on a substantial number of small entities. Pursuant to that review, it has been certified that this rule would not have a significant impact on a substantial number of small entities. While there may be some burden/impact on State agencies and small entities involved in the gaming industries, the impact is not significant as the burden would be on State agencies to ensure appropriate cooperative agreements are entered into.

    Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local and Tribal governments and the private sector. Under section 202 of the UMRA, the Department generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State, local or Tribal governments, in the aggregate, or the private sector, of $146 million or more (when adjusted for inflation; GDP deflator source: Table 1.1.9 at http://www.bea.gov/iTable) in any one year. When such a statement is needed for a rule, Section 205 of the UMRA generally requires the Department to identify and consider a reasonable number of regulatory alternatives and adopt the most cost effective or least burdensome alternative that achieves the objectives of the rule. This proposed rule does not contain Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local and Tribal governments or the private sector of $146 million or more in any one year. Thus, the rule is not subject to the requirements of sections 202 and 205 of the UMRA.

    Executive Order 12372

    SNAP is listed in the Catalog of Federal Domestic Assistance Programs under 10.551. For the reasons set forth in the final rule in 7 CFR part 3015, subpart V, and related Notice (48 FR 29115, June 24, 1983), this program is included in the scope of Executive Order 12372 which requires intergovernmental consultation with State and local officials.

    Federalism Summary Impact Statement

    Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement for inclusion in the preamble to the regulations describing the agency's considerations in terms of the three categories called for under Section (6)(b)(2)(B) of Executive Order 13121. The Department has considered the impact of this rule on State and local governments and has determined that this rule does not have federalism implications. Therefore, under section 6(b) of the Executive Order, a federalism summary is not required.

    Executive Order 12988, Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full and timely implementation. This rule is not intended to have retroactive effect unless so specified in the Effective Dates section of the final rule. Prior to any judicial challenge to the provisions of the final rule, all applicable administrative procedures must be exhausted.

    Civil Rights Impact Analysis

    FNS has reviewed this proposed rule in accordance with USDA Regulation 4300-4, “Civil Rights Impact Analysis,” to identify any major civil rights impacts the rule might have on program participants on the basis of age, race, color, national origin, sex or disability. After a careful review of the rule's intent and provisions, FNS has determined that the changes to SNAP regulations in this proposed rule are driven by legislation and therefore required. The Department specifically prohibits the State and local government agencies that administer the program from engaging in discriminatory actions. Discrimination in any aspect of program administration is prohibited by SNAP regulations, the Food and Nutrition Act of 2008, the Age Discrimination Act of 1975, Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990 and Title VI of the Civil Rights Act of 1964. Where State agencies have options, and they choose to implement a certain provision, they must implement it in such a way that it complies with these requirements and the regulations at 7 CFR 272.6.

    Student Provision: This provision implements the provision requiring that the exception provided to participants of a SNAP E&T program is limited to those who are enrolled in a course or program of study that is part of a program of career and technical education (as defined in Section 3 of the Carl D. Perkins Career and Technical Education Act of 2006) that may be completed in not more than 4 years at an institution of higher education (as defined in section 102 of the Higher Education Act of 1965), or enrolled in courses for remedial education, basic adult education, literacy, or English as a second language.

    Impact on Households: This mandatory change will be applied uniformly across households. Classification in an E&T program is not based on status in a protected class.

    Impact on State Agencies: Thirty-four States offer education components through their E&T programs in FY 2015. These States will need to evaluate whether those components meet the student eligibility criteria proposed in this rule. Impacts are expected to be minimal.

    Felon Disqualification: This provision disqualifies individuals who are convicted of certain crimes who are also not in compliance with the terms of their sentence or fleeing felons from receiving SNAP benefits, and requires individuals convicted of those crimes to attest to same.

    Impact on Households: The household will be responsible for honestly representing whether any household member has been convicted of the stated crimes. This change is also mandatory and will impact all houses uniformly regardless of status in a protected class. The Department does not have any information that individuals in a protected class are more likely to violate the terms of their sentence or probation or parole. The Department therefore does not anticipate a greater impact on any protected class.

    Impact on State agencies: State agencies will be required to update their application processes to obtain the attestation and document same in the case file. State agencies will also be responsible for verifying that those individuals are disqualified felons.

    Lottery and Gambling Winnings Disqualification: This provision disqualifies individuals who receive substantial lottery or gambling winnings from receiving SNAP benefits.

    Impact on Households: This provision is intended to make households that receive a substantial amount of gambling or lottery winnings ineligible for SNAP. All SNAP households will be subject to this provision equally, whereby if a SNAP household receives substantial winnings they will be made ineligible for benefits until they again meet normal program income and resource requirements.

    Impact on State agencies: State agencies are required to implement a data matching system with entities within the state that are involved in lotteries and gaming. As such, this rule will have an impact on those entities involved in cooperative agreements with the State agencies.

    Income and Eligibility and Immigration Verification Systems: This provision requires States to have an income and eligibility and immigration verification system.

    Impact on Households: This provision will not impact households directly. The Department anticipates that the only potential impact on households will be a benefit in that non-citizens applying for SNAP benefits will have their immigration status verified through more consistent methods across States.

    Impact on State agencies: States were required to implement the immigration verification system immediately upon implementation of the 2014 Farm Bill. The vast majority of States already had a system in place that adheres to these requirements. Many States already have an income and eligibility verification in place already as well. For those reasons, the Department does not anticipate that this provision will result in a significant impact on State agencies.

    Training and Outreach: SNAP is administered by State agencies which communicate program information and program rules based on Federal law and regulations to those within their jurisdiction, including individuals from protected classes that may be affected by program changes. After the passage of the 2014 Farm Bill, the Department worked with State agencies to ensure their understanding of the changes required by these provisions. The Department released an implementation memorandum on these provisions on March 21, 2014. The Department also shared guidance through a Question & Answer memorandum on June 10, 2014, to address the State agencies' questions and concerns and ensure clarity on requirements for implementing the requirement.

    The Department participated in a May 21, 2014, Tribal Consultation on the lottery provision, during which the Department received no significant feedback or questions.

    The Department maintains a public Web site that provides basic information on each program, including SNAP. Interested persons, including potential applicants, applicants, and participants can find information about these changes as well as State agency contact information, downloadable applications, and links to State agency Web sites and online applications.

    Finding and Conclusion: After careful review of the rule's intent and provisions, and the characteristics of SNAP households and individual participants, the Department has determined that this proposed rule will not have a disparate impact on any group or class of persons.

    Executive Order 13175

    Executive Order 13175 requires Federal agencies to consult and coordinate with Tribes on a government-to-government basis on policies that have Tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes. The Department participated in a Tribal Consultation on the Lottery provisions of this rule. Tribal organizations with gaming facilities may be approached by the State(s) in which they are located to participate in the cooperative agreements to identify individuals with significant lottery or gambling winnings. The Department also notes that the regulatory changes proposed in this rule regarding students enrolled more than half-time and certain convicted felons will not have a greater substantial direct effect on tribal organizations than all other applicants applying for SNAP. We are unaware of any current Tribal laws that could be in conflict with the final rule.

    Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; 5 CFR 1320) requires the Office of Management and Budget (OMB) approve all collections of information by a Federal agency before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current valid OMB control number. This rule proposes information collections that are subject to review and approval by the Office of Management and Budget; therefore, FNS is submitting for public comment the changes in the information collection burden that would result from adoption of the proposals in the rule. In accordance with the Paperwork Reduction Act of 1995, this notice invites the general public and other public agencies to comment on this proposed information collection.

    This is a new collection for proposed rule, Lottery and Gambling Winners in the Supplemental Nutrition Assistance Program, which would require States to make ineligible SNAP participants with substantial lottery or gambling winnings and establish cooperative agreements with gaming entities within their States to identify SNAP participants with substantial winnings. The provisions regarding students, felon disqualification and State eligibility verification systems in this proposed rule do not contain information collection requirements subject to approval by OMB under the Paperwork Reduction Act of 1994.

    State agencies will be required to make minimal, one-time changes to their application process in order to comply with the provisions of the felon disqualification attestation requirement. Since State agencies are already required to verify the immigration status of non-citizens applying for the program, the impact of this provision is negligible. Other minimal burdens imposed on State agencies by this proposed rule are usual and customary within the course of their normal business activities. These changes are contingent upon OMB approval under the Paperwork Reduction Act of 1995. When the information collection requirements have been approved, FNS will publish a separate action in the Federal Register announcing OMB's approval.

    Comments on this information collection pursuant this proposed rule must be received on or before January 30, 2017.

    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 of the proposed collection of information, including the validity of the methodology and assumptions that were used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.

    Comments may be sent to: Mary Rose Conroy, Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park Center Drive, Room 810, Alexandria, VA 22302. Comments may also be submitted via fax to the attention of Mary Rose Conroy at 703-305-2803 or via email to [email protected] Comments will also be accepted through the Federal eRulemaking Portal. Go to http://www.regulations.gov, and follow the online instructions for submitting comments electronically. All responses to this notice will be summarized and included in the request for Office of Management and Budget approval. All comments will be a matter of public record.

    Title: Supplemental Nutrition Assistance Program: Student Eligibility, Convicted Felons, Lottery and Gambling, and State Verification Provisions of the Agricultural Act of 2014.

    OMB Number: 0584-NEW.

    Expiration Date: [Not Yet Determined.]

    Type of Request: New collection

    Abstract: This proposed rule is intended to implement several section of the Agricultural Act of 2014 including section 4009 (Ending Supplemental Nutrition Assistance Program Benefits for Lottery or Gambling Winners). This provision makes households in which a members receives substantial lottery and gambling winnings (as determined by the Secretary) ineligible for SNAP until they meet allowable financial resources and income eligibility requirements. The provision also requires States to establish cooperative agreements, to the maximum extent practicable, with entities responsible for gaming in their State in order to identify individuals with substantial winnings.

    This rule does not require any recordkeeping burden. Reporting detail burden information is provided below.

    Estimates of the Hour Burden of the Reporting of Information First Year Burden Hours

    The affected public for this collection is 53 State SNAP agencies, 53 State public agency gaming entities, and 159 private business gaming entities. It is estimated that each of the 53 State SNAP agencies will establish cooperative agreements once with one State public agency gaming entity within the State and 3 private business gaming entities within the State for a total of 212 annual responses which will take approximately 320 hours per response for a total of 67,840 annual burden hours. This one time activity includes time for the State SNAP agency to reach out to the State public agency gaming entities and private business gaming entities in the State, negotiate terms for sharing identifying information of winners, establish secure connections for sharing information, and to complete all necessary reviews of agreements by legal counsel and State leadership. Each of the 53 State public agency gaming entities will also incur a burden entering into cooperative agreements with their State SNAP agency, which will take approximately 320 hours per response for a total of 16,960 burden hours. This one time activity includes time for the State public agency gaming entity to negotiate terms for sharing identifying information of winners, establish secure connections for sharing information, and to complete all necessary reviews of agreements by legal counsel and State public agency gaming entity leadership. It is estimated that each of 159 affected private business gaming entities will establish cooperative agreements once with their respective State SNAP agency, which will take approximately 320 hours per response for a total of 50,880 annual burden hours. Our estimate assumes all 53 State SNAP agencies receiving SNAP funding will implement this rule despite large variations in gaming activities from State to State.

    It is estimated that each of the 53 State SNAP agencies will create a data matching system once to match information on winners from State public agency gaming entities and private business gaming entities within the State with SNAP participation lists, which will take approximately 160 hours per response for a total of 8,480 annual burden hours. All State SNAP agencies currently make use of other computerized data matching systems (e.g. SAVE for immigration verification), so costs assume States will re-program existing systems.

    Ongoing Yearly Costs

    Once the matching system is in place, for every year thereafter, the State public agency and private business gaming entities will have to enter information into the system for every individual who wins over the threshold for winnings. There is no national database of how many people win large amounts of money in State lotteries or through other gaming activities. For this estimate, it is assumed that each of the 53 State public agency gaming entities would have 200 individuals who win over the threshold in a given year for a total of 10,600 annual responses. It will take approximately 0.08 hours for the State public agency gaming entity to identify the winner and enter the appropriate information into the matching system for a total of 848 annual burden hours per year. In addition, it is estimated that each of the 159 private business gaming entities will identify 100 individuals per year who have won over the threshold for a total of 15,900 annual responses. It will take approximately 0.08 hours for the private business gaming agency to identify the winner and enter the appropriate information into the matching system for a total of 1,272 annual burden hours per year.

    Once the matching system is in place, for every year thereafter, the matches between the winner list and SNAP participation list should occur automatically and with negligible cost. For this estimate, it is assumed that each of the 53 State SNAP agencies will positively match with the one State public agency and three private business gaming entities in their respective States an average of 35 records per year for a total annual response of approximately 1,855 SNAP participants nationally. Each of 53 State SNAP agencies will have to identify among the responses above those that are misidentified as SNAP participants because of a similar name, inaccurate reporting etc. FNS anticipates that each of the 53 State SNAP agencies will receive approximately 5 total annual records with misidentified participants for a total annual response of 265 records. It will take approximately 0.667 hours to identify these types of misidentifications for a total annual burden of 176.76 burden hours. Additionally, each of the 53 State SNAP agencies will have to follow-up with and disqualify SNAP participants discovered through the above matches to have actual substantial lottery or gambling winnings. FNS anticipates approximately 30 records annually per State SNAP agency will be households with actual substantial winnings and it will take approximately 1 hour of the State SNAP agency's time for this activity for a total of approximately 1590 annual burden hours.

    Lottery or gambling winners who lose eligibility for SNAP will need to be re-evaluated according to normal program rules if they again decide to apply for SNAP benefits. In order to identify applicants who were previously disqualified due to substantial winnings, eligibility workers may conduct a routine search of past enrollment files at the time of application. In most cases, eligibility workers are already doing this search to identify other relevant information for the current household application, and as a result the cost is negligible.

    There is no recordkeeping burden required for this information collection request.

    Reg. Section Respondent type Description of
  • activity
  • Estimated number of
  • respondents
  • Annual
  • report or record filed
  • Total annual responses Number of burden hours per response Estimated total burden hours Hourly wage rate *
  • ($)
  • Estimate cost to respondents
  • ($)
  • 7 CFR 272.17 State SNAP Agency Managers Establish cooperative agreements with State public agency and private business gaming entities.** 53 4 212 320 67,840 $45.64 $3,096,217.60 7 CFR 272.17 State Public Agency Gaming Entity Managers Establish cooperative agreements with State SNAP agency.** 53 1 53 320 16,960 45.64 774,054.40 7 CFR 272.17 State SNAP Agency Managers Create a data matching system with State public agency and private business gaming entities.** 53 1 53 160 8,480 45.64 387,027.20 272.17 and 273.11(r) State SNAP Agency Eligibility Worker Eligibility worker follow-up—misidentified winners 53 5 265 0.667 176.76 20.41 3,607.57 7 CFR 272.17 and 7 CFR 273.11(r) State SNAP Agency Eligibility Worker Eligibility worker follow-up—true winners 53 30 1590 1 1590 20.41 32,451.90 7 CFR 272.17 State Public Agency Gaming Entity Staff Member Input data into data matching system for use by State SNAP agency 53 200 10,600 0.08 848 18.46 15,654.08 State Agency Subtotal Reporting 53 241 12,773 95,894.76 4,309,012.60 7 CFR 272.17 Private Business Gaming Entity Managers Establish cooperative agreements with State SNAP agency.** 159 1 159 320 50,880 71.79 3,652,675.20 7 CFR 272.17 Private Business Gaming Entity Staff Member Input data into data matching system for use by State SNAP agency 159 100 15,900 0.08 1272 13.25 16,854 Business Subtotal Reporting 159 101 16,059 52,152 3,669,529.20 States and Business Reporting Grand Total Burden Estimates 212 28,832 148,046.76 7,978,541.80 * Based on the Bureau of Labor Statistics May 2014 Occupational and Wage Statistics. The salaries of State SNAP agency managers and public gaming entity managers are considered to be “General and Operations Managers, Local Government (11-1021).” The salaries of private gaming entity managers are considered to be “General and Operations Managers, Management in Companies and Enterprises (11-1021).” The salaries of private gaming entity managers are considered to be “Gaming Managers (11-9071).” The salaries of the eligibility workers are considered to be “Eligibility Interviewers, Government Programs (43-4061).” The salaries of public gaming entity staff member are considered to be “Information and Record Clerks, All Other (43-4199).” The salaries of private gaming entity staff member are considered to be “Gaming Cage Workers (43-3041).” (http://www.bls.gov/oes/home.htm). ** These are only first year costs and are not expected to re-occur annually.
    Description of Costs and Assumptions

    The estimate of respondent cost is based on the burden estimates and utilizes the Department of Labor, Bureau of Labor Statistic, May 2015 National Occupational and Wage Statistics, Occupational Groups (11-1021), (11-9071), (43-4061), (43-4199), and (43-3041).

    The total annual cost to respondents is $7,978,541.80. This includes $3,669,529.20 for Business and $4,309,012.60 for State Agencies. It is estimated that State SNAP agency mangers in the General and Operations Managers for Local Government occupation group (11-1021) in the 53 State SNAP agencies will spend a total of 67,840 hours to establish cooperative agreements with State public agency and private business gaming entities at a rate of $45.64 per hour for a total estimated cost of $3,096,217.60 for all respondents in the first year.

    It is estimated that State public agency gaming entity managers in the General and Operations Managers for Local Government occupation group (11-1021) in the 53 State SNAP agencies will spend a total of 16,960 hours to establish cooperative agreements with State SNAP agencies at a rate of $45.64 per hour for a total estimated cost of $774,054.40 for all respondents in the first year.

    It is estimated that State SNAP agency mangers in the General and Operations Managers for Local Government occupation group (11-1021) in the 53 State SNAP agencies will spend a total of 8480 hours to establish data matching systems with State public agency and private business gaming entities at a rate of $45.64 per hour for a total estimated cost of $387,027.20 for all respondents in the first year.

    It is estimated that State SNAP agency eligibility workers in the Eligibility, Interviews, Government Programs occupation group (43-4061) in the 53 State SNAP agencies will spend a total of 176.76 hours to review matches for misidentified winners at a rate of $20.41 per hour for a total estimated cost of $3,607.57 for all respondents annually.

    It is estimated that State SNAP agency eligibility workers in the Eligibility, Interviews, Government Programs occupation group (43-4061) in the 53 State SNAP agencies will spend a total of 1590 hours to follow-up with and disqualify correctly matched winners at a rate of $20.41 per hour for a total estimated cost of $32,451.90 for all respondents annually.

    It is estimated that State public agency gaming entity staff in the Information and Record Clerks, All Other occupation group (43-4199) in the 53 State public agency gaming entities will spend a total of 848 hours to enter appropriate information into the data matching system with the State SNAP agency at a rate of $18.46 per hour for a total estimated cost of $15,654.08 for all respondents annually.

    It is estimated that private gaming entity managers in the General and Operations Managers, Management in Companies and Enterprises occupation group (11-1021) in the 159 private business gaming entities will spend a total of 50,880 hours to establish cooperative agreements with State SNAP agencies at a rate of $71.79 per hour for a total estimated cost of $3,652,675.20 for all respondents in the first year.

    It is estimated that private business gaming entity staff in the Gaming Cage Workers occupation group (43-3041) in the 159 private business gaming entities will spend a total of 1272 hours to enter appropriate information into the data matching system with the State SNAP agency at a rate of $13.25 per hour for a total estimated cost of $16,854 for all respondents annually.

    E-Government Act Compliance

    The Department is committed to complying with the E-Government Act of 2002, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

    List of Subjects 7 CFR Part 271

    Food stamps, Grant programs—social programs, Reporting and recordkeeping requirements.

    7 CFR Part 272

    Alaska, Civil rights, Supplemental Nutrition Assistance Program, Grant programs—social programs, Penalties, Reporting and recordkeeping requirements.

    7 CFR Part 273

    Administrative practice and procedures, Aliens, Claims, Supplemental Nutrition Assistance Program, Fraud, Grant programs—social programs, Penalties, Reporting and recordkeeping requirements, Social Security, Students.

    For the reasons set forth in the preamble, 7 CFR parts 271, 272 and 273 are proposed to be amended as follows:

    1. The authority citation for Parts 271, 272 and 273 continue to read as follows: Authority:

    7 U.S.C. 2011-2036.

    PART 271—GENERAL INFORMATION AND DEFINITIONS 2. In § 271.2: a. In the definition for Alien Status Verification Index (ASVI), remove the words “Immigration and Naturalization Service” and add in its place the words “United States Citizenship and Immigration Services (USCIS)”. b. Remove the definition for “Immigration and Naturalization Service (INS).” c. Add a definition for “United States Citizenship and Immigration Services (USCIS)”.

    The addition to read as follows:

    § 271.2 Definitions.

    United States Citizenship and Immigration Services (USCIS) means the U.S. Citizenship and Immigration Services, U.S. Department of Homeland Security.”

    PART 272—REQUIREMENTS FOR PARTICIPATING STATE AGENCIES 3. In § 272.11 (b) and (d), remove the word “INS” and add in its place the word “USCIS”. 4. Revise the first sentence of § 272.8(a)(1), to read as follows:
    § 272.8 State income and eligibility verification system.

    (a) * * *

    (1) State agencies shall maintain and use an income and eligibility verification system (IEVS), as specified in this section. * * *

    5. Revise § 272.11(a) to read as follows:
    § 272.11 Systematic Alien Verification for Entitlements (SAVE) Program.

    (a) General. A State agency shall use an immigration status verification system established under Section 1137 of the Social Security Act (42 U.S.C. 1320b-7) to verify the eligible status of all aliens applying for SNAP benefits. USCIS maintains the Systematic Alien Verification for Entitlements (SAVE) Program to conduct such verification.

    6. Add § 272.17, to read as follows:
    § 272.17 Data matching for substantial lottery or gambling winnings.

    (a) General. Each State agency, to the maximum extent practicable, shall establish cooperative agreements with gaming entities within their State to identify members of certified households who have won substantial lottery or gambling winnings as defined in § 273.11(r).

    (b) Cooperative Agreements. State agencies, to the maximum extent practicable, shall enter into cooperative agreements with the gaming entities responsible for the regulation or sponsorship of gaming in the State. Cooperative agreements should specify the type of information to be shared by the gaming entity, the procedures used to share information, the frequency of sharing information, and the job titles of individuals who will have access to the data. Cooperative agreements shall also include safeguards limiting release or disclosure of personally identifiable information of SNAP recipients who are the subject of data matches.

    (c) Use of match data. States shall provide a system for:

    (1) Comparing information obtained from gaming entities about individuals with substantial winnings with databases of currently certified households within the State;

    (2) The reporting of instances where there is a match;

    (3) If match information is not considered verified upon receipt, the verification of matches to determine their accuracy in accordance with § 273.2(f);

    (4) If during a household's certification period, the household is found to have received substantial winnings, as defined in § 273.11(r), prior to any action to terminate the household's benefits, the State agency shall provide the household notice in accordance with the provisions on notices of adverse action appearing in § 273.13. For households that are found to have received substantial winnings at the time of the household's recertification, the State agency shall notify such households, in accordance with the provisions on notices of denial appearing in § 273.10(g)(2); and

    (5) The establishment and collection of claims as appropriate.

    (d) Frequency of data matches. The State agency shall perform data matches as frequently as is feasibly possible to identify SNAP recipients with substantial winnings, as defined in § 273.11(r); however, at a minimum the State agency shall conduct data matches when a household files a periodic report and at the time of the household's recertification.

    (e) State Plan of Operations. The State agency shall include as an attachment to the annual State Plan of Operations, as required in accordance with § 272.2, the names of gaming entities with which the State agency has entered into cooperative agreements, the frequency of data matches with such entities, and if information is considered verified upon receipt.

    PART 273—CERTIFICATION OF ELIGIBLE HOUSEHOLDS 7. In Part 273, remove the word “INS” wherever it appears and add in its place “USCIS”. 8. In § 273.2: a. Revise the first sentence of paragraph (b)(2); b. Revise the first sentence of paragraph (f)(1)(ii)(A) and add new second sentence; c. Amend paragraph (f)(5)(i) by adding a sentence at the end of paragraph; d. Amend paragraph (f)(9) by revising the paragraph heading and paragraphs (i) and (ii); e. Revise the paragraph heading and introductory text of (f)(10); f. Add paragraph (f)(10)(vi); g. Revise § 273.2(j)(2)(vii)(D); h. Add new paragraph (o).

    The revisions and additions to read as follows:

    § 273.2 Office operations and application processing.

    (b) * * *

    (2) * * * In using IEVS in accordance with paragraph (f)(9) of this section, it must notify all applicants for food stamp benefits at the time of application and at each recertification through a written statement on or provided with the application form that information available through IEVS will be requested, used and may be verified through collateral contact when discrepancies are found by the State agency, and that such information may affect the household's eligibility and level of benefits. * * *

    (f) * * *

    (1) * * *

    (ii) * * *

    (A) The State agency shall verify the eligible status of all aliens applying for SNAP benefits by using an immigration status verification system established under Section 1137 of the Social Security Act (42 U.S.C. 1320b-7). FNS may require State agencies to provide written confirmation from USCIS that the system used by the State is an immigration status verification system established under Section 1137 of the Social Security Act. * * *

    (5) * * *

    (i) * * * However, if a SNAP applicant's attestation regarding disqualified felon status described in § 273.2(o) is questionable, the State agency shall verify the attestation. The State agency shall verify the felon status when an applicant affirmatively attests that he or she or a member of their household is such a convicted felon and is not in compliance with the sentence. Each element of an affirmative attestation—that the individual has been convicted of a crime listed at § 273.11(s), and that the individual is not in compliance with the terms of their sentence—shall be verified. In conducting verifications of both questionable attestations and affirmative attestations under this paragraph the State agency shall establish reasonable, consistent standards, evaluate each case separately, and document the case file accordingly.

    (9) Mandatory use of IEVS. (i) The State agency must obtain information through IEVS in accordance with procedures specified in § 272.8 of this chapter and use it to verify the eligibility and benefit levels of applicants and participating households.

    (ii) The State agency must access data through the IEVS in accordance with the disclosure safeguards and data exchange agreements required by part 272.

    (10) Use of SAVE. Households are required to submit documentation for each alien applying for SNAP benefits in order for the State agency to verify their immigration statuses. State agencies shall verify the validity of such documents through an immigration status verification system established under Section 1137 of the Social Security Act (42 U.S.C. 1320b-7) in accordance with § 272.11 of this chapter. USCIS maintains the SAVE system to conduct this verification. When using SAVE to verify immigration status, State agencies shall use the following procedures:

    (vi) State agencies may use information contained in SAVE search results to confirm whether a non-citizen has a sponsor who has signed a legally binding affidavit of support when evaluating the non-citizen's application for SNAP benefits in accordance with the deeming requirements described in § 273.4(c)(2).

    (j) * * *

    (2) * * *

    (vii) * * *

    (D) Any member of that household is ineligible under § 273.11(m) by virtue of a conviction for a drug-related felony, under § 273.11(n) for being a fleeing felon or a probation or parole violator, or under § 273.11(s) for having a conviction for certain crimes and not being in compliance with the sentence.

    (o) Each State agency shall require the individual applying for SNAP benefits to attest to whether the individual or any other member of the household has been convicted of a crime as an adult as described in § 273.11(s) and whether any convicted member is complying with the terms of the sentence.

    (1) The State agency shall update its application process, including certification and recertification procedures, to include the attestation requirement. It may be done in writing, verbally, or both, provided that the attestation is legally binding in the law of the State. Whatever procedure a State chooses to implement must be reasonable and consistent for all households applying for SNAP benefits.

    (2) The State agency shall document this attestation in the case file.

    (3) The State agency shall establish standards for determining what makes an attestation under this subsection questionable and for verifying a questionable attestation as described in § 273.2(f)(2).

    9. Revise § 273.5(b)(11)(ii), to read as follows:
    § 273.5 Students.

    (b) * * *

    (11) * * *

    (ii) An employment and training program under § 273.7, subject to the condition that the course or program of study, as determined by the State agency:

    (A) is part of a program of career and technical education (as defined in section 3 of the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2302) designed to be completed in not more than 4 years at an institution of higher education (as defined in section 102 of the Higher Education Act of 1965 (20 U.S.C. 2296); or

    (B) is limited to remedial courses, basic adult education, literacy, or English as a second language.

    10. Revise § 273.7(e)(1)(vi) to read as follows:
    § 273.7 Work provisions.

    (e) * * *

    (1) * * *

    (vi) Educational programs or activities to improve basic skills or otherwise improve employability including educational programs or activities determined by the State agency to expand the job search abilities or employability of those subject to the program.

    (A) Allowable educational programs or activities may include, but are not limited to, courses or programs of study that are part of a program of career and technical education (as defined in section 3 of the Carl D. Perkins Act of 2006), high school or equivalent educational programs, remedial education programs to achieve a basic literacy level, and instructional programs in English as a second language.

    (B) Only educational programs or activities that enhance the employability of the participants are allowable. A link between the education and job-readiness must be established for a component to be approved.

    11. In § 273.11: a. Amend paragraph (c)(1) introductory text by revising the sentence after the paragraph heading; and b. Add paragraphs (r) and (s).

    The revisions and additions to read as follows:

    § 273.11 Action on households with special circumstances.

    (c) * * *

    (1) * * * The eligibility and benefit level of any remaining household members of a household containing individuals determined ineligible because of a disqualification for an intentional Program violation, a felony drug conviction, their fleeing felon status, noncompliance with a work requirement of § 273.7, imposition of a sanction while they were participating in a household disqualified because of failure to comply with workfare requirements, or certain convicted felons as provided at § 273.11(s) shall be determined as follows:

    (r) Disqualification for Substantial Lottery or Gambling Winnings. Any household certified to receive benefits shall lose eligibility for benefits immediately upon receipt by any individual in the household of substantial lottery or gambling winnings, as defined in paragraph (r)(2) of this section. The household shall report the receipt of substantial winnings to the State agency in accordance with the reporting requirements contained in § 273.12(a)(5)(iii)(E)(3) and within the time-frame described in § 273.12(a)(2). The State agency shall also take action to disqualify any household identified as including a member with substantial winnings in accordance with § 272.17.

    (1) Regaining Eligibility. Such households shall remain ineligible until they meet the allowable resources and income eligibility requirements described in §§ 273.8 and 273.9, respectively.

    (2) Substantial Winnings.— (i) In General. Substantial lottery or gambling winnings are defined as a cash prize equal to or greater than $25,000 won in a single game before taxes or other withholdings. If multiple individuals shared in the purchase of a ticket, hand, or similar bet, then only the portion of the winnings allocated to the member of the SNAP household would be counted in the eligibility determination.

    (ii) Adjustment. The value of substantial winnings shall be adjusted annually, as needed, by multiplying the gross monthly income limit for a household of three by 12 months and rounding the value to the nearest $5000.

    (s) Disqualification for certain convicted felons. An individual shall not be eligible for SNAP benefits if:

    (1) The individual is convicted as an adult of:

    (i) Aggravated sexual abuse under Section 2241 of Title 18, United States Code;

    (ii) Murder under Section 1111 of Title 18, United States Code;

    (iii) An offense under Chapter 110 of Title 18, United States Code;

    (iv) A Federal or State offense involving sexual assault, as defined in 40002(a) of the Violence Against Women Act of 1994 (42 U.S.C. 13925(a)); or

    (v) An offense under State law determined by the Attorney General to be substantially similar to an offense described in clause (i), (ii), or (iii) and

    (2) The individual is not in compliance with the terms of the sentence of the individual or the restrictions under § 273.11(n).

    (3) The disqualification contained in this subsection shall not apply to a conviction if the conviction is for conduct occurring on or before February 7, 2014.

    12. In § 273.12: a. Add paragraph (a)(1)(viii) b. Revise paragraph (a)(4)(iv) c. Revise paragraph (a)(5)(iii)(E); and d. Revise paragraph (a)(5)(vi)(B).

    The revisions to read as follows:

    § 273.12 Requirements for Change Reporting Households.

    (a) * * *

    (1) * * *

    (viii) whenever a member of the household wins substantial lottery or gambling winnings in accord with § 273.11(r).

    (4) * * *

    (iv) Content of the quarterly report form. The State agency may include all of the items subject to reporting under paragraph (a)(1) of this section in the quarterly report, except changes reportable under paragraphs (a)(1)(vii) of this section, or may limit the report to specific items while requiring that households report other items through the use of the change report form.

    (5) * * *

    (iii) * * *

    (E) The periodic report form shall be the sole reporting requirement for any information that is required to be reported on the form, except that a household required to report less frequently than quarterly shall report:

    (1) when the household monthly gross income exceeds the monthly gross income limit for its household size in accordance with paragraph (a)(5)(v) of this section;

    (2) whenever able-bodied adults subject to the time limit of § 273.24 have their work hours fall below 20 hours per week, averaged monthly, and;

    (3) whenever a member of the household wins substantial lottery or gambling winnings in accord with § 273.11(r).

    (vi) * * *

    (B) * * *

    (1) The household has voluntarily requested that its case be closed in accordance with § 273.13(b)(12);

    (2) The State agency has information about the household's circumstances considered verified upon receipt;

    (3) A household member has been identified as a fleeing felon or probation or parole violator in accord with § 273.11(n);

    (4) There has been a change in the household's PA grant, or GA grant in project areas where GA and food stamp cases are jointly processed in accord with § 273.2(j)(2); or

    (5) The State agency has verified information (including information considered verified upon receipt) that a member of a SNAP household has won substantial lottery or gambling winnings in accordance with § 273.11(r).

    Dated: November 17, 2016. Audrey Rowe, Administrator, Food and Nutrition Service.
    [FR Doc. 2016-28520 Filed 11-30-16; 8:45 am] BILLING CODE 3410-30-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9430; Directorate Identifier 2016-NM-051-AD] RIN 2120-AA64 Airworthiness Directives; ATR-GIE Avions de Transport Régional Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to adopt a new airworthiness directive (AD) for certain ATR-GIE Avions de Transport Régional Model ATR42-500 and Model ATR72-102, -202, -212, and -212A airplanes. This proposed AD was prompted by reports of failure of emergency power supply units (EPSUs) in production and in service. This proposed AD would require an inspection to determine the part number and serial number of each EPSU, and replacement if necessary. We are proposing this AD to address the unsafe condition on these products.

    DATES:

    We must receive comments on this proposed AD by January 17, 2017.

    ADDRESSES:

    You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: 202-493-2251.

    Mail: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

    Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    For ATR service information identified in this NPRM, contact ATR—GIE Avions de Transport Régional, 1, Allée Pierre Nadot, 31712 Blagnac Cedex, France; telephone +33 (0) 5 62 21 62 21; fax +33 (0) 5 62 21 67 18; email [email protected]; Internet http://www.aerochain.com.

    For COBHAM service information identified in this NPRM, contact COBHAM 174-178 Quai de Jemmapes, 75010, Paris, France; telephone +33 (0) 1 53 38 98 98; fax +33 (0) 1 42 00 67 83.

    You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9430; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

    FOR FURTHER INFORMATION CONTACT:

    Shahram Daneshmandi, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1112; fax 425-227-1149.

    SUPPLEMENTARY INFORMATION: Comments Invited

    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 ADDRESSES section. Include “Docket No. FAA-2016-9430; Directorate Identifier 2016-NM-051-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

    Discussion

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2016-0070, dated April 11, 2016; corrected April 12, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”); to correct an unsafe condition for certain ATR-GIE Avions de Transport Régional Model ATR42-500 and Model ATR72 -102, -202, -212, and -212A airplanes. The MCAI states:

    Some failure cases have been reported of emergency power supply units (EPSU), Part Number (P/N) 301-3100 Amdt [Amendment] A, both on the production line and in service. The results of the technical investigations revealed that these failures could have been caused by a defective internal electronic component, which could affect the EPSU internal battery charge.

    To address this potential unsafe condition, ATR issued Service Bulletin (SB) ATR42-33-0050 and SB ATR72-33-1043 to provide instructions to inspect EPSUs.

    For the reason described above, this [EASA] AD requires identification and replacement of the affected EPSUs with serviceable units.

    This [EASA] AD was republished to correct two typographical errors in paragraph (3) of the [EASA] AD and to specify the correct Revision (3) of the Cobham SB 301-3100-33-002.

    You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9430.

    Related Service Information Under 1 CFR Part 51

    ATR has issued Service Bulletin ATR42-33-0050, Revision 01, dated January 26, 2016; and ATR Service Bulletin ATR72-33-1043, Revision 01, dated January 26, 2016. This service information describes procedures for inspecting an EPSU to determine the part number, serial number, and amendment level, and replacing the EPSU. These documents are distinct since they apply to different airplane models.

    Cobham has issued COBHAM Service Bulletin 301-3100-33-002, Revision 3, dated July 30, 2015, which describes procedures for modifying an EPSU by replacing the printed circuit board.

    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 ADDRESSES section.

    FAA's Determination and Requirements of This Proposed AD

    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.

    Costs of Compliance

    We estimate that this proposed AD affects 11 airplanes of U.S. registry.

    We estimate the following costs to comply with this proposed AD:

    Estimated Costs Action Labor cost Parts cost Cost per product Cost on
  • U.S. operators
  • Inspection 1 work-hour × $85 per hour = $85 per EPSU $0 $85 per EPSU (4 EPSUs per airplane) $3,740

    We estimate the following costs to do any necessary replacements that would be required based on the results of the proposed inspection. We have no way of determining the number of airplanes that might need these replacements:

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Replacement 1 work-hour × $85 per hour = $85 per EPSU Not available $85

    According to the manufacturer, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate.

    Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

    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.

    Regulatory Findings

    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.

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

    PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority:

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): ATR—GIE Avions de Transport Régional: Docket No. FAA-2016-9430; Directorate Identifier 2016-NM-051-AD. (a) Comments Due Date

    We must receive comments by January 17, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to the ATR-GIE Avions de Transport Régional airplanes, certificated in any category, identified in paragraphs (c)(1) and (c)(2) of this AD.

    (1) Model ATR42-500 airplanes, all manufacturer serial numbers (MSNs), except those on which ATR Modification 6780 has been embodied in production.

    (2) Model ATR72-102, -202, -212, and -212A airplanes, all MSNs on which ATR Model 3715 has been embodied in production, except those on which ATR Modification 6780 has been embodied in production.

    (d) Subject

    Air Transport Association (ATA) of America Code 33, Lights.

    (e) Reason

    This AD was prompted by reports of failure of emergency power supply units (EPSUs) in production and in service. We are issuing this AD to detect and correct defective internal electronic components, which could adversely affect the EPSU internal battery. This condition could result in a partial or total loss of emergency lighting, possibly affecting passenger evacuation during an emergency situation.

    (f) Compliance

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

    (g) Inspection of EPSU and Corrective Action

    Within 12 months after the effective date of this AD, inspect each EPSU on the airplane to determine the part number and serial number. For any EPSU having part number (P/N) 301-3100 Amendment (Amdt) A and a serial number identified in figure 1 to paragraph (g) of this AD, and that does not have a control sticker marked with “SIL 301-3100-33-001”: Except as provided by paragraph (i) of this AD, before further flight, replace the EPSU with a serviceable unit, as specified in paragraph (h) of this AD, in accordance with the Accomplishment Instructions of ATR Service Bulletin ATR42-33-0050, Revision 01, dated January 26, 2016; or Service Bulletin ATR72-33-1043, Revision 01, dated January 26, 2016; as applicable. A review of airplane maintenance records may be done in lieu of inspection of the EPSUs on the airplane if the part number and serial number of each EPSU can be positively determined from that review.

    Figure 1 to Paragraph (g) of This AD—Affected Serial Numbers of EPSU P/N 301-3100 Amdt A Affected Serial Numbers of EPSU P/N 301-3100 Amdt A 2905 4929 4960 4994 5025 5077 5113 5156 2906 4930 4961 4995 5026 5079 5114 5157 3401 4931 4962 4996 5027 5080 5115 5158 3697 4932 4963 4997 5028 5081 5116 5159 3825 4933 4964 4998 5029 5082 5117 5160 4343 4934 4965 4999 5031 5083 5118 5161 4420 4935 4966 5000 5032 5084 5119 5162 4634 4936 4967 5001 5033 5085 5120 5163 4706 4937 4968 5002 5034 5086 5121 5164 4707 4938 4969 5003 5038 5087 5122 5166 4708 4939 4970 5004 5041 5088 5123 5171 4709 4940 4971 5005 5042 5089 5124 5172 4710 4941 4972 5006 5046 5090 5125 5173 4711 4942 4973 5007 5047 5091 5126 5174 4712 4943 4976 5008 5050 5092 5127 5175 4713 4944 4977 5009 5052 5096 5128 5176 4714 4945 4978 5010 5054 5097 5129 5177 4715 4946 4979 5011 5055 5098 5130 5178 4716 4947 4980 5012 5056 5099 5131 5179 4717 4948 4981 5013 5058 5100 5132 5180 4718 4949 4982 5014 5059 5101 5133 5181 4719 4950 4983 5015 5065 5103 5134 5182 4720 4951 4984 5016 5067 5104 5135 5183 4721 4952 4985 5017 5068 5105 5136 5184 4722 4953 4986 5018 5069 5106 5138 5185 4723 4954 4987 5019 5070 5107 5139 5186 4724 4955 4988 5020 5071 5108 5140 5187 4745 4956 4989 5021 5072 5109 5147 None 4926 4957 4990 5022 5073 5110 5153 None 4927 4958 4991 5023 5075 5111 5154 None 4928 4959 4993 5024 5076 5112 5155 None (h) Definition of Serviceable EPSU

    For the purpose of this AD, a serviceable EPSU is one that meets the criteria in paragraph (h)(1), (h)(2), or (h)(3) of this AD.

    (1) Has P/N 301-3100 Amdt A and a serial number that is not included figure 1 to paragraph (g) of this AD.

    (2) Has P/N 301-3100 Amdt A, a serial number that is included in figure 1 to paragraph (g) of this AD, but has a control sticker marked with “SIL 301-3100-33-001.”

    (3) Has P/N 301-3100 Amdt B, or later amendment.

    (i) Alternative Modification of Affected EPSU

    In lieu of the replacement required by paragraph (g) of this AD, modification of an affected EPSU may be done in accordance with the Accomplishment Instructions of COBHAM Service Bulletin 301-3100-33-002, Revision 3, dated July 30, 2015.

    (j) Parts Installation Prohibition

    As of the effective date of this AD, no person may install on any airplane any EPSU having P/N 301-3100 Amdt A and a serial number identified in figure 1 to paragraph (g) of this AD, unless it has a control sticker marked with “SIL 301-3100-33-001”.

    (k) Credit for Previous Actions

    This paragraph provides credit for actions required by paragraph (g) of this AD, if those actions were performed before the effective date of this AD using the service information identified in paragraph (k)(1) or (k)(2) of this AD, provided it can be determined that no EPSU having a serial number listed in figure 1 to paragraph (g) of this AD has been installed on that airplane since the actions in the applicable service bulletin were completed.

    (1) ATR Service Bulletin ATR42-33-0050, dated December 11, 2015.

    (2) ATR Service Bulletin ATR72-33-1043, dated December 11, 2015.

    (l) Other FAA AD Provisions

    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: Shahram Daneshmandi, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1112; fax 425-227-1149. Information may be emailed to: [email protected] Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.

    (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 the European Aviation Safety Agency (EASA); or ATR—GIE Avions de Transport Régional's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature.

    (m) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2016-0070, dated April 11, 2016; corrected April 12, 2016; for related information. This MCAI may be found in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9430.

    (2) For ATR service information identified in this AD, contact ATR-GIE Avions de Transport Régional, 1, Allée Pierre Nadot, 31712 Blagnac Cedex, France; telephone +33 (0) 5 62 21 62 21; fax +33 (0) 5 62 21 67 18; email [email protected]; Internet http://www.aerochain.com. For Cobham service information identified in this AD, contact COBHAM 174-178 Quai de Jemmapes, 75010, Paris, France; telephone +33 (0) 1 53 38 98 98; fax +33 (0) 1 42 00 67 83. You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    Issued in Renton, Washington, on November 17, 2016. Phil Forde, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-28618 Filed 11-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2014-0363; Directorate Identifier 2014-NE-08-AD] RIN 2120-AA64 Airworthiness Directives; Rolls-Royce plc Turbofan Engines AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to supersede airworthiness directive (AD) 2015-17-19 that applies to all Rolls-Royce plc (RR) RB211 Trent 768-60, 772-60, and 772B-60 turbofan engines. AD 2015-17-19 requires inspection of the fan case low-pressure (LP) fuel tubes and associated clips and the fuel oil heat exchanger (FOHE) mounts and associated hardware. Since we issued AD 2015-17-19, fractures on the LP fuel return tube at mid-span locations were found with resulting fuel leaks. This proposed AD would require a modification, which terminates the repetitive inspections. We are proposing this AD to prevent failure of the fan case LP fuel tubes, which could lead to an in-flight shutdown, loss of thrust control, and damage to the airplane.

    DATES:

    We must receive comments on this proposed AD by January 30, 2017.

    ADDRESSES:

    You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: 202-493-2251.

    Mail: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

    Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    For service information identified in this NPRM, contact Rolls-Royce plc, Corporate Communications, P.O. Box 31, Derby, England, DE248BJ; phone: 011-44-1332-242424; fax: 011-44-1332-249936; email: http://www.rolls-royce.com/contact/civil_team.jsp; Web site: https://www.aeromanager.com. 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.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2014-0363; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the mandatory continuing airworthiness information, regulatory evaluation, any comments received, and other information. The address for the Docket Office (phone: 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

    FOR FURTHER INFORMATION CONTACT:

    Wego Wang, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7134; fax: 781-238-7199; email: [email protected]

    SUPPLEMENTARY INFORMATION: Comments Invited

    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 ADDRESSES section. Include “Docket No. FAA-2014-0363; Directorate Identifier 2014-NE-08-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

    Discussion

    On August 20, 2015, we issued AD 2015-17-19, Amendment 39-18252 (80 FR 55232, September 15, 2015), (“AD 2015-17-19”) for RR RB211 Trent 768-60, 772-60, and 772B-60 turbofan engines. AD 2015-17-19 requires inspection of the fan case LP fuel tubes and associated clips and the FOHE mounts and associated hardware. AD 2015-17-19 resulted from fuel leaks caused by damage to the fan case LP fuel tube. We issued AD 2015-17-19 to prevent failure of the fan case LP fuel tube, which could lead to an in-flight shutdown, loss of thrust control, and damage to the airplane.

    Actions Since AD 2015-17-19 Was Issued

    Since we issued AD 2015-17-19, fractures on the LP fuel return tube at mid-span locations were found with resulting fuel leaks. Also since we issued AD 2015-17-19, the European Aviation Safety Agency (EASA) has issued AD 2016-0120, dated June 17, 2016, which supersedes EASA AD 2014-0243, Revision 1, dated December 10, 2014 and Correction, dated March 23, 2015.

    Related Service Information Under 1 CFR Part 51

    RR has issued Alert Non-Modification Service Bulletin (NMSB) RB.211-73-AH522, Revision 4, dated January 18, 2016; Alert NMSB RB.211-73-AH837, Revision 1, dated November 6, 2015; and Alert Service Bulletin (ASB) RB.211-73-AJ366, Initial Issue and Supplement, dated May 3, 2016. Alert NMSB RB.211-73-AH522, Revision 4, dated January 18, 2016 describes procedures for inspecting and, if necessary, replacing worn rubber sections of the P-clip. Alert NMSB RB.211-73-AH837, Revision 1, dated November 6, 2015 describes procedures for inspecting and, if necessary, replacing the P-clip attaching bracket, supporting hardware, and low-pressure (LP) fuel tube.Alert SB RB.211-73-AJ366, Initial Issue and Supplement, dated May 3, 2016 describes procedures for modification of the routing of fuel, oil, and hydraulic tube assemblies. 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 ADDRESSES section.

    Other Related Service Information

    RR has issued SB RB.211-73-F343, Revision 4, dated May 26, 2011. The service information describes procedures for replacing the fuel tube assemblies and supporting hardware.

    FAA's Determination

    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 these same type designs.

    Proposed AD Requirements

    This proposed AD would retain the requirements of AD 2015-17-19, (80 FR 55232, September 15, 2015), except it would require a modification, which terminates the repetitive inspections. This proposed AD would add a mandatory terminating action to the repetitive inspections by incorporating ASB RB.211-73-AJ366, Initial Issue and Supplement, dated May 3, 2016.

    Costs of Compliance

    We estimate that this proposed AD affects 108 engines installed on airplanes of U.S. registry. We also estimate that it would take about 6 hours per engine to perform the inspections in this proposed AD. The average labor rate is $85 per hour. We also estimate that 54 of the engines will fail the inspections required by this AD. Replacement parts cost about $4,031 per engine.

    We also estimate that it would take about 50 hours per engine to modify each engine. The modification would cost about $150,000 per engine. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $16,931,754.

    Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

    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.

    Regulatory Findings

    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.

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

    PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority:

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by removing airworthiness directive (AD) 2015-17-19, Amendment 39-18252 (80 FR 55232, September 15, 2015), and adding the following new AD: Rolls-Royce plc: Docket No. FAA-2014-0363; Directorate Identifier 2014-NE-08-AD. (a) Comments Due Date

    We must receive comments by January 30, 2017.

    (b) Affected ADs

    This AD supersedes AD 2015-17-19, Amendment 39-18252 (80 FR 55232, September 15, 2015).

    (c) Applicability

    This AD applies to all Rolls-Royce plc (RR) RB211 Trent 768-60, 772-60, and 772B-60 turbofan engines, if fitted with fuel tube, part number (P/N) FW53576, which was incorporated through RR production modification 73-F343 or which were modified in service in accordance with RR Service Bulletin (SB) RB.211-73-F343, Revision 4, dated May 26, 2011.

    (d) Unsafe Condition

    This AD was prompted by fractures found on the low-pressure (LP) fuel return tube at mid span locations with resulting fuel leaks. We are issuing this AD to prevent failure of the fan case LP fuel tube, which could lead to an in-flight engine shutdown, loss of thrust control, and damage to the airplane.

    (e) Compliance

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

    (1) Within 800 flight hours (FH) after October 20, 2015 (the effective date of AD 2015-17-19, Amendment 39-18252 (80 FR 55232, September 15, 2015)), or prior to further flight, whichever occurs later, and thereafter at intervals not to exceed 800 FH, inspect the clip at the uppermost fan case LP fuel tube clip position, CP4881, and support bracket, P/N FW26692. Use Accomplishment Instructions, paragraph 3.A, of RR Alert Non-Modification Service Bulletin (NMSB) RB.211-73-AH837, Revision 1, dated November 6, 2015, or paragraph 3.A. or 3.B. of RR Alert NMSB RB.211-73-AH522, Revision 4, dated January 18, 2016, to do the inspection.

    (i) If the clip at the uppermost clip position, CP4881, fails inspection, before further flight, replace the clip with a part eligible for installation and inspect the fan case LP fuel tube, P/N FW53576, for fretting, and clips for cracks or failure, according to Accomplishment Instructions, paragraph 3.A. of RR Alert NMSB RB.211-73-AH837, Revision 1, dated November 6, 2015, or paragraph 3.A. or 3.B. of RR Alert NMSB RB.211-73-AH522, Revision 4, dated January 18, 2016.

    (ii) If the support bracket, P/N FW26692, fails inspection, before further flight, replace the bracket with a part eligible for installation and inspect the fan case LP fuel tube, P/N FW53576, and clips for cracks or failure, according to Accomplishment Instructions, paragraph 3.A. of RR Alert NMSB RB.211-73-AH837, Revision 1, dated November 6, 2015, or paragraph 3.A. or 3.B. of RR Alert NMSB RB.211-73-AH522, Revision 4, dated January 18, 2016.

    (2) Within 4,000 FH since new or 800 FH after October 20, 2015 (the effective date of AD 2015-17-19, Amendment 39-18252 (80 FR 55232, September 15, 2015)), or prior to further flight, whichever occurs later, and thereafter at intervals not to exceed 4,000 FH, inspect the fan case LP fuel tube, P/N FW53576, and clips, and the fuel oil heat exchanger (FOHE) mounts and hardware, for damage, wear, or fretting. Use paragraph 3.A. or 3.B., Accomplishment Instructions, of RR Alert NMSB RB.211-73-AH522, Revision 4, dated January 18, 2016, to do the inspection.

    (i) If the fan case LP fuel tube, P/N FW53576, fails inspection, before further flight, replace the fuel tube and clips with parts eligible for installation.

    (ii) If any FOHE mount or hardware shows signs of damage, wear, or fretting, before further flight, replace the damaged part with a part eligible for installation.

    (3) At each shop visit after the effective date of this AD, inspect the fan case LP fuel tubes, P/Ns FW26589, FW36335, FW26587, FW53577, and FW53576, and clips, and the FOHE mounts and hardware, for damage, wear, or fretting. Use paragraphs 3.B.(1) and 3.B.(2) of RR Alert NMSB RB.211-73-AH522, Revision 4, dated January 18, 2016, to do the inspection.

    (i) If any fan case LP fuel tube fails inspection, before further flight, replace the fuel tube and clips with parts eligible for installation.

    (ii) If any FOHE mount or hardware shows signs of damage, wear, or fretting, before further flight, replace the damaged part with a part eligible for installation.

    (4) If you replace any fan case LP fuel tube, clip, FOHE mount, or hardware as a result of the inspections in paragraphs (e)(1), (2), or (3) of this AD, you must still continue to perform the repetitive inspections specified in paragraphs (e)(1), (2), and (3) of this AD, until you comply with paragraph (e)(6) of this AD.

    (5) No reports requested in any of the Alert NMSBs that are referenced in paragraphs (e)(1), (2), and (3) of this AD are required by this AD.

    (6) During the next shop visit after the effective date of this AD, modify the engine in accordance with the Accomplishment Instructions, paragraphs (B) and (C), Section 3, of RR Alert Service Bulletin (ASB) RB.211-73-AJ366, Initial Issue and Supplement, dated May 3, 2016.

    (7) After the effective date of this AD, do not install an M07 module, unless it is modified in accordance with the Accomplishment Instructions, paragraphs (B) and (C), Section 3, of RR ASB RB.211-73-AJ366, Initial Issue and Supplement, dated May 3, 2016.

    (f) Credit for Previous Actions

    If, before the effective date of this AD, you performed the inspections and corrective actions required by paragraph (e) of this AD using RR NMSB RB.211-73-G848, Revision 3, dated June 12, 2014; or RR Alert NMSB RB.211-73-AH837, Revision 1, dated November 6, 2015; or paragraph 3.A. or 3.B. of RR Alert NMSB RB.211-73-AH522, Revision 4, dated January 18, 2016; or any earlier version of those NMSBs, you met the inspection requirements in paragraph (e) of this AD.

    (g) Mandatory Terminating Action

    Modification of an engine, as required by paragraph (e)(6) of this AD, constitutes terminating action for the repetitive inspections required by paragraphs (e)(1), (2), (3), and (4) of this AD.

    (h) Definitions

    For the purposes of this AD:

    (1) An “engine shop visit” is the induction of an engine into the shop for maintenance involving the separation of pairs of major mating engine flanges, except that the separation of engine flanges solely for the purposes of transportation without subsequent engine maintenance is not an engine shop visit.

    (2) The fan case LP fuel tubes and clips, and the FOHE mounts and hardware, are eligible for installation if they have passed the inspection requirements of paragraphs (e)(1), (2), and (3) of this AD.

    (i) Alternative Methods of Compliance (AMOCs)

    The Manager, Engine Certification Office, FAA, may approve AMOCs to this AD. Use the procedures found in 14 CFR 39.19 to make your request. You may email your request to: [email protected]

    (j) Related Information

    (1) For more information about this AD, contact Wego Wang, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7134; fax: 781-238-7199; email: [email protected]

    (2) Refer to MCAI European Aviation Safety Agency (EASA) AD 2016-0120, dated June 17, 2016, which supersedes EASA AD 2014-0243, Revision 1, dated December 10, 2014 and Correction dated March 23, 2015, for more information. You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating it in Docket No. FAA-2014-0363.

    (3) Rolls-Royce plc has issued SB RB.211-73-F343, Revision 4, dated May 26, 2011; Alert NMSB RB.211-73-AH522, Revision 4, dated January 18, 2016; Alert NMSB RB.211-73-AH837, Revision 1, dated November 6, 2015; and ASB RB.211-73-AJ366, Initial Issue and Supplement, dated May 3, 2016. These service bulletins can be obtained from Rolls-Royce plc, using the contact information in paragraph (j)(4) of this AD.

    (4) For service information identified in this AD, contact Rolls-Royce plc, Corporate Communications, P.O. Box 31, Derby, England, DE248BJ; phone: 011-44-1332-242424; fax: 011-44-1332-249936; email: http://www.rolls-royce.com/contact/civil_team.jsp; Web site: https://www.aeromanager.com.

    (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.

    Issued in Burlington, Massachusetts, on November 2, 2016. Robert J. Ganley, Acting Manager, Engine & Propeller Directorate, Aircraft Certification Service.
    [FR Doc. 2016-27923 Filed 11-30-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2016-9178; Airspace Docket No. 16-ASO-12] RIN 2120-AA66 Proposed Amendment of VOR Federal Airways; Eastern United States AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    This action proposes to modify VOR Federal airways V-16, V-94 and V-124, in the eastern United States due to the planned decommissioning of the Jacks Creek, TN, VOR/DME navigation aid.

    DATES:

    Comments must be received on or before January 17, 2017. The Director of the Federal Register approves this incorporation by reference action under title 1, Code of Federal Regulations, part 51, subject to the annual revision of FAA, Order 7400.11 and publication of conforming amendments.

    ADDRESSES:

    Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE., West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: 1 (800) 647-5527 or (202) 366-9826. You must identify FAA Docket No. FAA-2016-9178 and Airspace Docket No. 16-ASO-12 at the beginning of your comments. You may also submit comments through the Internet at http://www.regulations.gov.

    FAA Order 7400.11A, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at http://www.faa.gov/air_traffic/publications/. For further information, you can contact the Airspace Policy Group, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone: (202) 267-8783. The Order is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of FAA Order 7400.11A at NARA, call (202) 741-6030, or go to http://www.archives.gov/federal_register/code_of_federal-regulations/ibr_locations.html.

    FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

    FOR FURTHER INFORMATION CONTACT:

    Paul Gallant, Airspace Policy Group, Office of Airspace Services, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone: (202) 267-8783.

    SUPPLEMENTARY INFORMATION: Authority for This Rulemaking

    The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. 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. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify three air traffic service route structures in the eastern United States to maintain the efficient flow of air traffic.

    Comments Invited

    Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.

    Communications should identify both docket numbers (FAA Docket No. FAA-2016-9178 and Airspace Docket No. 16-ASO-12) and be submitted in triplicate to the Docket Management Facility (see ADDRESSES section for address and phone number). You may also submit comments through the Internet at http://www.regulations.gov.

    Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2016-9178 and Airspace Docket No. 16-ASO-12.” The postcard will be date/time stamped and returned to the commenter.

    All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

    Availability of NPRM's

    An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/air_traffic/publications/airspace_amendments/.

    You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Eastern Service Center, Federal Aviation Administration, Room 210, 1701 Columbia Ave., College Park, GA, 30337.

    Availability and Summary of Documents for Incorporation by Reference

    This document proposes to amend FAA Order 7400.11A, Airspace Designations and Reporting Points, dated August 3, 2016 and effective September 15, 2016. FAA Order 7400.11A is publicly available as listed in the ADDRESSES section of this proposed rule. FAA Order 7400.11A lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

    The Proposal

    The FAA is proposing an amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 to modify the descriptions of VOR Federal airways V-16, V-94 and V-124, due to the planned decommissioning of the Jacks Creek, TN, VOR/DME. The proposed route changes are described below.

    V-16: V-16 extends between Los Angeles, CA, and Boston, MA. The FAA proposes to modify that portion of the route that reads “. . . Marvell, AR; Holly Springs, MS; Jacks Creek, TN; Shelbyville, TN . . . .” To read as follows: “. . . Marvell, AR; to Holly Springs, MS. From Shelbyville, TN; . . . .” thus eliminating Jacks Creek, TN, from the route.

    V-94: V-94 extends between Blythe, CA and Bowling Green, KY. The FAA proposes to terminate the route at Holly Springs, MS, thus eliminating the segments of the route from Holly Springs, MS, through Jacks Creek, TN, to Bowling Green, KY.

    V-124: V-124 extends between Bonham, TX and Graham, TN. The FAA proposes to terminate the route at Gilmore, AR, thus eliminating the segments from Gilmore, AR, through Jacks Creek, TN, to Graham, TN.

    Domestic VOR Federal airways are published in paragraph 6010(a) of FAA Order 7400.11A, dated August 3, 2016 and effective September 15, 2016, which is incorporated by reference in 14 CFR 71.1. The VOR Federal airways listed in this document would be subsequently published in the Order.

    Regulatory Notices and Analyses

    The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

    Environmental Review

    This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

    List of Subjects in 14 CFR Part 71

    Airspace, Incorporation by reference, Navigation (air).

    The Proposed Amendment

    In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

    PART 71—DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 1. The authority citation for part 71 continues to read as follows: Authority:

    49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.

    § 71.1 [Amended]
    2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.11A, Airspace Design ations and Reporting Points, dated August 3, 2016 and effective September 15, 2016, is amended as follows: Paragraph 6010(a) Domestic VOR Federal Airways. V-16 [Amended]

    From Los Angeles, CA; Paradise, CA; Palm Springs, CA; Blythe, CA; Buckeye, AZ; Phoenix, AZ; INT Phoenix 155° and Stanfield, AZ, 105° radials; Tucson, AZ; San Simon, AZ; INT San Simon 119° and Columbus, NM, 277° radials; Columbus; El Paso, TX; Salt Flat, TX; Wink, TX; INT Wink 066° and Big Spring, TX, 260° radials; Big Spring; Abilene, TX; Bowie, TX; Bonham, TX; Paris, TX; Texarkana, AR; Pine Bluff, AR; Marvell, AR; to Holly Springs, MS. From Shelbyville, TN; Hinch Mountain, TN; Volunteer, TN; Holston Mountain, TN; Pulaski, VA; Roanoke, VA; Lynchburg, VA; Flat Rock, VA; Richmond, VA; INT Richmond 039° and Patuxent, MD, 228° radials; Patuxent; Smyrna, DE; Cedar Lake, NJ; Coyle, NJ; INT Coyle 036° and Kennedy, NY, 209° radials; Kennedy; INT Kennedy 040° and Calverton, NY 261° radials; Calverton; Norwich, CT; Boston, MA. The airspace within Mexico and the airspace below 2,000 feet MSL outside the United States is excluded. The airspace within Restricted Areas R-5002A, R-5002C, and R-5002D is excluded during their times of use. The airspace within Restricted Areas R-4005 and R-4006 is excluded.

    V-94 [Amended]

    From Blythe, CA, INT Blythe 094° and Gila Bend, AZ, 299° radials; Gila Bend; Stanfield, AZ; 55 miles, 74 miles, 95 MSL, San Simon, AZ; Deming, NM; Newman, TX; Salt Flat, TX; Wink, TX; Midland, TX; Tuscola, TX; Glen Rose, TX; Cedar Creek, TX: Gregg County, TX; Elm Grove, LA; Monroe, LA; Greenville, MS; to Holly Springs, MS.

    V-124 [Amended]

    From Bonham, TX, via Paris, TX; Hot Springs, AR; Little Rock, AR; to Gilmore, AR.

    Issued in Washington, DC, on November 22, 2016. Leslie M. Swann, Acting Manager, Airspace Policy Group.
    [FR Doc. 2016-28728 Filed 11-30-16; 8:45 am] BILLING CODE 4910-13-P
    LIBRARY OF CONGRESS Copyright Office 37 CFR Parts 201, 202 [Docket No. 2016-8] Group Registration of Contributions to Periodicals AGENCY:

    U.S. Copyright Office, Library of Congress.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The U.S. Copyright Office is proposing to amend the regulation governing the group registration option for contributions to periodicals to reflect certain upgrades that will soon be made to the electronic registration system. The proposed rule will require groups of contributions to be filed through the Office's electronic registration system. In addition, it will modify the deposit requirement for this option by requiring applicants to submit their contributions in a digital format and to upload those files through the electronic system. The proposed rule will increase the efficiency of the registration process for both the Office and copyright owners alike.

    DATES:

    Comments on the proposed rule must be made in writing and must be received in the U.S. Copyright Office no later than January 3, 2017.

    ADDRESSES:

    For reasons of government efficiency, the Copyright Office is using the regulations.gov system for the submission and posting of public comments in this proceeding. All comments are therefore to be submitted electronically through regulations.gov. Specific instructions for submitting comments are available on the Copyright Office Web site at http://copyright.gov/rulemaking/grcp/. If electronic submission of comments is not feasible due to lack of access to a computer and/or the Internet, please contact the Office using the contact information below for special instructions.

    FOR FURTHER INFORMATION CONTACT:

    Robert J. Kasunic, Associate Register of Copyrights and Director of Registration Policy and Practice, or Erik Bertin, Deputy Director of Registration Policy and Practice, by telephone at 202-707-8040.

    SUPPLEMENTARY INFORMATION:

    I. Background

    When Congress enacted the Copyright Act of 1976, it authorized the Register of Copyrights (the “Register”) to issue regulations specifying the administrative classes of works for the purpose of seeking a registration, and the nature of the deposit required for each such class. In addition, Congress gave the Register the discretion to allow groups of related works to be registered with one application and one filing fee, a procedure known as “group registration.” See 17 U.S.C. 408(c)(1). Pursuant to this authority, the Register issued regulations permitting the U.S. Copyright Office (the “Office”) to issue group registrations for certain limited categories of works, provided that certain conditions have been met. See generally 37 CFR 202.3(b)(5)-(10).

    Without prejudice to the Register's general authority to create group registration options under section 408(c)(1) of the Copyright Act at the Register's discretion, Congress also specifically directed the Register, under section 408(c)(2), to issue regulations allowing works by the same individual author to be registered as a group, if those works were first published within a twelve-month period as contributions to periodicals (including newspapers).1 17 U.S.C. 408(c)(2). In particular, section 408(c)(2) states that “the Register of Copyrights shall establish regulations specifically permitting a single registration for a group of works by the same individual author, all first published as contributions to periodicals, including newspapers, within a twelve-month period, on the basis of a single deposit, application, and registration fee, under the following conditions—(A) if the deposit consists of one copy of the entire issue of the periodical, or of the entire section in the case of a newspaper, in which each contribution was first published; and (B) if the application identifies each work separately, including the periodical containing it and its date of first publication.” Id.

    1 A bill introduced last year in Congress would maintain the Office's general authority to create group registration options, but would eliminate the provision specifically directing the Office to establish a group option for contributions to periodicals and specifying the precise requirements for that option. See Copyright Office for the Digital Economy Act, H.R. 4241, 114th Cong., § 3(b)(1) (2015).

    As the legislative history explains, allowing “a number of related works to be registered together as a group represent[ed] a needed and important liberalization of the law.” H.R. Rep. No. 94-1476, at 154 (1976); S. Rep. No. 94-473, at 136 (1975). Congress recognized that requiring applicants to submit separate applications for certain types of works may be so burdensome and expensive that authors and copyright owners may forgo registration altogether, since copyright registration is not a prerequisite to copyright protection. Id. If copyright owners do not submit their works for registration under this permissive system, the public record will not contain any information concerning those works. This creates a void in the public record that diminishes the value of the Office's database. At the same time, when large numbers of works are bundled together in one application, information about the individual works may not be adequately captured. Therefore, group registration options require careful balancing of the need for an accurate public record and the need for an efficient method of facilitating the registration of such works.

    II. The Current Group Registration Option for Contributions to Periodicals

    In 1978, the Office issued an interim rule that established a procedure for registering groups of contributions to periodicals. See 43 FR 965 (Jan. 5, 1978). This interim rule is largely still in effect today, with the exception of one amendment discussed below. See 37 CFR 202.3(b)(8). The Office refers to this procedure as a “group registration for contributions to periodicals” or “GRCP.” Applicants may use this option if they satisfy the requirements set forth in the regulation. First, all the contributions must be created by the same individual, and none of them can be a work made for hire. Id. § 202.3(b)(8)(i)(A), (B). Second, all the works must be first published as a contribution to a periodical, and they must be published within a twelve-month period (e.g., October 1, 2014 through September 30, 2015). In other words, the contributions do not have to be published during the same calendar year, but “the earliest and latest contributions must not have been first published more than twelve months apart.” Id. § 202.3(b)(8)(i)(C) n.2. And, third, if the contributions were first published before March 1, 1989, each contribution must contain an appropriate copyright notice. Id. § 202.3(b)(8)(i)(D).

    The current regulation states that the applicant must complete and submit a paper application using Form TX, Form VA, or Form PA. It also states that the application “should be filed in the [administrative] class appropriate to the nature of authorship in the majority of the contributions.” 2 Id. 202.3(b)(8)(ii)(A) & n.3. For instance, Form TX should be used if the group primarily contains textual material (such as articles, editorials, essays, etc.), Form VA should be used if the group primarily contains visual material (such as photographs, cartoons, illustrations, etc.), and Form PA should be used if the group primarily contains works of the performing arts (such as music, sound recordings, dramas, etc.). In addition, the applicant must complete and submit an “adjunct form” known as Form GR/CP, which is specifically designed for providing information about the particular group of contributions that is being registered. Id. § 202.3(b)(8)(ii)(B).

    2 There is a limited exception to this rule that is set forth in footnote 3 to the current regulation. As discussed in Section III.A.1 below, that exception is now obsolete. Therefore, the Office is proposing to remove footnote 3 from the regulation.

    In all cases, the application must “contain the information required by the form and its accompanying instructions.” Id. § 202.3(b)(8)(ii)(A), (B). The instructions for Form GR/CP state that the application must identify “each contribution separately, including the periodical containing it and its date of first publication.” 3 Form GR/CP (http://copyright.gov/forms/formgr_tx.pdf). Specifically, applicants are instructed to provide the title of each contribution that is included in the group, the title of the periodical where each contribution was first published, the volume and issue number (if any) and issue date for each periodical, and the page number where each contribution appeared. The instructions for Form GR/CP also state that the applicant must satisfy one other requirement: The copyright claimant for each contribution must be the same person or organization. This requirement does not appear in the current regulation, although it has appeared in the instructions for Form GR/CP since at least July 2012.

    3 This same language appears in section 408(c)(2)(B) of the statute, as well as the legislative history for that provision. H.R. Rep. No. 94-1476, at 155 (1976); S. Rep. No. 94-473, at 137 (1975).

    Under the current regulations there is no limit on the number of contributions that may be registered with the GRCP option. The current regulations also provide that the applicant must submit the contributions in the precise form in which they were first published, and the copies must be submitted in a physical—rather than a digital—form.

    When the Office established the group option for contributions to periodicals, the regulation stated that the applicant must submit “one copy of the entire issue of the periodical, or of the entire section in the case of a newspaper, in which each contribution was first published.” See 43 FR at 967. The Federal Register notice announcing this rule explained that the deposit requirements for this group option “essentially follow the conditions set forth in [section 408(c)(2) of] the statute.” Id. at 966. This imposed a hardship on applicants who did not have a copy of the entire issue or the entire section where the contribution was first published. To address this concern, the Office began granting special relief from the deposit requirements on a case-by-case basis and allowed applicants to submit their works in other formats. See 67 FR 10329 (Mar. 7, 2002).

    Based on this experience, the Office amended the regulation in 2002 to allow applicants to submit their contributions in any of the following physical formats: (i) One copy of the entire issue of the periodical that contains the contribution; (ii) one copy of the entire section of a newspaper that contains the contribution; (iii) tear sheets or proof copies of the contribution; (iv) a photocopy of the contribution; (v) a photocopy of the entire page from the periodical that contains the contribution; (vi) the entire page from the periodical that contains the contribution, either cut or torn from the periodical; (vii) the contribution cut or torn from the periodical; (viii) photographs or photographic slides of the contribution, provided that the content of the contribution is clear and legible; or (ix) photographs or photographic slides of the entire page from the periodical that contains the contribution, provided that the content of the contribution is clear and legible. See 37 CFR 202.3(b)(8)(i)(E); 67 FR at 10329. The Office explained that expanding the list of acceptable formats would be “broadly consistent” “with the spirit of administrative flexibility Congress indicated the Register had in order to ensure that the deposit requirement was reasonable and non-burdensome for the applicant.” 67 FR at 10329 (citing H.R. Rep. No. 94-1476, at 150-55 (1976)). It also explained that this would not diminish the quality of the public record, because applicants were expected to provide bibliographic information on Form GR/CP, which could be used to identify the periodicals where the contributions were first published (even if the applicant did not submit a copy of the actual publications). See id.

    III. The Proposed Rule

    The Office is proposing to amend the regulation that governs the group registration option for contributions to periodicals (the “Proposed Rule”). As explained in greater detail below, the Proposed Rule will make several notable changes to the Office's GRCP regulation. First, it will improve the efficiency of the GRCP option by requiring applicants to register their contributions through the Office's electronic registration system (instead of submitting a paper application). Second, it will modify the eligibility criteria for the GRCP option by providing a more specific definition of the term “periodical,” and by specifically requiring the contributions to be owned by the same copyright claimant. Third, it will require applicants to register their contributions either in Class TX or Class VA (but not Class PA), and to identify the date of publication for each contribution and the periodical where each contribution was first published. Fourth, it will modify the deposit requirements for this option by requiring applicants to submit a digital copy of each contribution and to upload these copies through the electronic registration system (instead of submitting a physical copy of each contribution).

    The Proposed Rule also memorializes the Office's longstanding position regarding the scope of a registration for a group of contributions to periodicals. It also confirms that the Office may refuse to issue a group registration or may cancel a group registration if it determines that a party failed to comply with the requirements for that option.4

    4 As discussed in Sections III.F and G, this aspect of the Proposed Rule will apply to any group option that the Office creates under Section 408(c)—including the group options for serials, daily newspapers, daily newsletters, photographs, and databases. The Office is not proposing to make any other changes to those group options as part of this rulemaking.

    Each of these proposals is discussed below.

    A. Application Requirements 1. Online Registration

    Once this rule is finalized, it will be possible to register groups of contributions to periodicals through the Office's electronic registration system. The Office generally has allowed and encouraged applicants to register their works through this system since 2007. When the system was introduced, applicants could submit their works on an individual basis or as part of a collective work or an unpublished collection. See 72 FR 36883, 36884-85 (July 6, 2007). However, applicants could not submit a group registration covering contributions to periodicals, because the system was not designed to take in the information that is required for such a registration. Instead, applicants were required to file their claims with a paper application submitted on Form TX, Form VA, or Form PA, together with Form GR/CP.

    In February 2015 the Office completed a comprehensive analysis of its electronic registration system with input from technical experts and stakeholders. This analysis will support the Office's long-term goals of creating both a better interface and a better public record. See U.S. Copyright Office, Office of the Chief Information Officer, Report and Recommendations of the Technical Upgrades Special Project Team (February 2015), available at http://copyright.gov/docs/technical_upgrades/usco-technicalupgrades.pdf; see also 78 FR 17722 (Mar. 22, 2013). In December 2015 the Register issued a strategic plan that sets forth the Office's performance objectives for the next five years. It provides a roadmap for re-envisioning almost all of the services that the Office provides, including how applicants register claims, submit deposits, record documents, share data, and access expert resources. With respect to information technology, the plan calls for “a robust and flexible technology enterprise that is dedicated to the current and future needs of a modern copyright agency.” U.S. Copyright Office, Strategic Plan 2016-2020: Positioning the United States Copyright Office for the Future, at 35 (Dec. 1, 2014) (“Strategic Plan 2016-2020”), available at http://copyright.gov/reports/strategic-plan/USCO-strategic.pdf. At the direction of Congress,5 the Office also developed a detailed IT plan, and obtained public comments on specific strategies, costs, and timelines for technology objectives. U.S. Copyright Office, Provisional Information Technology Modernization Plan and Cost Analysis (Feb. 29, 2016), available at http://www.copyright.gov/reports/itplan/technology-report.pdf.

    5 H.R. Rep. No. 114-110, at 16-17 (2015).

    In the meantime, the Office has made some enhancements to the current system to benefit authors, the Office, and the public at large. Under the Proposed Rule, applicants will be required to use an online application specifically designed for GRCP as a condition for using this group option. Once the Proposed Rule goes into effect, the Office will no longer accept groups of contributions that are submitted with a paper application on Form TX, Form VA, Form PA, or Form GR/CP. In such cases the Office will ask the applicant to resubmit the claim using the online application, which may change the effective date of registration that is assigned to the claim. The Office invites comment on this proposal, including whether the Office should eliminate the paper applications for GRCP, phase them out after a specified period of time, or continue to offer them for applicants who prefer to use the paper-based system.

    When completing the online application, applicants will be asked to provide the same information that is currently requested in Form TX, Form VA, and Form GR/CP. Consistent with Section 408(c)(2) of the statute, applicants will be required to provide the title and date of first publication for each contribution in the group, as well as the title of the periodical where each contribution was first published. If an applicant fails to provide this information, the application will not be accepted by the electronic system. In addition, applicants will be given an opportunity to provide the International Standard Serial Number (“ISSN”) that has been assigned to the periodical (if any), as well as the volume, number, issue date, and relevant page numbers (if any) for the particular issue where the contribution was first published. If the contributions were published as part of a continuing series of works by the same author, such as an advice column, an editorial column, a cartoon strip, or the like, the applicant will be given an opportunity to provide the title (if any) that may be used to identify the entire series of works.

    The current regulation states that an applicant may register a group of contributions to periodicals in Class TX, VA, or PA by submitting the appropriate application for that class. 37 CFR 202.3(b)(8)(ii)(A) & n.3. The Proposed Rule, however, will allow applicants to register their claims only in Class TX or Class VA, and will eliminate the provision that allows a group of contributions to be registered in Class PA. The Office routinely registers contributions to periodicals in Class TX and Class VA, but has no institutional memory of having ever registered a claim in Class PA. Presumably, this is due to the fact that it would be extremely unusual for a musical work, a dramatic work, a choreographic work, a pantomime, a motion picture, or an audiovisual work to be first published as a contribution to a periodical.

    The Proposed Rule states that applicants should register their claims in Class TX if a majority of the contributions predominantly consist of text, and should register their claims in Class VA if a majority of the contributions predominantly consist of photographs, illustrations, artwork, or other visual material. A similar provision appears in the current regulation; the Proposed Rule simply reiterates this requirement.

    As discussed above, the current regulation also contains a limited exception to this rule, which is set forth in footnote 3 to the regulation. See 37 CFR 202.3(b)(8)(ii)(A) n.3. The Proposed Rule will eliminate this footnote, because it is obsolete.

    When Congress enacted the Copyright Act of 1976 it contained a provision known as the “manufacturing clause,” which was set forth in Section 601 of the statute. Briefly stated, that provision prohibited the importation or distribution “of copies of a work consisting preponderantly of nondramatic literary material that is in the English language,” unless that material was “manufactured in the United States or Canada.” 17 U.S.C. 601 (1978) (repealed by Pub. L. 111-295, 4(a), 124 Stat. 3180 (2010)). Footnote 3 to the regulation that governs GRCP contains similar language. It states that “if any of the contributions consists preponderantly of nondramatic literary material that is in the English language, the basic application for the entire group should be submitted on Form TX.” 37 CFR 202.3(b)(8)(ii)(A) n.3. The reason for this limitation is that when the Office adopted the regulation in 1978, Form TX contained a space that asked the applicant to identify the country where the copies were printed. The Office used this information to determine whether the work was subject to the manufacturing clause. (The Office did not include this space on Form VA or Form PA, because as mentioned above, the manufacturing clause only applied to nondramatic literary works.)

    The manufacturing clause expired in 1986, Congress removed that provision from the statute in 2010, and as a result, the Office no longer asks for “country of origin” information on Form TX. Public Law 97-215, 96 Stat. 178, 178-79 (1982); Public Law 111-295, 4(a), 124 Stat. 3180, 3180 (2010). Thus, footnote 3 to the current regulation no longer serves any purpose.

    2. Supplementary Registration

    A supplementary registration is a special type of registration that may be used “to correct an error in a copyright registration or to amplify the information given in a registration,” including a registration for a group of related works. 17 U.S.C. 408(d). Specifically, it identifies an error or omission in an existing registration (referred to herein as a “basic registration”) and places the corrected information or additional information in the public record. The Office often refers to this type of registration as a “CA,” which stands for “correction and amplification.”

    The Office is issuing a separate notice of proposed rulemaking (published elsewhere in this volume of the Federal Register, and referred to herein as the “CA Rulemaking”) that will modify the regulation that governs this procedure. Under the rule proposed in the CA Rulemaking, applicants will be required to file an online application in order to correct or amplify the information set forth in a basic registration for any work that is capable of being registered through the electronic system, rather than filing a paper application. This online-filing requirement will apply to supplementary registrations for groups of contributions to periodicals—even if those contributions were originally registered with a paper application submitted on Forms TX, VA, and GR/CP. When the rule proposed in the CA Rulemaking goes into effect, applicants will be required to file an online application in order to correct or amplify a basic registration for a GRCP claim. If an applicant attempts to use a paper application, the Office will ask the applicant to resubmit the claim using the online form.

    The Office is inviting comment on this proposal, including whether the Office should eliminate the paper application for seeking a supplementary registration, phase out this option after a specified period of time, or continue to offer this option for applicants who prefer to use the paper-based system. Comments concerning this proposal should be submitted as part of the CA Rulemaking, and should not be submitted as part of this rulemaking on GRCP.

    3. Policy Considerations Supporting Online-Only Registration

    A substantial majority of the U.S. population has access to the internet,6 and therefore, the Office expects that most authors will be able to use the electronic system.7 That said, the Office recognizes that millions of Americans do not have broadband service, and recognizes that eliminating the paper application may impose a burden on authors who fall within that segment of the population.8 Nevertheless, the Office believes that the benefits of requiring applicants to use the online application outweigh the potential burden on authors who do not have direct access to the internet.

    6 The Pew Research Center found that 84% of adults use the internet, including 85% of the people in urban and suburban communities and 78% of the people in rural communities. Pew Research Center, Americans' Internet Access: 2000-2015, at 2, 10 (June 26, 2015), available at http://www.pewinternet.org/files/2015/06/2015-06-26_internet-usage-across-demographics-discover_FINAL.pdf.

    7 Approximately 94% of the claims submitted in fiscal year 2015 were filed through the electronic system, while 6% of the claims were submitted on a paper application.

    8 The Federal Communications Commission reported that 17% of the population does not have access to a broadband service with connection speeds of twenty-five megabits per second (“mbps”) for downloads and three mbps for uploads. This figure includes 8% of the people who live in urban areas, 53% of the people in rural areas, and 63% of the people in U.S. territories and Tribal lands. Federal Communications Commission, 2015 Broadband Progress Report 4 (Jan. 29, 2015), available at https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-10A1.pdf.

    Providing title and publication information with a paper application can be tedious and time consuming, especially when applicants submit dozens or even hundreds of contributions in a group registration. Examining these types of claims also imposes substantial burdens on the Office, because the cataloging information for each contribution must be copied from the application and typed into the Office's electronic system by hand. In some cases, examiners have spent an entire day processing a single claim, which has resulted in corresponding delays in issuing certificates of registration. Moreover, the increasing demand on the Office's limited resources has had an adverse effect on the examination of other types of works within the Literary and Visual Arts Divisions.

    If an author does not have broadband at home, at the home of a relative, a friend, or a neighbor, or at her place of employment, there are other options for registering a group of contributions to periodicals. If the copyright owner has a tablet or laptop, she could complete and submit the online application at a coffee shop, a bookstore, or any other place where wi-fi or cellular service is available.9 She could log into the electronic system at a public library or other institution that provides computers with Internet access. Alternatively, the author could hire an attorney to submit the application on her behalf, either by paying for the attorney's services or by obtaining pro bono representation.10 The Office also notes that a number of companies will prepare an application and file it with the Office for a fee. These companies typically provide this service for authors who wish to register a single work, but they could conceivably expand their offering to include groups of contributions to periodicals.

    9 When filing an application for a supplementary registration there is no need to upload a copy of the work that is covered by the basic registration. Thus, applicants will be able to submit these types of claims with a tablet or other wi-fi enabled device. In some cases, the registration specialist may need to compare the information provided in the application for supplementary registration with the copy of the work that was submitted with the application for the basic registration. For instance, this may be necessary if the supplementary registration changes the publication status of the work or adds additional authors to the registration record. If the Office does not have a copy of the work in its possession, the registration specialist may ask the applicant to submit a replacement copy. See Compendium section 1802.9(C). But in all cases, the replacement copy could be sent by first class mail, courier, or hand delivery; the copy does not need to be uploaded to the electronic system (though this would be an option if the applicant has broadband service).

    10 The Office does not require applications to be prepared or submitted by an attorney. In certain special cases the Office may suggest that the copyright owner consider seeking legal advice, but the Office does not furnish the names of copyright attorneys, publishers, agents, or other similar information. See 37 CFR 201.2(a)(2).

    Congress gave the Office broad authority to establish the requirements for group registration options. 17 U.S.C. 408(c)(1). For the foregoing reasons, the Office believes that requiring applicants to submit an online application as a condition for seeking a registration for a group of contributions to periodicals is a reasonable trade-off for improving the overall efficiency of the group registration process. Nonetheless, the Office invites comment on this aspect of the Proposed Rule.

    B. Eligibility Requirements

    This section discusses the eligibility requirements for the group option for contributions to periodicals. Applicants that fail to satisfy these requirements will not be permitted to use this option.

    1. Restating the Existing Eligibility Requirements

    The Proposed Rule improves the readability of the regulation by restating the eligibility requirements for this group option, including the requirements involving authorship, work made for hire, first publication, and notice. The changes in language are simply intended to clarify these requirements and do not represent a substantive change in policy.

    2. Definition of “Periodicals”

    The Proposed Rule provides a definition for the term “periodicals.” It states that a periodical is a collective work that is issued or intended to be issued on an established schedule in successive issues that are intended to be continued indefinitely. It recognizes that each issue of a periodical usually bears the same title, as well as numerical or chronological designations. It also provides examples of works that typically qualify as a periodical, such as newspapers, magazines, newsletters, journals, bulletins, annuals, the proceedings of societies, and other similar works. This definition has appeared in the Compendium of U.S. Copyright Office Practices since December 22, 2014, and is consistent with the Office's longstanding definition for the term “serial,” which has been in effect since 1991. See U.S. Copyright Office, Compendium of U.S. Copyright Office Practices, section 1115.1 (3d ed. 2014) (hereinafter the “Compendium”); 37 CFR 202.3(b)(1)(v); 56 FR 7812, 7813 (Feb. 26, 1991).

    An applicant may be permitted to register articles, blog entries, artwork, photographs, or other contributions that were first published in an electronically printed (“ePrint”) publication if that publication fits within the regulatory definition of a “periodical.” Specifically, an ePrint publication may be considered a periodical for purposes of registration if it is fixed and distributed online or via email as a self-contained work, such as a digital version of a tangible newspaper, magazine, newsletter, or similar publication. For example, many companies publish electronic newsletters that contain articles on a particular subject, and distribute these publications to their subscribers either online or via email. An article published in an ePrint newsletter could be considered a contribution to a periodical under the Proposed Rule if each issue of the newsletter is fixed and distributed as a self-contained work and if the content of each issue does not change once it has been distributed.

    By contrast, a Web site would not be considered a periodical under the Proposed Rule. Web sites are typically updated on a continual basis rather than an established schedule. The updates are not made in successive issues that can be recognized as discrete, self-contained collective works, and they do not contain numerical or chronological designations that distinguish one update from the next. For these reasons, an applicant could register a group of articles that were first published in the print or ePrint edition of a magazine. Likewise, an applicant could register a group of articles that were first published in a print or ePrint edition of a magazine and simultaneously published on the publisher's Web site. However, an applicant could not register a group of articles that were published solely on a Web site.

    The Office is aware of the need for establishing new and updated practices for examining and registering complex or emerging areas of authorship. The Register's strategic plan calls for the Office to “[a]ssess special issues relating to registration and deposit protocols for emerging forms of digital dissemination of works across the spectrum of creative industries,” and to “[i]dentify and make appropriate changes to Office policy and procedures in response to . . . emerging business standards.” Strategic Plan 2016-2020 at 11. The rule proposed in this notice represents an interim improvement to the current electronic registration system, and is intended to provide a sound foundation for creating other registration options within the next five years.

    3. Identifying the Contributions in the Group

    The Proposed Rule confirms that the application must identify each contribution that is included in the group, including the date of publication for each contribution and the periodical in which it was first published. Although the statute expressly states that this requirement should be included in the regulation, it does not appear in the current rule. 17 U.S.C. 408(c)(2)(B). Instead, the regulation states that the application “shall contain the information required by the form and its accompanying instructions,” and in turn, the instructions for Form GR/CP state that this information should be included in the form. 37 CFR 202.3(b)(8)(ii)(A); see also United States Copyright Office, Adjunct Application Form GR/CP, available at http://copyright.gov/forms/formgr_tx.pdf. The Proposed Rule reconciles the regulation with the statute and the Office's current practices.

    4. Ownership Requirements

    The Proposed Rule confirms that the copyright claimant for each contribution in the group must be the same person or organization. This is in addition to the requirement that the contributions must be created by the same individual, although the author and claimant may be different persons. As noted in Section II, this requirement has appeared in the instructions for Form GR/CP for some time, but it does not appear in the current regulation. The change is simply intended to reconcile the regulation with the Office's longstanding practices. The Office will continue to register contributions authored by an individual who transferred his or her copyrights to the copyright claimant, provided that the claimant owns all of the exclusive rights in those contributions and provided that the application contains an appropriate transfer statement explaining how the claimant obtained those rights.

    5. Number of Contributions in the Group

    The statute directs the Office to establish a procedure for registering a group of works by the same individual, but it does not specify the total number of works that may be included within each group. Although the statute requires the Register to establish a group registration procedure for contributions to periodicals that are “all first published as contributions to periodicals, within a twelve-month period,” 17 U.S.C. 408(c)(2) (emphasis added), that is not the same thing as saying that an author should be permitted to register “all” such contributions with one application and one filing fee. If that is what Congress intended, then presumably it would have directed the Register to establish a procedure for registering “all” works by the same individual author (rather than “a group of works”). Id.

    Although the Office thus has the authority to limit the number of contributions that may be included within each group, it has decided not to impose any limits at this time. Once the Proposed Rule has been implemented, the Office will monitor these group registrations to determine if any restrictions may be warranted in the future.

    In the meantime, the Office encourages authors to submit their contributions on a quarterly basis (i.e., every three months), instead of submitting them on an annual or semi-annual basis. As with any work of authorship, a contribution to a periodical must be registered in a timely manner to seek statutory damages and attorney's fees in an infringement action. Specifically, an author may seek statutory damages and attorney's fees if the contribution was registered (i) before the infringement commenced or (ii) within three months after the first publication of that work. 17 U.S.C. 412. To secure these benefits, the Office encourages authors to register their contributions within three months after they were published. By doing so, authors will preserve their ability to seek statutory damages and attorney's fees for any infringements that may occur after the effective date of registration, as well as any infringements that may occur within three months after the publication of each work. For example, if the first contribution in the group was published on June 1, 2016 and the last contribution was published on September 1, 2016, it would be advisable to file a complete application, deposit, and filing fee on or before September 1, 2016. By doing so, the author will preserve his or her ability to seek statutory damages and attorney's fees for any infringements that began after the effective date of registration (i.e., after September 1, 2016), as well as any infringements that began within three months after the date of publication for each contribution in the group.

    C. Deposit Requirements

    To register a group of contributions to periodicals under the Proposed Rule applicants must submit a complete copy of each contribution that is included in the group. This will ensure that the Office receives the entire content of each contribution for the purpose of examining, indexing, and documenting the claim.

    Applicants may satisfy this requirement by submitting one copy of the entire issue of the periodical in which the contribution was first published. If the contribution was first published in a newspaper, applicants may satisfy this requirement by submitting one copy of the entire section of the newspaper in which the contribution was first published. Both of these options appear in the existing rule and are required to be included by statute. 17 U.S.C. 408(c)(2)(A); 37 CFR 202.3(b)(8)(i)(E).

    Alternatively, applicants may satisfy this requirement by submitting one copy of each contribution in the precise form in which it was first published in the periodical. Specifically, applicants may submit a copy of the particular pages within the periodical where the contribution was first published. This provision essentially mirrors regulations that have been in place since 2002 and, as discussed, is necessary to ensure that authors can readily take advantage of the GRCP option. See generally 67 FR 10329.

    The Register may, consistently with the statutory scheme, accept deposits other than “one copy of the entire issue of the periodical” and “the entire section in the case of a newspaper” for the GRCP option. 17 U.S.C. 408(c)(2)(A). As mentioned above, section 408(c) gives the Register broad authority to establish group registration options, and to define the nature of the deposit materials for such registrations. See 17 U.S.C. 408(c)(1) (“The Register of Copyrights is authorized to specify by regulation the administrative classes into which works are to be placed for purposes of deposit and registration, and the nature of the copies or phonorecords to be deposited in the various classes specified. The regulations may require or permit . . . a single registration for a group of related works.”). Section 408(c)(2), in turn, requires the Register to establish a particular group registration option with the following conditions: “specifically permitting a single registration for a group of works by the same individual author, all first published as contributions to periodicals, including newspapers, within a twelve-month period . . . if the deposit consists of one copy of the entire issue of the periodical, or of the entire section in the case of a newspaper, in which each contribution was first published.” 11 17 U.S.C. 408(c)(2)(A). The Proposed Rule provides that option. Section 408(c)(2) does not, however, limit the Register's ability to expand the circumstances where group registration of contributions to periodicals would be accepted. Nor does it limit her ability to provide authors of such contributions with additional accommodations to facilitate their use of this group registration option. To the contrary, section 408(c)(2) makes clear that its terms are “[w]ithout prejudice to the general authority provided under” section 408(c)(1) to create group registration options and define the deposit requirements for those options. Id. 408(c)(2). Indeed, to read section 408(c)(2) as limiting the Register's authority in this regard would be contrary to the overall purpose of the statutory scheme, which was to reduce “administrative problems” and “unnecessary burdens and expenses on authors and other copyright owners” by permitting group registration. H.R. Rep. No. 94-1476, at 154 (1976). Thus, as an exercise of the Register's general authority in section 408(c)(1), the Office has determined that it may accept formats other than those specifically listed in section 408(c)(2)(A) as deposits for the GRCP option.

    11 Similar language appears in the legislative history for this provision. See H.R. Rep. No. 94-1476, at 154 (1976) (“It is further required that the deposit consist of one copy of the entire issue of the periodical, or of the entire section in the case of a newspaper, in which each contribution is first published.”); S. Rep. No. 94-473, at 137 (1975) (same).

    In all cases applicants will be required to submit a digital copy of each contribution that is included in a group. Specifically, applicants will be required to submit electronic files in Portable Document Format (“PDF”) or other electronic format specifically approved by the Office. This requirement will apply regardless of whether an applicant submits a copy of an entire issue of a periodical, an entire section of a newspaper, or the specific pages from the periodicals where the contributions were first published.

    Applicants will be required to upload the digital copies through the electronic registration system. When uploading the files, applicants will be strongly encouraged to save them in a .zip file and then upload the .zip file to the system. In all cases, the size of each uploaded file may not exceed 500 megabytes, although applicants may digitally compress the contributions to comply with this limitation.

    Under the current regulation, applicants must submit a physical copy of each contribution, such as photographic prints, contact sheets, or slides; camera-ready proof copies; or pages or clippings cut or torn from a newspaper, magazine, or other publication. Under the Proposed Rule, the Office will no longer accept physical copies. Likewise, the Office will not accept digital copies that have been saved onto a disc, a flash drive, or other physical storage device that is delivered to the Office by mail, by courier, or by hand delivery. In all cases, applicants will be required to upload a digital copy of each contribution via the electronic registration system.

    Requiring applicants to upload their digital copies to this system will increase the efficiency of the group registration process. Based on the Office's experience, electronic submissions take less time to process, they are easier to track, and they are less burdensome to store than physical copies. From the applicant's perspective, electronic submissions should be more convenient and less expensive than submitting digital copies on a physical storage device, and if the claim is approved, the applicant should receive a certificate of registration in a more timely manner.

    Moving to electronic deposits may also provide copyright owners with certain legal benefits. When the Office registers a group of contributions to periodicals it assigns an effective date of registration to the claim. This determination is based on the date that the Office received the application, the filing fee, and the deposit. When an applicant uploads a digital copy to the electronic system, the Office typically receives the application, the filing fee, and the deposit on the same date. By contrast, when an applicant delivers a physical copy to the Office by mail, courier, or hand delivery, the deposit may not be received for days or even weeks after the date that the application and filing fee were submitted.

    Requiring applicants to submit a scanned copy of their contributions in the precise form in which they were first published is consistent with the legislative history, which states that “[a]s a general rule the deposit of more than a tear sheet or similar fraction of a collective work is needed to identify the contribution properly and to show the form in which it was published.” H.R. Rep. No. 94-1476, at 153 (1976). It also serves an evidentiary purpose. It gives the examiner an opportunity to compare the deposit with the title, date of publication, issue number, page number, or other information that is set forth in the application (although in practice examiners do not conduct this type of analysis for every contribution in the group). If a particular contribution becomes involved in litigation, the deposit could be used to verify that the contribution was published in a particular periodical on a particular date.

    Applicants who are unable to submit their contributions in the precise form in which they were first published may request special relief from the deposit requirements. 37 CFR 202.20(d). Likewise, applicants may request special relief if they are unable to submit a digital copy of their contributions or unable to upload them through the electronic system. For information concerning special relief, see section 1508.8 of the Compendium.

    D. Filing Fee

    Under the Proposed Rule, the applicant will be required to pay the same filing fee that is currently set forth in the Office's fee schedule, namely $85 per claim.

    In 2012 the Office conducted a study pursuant to Section 708 of the Copyright Act, which authorizes the Register to establish, adjust, and recover fees for certain services that the Office provides to the public. After reviewing its costs, the Office decided to increase the filing fee for GRCP from $65 to $85, noting that these types of claims are “labor-intensive.” 12 U.S. Copyright Office, Proposed Schedule and Analysis of Copyright Fees To Go Into Effect On Or About April 1, 2014, at 17 (Nov. 14, 2013).

    12 This increase went into effect on May 1, 2014.

    Section 708(b) authorizes the Register to adjust the fees that the Office charges for certain services (including the fee for seeking a group registration), but before doing so the Register must conduct a study of the costs incurred by the Office for registering claims, recording documents, and providing other services. In conducting this study, the Register must consider the timing of any fee adjustments and the Office's authority to use the fees consistent with its budget. 17 U.S.C. 708(b)(1). Section 708(b) provides that the Register may adjust these fees no “more than necessary to cover the reasonable costs incurred by the Copyright Office for . . . [such services], plus a reasonable inflation adjustment to account for any estimated increase in costs.” 17 U.S.C. 708(b)(2). It also provides that the Office must submit the proposed fee schedule to Congress, and that the Office may implement the schedule 120 days thereafter unless Congress enacts a law stating that it does not approve the schedule. 17 U.S.C. 708(b)(5).

    Once the Proposed Rule has been implemented, the Office will monitor the cost of processing GRCP claims to determine if future fee adjustments may be warranted. The Office will use this information in conducting its next fee study.

    E. The Scope of a Group Registration

    The Proposed Rule memorializes the Office's longstanding position regarding the scope of a registration for a group of contributions to periodicals.

    When the Office issues a group registration it prepares one certificate of registration for the entire group and assigns one registration number to that certificate. The Proposed Rule clarifies that a registration for a group of contributions to periodicals covers each contribution in the group, and each contribution is registered as a separate “work.” This understanding is consistent with the statutory scheme. The legislative history makes clear that group registration was “a needed and important liberalization of the law [then] in effect,” which to that point had required “separate registrations where related works or parts of a work are published separately.” H.R. Rep. No. 94-1476, at 154 (1976). In particular, Congress noted that “the technical necessity for separate applications and fees has caused copyright owners to forego copyright altogether.” Id. Given that context, it would be anomalous for works registered as part of a group registration application to be given lesser protection than if they had been registered through separate applications.

    For similar reasons, the Proposed Rule also clarifies that when a group of works are registered under GRCP, the group as a whole is not considered a compilation or a collective work. Instead, the group is merely an administrative classification created solely for the purpose of registering multiple contributions with one application and one filing fee. See 17 U.S.C. 408(c)(1) (“Th[e] administrative classification of works has no significance with respect to the subject matter of copyright or the exclusive rights provided by this title.”). Although an applicant may exercise some judgment in selecting the contributions that are included within a particular group, that decision does not necessarily constitute copyrightable authorship. The selection is based on the regulatory requirements for GRCP, and any coordination or arrangement of the contributions is merely an administrative formality that facilitates the examination of the works.

    Likewise, the Proposed Rule clarifies that the group is not considered a derivative work. When a group of contributions are combined together for the purpose of facilitating registration those works are not “recast, transformed, or adapted” in any way, and the group as a whole is not “a work based upon one or more preexisting works” because there is no copyrightable authorship in simply following the administrative requirements for GRCP. 17 U.S.C. 101 (definition of “derivative work”).

    F. Refusals To Register

    The Proposed Rule confirms that the Office may refuse to issue a group registration if it determines that the applicant failed to satisfy the requirements set forth in the statute or regulations.13 17 U.S.C. 410(b) (stating that the Register “shall refuse registration and shall notify the applicant in writing of the reasons for such refusal” “[i]n any case in which [she] determines that . . . the material deposited does not constitute copyrightable subject matter or that the claim is invalid for any other reason”).

    13 A similar requirement has appeared in the regulation governing the group registration option for serials since 1990. See 55 FR 50556, 50556-57 (Dec. 7, 1990). That regulation states that the Office may revoke the privilege of registering a group of serials if a publisher fails to comply with the deposit requirement for that option. 37 CFR 203.3(b)(6)(iv).

    G. Cancellation

    The Proposed Rule confirms that the Office may cancel a group registration under § 201.7(c)(4) of the regulations if it determines, after the registration has issued, that the requirements for that option were not met. In such cases, the Office will send a written notice to the correspondent and claimant named in the registration at the addresses specified in the registration record. The Office will describe the defect in the registration and will inform the parties that the registration may be cancelled if they fail to resolve the defect in a timely manner.

    In a related vein, the Proposed Rule makes some clarifying edits to the Office's cancellation regulation, section 201.7(c)(4). First, it makes clear, consistent with existing Copyright Office practice, that the regulation only provides representative examples of situations where the Office may cancel a registration (rather than an exhaustive list of situations where cancellation may be warranted). Second, the Proposed Rule also removes one of the examples from that list—namely section 201.7(c)(4)(ix), which states that the Office may cancel a registration for a work published after January 1, 1978 if it determines that “the only claimant given on the application was deceased on the date the application was certified.” This is inconsistent with current practices of the Copyright Office.

    The Office recently conducted a comprehensive review of its internal policies in conjunction with the revision of the Compendium. The Compendium explains that if the Office discovers that the named claimant died before the work was submitted or before it has been approved for registration, the Office may ask the applicant to provide the name of the current claimant. In such cases, the Office will accept an application filed by or on behalf of the person or organization that owns all of the exclusive rights that initially belonged to a deceased claimant, such as the claimant's estate, a devisee, or an heir. Likewise, the Office will accept an application that names a deceased author as the copyright claimant if that author is the only party who is eligible to be named as the claimant, as might be the case where no one owns all of the exclusive rights in the work because the author previously transferred those rights to multiple parties. See Compendium section 405.5.

    H. Technical Amendments

    The Proposed Rule will move the regulation that governs this group option from section 202.3(b)(8) to section 202.4(h).14 In the future, the Office intends to move all regulations governing the various group options that it has created under section 408(c) of the Copyright Act to section 202.4. This change is intended to improve the readability of the existing regulations, but it does not represent a substantive change in policy.

    14 The Office recently issued a notice of proposed rulemaking that would remove the current text of section 202.4 and reserve that section for later use. See 81 FR 67940, 67942 (Oct. 3, 2016).

    In addition, the Proposed Rule will incorporate the definitions of “Class TX,” “Class VA,” and “works of the visual arts” that are set forth in section 202.3, and it will confirm that the application may be submitted by any of the parties listed in section 202.3(c)(1), namely (i) the author or copyright claimant of those works, (ii) the owner of any of the exclusive rights in those works, or (iii) a duly authorized agent of any author, claimant, or owner of exclusive rights.

    IV. Conclusion

    The Proposed Rule will allow broader participation in the registration system, and increase the efficiency of the group registration process. The Office invites public comment on these proposed changes.

    List of Subjects 37 CFR Part 201

    Copyright, General provisions.

    37 CFR Part 202

    Copyright, Preregistration and registration of claims to copyright.

    Proposed Regulation

    For the reasons set forth in the preamble, the U.S. Copyright Office proposes amending 37 CFR parts 201 and 202, as follows:

    PART 201—GENERAL PROVISIONS 1. Revise the authority citation for part 201 to read as follows: Authority:

    17 U.S.C. 702.

    2. Amend § 201.3 by revising: paragraph (c)(2) to read as follows:
    § 201.3 Fees for registration, recordation, and related services, special services, and services performed by the Licensing Division.

    (c) * * *

    (2) Registration of a claim in a group of contributions to periodicals or a group of database updates. 85
    3. Amend § 201.7 by: a. In the last sentence in paragraph (c)(4), adding the phrase “examples of” after the phrase “The following are”. b. In paragraph (c)(4)(i), removing the semi-colon and add a period in its place. c. In paragraph (c)(4)(ii), removing “1989,” and add in its place “1989” and remove “notice;” and add in its place “notice.” . d. In paragraphs (c)(4)(iii) through (viii), removing the semi-colon and add a period in its place. e. Removing paragraph (c)(4)(ix) and redesignate paragraphs (c)(4)(x) and (xi) as paragraphs (c)(4)(ix) and (x), respectively. f. In newly redesignated paragraph (c)(4)(ix), removing the term “; and ” and add a period in its place. g. Adding paragraph (c)(4)(xi).

    The addition to read as follows:

    § 201.7 Cancellation of completed registrations.

    (c) * * *

    (4) * * *

    (xi) The requirements for registering a group of related works under section 408(c) of title 17 of the United States Code have not been met.

    PART 202—PREREGISTRATION AND REGISTRATION OF CLAIMS TO COPYRIGHT 4. The authority citation for part 202 continues to read as follows: Authority:

    17 U.S.C. 408(f), 702.

    5. Amend § 202.3 by: a. Revising paragraph (b)(4)(ii). b. Removing and reserving paragraph (b)(8). c. In paragraph (b)(11)(ii), redesignating footnote 4 as footnote 2 (both in the text of paragraph (b)(11)(ii) and in the footnote itself). d. In the text of paragraph (c)(2), removing the reference to footnote “6” and adding in its place a reference to footnote “3”, redesignating footnote 5 as footnote 3, and revising newly redesignated footnote 3.

    The revisions to read as follows:

    § 202.3 Registration of copyright.

    (b) * * *

    (4) * * *

    (ii) In the case of an application for registration made under paragraphs (b)(4) through (10) of this section or under § 202.4, the “year of creation,” “year of completion,” or “year in which creation of this work was completed” means the latest year in which the creation of any copyrightable element was completed.

    (c) * * *

    (2) * * *

    3 In the case of an application to register a group of newspapers, newsletters, or contributions to periodicals under paragraphs (b)(7) or (9) of this section or under § 202.4(h), the deposit shall comply with the respective requirements specified in those paragraphs.

    7. Revise § 202.4 to read as follows:
    § 202.4 Group Registration.

    (a) This section prescribes conditions for issuing a registration for a group of related works under section 408(c) of title 17 of the United States Code.

    (b) Definitions. For purposes of this section, the terms collective work, copy, and work made for hire have the meanings set forth in section 101 of title 17 of the United States Code, and the terms claimant, Class TX, Class VA, and works of the visual arts have the meanings set forth in § 202.3(a)(3), (b)(1)(i), and (b)(1)(iii).

    (c) [Reserved]

    (d) [Reserved]

    (e) [Reserved]

    (f) [Reserved]

    (g) [Reserved]

    (h) Group registration of contributions to periodicals. Pursuant to the authority granted by 17 U.S.C. 408(c)(2), the Register of Copyrights has determined that a group of contributions to periodicals may be registered in Class TX or Class VA with one application, one filing fee, and the required deposit, if the following conditions are met:

    (1) All the contributions in the group must be created by the same individual.

    (2) The copyright claimant must be the same person or organization for all the contributions.

    (3) The contributions must not be works made for hire.

    (4) Each work must be first published as a contribution to a periodical, and all the contributions must be first published within a twelve-month period (e.g., January 1, 2015 through December 31, 2015; February 1, 2015 through January 31, 2016). For purposes of this section, a periodical is a collective work that is issued or intended to be issued on an established schedule in successive issues that are intended to be continued indefinitely. In most cases, each issue will bear the same title, as well as numerical or chronological designations. Examples include newspapers, magazines, newsletters, journals, bulletins, annuals, the proceedings of societies, and other similar works.

    (5) If any of the contributions were first published before March 1, 1989, those works must bear a separate copyright notice, the notice must contain the copyright owner's name (or an abbreviation by which the name can be recognized, or a generally known alternative designation for the owner), and the name that appears in each notice must be the same.

    (6) The applicant must complete and submit the online application designated for a group of contributions to periodicals. The application must identify each contribution that is included in the group, including the date of publication for each contribution and the periodical in which it was first published. The application may be submitted by any of the parties listed in § 202.3(c)(1). The application should be filed in Class TX if a majority of the contributions predominantly consist of text, and the application should be filed in Class VA if a majority of the contributions predominantly consist of photographs, illustrations, artwork, or other works of the visual arts.

    (7) The appropriate filing fee, as required by § 201.3(c) of this chapter, must be included with the application or charged to an active deposit account.

    (8) The applicant must submit one copy of each contribution that is included in the group, either by submitting the entire issue of the periodical where the contribution was first published, the entire section of the newspaper where it was first published, or the specific page(s) from the periodical where the contribution was first published. The contributions must be contained in separate electronic files that comply with § 202.20(b)(2)(iii). The files must be submitted in Portable Document Format (PDF) or other electronic format approved by the Office, and they must be uploaded to the electronic registration system, preferably in a .zip file containing all the files. The file size for each uploaded file must not exceed 500 megabytes; the files may be compressed to comply with this requirement.

    (i) [Reserved]

    (j) [Reserved]

    (k) [Reserved]

    (l) Refusal to register. The Copyright Office may refuse registration if the applicant fails to satisfy the requirements for registering a group of related works under this section or § 202.3(b)(5)-(7), (9), or (10).

    (m) Cancellation. If the Copyright Office issues a registration for a group of related works and subsequently determines that the requirements for that group option have not been met, and if the claimant fails to cure the deficiency after being notified by the Office, the registration may be cancelled in accordance with § 201.7 of this chapter.

    (n) The scope of a group registration. When the Office issues a group registration under paragraph (h) of this section, the registration covers each work in the group and each work is registered as a separate work. For purposes of registration, the group as a whole is not considered a compilation, a collective work, or a derivative work under sections 101, 103(b), or 504(c)(1) of title 17 of the United States Code.

    Dated: November 22, 2016. Sarang V. Damle, General Counsel and Associate Register of Copyrights.
    [FR Doc. 2016-28700 Filed 11-30-16; 8:45 am] BILLING CODE 1410-30-P
    LIBRARY OF CONGRESS Copyright Office 37 CFR Parts 201, 202 [Docket No. 2016-10] Group Registration of Photographs AGENCY:

    U.S. Copyright Office, Library of Congress.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The U.S. Copyright Office is proposing to update its regulations governing group registration options for photographers to encourage broader participation in the registration system, increase the efficiency of the registration process, and create a more robust record of the claim. First, the Office has created new online registration applications specifically designed for group registrations of published photographs and group registrations of unpublished photographs. The proposed rule would require applicants to use these online applications, in lieu of any existing paper application. Applicants will be allowed to include up to 750 photographs with each application. Second, the proposal would eliminate less-efficient forms of registering photographs that have been adopted over the years—namely, the pilot program permitting group registration of published photographs using the electronic application designed for registering a single work, and the option of registering a number of unpublished photographs as an “unpublished collection.” The pilot program for photographic databases will remain in effect. Third, the proposed rule will update the deposit requirement for group registrations of photographs and photographic databases by requiring applicants to submit their works in digital form.

    DATES:

    Comments on the proposed rule must be made in writing and must be received in the U.S. Copyright Office no later than January 3, 2017.

    ADDRESSES:

    For reasons of government efficiency, the Copyright Office is using the regulations.gov system for the submission and posting of public comments in this proceeding. All comments are therefore to be submitted electronically through regulations.gov. Specific instructions for submitting comments are available on the Copyright Office Web site at http://www.copyright.gov/rulemaking/group-photographs/. If electronic submission of comments is not feasible due to lack of access to a computer and/or the Internet, please contact the Office using the contact information below for special instructions.

    FOR FURTHER INFORMATION CONTACT:

    Robert J. Kasunic, Associate Register of Copyrights and Director of Registration Policy and Practice, or Erik Bertin, Deputy Director of Registration Policy and Practice, at 202-707-8040.

    SUPPLEMENTARY INFORMATION:

    The U.S. Copyright Office (the “Office”) is proposing to amend the regulation that governs the group registration option for published photographs. In addition, the Office is proposing to create a new group registration option for unpublished photographs. Finally, the Office is proposing to amend the deposit requirements for groups of published photographs and photographic databases, and is proposing to establish similar deposit requirements for the new group option for unpublished photographs. These proposals are discussed in more detail below. The Office invites public comment on each proposal.

    Last year the Office issued a notice of inquiry concerning the practical and legal challenges faced by photographers, graphic artists, and illustrators (referred to herein as the “Visual Works Inquiry” 1 ). See 80 FR 23054 (Apr. 24, 2015). The Office recognized that photographers, graphic artists, and illustrators have a broad impact on U.S. culture, but they face significant challenges in the digital age. To better understand these challenges, the Office requested written comments on how photographs, graphic artworks, and illustrations are monetized, licensed, registered, and enforced under the Copyright Act of 1976 (“the Copyright Act”). The Office sought information concerning the current marketplace for these types of works, as well as observations regarding the real or potential obstacles that these creators and their licensees or other representatives face when navigating the digital landscape. With respect to registration, the Office asked the public to identify the most significant challenges for photographers and other visual artists. 80 FR at 23056.

    1 Information concerning the Visual Works Inquiry is available on the Office's Web site at http://copyright.gov/policy/visualworks/.

    The Office received 2,795 comments and 166 reply comments in response to the Visual Works Inquiry. The Office has not attempted to address these comments in this notice of proposed rulemaking.2 The rule proposed in this notice focuses solely on photographs, and it represents an interim improvement to the current electronic registration system. In the future, the Office may consider other options as it assesses the broader concerns of visual artists generally.

    2 In preparing this notice of proposed rulemaking the Office did consider comments submitted in a prior rulemaking concerning the deposit requirements for photographic databases, which was completed in July 2012. Information concerning that rulemaking is available on the Office's Web site at http://copyright.gov/rulemaking/databases/.

    I. Background

    When Congress enacted the Copyright Act, it authorized the Register of Copyrights (the “Register”) to specify by regulation the administrative classes of works for the purpose of seeking a registration and the nature of the deposit required for each such class. In addition, Congress gave the Register the discretion to allow groups of related works to be registered with one application and one filing fee, a procedure known as “group registration.” See 17 U.S.C. 408(c)(1). Pursuant to this authority, the Register issued regulations permitting the Office to issue group registrations for certain limited categories of works, provided that certain conditions have been met. See generally 37 CFR 202.3(b)(5)-(10).

    As the legislative history explains, allowing “a number of related works to be registered together as a group represent[ed] a needed and important liberalization of the law.” H.R. Rep. No. 94-1476, at 154 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5770; S. Rep. No. 94-473, at 136 (1975). Congress recognized that requiring applicants to submit separate applications for certain types of works may be so burdensome and expensive that authors and copyright owners may forgo registration altogether, since copyright registration is not a prerequisite to copyright protection. Id. If copyright owners do not submit their works for registration under this permissive system, the public record will not contain any information concerning those works. This creates a void in the record that diminishes the value of the Office's database.

    Congress cited “a group of photographs by one photographer” as an example of a “group of related works” that would be suitable for registration under section 408(c)(1). Id. At the same time, when large numbers of works are bundled together in one application, information about the individual works may not be adequately captured. Therefore, group registration options require careful balancing of the need for an accurate public record and the need for an efficient method of facilitating the registration of multiple photographs.

    II. Existing Registration Accommodations for Photographers

    Under the Copyright Office's existing regulations and registration practice, photographers have several options for registering groups or collections of photographs with one application and one filing fee. These options are summarized below.

    A. Group Registration of Published Photographs

    After conducting an extensive rulemaking, the Office issued a regulation in 2001 that allows applicants to register a group of published photographs with one application and one filing fee. See 66 FR 37142, 37149-50 (July 17, 2001). The Office refers to this procedure as the “group option for published photographs” or “GRPPH.”

    An applicant may register a group of photographs under this procedure if all the photographs were taken by the same photographer and were published within the same calendar year, and if the copyright claimant for all the photographs is the same person or organization. 37 CFR 202.3(b)(10)(i)-(iii). If the photographs were created as works made for hire, the application must provide both the name of the photographer and the name of the photographer's employer or the party who specially ordered or commissioned the photographs (e.g., “ABC Corporation, employer for hire of John Doe”). Id. § 202.3(b)(10)(ix).

    As a general rule, the applicant must provide a precise date of publication for each photograph in the group (i.e., month, day, and year), either by providing the date on the application, on a continuation sheet submitted on Form GR/PPh/CON,3 on a separate list submitted on paper or in a text file, or on the photographs themselves (e.g., writing the date on the back of each print, including the date in the file name for each image, etc.). Id. § 202.3(b)(10)(iv)(A)-(D). Alternatively, the applicant may provide a range of dates (e.g., February 25, 2015 through May 25, 2015), but only if the photographs were published within three months before the date that the application is received in the Office. Id. § 202.3(b)(10)(vi). If the applicant chooses to provide publication information on Form GR/PPh/CON, the applicant may include up to 750 photographs in the claim. Id. § 202.3(b)(10)(v). By contrast, if the applicant provides publication information using any other method, there is no limit on the number of photographs that may be submitted. Id. § 202.3(b)(10)(v), (viii).

    3 Form GR/PPh/CON is a continuation sheet for Form VA specifically designed for providing information for a group registration of published photographs.

    Initially, all applicants were required to file their claims using a paper application submitted on Form VA. As discussed below in Section III.A.1, the Office has established a pilot program that allows applicants to submit their claims through the electronic registration system. Id. § 202.3(b)(10)(xi).

    In all cases, the applicant must submit one copy of each photograph that is included in the group, and all the photographs must be submitted in the same format. Id. § 202.3(b)(10)(x). The applicant may submit the photographs in digital form by saving them on a CD-ROM or DVD-ROM in a JPEG, GIF, TIFF, or PCD format.4 Alternatively, the applicant may submit the photographs in a physical form, such as prints, contact sheets, slides, photocopies, or even videotape. Id. § 202.20(c)(2)(xx)(B)-(H).

    4 The regulation that currently governs the deposit requirements for GRPPH does not mention other types of storage devices, such as flash drives. 37 CFR 202.20(c)(2)(xx)(A).

    B. Other Registration Options

    In addition to the group option for published photographs, there are four other options for registering multiple photographs with the same application. These options are summarized below.

    1. Unpublished Collections

    Since 1978 the Office has allowed applicants to register a number of unpublished works with one application and one filing fee if the works qualify as an “unpublished collection.” To qualify for this option, the works must be unpublished, the works must have at least one common author, the copyright claimant for each work and the collection as a whole must be the same person or organization, the works must be assembled in an orderly form, and the applicant must provide a single title identifying the collection as a whole. Id. § 203.3(b)(4)(i)(B). Photographers may use this option to register their photographs if they satisfy these requirements, and at the present time there is no limit on the number of photographs that may be included within each collection. Under this option, the applicant may register the works using the electronic registration system or a paper application submitted on Form VA. Id. § 202.3(b)(2).

    In all cases, the applicant must submit one copy of each photograph that is included in the collection. The applicant may submit the photographs in digital form (e.g., uploading digital files to the electronic registration system or mailing them to the Office on a CD-ROM or DVD-ROM, etc.) or physical form (e.g., prints, slides, photocopies, etc.), but all of the photographs must be submitted in the same format. Id. § 202.20(c)(2)(xx).

    2. Group Registration for Contributions to Periodicals

    Without prejudice to the Register's general authority to create group registration options under Section 408(c)(2) at the Register's discretion, Congress also directed the Register to create a group option for works by the same individual author that were first published as a contribution to a periodical. 17 U.S.C. 408(c)(2). In response to this directive, the Office established a procedure known as the “group option for contributions to periodicals” or “GRCP.” See 43 FR 965, 966-67 (Jan. 5, 1978). Photographers may use this option to register their photographs if they satisfy the requirements set forth in the regulation. First, all the photographs must be taken by the same individual, and none of them can be a work made for hire. 37 CFR 202.3(b)(8)(i)(A)-(B). Second, all the photographs must be first published as a contribution to a periodical (e.g., a newspaper, a magazine, a journal, etc.) and they must be published within a twelve-month period (e.g., June 1, 2014 through May 31, 2015). Id. § 202.3(b)(8)(i)(C) & n.2. And, third, if the photographs were first published before March 1, 1989, each photograph must contain an appropriate copyright notice. Id. § 202.3(b)(8)(i)(D).

    Under the current regulation, there is no limit on the number of photographs that may be registered under GRCP. The applicant must complete a paper application using Form VA and Form GR/CP.5 Id. § 202.3(b)(8)(ii)(A)-(B). The applicant must submit the photographs in the precise form in which they were first published, and the copies must be submitted in physical—rather than digital—form. See id. § 202.3(b)(8)(i)(E). For example, the applicant may submit the entire issue of the periodical that contains the photograph, the entire section of the newspaper that contains the photograph, a photocopy of the entire page from the periodical that contains the photograph, among other formats.6 See id.

    5 Form GR/CP is an adjunct form specifically designed for providing information for a group registration of contributions to periodicals.

    6 The Office is issuing a separate notice of proposed rulemaking (published elsewhere in this volume of the Federal Register, and referred to herein as the “GRCP Rulemaking”) that invites comment on a proposed rule that will modify the group option for contributions to periodicals. To be clear, the Office is not proposing any changes to the GRCP regulation as part of this rulemaking on group registration of photographs.

    3. Group Registration for Photographic Databases

    In 1989, the Office created a procedure that allows database owners to register the updates and revisions to a database with one application and one filing fee. 37 CFR 202.3(b)(5); 54 FR 13177 (Mar. 31, 1989). The Office refers to this procedure as the “group database option.” In the late 1990s, some stock photography companies began using this option to register databases that contain large numbers of photographs. After consulting with representatives from the industry, the Office concluded that the database option could potentially be used to register a photographic database if certain requirements have been met. The Office noted this understanding in an earlier notice of proposed rulemaking that is discussed in Section III.A.1 below. See 76 FR 4072, 4075-76 (Jan. 24, 2011).

    The requirements for the database option are extremely complex.7 Briefly stated, an applicant may register the updates or revisions that were made to a database over a period of three months if the updates and revisions are owned by the same claimant and if the general content and organization of the updates and revisions are similar. 37 CFR 202.3(b)(5). The applicant must submit a detailed statement that describes the content and organization of the database, and in the case of a photographic database, the applicant must submit one copy of each photograph that is included in the group. The applicant may submit an online application or a paper application. The applicant may submit the photographs in digital or physical form, but all the photographs must be submitted in the same format. 37 CFR 202.20(c)(2)(xx).

    7 For a detailed summary of these requirements, see section 1117 of the Compendium of U.S. Copyright Office Practices, Third Edition (hereinafter the “Compendium”).

    A registration for a photographic database covers the authorship involved in selecting, coordinating, and arranging the content of the database as a whole. It also may cover the individual photographs that are included within the database if the photographers transferred the exclusive rights in their respective works to the owner of the database, and if the selection, coordination, and/or arrangement of those photographs is sufficiently creative. See Compendium section 1117.2. That said, the Office has questioned whether this practice should be revised to limit the examination of a database to the authorship involved in creating the selection, coordination, and arrangement of the database as a whole and to exclude examination (and thus, the prima facie validity) of a claim in the component elements of the database. See 77 FR 40268, 40269 (July 9, 2012); see also 76 FR at 4073. The Office generally discourages photographers from registering their works as part of a photographic database and instead encourages them to use one of the other options discussed in this section, in part, because they provide a better registration record for claims in the individual component works within a database, as opposed to a claim in the database itself as a compilation of data. See 77 FR at 40269 n.1; 76 FR at 4073. Moreover, registering photographs as part of a photographic database may limit the copyright owner's ability to seek certain remedies in an infringement action. This issue is discussed in more detail in Section III.G.3 below.

    4. Collective Works

    Applicants may register a number of photographs with one application and one filing fee if they are part of a collective work. The statute defines a collective work as “a work, such as a periodical issue, anthology, or encyclopedia, in which a number of contributions, constituting separate and independent works in themselves, are assembled into a collective whole.” 17 U.S.C. 101. A collective work may consist entirely of photographs, such as a book of photographs, an exhibition catalog, or a retrospective book that contains photographs taken by a particular photographer. A collective work also may combine photographs with other types of authorship, such as a calendar, textbook, coffee table book, or similar types of works.

    Applicants may register a collective work with an online application or a paper application. The claim may include photographs taken by multiple photographers, but the applicant does not need to name each photographer in the application and there is no limit on the number of photographs that may be included within each claim. If the claim is approved, the registration will cover the authorship involved in selecting, coordinating, and arranging the content of the collective work as a whole. It also may cover the individual photographs that are included within the collective work if (i) the claimant owns the copyright in both the individual photographs and the collective work as a whole, and if (ii) the photographs have not previously been published or registered. Although a registration for a collective work may cover the individual photographs contained therein, this type of registration may limit the copyright owner's ability to seek certain remedies in an infringement action. This issue is discussed in more detail in Section III.G.4 below.

    III. The Proposed Rule

    The Proposed Rule does several things. First, the Office is proposing to amend the regulation that governs the group option for published photographs to reflect certain technical upgrades that will be made to the electronic registration system. Second, the Office is proposing to create, for the first time, an equivalent group registration option for unpublished photographs. This new procedure will be known as the “group option for unpublished photographs” or “GRUPH,” and it will replace the option that currently allows photographers to register their works as an unpublished collection. These first two amendments will increase the efficiency of the registration process for both published and unpublished photographs alike by requiring applicants to submit their claims through the electronic registration system. In addition, GRUPH will foster early registration, thereby eliminating complex questions that arise when published and unpublished photographs are commingled.

    Third, the Office is proposing to update the deposit requirements for the group options for published photographs and photographic databases by requiring applicants to submit a digital copy of each photograph that is included in the group, and a separate document containing a sequentially numbered list that provides the title and file name for each photograph in the group. Applicants may submit these items by uploading them through the electronic system or by sending them on a physical storage device. This same requirement will apply to the new group option for unpublished photographs.

    Finally, the Proposed Rule will memorialize the Office's longstanding position regarding the scope of a group registration for photographs.

    Each of these proposals is discussed below.8

    8 As mentioned above in footnote 6, the Office is issuing a separate notice of proposed rulemaking involving the group option for contributions to periodicals. The rule proposed in the GRCP Rulemaking states that the Office may refuse to issue a group registration or may cancel a group registration if it determines that the applicant failed to comply with the relevant requirements for a particular group option. These requirements will apply to any group option that the Office creates under section 408 of the Copyright Act, including GRCP, GRPPH, GRUPH, and the group option for photographic databases.

    A. Application Requirements for Groups of Published Photographs (GRPPH) and Groups of Unpublished Photographs (GRUPH) 1. Online Registration

    In February 2015 the Office completed a comprehensive analysis of its electronic registration system with input from technical experts and stakeholders. This analysis will support the Office's long-term goals of creating both a better interface and a better public record. See U.S. Copyright Office, Office of the Chief Information Officer, Report and Recommendations of the Technical Upgrades Special Project Team (February 2015), available at http://copyright.gov/docs/technical_upgrades/usco-technicalupgrades.pdf; see also Technological Upgrades to Registration and Recordation Functions, 78 FR 17722 (Mar. 22, 2013). In December 2015, the Register issued a strategic plan that sets forth the Office's performance objectives for the next five years. The plan provides a roadmap for re-envisioning almost all of the services that the Office provides, including how applicants register claims, submit deposits, record documents, share data, and access expert resources. With respect to information technology, the plan calls for “a robust and flexible technology enterprise that is dedicated to the current and future needs of a modern copyright agency.” U.S. Copyright Office, Strategic Plan 2016-2020: Positioning the United States Copyright Office for the Future, at 35 (Dec. 1, 2015), available at http://copyright.gov/reports/strategic-plan/USCO-strategic.pdf. At the direction of Congress,9 the Office also developed a detailed IT plan, and obtained public comments on specific strategies, costs, and timelines for technology objectives. U.S. Copyright Office, Provisional Information Technology Modernization Plan and Cost Analysis (Feb. 29, 2016), available at http://copyright.gov/reports/itplan/.

    9 H.R. Rep. No. 114-110, at 16-17 (2015).

    In the meantime, the Office has made some enhancements to the current electronic registration system that will benefit photographers, the Office, and the public at large. When the electronic registration system was introduced in 2007, it contained a “standard” application (referred to herein as the “standard online application”). Applicants could use this application to register a single work; they also could use this application to register a number of works as an unpublished collection or as part of a collective work. See 72 FR 36883, 36885 (July 6, 2007). But the standard online application was not meant to be used to register groups of published photographs, photographic databases, or contributions to periodicals, because the system was not designed to take in the information required for a group claim. Instead, photographers were required to submit these types of claims using a paper application submitted on Form VA (either alone or together with Form GR/PPh/CON or Form GR/CP).

    Photographers soon expressed interest in using the electronic system, and beginning in 2010, some applicants began submitting large numbers of photographs with the standard online application. Although this application was not designed to handle group registrations, the Visual Arts Division processed some of these claims in cases where the application contained all the information required for a group claim. Based on this experience, the Office issued an interim regulation in 2011 that established a pilot program allowing applicants to register groups of published photographs and photographic databases with the standard online application.10 76 FR at 4074, 4075. Applicants that participate in the pilot program may submit their claims through the electronic system (rather than submitting a paper application), provided that they obtain prior authorization from the Visual Arts Division and follow the instructions from that Division concerning the information that should be included in the application and the proper method for submitting the deposit. 37 CFR 202.3(b)(5)(ii)(A), (b)(10)(xi).

    10 The pilot program does not apply to the group option for contributions to periodicals.

    The Office explained that, during the pilot, it would assess the desirability and feasibility of allowing applicants to submit groups of photographs through the electronic system on a permanent basis, and invited public comment on the issue. 76 FR 5106 (Jan. 28, 2011). The Professional Photographers of America (“PPA”) and other organizations that represent photographers supported the pilot program, predicting that the standard online application would require less time to complete than a paper application, and that applicants would receive their certificates in a more timely manner.11

    11 PPA at 2, available at http://copyright.gov/rulemaking/databases/comments/professional-photographers-of-america.pdf. PPA jointly submitted its comments with Commercial Photographers International, the Society of Sport & Event Photographers, the Student Photographic Society, Evidence Photographers International Council, and the Stock Artists Alliance. Id. at 1.

    While the pilot program was well-intentioned, it has been extremely burdensome for both applicants and the Office. The standard online application was designed to handle claims involving one work or a limited number of works. Using the existing architecture to provide title and publication information for hundreds or even thousands of photographs is necessarily challenging for applicants who are unfamiliar with the system. Examining these types of claims also requires significantly more time. In some cases, registration specialists have spent an entire day processing a single claim, which has resulted in corresponding delays in issuing certificates of registration for such claims. Moreover, the increasing demand on the Office's limited resources has had an adverse effect on the examination of other types of works within the Visual Arts Division.

    To address these concerns, the Office has decided to eliminate the pilot program for published photographs, and replace it with an online application specifically designed for groups of published photographs. (The pilot program for photographic databases will remain in effect for the time being, though as discussed in Sections D.2 and G.3, the deposit requirements for photographic databases will be modified in some respects.) In addition, the Office has created a new online application specifically designed for groups of unpublished photographs.

    Under the Proposed Rule, applicants will be required to use the online application designated for GRPPH or GRUPH as a condition for using either of these group options. To facilitate this transition, the Office will contact each applicant that has participated in the pilot program for published photographs and will notify them that the pilot program will be replaced with a new procedure. The Office will provide instructions on how to complete the new applications on its Web site and in chapter 1100 of the Compendium. In addition, the Office will make its staff available to groups or associations that are interested in producing webinars or other educational programs for their members.

    Once the Proposed Rule goes into effect, the Office will no longer accept groups of published photographs or groups of unpublished photographs that are submitted with a paper application on Form VA (either with or without Form GR/PPh/CON).12 Likewise, the Office will no longer accept these types of claims if they are submitted with a standard online application, rather than the online application designated for GRPPH or GRUPH.13 In such cases the Office will ask the applicant to resubmit the photographs using the appropriate application, which may affect the effective date of registration that is assigned to the claim. The Office invites comment on this proposal, including whether it should eliminate the paper application for these group options, phase them out after a specified period of time, or continue to offer them for photographers who prefer to use the paper-based system.

    12 By contrast, Applicants may continue to use Form VA to register a photographic database if they meet the eligibility requirements for that option. Similarly, photographers may continue to use Form VA to register an individual photograph or a collective work, although the Office strongly encourages applicants to use the online application rather than the paper form.

    13 By contrast, applicants may continue to use the standard online application to register a photographic database, as long as they comply with the requirements for the pilot program. Photographers may continue to use the standard application to register photographs as part of a collective work. Likewise, photographers may continue to use the standard online application to register an individual photograph.

    2. Relationship to Supplementary Registration Rulemaking

    A supplementary registration is a special type of registration that may be used “to correct an error in a copyright registration or to amplify the information given in a registration,” including a registration for a group of related works. 17 U.S.C. 408(d). Specifically, it identifies an error or omission in an existing registration (referred to herein as a “basic registration”) and places the corrected information or additional information in the public record. The Office refers to this type of registration as a “CA,” which stands for “correction and amplification.”

    The Office is issuing a separate notice of proposed rulemaking (published elsewhere in this volume of the Federal Register, and referred to herein as the “CA Rulemaking”) that will modify the regulation that governs this procedure. Under the rule proposed in the CA Rulemaking, applicants will be required to file an online application in order to correct or amplify the information set forth in a basic registration for any photograph that is capable of being registered through the electronic system—even if the work was originally registered with a paper application submitted on Form VA (either with or without Form GR/PPh/CON).

    If the rules proposed in the CA Rulemaking and in this proceeding both go into effect, applicants will be required to file an online application in order to correct or amplify a basic registration for works registered under the GRPPH and GRUPH options. If an applicant attempts to use a paper application, the Office will ask the applicant to resubmit the claim using the online form. As discussed in Section III.C.1 below, if the basic registration encompasses more than 750 photographs, multiple applications may need to be submitted to correct or amplify that registration. Applicants will not need to contact the Visual Arts Division in order to correct or amplify a basic registration for a group of photographs registered under GRPPH or GRUPH.

    This online-filing requirement will also apply when correcting or amplifying a basic registration for works registered under the pilot program for group registration option for photographic databases.14 Applicants will need to contact the Visual Arts Division before filing an application to correct or amplify a basic registration for a photographic database. This is due to the fact a supplementary registration for a photographic database will have to be submitted under the pilot program. As discussed in Section III.A.1, the Visual Arts Division closely monitors claims submitted under this program to ensure that applicants complete the online application in an appropriate manner.

    14 Under the rule proposed in the CA Rulemaking, the online filing requirement for supplementary registrations will also apply to basic registrations for a single photograph, a collection of unpublished photographs, or a collective work that contains photographs.

    Comments concerning this proposal should be submitted as part of the CA Rulemaking, and should not be submitted as part of this rulemaking on group registration of photographs.

    3. Policy Considerations Supporting Online-Only Registration

    A substantial majority of the U.S. population has access to the internet,15 and the Office expects that most photographers will be able to use the electronic system.16 That said, the Office recognizes that millions of Americans do not have broadband service, and that the Proposed Rule may impose a burden on photographers who fall within this segment of the population.17 Nevertheless, the Office believes that the benefits of requiring applicants to use the online application designated for GRPPH or GRUPH outweigh the potential burden on photographers who do not have direct access to the internet.

    15 The Pew Research Center found that 84% of adults use the internet, including 85% of the people in urban and suburban communities and 78% of the people in rural communities. Pew Research Center, Americans' Internet Access: 2000-2015, at 2, 10 (June 26, 2015), available at http://www.pewinternet.org/files/2015/06/2015-06-26_internet-usage-across-demographics-discover_FINAL.pdf.

    16 Approximately 94% of the claims submitted in fiscal year 2015 were filed through the electronic system, while 6% of the claims were submitted on a paper application.

    17 The Federal Communications Commission (“FCC”) reported that 17% of the population does not have access to a broadband service with connection speeds of twenty-five megabits per second (“mbps”) for downloads and three mbps for uploads. This figure includes 8% of the people who live in urban areas, 53% of the people in rural areas, and 63% of the people in U.S. territories and Tribal lands. Federal Communications Commission, 2015 Broadband Progress Report at 4 (Jan. 29, 2015), available at https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-10A1.pdf.

    As discussed above, the PPA and other organizations that represent photographers expressed support for online registration in a prior rulemaking. They stated that “only a tiny fraction of photographers (1% according to PPA member surveys)” register their works with the Office, in part, because the paper application takes too much time to complete. PPA, supra note 11, at 1. Thus, requiring applicants to use the online application will encourage broader participation in the registration process.

    If a photographer does not have broadband at home, at the home of a relative, friend, or neighbor, or at her place of employment, there are other options for registering large numbers of published or unpublished photographs. If the copyright owner has a tablet or laptop, she could complete and submit the online application at a coffee shop, a bookstore, or any other place where wi-fi or cellular service is available.18 She could log onto the electronic system at a public library or other institution that provides computers with internet access. Although the photographer would have to submit the application through the electronic system and pay the filing fee through a secure Web site (www.pay.gov), she would not necessarily have to submit her photographs over the internet. As discussed in Section III.D.1.c, the photographer could save her photographs onto a flash drive or other storage device and mail it to the Office with the required shipping slip that is generated by the electronic registration system.

    18 When filing an application for a supplementary registration there is no need to upload a copy of the work that is covered by the basic registration. Thus, applicants will be able to submit these types of claims with a tablet or other wi-fi enabled device. In some cases, the registration specialist may need to compare the information provided in the application for supplementary registration with the copy of the work that was submitted with the application for the basic registration. For instance, this may be necessary if the supplementary registration changes the publication status of the work or adds additional authors to the registration record. If the Office does not have a copy of the work in its possession, the registration specialist may ask the applicant to submit a replacement copy. See Compendium section 1802.9(C). But in all cases, the replacement copy could be sent by first class mail, courier, or hand delivery; the copy does not need to be uploaded to the electronic system (though this would be an option if the applicant has broadband service).

    In the alternative, the photographer could hire an attorney to submit the application on her behalf, either by paying for the attorney's services or by obtaining pro bono representation.19 The Office also notes that a number of companies will prepare an application and file it with the Office for a fee. These companies typically provide this service for copyright owners who wish to register a single work, but they could conceivably expand their offering to include groups of photographs.

    19 The Office does not require applications to be prepared or submitted by an attorney. In certain special cases the Office may suggest that the copyright owner consider seeking legal advice, but the Office does not furnish the names of copyright attorneys, publishers, agents, or other similar information. See 37 CFR 201.2(a)(2).

    The Office's decision to offer a group option for photographers is entirely discretionary, and Congress gave the Office broad authority to set the requirements for these types of claims. 17 U.S.C. 408(c)(1). For the foregoing reasons, the Office believes that requiring applicants to submit an online application as a condition for seeking a group registration for a group of photographs is a reasonable trade-off for improving the overall efficiency of the group registration process. Nonetheless, the Office invites comment on this aspect of the Proposed Rule.

    B. Filing Fee for GRPPH and GRUPH

    The filing fee for registering groups of published or unpublished photographs will be $55, which is the amount the Office currently charges for a group of published photographs submitted with an online application under the pilot program.20 37 CFR 201.3(c)(3)(i).

    20 Likewise, the filing fee for registering a photographic database will remain unchanged. Applicants will continue to pay $55 if the claim is submitted with an online application under the pilot program, and will continue to pay $65 if the claim is submitted with a paper application on Form VA. 37 CFR 201.3(c)(3).

    In 2012 the Office conducted a study pursuant to section 708 of the Copyright Act, which authorizes the Register to establish, adjust, and recover fees for certain services that the Office provides to the public. Initially, the Office proposed to increase the filing fee for a group of published photographs, but after weighing the concerns expressed by photographers the Office decided to keep the fee for submitting an online application under the pilot program at $55 and the fee for submitting a paper application at $65. The Office noted that photographers “expressed significant concern about the impact of fees on their ability to protect their works,” given “the number of works they produce and must register in order to receive the full range of judicial remedies for infringement.” U.S. Copyright Office, Proposed Schedule and Analysis of Copyright Fees To Go Into Effect On Or About April 1, 2014, at 15 (Nov. 14, 2013), available at http://www.copyright.gov/docs/newfees/USCOFeeStudy-Nov13.pdf.

    Section 708(b) authorizes the Register to adjust the fees that the Office charges for certain services (including the fee for seeking a group registration), but before doing so the Register must conduct a study of the costs incurred by the Office for registering claims, recording documents, and providing other services. In conducting this study, the Register must consider the timing of any fee adjustments and the Office's authority to use the fees consistent with its budget. 17 U.S.C. 708(b)(1). Section 708(b) provides that the Register may adjust these fees no “more than that necessary to cover the reasonable costs incurred by the Copyright Office for . . . [such services], plus a reasonable inflation adjustment to account for any estimated increase in costs.” 17 U.S.C. 708(b)(2). It also provides that the Office must submit a proposed fee schedule to Congress and that the Office may implement the schedule 120 days thereafter (unless Congress enacts a law stating that it does not approve the schedule). 17 U.S.C. 708(b)(5).

    Once the Proposed Rule has been implemented, the Office will monitor the cost of processing groups of published and unpublished photographs to determine if future fee adjustments may be warranted. The Office will use this information in conducting its next fee study.

    C. Eligibility Requirements for GRPPH and GRUPH

    This section discusses the eligibility requirements for the group option for published photographs and the group option for unpublished photographs. Applicants that fail to satisfy these requirements will not be permitted to use these options.

    1. Photographs That May Be Included in the Group

    Among the key requirements of the Proposed Rule are that all the works in the group must be photographs, the group must contain no more than 750 photographs, and the applicant must specify the total number of photographs that are included in the group. These requirements must be satisfied, regardless of whether the applicant uses the group option for published or unpublished photographs.

    This represents a change in policy. Under the current regulation, applicants may register a group of published photographs by submitting a paper application on Form VA and may use Form GR/PPh/CON to provide titles, publication dates, and other pertinent information for each photograph. Completing Form GR/PPh/CON is optional, although it does provide certain advantages. See Compendium section 1116.2. When using Form GR/PPh/CON, the applicant may only include up to 750 photographs in each group. By contrast, if the applicant uses any other method for submitting a group of published photographs—such as completing the standard online application under the pilot program or submitting a paper application on Form VA without completing Form GR/PPh/CON—there is no limit on the number of photographs that may be included in the group. Likewise, when an applicant submits a number of photographs as an unpublished collection under § 202.3(b)(4)(i)(B), there is no limit on the number of photographs that may be included in the claim (regardless of whether the applicant submits the claim through the electronic system or with a paper application).

    The Office recognizes that photographers are prolific creators. A photographer may take dozens or even hundreds of copyrightable images in a single session and thousands of images over the course of a week, a month, or a year. The Office created a group option for photographs, in part, because it is unrealistic and cost-prohibitive to expect photographers to register all of their images on an individual basis. At the same time, the Office recognizes that an effective public record must provide sufficient information about each claim. Photographers who register their works in a timely manner may be entitled to claim statutory damages in an infringement action and the granularity of the public record is critical to that determination.

    Given resource limitations and the modest filing fee for this group option, the Office must impose some limit on the total number of photographs that may be submitted under the group option for published photographs and the new option for unpublished photographs. Based on its experience with Form GR/PPh/CON, the Office has determined that a limit of 750 photographs strikes an appropriate balance between the interests of photographers and the administrative capabilities of the Office.

    To ensure that applicants do not attempt to circumvent the 750-photograph limit the Office proposes to eliminate the pilot program that allows applicants to submit groups of published photographs with the standard online application.21 If an applicant submits more than 750 photographs or fails to use the online application designated for GRPPH, the Office will ask the applicant to resubmit the claim using the appropriate application and will ask the applicant to limit the claim to no more than 750 photographs.

    21 The Proposed Rule only eliminates the pilot program for GRPPH. As discussed in Section III.A.1, the pilot program for photographic databases will remain in effect for the time being.

    For the same reason, the Office will no longer register a group of unpublished photographs as an unpublished collection. If an applicant submits more than 750 photographs or fails to use the online application designated for GRUPH, the Office will ask the applicant to resubmit the claim using the appropriate application and will ask the applicant to limit the number of photographs in the group.

    The limit on the number of photographs, in turn, will affect the procedure for correcting or amplifying a basic registration for a group of published photographs. As noted in Section III.A.2, the rule proposed in the CA rulemaking will require applicants to file an online application in order to seek a supplementary registration for a group of photographs. If the basic registration covers 750 photographs or fewer, the applicant will be able to correct or amplify the registration record with a single supplementary registration submitted through the online system. But if the basic registration was issued before the Proposed Rule goes into effect, and if that registration covers more than 750 photographs, multiple supplementary registrations may be needed to correct or amplify the record for those works.

    2. Authorship and Ownership

    Another key requirement is that all the photographs in the group must be taken by the same photographer. Applicants will not be allowed to submit groups of photographs taken by different photographers (e.g., 300 photographs by Raul Martinez, 300 photographs by Jose Rodriguez, and 150 photographs by Diego Hernandez). Likewise, the Office will not accept applications claiming that two or more individuals jointly created each photograph in the group as a joint work.22 These requirements are consistent with the regulation that currently governs GRPPH. See 37 CFR 202.3(b)(10)(ii).

    22 Joint authors will not be able to use GRPPH or GRUPH. The Office is willing to entertain these types of claims if the applicant submits a separate application for each individual photograph (i.e., not using the group option) and provides a sufficient basis for the claim of joint authorship.

    In all cases, the claim will be limited to “photographs” and that term will be added automatically to the application by the electronic system. The system will not accept claims in “digital editing,” “compilation,” or any other form of authorship other than “photographs.” 23 Likewise, the Office will not allow applicants to add other forms of authorship to the claim during the examination process or with a supplementary registration.

    23 To assert a claim in “digital editing” applicants may submit a separate application and a separate filing fee for each photograph (rather than submitting a group of photographs under GRPPH or GRUPH). In appropriate cases, applicants may assert a claim in a “compilation” of photographs by registering them as part of a collective work, such as a book of photographs, an exhibition catalog, a calendar, or the like.

    In all cases, the copyright claimant for each photograph must be the same person or organization.24 Specifically, the claimant must be the author of all the photographs in the group, or the copyright owner that owns all the exclusive rights in those photographs.25

    24 This requirement appears in the current regulation governing groups of published photographs. 37 CFR 202.3(b)(10)(i).

    25 The term “claimant” is defined in § 202.3(a)(3)(iii) of the regulations. That provision contains a footnote stating that a person or organization that has obtained “the contractual right to claim legal title to the copyright” may be named as claimant. 37 CFR 202.3(a)(3)(ii) n.1. The Office proposed to eliminate this footnote in a prior rulemaking. See Registration of Copyright: Definition of Claimant, 77 FR 29257, 29259 (May 17, 2012). The Office expects to issue a final rule in that proceeding before the new regulations governing GRPPH and GRUPH go into effect.

    Applicants will be allowed to register a group of photographs if the claimant obtained all the exclusive rights in those works through a transfer of ownership. Likewise, applicants will be allowed to register a group of photographs as works made for hire (i) if all the photographs are identified in the application as works made for hire, (ii) if all the photographs were created by the same individual for the same employer, and (iii) if the photographer and the employer are both listed in the name of author field (e.g., “Advertising Agency LLC, employer for hire of John Smith”).26 However, the Office will not allow applicants to combine works made for hire with works obtained through a transfer of ownership. Similarly, the electronic system will not allow works created by one photographer to be combined with works created by a different photographer (even if those works are owned by the same claimant).

    26 This requirement appears in the current regulation governing groups of published photographs. 37 CFR 202.3(b)(10)(ix).

    For example, if an advertising agency acquired a group of photographs from a particular photographer through an assignment of copyright and acquired another group of photographs taken by the same photographer through a work made for hire agreement, the agency could register those photographs under GRPPH or GRUPH only by separating the photographs into two groups and submit a separate application for each group (i.e., one application with the work made for hire question answered “yes” and the other with the question answered “no”). Likewise, if the agency hired five freelancers to take photographs pursuant to a work made for hire agreement, the agency should separate the photographs into five separate groups (i.e., one group for each photographer) and submit a separate application for each group.

    3. Publication and Titles

    The group options for published and unpublished photographs are designed to be mutually exclusive of each other. Under the Proposed Rule, an applicant will be allowed to register a group of unpublished photographs if all the photographs are unpublished, and will be allowed to register a group of published photographs if all the photographs are published. Applicants will not be allowed to combine published and unpublished photographs in the same claim. In addition, in the case of published photographs, all the works must be published within the same nation and within the same calendar year (e.g., January 1 through December 31, 2016).27 When completing the online application, applicants will be asked to verify this information by providing the earliest date and the most recent date that photographs were published during the year.

    27 The current regulation governing GRPPH states that the photographs must be published within the same calendar year, but does not indicate whether the photographs must be published within the same nation. 37 CFR 202.3(b)(10)(iii).

    To register a group of published or unpublished photographs, applicants will be required to provide a title for the group as a whole, and will be required to include this information in the online application itself. For example, the applicant may provide a title that identifies the photographer and the month/year that the photographs were created, such as “Jack Jackson's photos May through July 2016,” or one that identifies the subject matter of the photographs, such as “Tropical Images from Hawaii.”

    In addition to this basic information about the group of photographs, applicants will be required to submit a separate document in Excel format (“.xls”), Portable Document Format (“PDF”), or other electronic format that may be specifically approved by the Office that contains a sequentially numbered 28 list with a title, file name (matching the file name of the corresponding deposit copy), and in the case of GRPPH, the month and year of publication 29 (e.g., “January 2016,” “February 2016,” etc.) for each photograph in the group.30 This list must be submitted together with the copies of the photographs, by uploading them through the electronic system or by sending them on a physical storage device. The specific requirements of this list are discussed below.

    28 Each entry on the list must be sequentially numbered (i.e., 1, 2, 3, etc.); these numbers can be entered automatically with most spreadsheet programs. The Office will use this information to count the number of photographs that are included in the deposit, and to ensure that it matches the number of photographs claimed in the application.

    29 Applicants will not be required to provide a precise date of publication for each photograph in the group (i.e., month, day, and year). This represents a change in the current policy for registering a group of published photographs. Under the current regulation for GRPPH, applicants generally are required to provide a month, day, and year of publication for each photograph, although they may provide a range of dates if the application is received within three months after the first date of publication specified in the application.

    30 The specific requirements for the numbered list are discussed below in Section III.D.1.b.

    In addition, applicants will be encouraged—but not required—to provide title and publication information in the online application itself. The Office will provide instructions on its Web site that will explain how to copy this information from the numbered list into the appropriate fields in the online application.

    Although applicants will not be required to provide title and publication information in the online application, there are certain advantages to doing so. If the applicant includes the titles in the online application, they will appear on the certificate of registration and in the Office's online database. This will improve the quality of the registration record by making the information more accessible to the public. If this information appears on the certificate, and if the certificate is issued within five years after the publication of a particular photograph, the certificate will create a legal presumption that the work was published in the month and year specified on the certificate. See 17 U.S.C. 410(c).

    By contrast, if the applicant provides title and publication information in the numbered list, but does not include that information in the online application itself, the titles and publication dates will not appear on the certificate of registration or the Office's online database (although the Office will keep a copy of the numbered list in its files). In such cases, the Office will add an annotation to the record, such as “Regarding title: deposit contains complete list of titles that correspond to the individual photographs included in this group.”

    In comments regarding the Office's pilot program for electronic registration of photographs, the PPA and other organizations stated that photographers struggle with the definition of “publication” and “the public,” and find it difficult to determine whether their works are published or unpublished, particularly when they are distributed in digital form. PPA, supra note 11, at 2-3. They explained that their members are reluctant to register their works, in part, because they worry about the possible consequences of classifying an unpublished photograph as a published work (or vice versa). They asked the Office to address this “barrier to registration” by providing clarification and guidance on these issues. Id. at 3.

    The new group option for unpublished photographs will help mitigate this problem by encouraging early registration. The Office strongly encourages photographers to register their works before they are published (i.e., before any distributions have occurred), because this avoids much of the confusion concerning publication and the treatment of published works. The new group option supports this objective by giving photographers a convenient and cost-effective means for registering their photographs before they are distributed to the public.

    In addition, the Office released a comprehensive revision of the Compendium in 2014, which sets forth and explains key administrative duties of the Copyright Office under title 17 of the United States Code. See 79 FR 78911, 78911-12 (Dec. 31, 2014). Among other improvements, the Compendium contains an entire chapter on publication. This chapter provides a detailed discussion of the definition of “publication” and “the public” and specific examples of how the Office applies these definitions to photographs and other types of works. See generally Compendium, chapter 1900. The Compendium provides guidance on how to determine whether a work is published or unpublished when it is posted on the internet or distributed online. See id. section 1008.3. It also explains how to correct an error in a registration if the applicant mistakenly claims that the work was published or unpublished. See id. sections 1802.6(I), 1802.7(C).

    In the future, the Office intends to develop a portal on its Web site that will provide photographers with pertinent information on a wide range of copyright issues. In developing these resources it would be helpful to learn more about the specific methods that photographers use to distribute their works to their customers and the general public. The Office previously asked for written comments on this issue in the Visual Works Inquiry, and it welcomes additional input as part of this rulemaking.

    D. The Deposit Requirement

    The Proposed Rule will modify the deposit requirements for the group option for published photographs and the group option for photographic databases, and it will establish similar requirements for the new option for unpublished photographs. These requirements are summarized below.31

    31 The rule proposed in the GRCP Rulemaking will modify the deposit requirements for registering a group of contributions to periodicals in some respects. By contrast, the Office is not proposing to make any changes to the deposit requirements for an individual photograph or a collective work, such as a calendar or a book of photographs. To register an individual photograph, the applicant should submit two complete copies of the best edition if the photograph has been published in the United States or one complete copy if the photograph is unpublished. To register a collective work, the applicant should submit one complete copy of the collective work (if it is unpublished) or two complete copies of the best edition (if the work has been published in the United States). See generally Compendium, chapter 1500.

    1. Deposit Requirements for GRPPH and GRUPH a. Digital Photographs

    Under the Proposed Rule, applicants will be required to submit a digital copy of each photograph that is included in a group of published photographs (GRPPH) or a group of unpublished photographs (GRUPH). Applicants will be required to submit each photograph in one of the following formats: JPEG, GIF, TIFF, or PCD. The Office will no longer accept physical copies, such as prints, contact sheets, slides, photocopies, videotapes, or clippings from a newspaper, magazine, or other publication. This should not impose a significant burden on photographers because it appears that the vast majority of them use digital cameras.

    b. Numbered List of Photographs

    In addition, as noted above, applicants will be required to submit a separate document containing a sequentially numbered list that identifies the title and file name—and in the case of published photographs, the month and year of publication—for each photograph in the group. The Office will provide a template on its Web site that may be used to prepare this list. The title and file name for a particular photograph may be the same, and may consist solely of numbers, letters, and spaces that were automatically assigned by the camera or a unique identifier that has been assigned to the image by a third party, such as the PLUS Registry. As noted above, the file names specified in the list must match the corresponding file names in the deposit copy. However, the file name should not contain slashes or any other form of punctuation. Including punctuation marks in the file name (other than spaces) may cause a system error that may prevent the Office from viewing the photographs. The Office also discourages applicants from stating “Untitled,” “No Title,” or the like, because interested parties typically search for works by title and it may be impossible to locate a particular photograph unless a meaningful title has been provided.

    The Office will use the list to examine and document the claim, particularly in cases where the applicant does not provide title or publication information in the online application itself. In addition, the Office may use the list to locate and retrieve the deposit in the event it is needed for litigation or other legitimate purposes. For these reasons, the titles and file names specified in the list must correspond to the titles and files names for the actual photographs that are included in the deposit. In this respect, the Proposed Rule builds upon a suggestion that the Digital Media Licensing Association (“DMLA”) offered in a prior rulemaking.32

    32 DMLA was previously known as the Picture Archive Council of America (“PACA”). In a prior rulemaking, it stated that works deposited with the Office should be accessible upon request so that parties can easily determine whether a particular photograph is covered by a particular registration. PACA at 1, available at http://copyright.gov/rulemaking/databases/comments/picture-archive-council-of-america.pdf.

    The list must be contained in an electronic file in Excel format (“.xls”), Portable Document Format (“PDF”), or other electronic format that may be specifically approved by the Office. The file name for the list must include the title of the group as a whole and the eleven-digit case number that is automatically assigned to the application by the electronic system (e.g., ” [Title of Group] Case Number 12345678910”). The Office will provide further guidance regarding the preferred format and naming conventions for these file names on its Web site and in Chapter 1100 of the Compendium. When completing the online application, applicants will be asked to provide the file name for this document in the application itself. This will help the Office connect the numbered list with the relevant application, and to distinguish it from the files that contain the digital photographs.

    c. Procedure for Submitting the Digital Photographs and the Numbered List of Photographs

    Applicants will be required to submit the files containing the digital photographs together with the file that contains the sequentially numbered list of photographs. Applicants may upload these files through the electronic system. Alternatively, they may save them onto a physical storage device, such as a flash drive or a CD-R or DVD-R, and send it to the Office by mail, by courier, or by hand delivery together with the required shipping slip.

    When submitting files through the electronic system, applicants will be strongly encouraged to save them in a .zip file and then upload the .zip file to the system. In all cases, the size of each uploaded file must not exceed 500 megabytes, although the applicant may digitally compress the photographs to comply with this limitation.

    When submitting files on a flash drive or other storage device, applicants must send that device in the same package with the shipping slip that is generated by the electronic system. If the applicant fails to include the required shipping slip, the Office may be unable to connect the storage device with the appropriate application. In such cases, the applicant will be required to pay an additional fee to search for the deposit and connect it with the application. If the deposit cannot be located, the applicant will be required to resubmit the storage device, which may change the effective date of registration for the claim.

    Packages that are delivered to the Office by mail or by courier will be irradiated to destroy possible contaminants, such as anthrax. This process may damage files stored on electronic media. To avoid this result, applicants will be strongly encouraged to send physical storage devices to the Office in boxes rather than envelopes. Additional information concerning the recommended procedure for delivering physical deposits by mail or by courier will be provided in the Compendium.

    2. Deposit Requirements for Photographic Databases

    The Proposed Rule will impose the same deposit requirements on a database that consists predominantly of photographs. Specifically, database owners will be required to submit a digital copy of each photograph that is included in the claim, and a separate document containing a sequentially numbered list that identifies the title and file name—and in the case of published photographs, the month and year of publication—for each photograph.33 Database owners will be required to submit digital copies, regardless of whether they intend to file an online application under the pilot program (in which case the photographs and the numbered list may be uploaded to the electronic system or submitted on a physical storage device with the required shipping slip) or a paper application (in which case the photographs and the numbered list may be submitted on a physical storage device together with Form VA).34

    33 As discussed in Section III.D.1.b, the Office will provide a standard template that may be used to prepare the numbered list of photographs.

    34 When submitting an online application the storage device must be accompanied by the shipping slip that is generated by the electronic system. When submitting a paper application, the device must be accompanied by Form VA.

    E. When should a group registration be filed?

    An application for a group registration may be filed at any time. However, a photograph must be registered in a timely manner to seek statutory damages and attorney's fees in an infringement action. Specifically, a copyright owner typically may seek these remedies if a photograph was registered (i) before the infringement commenced or (ii) within three months after the first publication of that work. See 17 U.S.C. 412.

    In the case of unpublished photographs, the Office strongly encourages photographers to register their works before sharing them with any other party. By doing so, photographers preserve the ability to seek statutory damages and attorney's fees in subsequent infringement disputes involving those works.

    In the case of published photographs, the Office encourages photographers to submit their claims every three months (instead of filing on an annual or semi-annual basis), and in each case, to file the claim within three months after the earliest date of publication specified in the application. For example, if a photographer first published his or her photographs on June 1, 2016, it would be advisable to submit a complete application, deposit, and filing fee on or before September 1, 2016. By doing so, the photographer would preserve his or her ability to seek statutory damages and attorney's fees for any infringements that began after the effective date of registration (i.e., after September 1, 2016), as well as any infringements that occurred within three months after the date of publication (i.e., between June 1, 2016 and September 1, 2016).

    F. The Scope of a Group Registration

    The Proposed Rule memorializes the Office's longstanding position regarding the scope of a registration for a group of published photographs, and it confirms that the Office will take the same position regarding the group option for unpublished photographs.

    When the Office issues a group registration, it prepares one certificate of registration for the entire group and assigns one registration number to that certificate. The Proposed Rule clarifies that a registration for a group of published or unpublished photographs covers each photograph in the group, and that each photograph is registered as a separate “work.” This understanding is consistent with the statutory scheme. The legislative history makes clear that group registration was “a needed and important liberalization of the law [then] in effect,” which to that point had required “separate registrations where related works or parts of a work are published separately.” H.R. Rep. No. 94-1476, at 154 (1976). In particular, Congress noted that “the technical necessity for separate applications and fees has caused copyright owners to forego copyright altogether.” Id. Given that context, it would be anomalous for works registered as part of a group registration application to be given less protection than if they had been registered through separate applications.

    For similar reasons, the Proposed Rule also clarifies that when a group of photographs is registered under GRPPH or GRUPH, the group as a whole is not considered a compilation or a collective work under sections 101, 103(b), or 504(c)(1) of the Copyright Act. The group is merely an administrative classification created solely for the purpose of registering multiple photographs with one application and one filing fee. See 17 U.S.C. 408(c)(1) (“Th[e] administrative classification of works has no significance with respect to the subject matter of copyright or the exclusive rights provided by this title.”). Although an applicant may exercise some judgment in selecting the photographs that are included within a particular group, that decision does not necessarily constitute copyrightable authorship. Instead, the selection is based on the regulatory requirements for these group options, and any coordination or arrangement of the photographs is merely an administrative formality that facilitates the examination of the works.

    Likewise, the Proposed Rule clarifies that the group is not considered a derivative work under sections 101, 103(b), or 504(c)(1) of the Copyright Act. When a group of photographs is compiled for the purpose of facilitating registration, those works are not “recast, transformed, or adapted” in any way, and the group as a whole is not “a work based upon one or more preexisting works” because there is no copyrightable authorship in simply following the administrative requirements for GRPPH or GRUPH. 17 U.S.C. 101 (definition of “derivative work”).

    G. Group Registration of Published and Unpublished Photographs Distinguished From Other Registration Options

    This section discusses the key differences between the options for registering a group of published or unpublished photographs as compared to the options for registering an unpublished collection, a group of contributions to periodicals, a photographic database, or a collective work.

    1. Group Registration of Unpublished Photographs vs. Unpublished Collections

    The group option for unpublished photographs is intended to replace the option that currently allows an applicant to register a number of photographs as an unpublished collection. Once the Proposed Rule goes into effect, the Office will no longer accept an application to register photographs under § 202.3(b)(4)(i)(B) of the regulations, regardless of whether the photographs are submitted with a standard application or a paper application (although the Office will continue to accept applications to register other types of works under this provision).

    As explained, the GRUPH option provides a more efficient mechanism for capturing information about photographs, and incorporating that information into the public record. Requiring applicants to use this option may also provide photographers with certain legal benefits.

    When an applicant submits photographs via the unpublished collection option, and asserts a claim in both the individual photographs as well as the selection and arrangement of the collection as whole, the Office will register the claim as an unpublished collective work, rather than an unpublished collection. A collective work is—by definition—a form of compilation. 17 U.S.C. 101 (“The term `compilation' includes collective works.”). Section 504(c)(1) of the Copyright Act states that a copyright owner may be entitled to recover “an award of statutory damages for all infringements involved in [an infringement] action, with respect to any one work,” but “[f]or the purposes of this subsection, all the parts of a compilation . . . constitute one work.” 17 U.S.C. 504(c)(1). In other words, when a number of photographs are registered as an unpublished collective work, the copyright owner would be entitled to seek only one award of statutory damages in an infringement action, rather than a separate award for each photograph.

    In contrast, as noted above in Section III.F, when a number of photographs are registered under the GRUPH option, each photograph is registered as a separate work. For purposes of registration, the group as a whole is not considered a collective work or compilation, and thus, the individual photographs within the group would not be subject to the limitation on statutory damages set forth in section 504(c)(1). Instead, a registration for a group of unpublished photographs is treated as a separate registration for each photograph that is included within the group.

    2. Group Registration of Published Photographs vs. Group Registration for Contributions to Periodicals

    The group option for published photographs is not intended to alter or replace the group option for contributions to periodicals. Photographers may continue to register their works as a group of published photographs or a group of contributions to periodicals, as long as they satisfy the relevant requirements for each option.

    There are some notable differences between these registration options. While a group of published photographs may include no more than 750 images, there is no limit on the number of photographs that may be included within a group of contributions to periodicals. Moreover, a group of published photographs may include photographs that were published during the same calendar year, while a group of contributions to periodicals may include photographs that were published over a twelve-month period—even if that period extends from one calendar year to the next (e.g., September 1, 2015 through August 31, 2016). In addition, to be eligible for GRPPH, the photographs may be published in any manner, but there is no need to specify the medium of publication and no need to submit the photographs in the specific form in which they were first published. To be eligible for GRCP, the photographs must be first published in a periodical (e.g., a newspaper, a magazine, etc.), the applicant must provide pertinent information about each periodical (e.g., title, issue number, publication date, etc.), and the applicant must submit a copy of the photographs as they appeared in each publication (e.g., a copy of the entire periodical, a copy of an entire section from a newspaper, etc.).

    The Office generally encourages applicants to use GRPPH, in part, because the deposit requirements for published photographs are more flexible than the deposit requirements for GRCP. Regardless of whether the applicant uses GRPPH or GRCP, the registration will cover all the photographs that are included within the group.

    3. Group Registration of Photographs vs. Group Registration for Photographic Databases

    As noted above, the Proposed Rule makes certain modifications to the deposit requirement for databases that predominantly consist of photographs. The Proposed Rule will not change any of the other requirements for these types of claims. See 37 CFR 202.3(b)(5); 202.20(c)(2)(vii)(D)(8).

    Although the Office will continue to accept these claims, the Office strongly encourages photographers, stock photography companies, database providers, and other interested parties to register their works with the group option for published or unpublished photographs—rather than the database option—for several reasons. Many photography Web sites and catalogs do not qualify as a database, and therefore, are not eligible for the group option for photographic databases. For purposes of registration, a database is defined “as a compilation of digital information comprised of data, information, abstracts, images, maps, music, sound recordings, video, other digitized material, or references to a particular subject or subjects. In all cases, the content of a database must be arranged in a systematic manner, and it must be accessed solely by means of an integrated information retrieval program or system with the following characteristics.” Compendium section 1117.1. First, “a query function must be used to access the content.” Id. Second, “[t]he information retrieval program or system must yield a subset of the content, or it must organize the content based on the parameters specified in each query.” Id.

    Stock photography Web sites or catalogs that merely display photographs do not satisfy these requirements and therefore are not considered databases for the purpose of registration. In most cases, users may access all the content on a Web site or in a catalog by scrolling or browsing through the individual images or categories of related images. Id. section 1002.6. By contrast, users cannot access the content of a database in its entirety. Id. Instead, they must use a query function to identify specific content within the database, and they must use an information retrieval system to extract the content that matches the user's search criteria. Id. While a user may view the entire content of a Web site or catalog, a user may view the content of a database only to the extent that it matches a particular query that the user entered into the information retrieval system. Id. While some Web sites may provide a search feature that may be used to locate particular images or categories of images, these types of features do not qualify as an information retrieval system nor do they transform an ordinary Web site into a database, because these features are not the sole means for accessing the images posted on the site. See id. If the Office determines that a particular Web site, catalog, or other work does not qualify as a database, the Office will refuse to register the work as a database or as a group of updates or revisions to a photographic database.

    Copyright owners also should consider the following issue before registering their photographs as part of a photographic database. As noted above in Section III.G.1, the Copyright Act states that a copyright owner may be entitled to recover “an award of statutory damages for all infringements involved in [an infringement] action, with respect to any one work,” but “[f]or the purposes of this subsection, all the parts of a compilation . . . constitute one work.” 17 U.S.C. 504(c)(1). A database is—by definition—a compilation. See Alaska Stock, LLC v. Houghton Mifflin Harcourt Publishing Co., 747 F.3d 673, 676 (9th Cir. 2014) (concluding that a photographic database is a collective work); see also Compendium section 1117.1 (same). Consequently, when a group of photographs is registered as a database, the copyright owner may be entitled to seek only one award of statutory damages for the database as a whole—rather than a separate award for each photograph—even if the defendant infringed all the photographs that are covered by the registration.

    By contrast, when a copyright owner registers a group of photographs under GRPPH or GRUPH, the registration covers each photograph in the group, but the group itself is not a compilation within the meaning of the Copyright Act. Therefore, any claim for infringement would not be subject to the limitation set forth in Section 504(c)(1) of the Copyright Act. For these reasons, the group options for published and unpublished photographs provide significant benefits, while avoiding the potential downside of registering a number of works as part of a photographic database.

    4. Group Registration of Photographs vs. Collective Works

    The Proposed Rule will not change the requirements for registering a number of photographs as part of a collective work, such as a book of photographs, a travel guide, or the like. Applicants may continue to register these types of works with a standard application submitted through the electronic system or with a paper application submitted on Form VA.

    Registration of photographs as part of a collective work differs in many respects from group registration of photographs. A registration for a collective work may include photographs taken by multiple photographers (even if the photographers are not explicitly named in the application), and there is no limit on the number of photographs that may be included within each claim. If the claim is approved, the registration will cover the authorship involved in selecting, coordinating, and/or arranging the content of the collective work as a whole. It also may cover the individual photographs that appear in the collective work if the claimant owns the copyright in those images and the collective work as a whole, and if the photographs have not been previously published or registered.

    There are some drawbacks to registering photographs as a collective work. As discussed in Section III.G.1, a collective work is—by definition—a compilation. As such, these types of works are subject to the limitation set forth in section 504(c)(1) of the Copyright Act. When a number of photographs are registered as part of a collective work, the copyright owner may be entitled to receive only one award of statutory damages in an infringement action, even if the defendant infringed all the photographs that appear in that work (regardless of whether the collective work is published or unpublished). By contrast, when a group of photographs are registered under GRPPH or GRUPH, the copyright owner would not be subject to the collective-work limitation in section 504(c)(1). For this reason, photographers may wish to register their photographs under GRPPH or GRUPH, even if those works also may be eligible for registration as part of a collective work.

    H. Technical Amendments

    The Proposed Rule will move the regulation governing published photographs from § 202.3 to § 202.4.35 In the future, the Office intends to move all regulations governing the various group options that have been implemented under section 408(c) of the Copyright Act to § 202.4. This change is intended to improve the readability of the existing regulations, but it does not represent a substantive change in policy.

    35 The Office recently issued a notice of proposed rulemaking that would remove the current text of § 202.4 and reserve that section for later use. See Copyright Office Technical Amendments, 81 FR 67940, 67942 (Oct. 3, 2016).

    In addition, the Proposed Rule incorporates the definitions of “claimant” and “Class VA” that are set forth in § 202.3, and it confirms that an application for a group of photographs may be submitted by any of the parties listed in § 202.3(c)(1), namely (i) the author or copyright claimant of those works, (ii) the owner of any of the exclusive rights in those works, or (iii) a duly authorized agent of any author, claimant, or owner of exclusive rights.

    IV. Conclusion

    The Proposed Rule will allow broader participation in the registration system by expanding the class of works that may be registered as a group, increase the efficiency of the registration process, and create a more robust record of the claim. The Office invites public comment on these proposed changes.

    List of Subjects 37 CFR Part 201

    Copyright, General provisions.

    37 CFR Part 202

    Copyright, Preregistration and registration of claims to copyright.

    Proposed Regulation

    For the reasons set forth in the preamble, the U.S. Copyright Office proposes amending 37 CFR parts 201 and 202, as follows:

    PART 201—GENERAL PROVISIONS 1. The authority citation for part 201 is amended to read as follows: Authority:

    17 U.S.C. 702.

    2. Amend § 201.3 by: a. Redesignating paragraphs (c)(3) through (18) as paragraphs (c)(4) through (19), respectively. b. Adding new paragraph (c)(3). c. Revising newly redesignated paragraph (c)(4).

    The revisions and additions to read as follows:

    § 201.3 Fees for registration, recordation, and related services, special services, and services performed by the Licensing Division.

    (c) * * *

    (3) Registration of a claim in a group of published photographs or a claim in a group of unpublished photographs 55 (4) Registration for a database that predominantly consists of photographs and updates thereto: (i) Electronic filing 55 (ii) Paper filing 65
    PART 202—PREREGISTRATION AND REGISTRATION OF CLAIMS TO COPYRIGHT 3. The authority citation for part 202 continues to read as follows: Authority:

    17 U.S.C. 408(f), 702.

    4. Amend § 202.3 by: a. In paragraph (b)(3) removing the phrase “, subject to the limitations in paragraph (b)(10)(v) of this section” . b. Revising paragraph (b)(4)(ii). c. Removing and reserving paragraph (b)(10). d. In the text of paragraph (c)(2), removing the reference to footnote “6” and adding in its place a reference to footnote “5”. e. In paragraph (c)(2), revising footnote 5.

    The revisions to read as follows:

    § 202.3 Registration of copyright.

    (b) * * *

    (4) * * *

    (ii) In the case of an application for registration made under paragraphs (b)(4) through (b)(10) of this section or under § 202.4, the “year of creation,” “year of completion,” or “year in which creation of this work was completed,” means the latest year in which the creation of any copyrightable element was completed.

    (c) * * *

    (2) * * *

    5 In the case of an application to register a group of newspapers, newsletters, contributions to periodicals, or photographs under paragraphs (b)(7) or (9) of this section or under § 202.4, the deposit shall comply with the respective requirements specified in those paragraphs.

    6. Revise § 202.4 to read as follows:
    § 202.4 Group Registration.

    (a) This section prescribes conditions for issuing a registration for a group of related works under section 408(c) of title 17 of the United States Code.

    (b) Definitions. For purposes of this section, the terms copy and work made for hire have the meanings set forth in section 101 of title 17 of the United States Code, and the terms claimant and Class VA have the meanings set forth in § 202.3(a)(3) and (b)(1)(iii).

    (c) [Reserved]

    (d) [Reserved]

    (e) [Reserved]

    (f) [Reserved]

    (g) [Reserved]

    (h) [Reserved]

    (i) Group registration of unpublished photographs. Pursuant to the authority granted by 17 U.S.C. 408(c)(1), the Register of Copyrights has determined that a group of unpublished photographs may be registered in Class VA with one application, one filing fee, and the required deposit, if the following conditions are met:

    (1) All the works in the group must be photographs.

    (2) The group must include no more than 750 photographs, and the application must specify the total number of photographs that are included in the group.

    (3) All the photographs must be created by the same photographer.

    (4) The copyright claimant for all the photographs must be the same person or organization.

    (5) The photographs may be registered as works made for hire if all the photographs are identified in the application as such, if all the photographs were created by the same photographer for the same employer, and if the application identifies both the photographer and the employer in the name of author field (e.g., “ABC Corporation, employer for hire of John Doe”).

    (6) All the photographs must be unpublished.

    (7) The applicant must provide a title for the group as a whole.

    (8) The applicant must complete and submit the online application designated for a group of unpublished photographs. (The Office will not register a group of unpublished photographs as an unpublished collection under § 202.3(b)(4)(i)(B).) The application may be submitted by any of the parties listed in § 202.3(c)(1).

    (9) The appropriate filing fee, as required by § 201.3(c) of this chapter, must be included with the application or charged to an active deposit account.

    (10) The applicant must submit one copy of each photograph in one of the following formats: JPEG, GIF, TIFF, or PCD. The file name for a particular photograph may consist of letters, numbers, and spaces, but the file name should not contain any other form of punctuation. The photographs may be uploaded to the electronic registration system together with the required numbered list, preferably in a .zip file containing all the photographs. The file size for each uploaded file must not exceed 500 megabytes; the photographs may be compressed to comply with this requirement. Alternatively, the photographs and the required numbered list may be saved on a physical storage device, such as a flash drive, CD-R, or DVD-R, and delivered to the Copyright Office together with the required shipping slip generated by the electronic registration system.

    (11) The applicant must submit a sequentially numbered list containing a title and file name for each photograph in the group (matching the corresponding file names for each photograph specified in paragraph (i)(10)). The title and file name for a particular photograph may be the same. The numbered list must be contained in an electronic file in Excel format (.xls), Portable Document Format (PDF), or other electronic format approved by the Office, and the file name for the list must contain the title of the group and the case number assigned to the application by the electronic registration system (e.g., “Title Of Group Case Number 16283927239.xls”).

    (j) Group registration of published photographs. Pursuant to the authority granted by 17 U.S.C. 408(c)(1), the Register of Copyrights has determined that a group of published photographs may be registered in Class VA with one application, one filing fee, and the required deposit, if the following conditions are met:

    (1) All the works in the group must be photographs.

    (2) The group must include no more than 750 photographs, and the application must specify the total number of photographs that are included in the group.

    (3) All the photographs must be created by the same photographer.

    (4) The copyright claimant for all the photographs must be the same person or organization.

    (5) The photographs may be registered as works made for hire if all the photographs are identified in the application as such, if all the photographs were created by the same photographer for the same employer, and if the application identifies both the photographer and the employer in the name of author field (e.g., “XYZ Corporation, employer for hire of Jane Doe”).

    (6) All the photographs must be published within the same nation and within the same calendar year, and the applicant must specify the earliest and latest date that the photographs were published during the year.

    (7) The applicant must provide a title for the group as a whole.

    (8) The applicant must complete and submit the online application designated for a group of published photographs. The application may be submitted by any of the parties listed in § 202.3(c)(1).

    (9) The appropriate filing fee, as required by § 201.3(c) of this chapter, must be included with the application or charged to an active deposit account.

    (10) The applicant must submit one copy of each photograph in one of the following formats: JPEG, GIF, TIFF, or PCD. The file name for a particular photograph may consist of letters, numbers, and spaces, but the file name should not contain any other form of punctuation. The photographs may be uploaded to the electronic registration system together with the required numbered list, preferably in a .zip file containing all the photographs. The file size for each uploaded file must not exceed 500 megabytes; the photographs may be compressed to comply with this requirement. Alternatively, the photographs and the required numbered list may be saved on a physical storage device, such as a flash drive, CD-R, or DVD-R, and delivered to the Copyright Office together with the required shipping slip generated by the electronic registration system.

    (11) The applicant must submit a sequentially numbered list containing the title, file name, and month and year of publication for each photograph in the group (matching the corresponding file names for each photograph specified in paragraph (j)(10)). The title and file name for a particular photograph may be the same. The numbered list must be contained in an electronic file in Excel format (.xls), Portable Document Format (PDF), or other electronic format approved by the Office, and the file name for the list must contain the title of the group and the case number assigned to the application by the electronic registration system (e.g., “Title Of Group Case Number 16283927239.xls”).

    (k) [Reserved]

    (l) [Reserved]

    (m) [Reserved]

    (n) The scope of a group registration. When the Office issues a group registration under paragraphs (i) or (j) of this section, the registration covers each work in the group and each work is registered as a separate work. For purposes of registration, the group as a whole is not considered a compilation, a collective work, or a derivative work under sections 101, 103(b), or 504(c)(1) of title 17 of the United States Code.

    7. Amend § 202.20 by: a. Revising paragraph (c)(2)(vii)(D)(8); and. b. Removing paragraph (c)(2)(xx).

    The revision to read as follows:

    § 202.20 Deposit of copies and phonorecords for copyright registration.

    (c) * * *

    (2) * * *

    (vii) * * *

    (D) * * *

    (8) In the case of an application for registration of a database that consists predominantly of photographs (including a group registration for revised or updated versions of such a database), “identifying portions” shall instead consist of all individual photographs included in the claim. Photographs must be submitted in digital form in one of the following formats: JPEG, GIF, TIFF, or PCD. In addition, the applicant must submit a sequentially numbered list containing the title and file name—and if the photographs have been published, the month and year of publication—for each photograph in the group. The title and file name for a particular photograph may be the same and may consist of letters, numbers, and spaces, but the file name should not contain any other form of punctuation. The numbered list must be contained in an electronic file in Excel format (.xls), Portable Document Format (PDF), or other electronic format approved by the Office. The file name for the list must contain the title of the database, and the case number assigned to the application by the electronic registration system, if any (e.g., “Title Of Database Case Number 162883927239.xls”). The photographs and the numbered list may be uploaded to the electronic registration system with the permission and under the direction of the Visual Arts Division, preferably in a .zip file containing these materials. The file size for each uploaded file must not exceed 500 megabytes; the photographs may be compressed to comply with this requirement. Alternatively, the photographs and the numbered list may be saved on a physical storage device, such as a flash drive, CD-R, or DVD-R, and delivered to the Copyright Office together with the required shipping slip generated by the electronic registration system or with a paper application submitted on Form VA.

    Dated: November 22, 2016. Sarang V. Damle, General Counsel and Associate Register of Copyrights.
    [FR Doc. 2016-28706 Filed 11-30-16; 8:45 am] BILLING CODE 1410-30-P
    LIBRARY OF CONGRESS Copyright Office 37 CFR Parts 201, 202 [Docket No. 2016-9] Supplementary Registration AGENCY:

    U.S. Copyright Office, Library of Congress.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The U.S. Copyright Office is proposing to amend the regulation governing supplementary registration to reflect certain technical upgrades that will soon be made to the electronic registration system. In most cases applicants will be required to submit an online application in order to correct or amplify the information set forth in a basic registration. This will increase the efficiency of the supplementary registration process for both applicants and the Office alike. In addition, the Office is amending the regulation to codify and update certain practices that are set forth in the Compendium of U.S. Copyright Office Practices, Third Edition and to improve the readability of the regulation.

    DATES:

    Comments on the proposed rule must be made in writing and must be received in the U.S. Copyright Office no later than January 3, 2017.

    ADDRESSES:

    For reasons of government efficiency, the Copyright Office is using the regulations.gov system for the submission and posting of public comments in this proceeding. All comments are therefore to be submitted electronically through regulations.gov. Specific instructions for submitting comments are available on the Copyright Office Web site at http://copyright.gov/rulemaking/supplementary-registration/. If electronic submission of comments is not feasible due to lack of access to a computer and/or the Internet, please contact the Office using the contact information below for special instructions.

    FOR FURTHER INFORMATION CONTACT:

    Robert J. Kasunic, Associate Register and Director of Registration Policy and Practice, by telephone at (202) 707-8040; or Erik Bertin, Deputy Director of Registration Policy and Practice, by telephone at 202-707-8040.

    SUPPLEMENTARY INFORMATION:

    I. Background

    Section 408(d) of the Copyright Act authorizes the Register of Copyrights (the “Register”) to establish “formal procedures for the filing of an application for supplementary registration.” 17 U.S.C. 408(d). A supplementary registration is a special type of registration that may be used “to correct an error in a copyright registration or to amplify the information given in a registration.” Id. Specifically, it identifies an error or omission in an existing registration (referred to herein as a “basic registration”) and places the corrected information or additional information in the public record.

    When the U.S. Copyright Office (the “Office”) issues a supplementary registration, it does not cancel or replace the basic registration or the registration number for that registration. Likewise, the Office does not change the information set forth in the basic registration or the public record for that registration. Instead, as specified by statute, the basic registration and the supplementary registration coexist with each other in the public record, and “the information contained in a supplementary registration augments but does not supersede that contained in the earlier registration.” Id.

    II. The Proposed Rule A. Application for Supplementary Registration 1. Online Registration

    The Office is proposing to amend the regulation that governs the procedure for seeking a supplementary registration (the “Proposed Rule”). Under the Proposed Rule, in most cases, applicants will be required to file an online application in order to correct or amplify the information set forth in a basic registration.

    The Office has allowed and encouraged applicants to register their works through the electronic registration system since 2007. See 72 FR 36883 (July 6, 2007). When the Office introduced this system, it could be used only to seek a basic registration. To seek a supplementary registration, applicants had to submit a paper application using Form CA. 37 CFR 201.5(c)(1), (c)(2). In February 2015 the Office completed a comprehensive analysis of its electronic registration system with input from technical experts and stakeholders. This analysis will support the Office's long-term goals of creating both a better interface and a better public record. See U.S. Copyright Office, Office of the Chief Information Officer, Report and Recommendations of the Technical Upgrades Special Project Team (Feb. 2015), available at http://copyright.gov/docs/technical_upgrades/usco-technicalupgrades.pdf; see also 78 FR 17722 (Mar. 22, 2013). In December 2015 the Register issued a strategic plan that sets forth the Office's performance objectives for the next five years. The plan provides a roadmap for re-envisioning almost all of the services that the Office provides, including how applicants register claims, submit deposits, record documents, share data, and access expert resources. With respect to information technology, the plan calls for “a robust and flexible technology enterprise that is dedicated to the current and future needs of a modern copyright agency.” U.S. Copyright Office, Strategic Plan 2016-2020: Positioning the United States Copyright Office for the Future, at 35 (Dec. 1, 2015), available at http://www.copyright.gov/reports/strategic-plan/sp2016-2020.html. At the direction of Congress,1 the Office has also developed a detailed IT plan, and obtained public comments on specific strategies, costs, and timelines for technology objectives. U.S. Copyright Office, Provisional Information Technology Modernization Plan and Cost Analysis (Feb. 29, 2016), available at http://copyright.gov/reports/itplan/.

    1 H.R. Rep. No. 114-110, at 16-17 (2015).

    In the meantime, the Office has made some enhancements to the current system that will improve the versatility of the supplementary registration process. Under the Proposed Rule, applicants will be required to use the online registration system to file a supplementary registration for any types of works that are capable of being registered through the electronic system. This online filing requirement will thus apply to supplementary registrations for literary works (e.g., fiction, nonfiction, poetry, etc.), single issues of a serial publication (e.g., periodicals, magazines, newsletters, journals, etc.), works of the visual arts (e.g., photographs, maps, technical drawings, etc.), works of the performing arts (e.g., musical works, dramatic works, choreographic works, pantomimes, motion pictures and other audiovisual works, etc.), and sound recordings. See 37 CFR 202.3(b). The online filing requirement will also extend to supplementary registrations for collective works, works registered under the unit of publication option, and works registered as an unpublished collection. See 37 CFR 202.3(b)(4). It will also apply to supplementary registrations for groups of serials,2 newspapers, or newsletters,3 groups of published photographs,4 or groups of updates and revisions to a photographic database.5 In the near future, the online filing requirement will apply to supplementary registrations for groups of unpublished photographs,6 and groups of contributions to periodicals.7 If the Office subsequently decides to move registrations for other classes of works into the electronic system, supplementary registrations for those works will also be subject to this same requirement. In short, use of the online supplementary registration application will be required for most works. Moreover, applicants will generally be required to use the online registration system to file a supplementary registration even if the work was originally registered using a paper application.8 Instructions for completing the online application will be provided in the electronic system and in Chapter 1800 of the Compendium of U.S. Copyright Office Practices, Third Edition (hereinafter “Compendium”).9

    2See 37 CFR 202.3(b)(6)(v).

    3 Although the current regulations state that an application for a group of newspaper or newsletter issues must be submitted with a paper application, the Office is able to process these types of claims through the electronic registration system, and has in fact been doing so since December 14, 2012. See 37 CFR 202.3(b)(7)(i)(B), (9)(viii). The Office intends to amend the regulations in a future rulemaking to reflect these recent upgrades.

    4 In 2012 the Office issued an interim regulation that established a pilot program for applicants that register large numbers of photographs using the group option for published photographs (referred to herein as “GRPPH”) and the group option for photographic databases. 76 FR 4072, 4074, 4075 (Jan. 24, 2011). Applicants that participate in the pilot program may submit their photographs through the electronic system, provided that they obtain prior authorization from the Visual Arts Division and follow the instructions from that Division concerning the information that should be included in the application. 37 CFR 202.3(b)(10)(xi). While the pilot program was well-intentioned, it has been extremely burdensome for both applicants and the Office. Therefore, the Office is issuing a separate notice of proposed rulemaking (published elsewhere in this volume of the Federal Register, and referred to herein as the “Photo Rulemaking”) that will modify the regulation that governs GRPPH. Among other changes, the rule proposed in the Photo Rulemaking will require applicants to submit an online application specifically designed for GRPPH claims, instead of submitting their photographs through the pilot program. (By contrast, the pilot program for photographic databases will remain in effect—at least for the time being.)

    5 Applicants may register a photographic database through the electronic system by participating in the pilot program mentioned in footnote 4. 76 FR at 4074, 4075; 37 CFR 202.3(b)(5)(ii)(A).

    6 The rule proposed in the Photo Rulemaking will establish a new group registration option for unpublished photographs (referred to herein as “GRUPH”). In order to use this option, applicants will be required to submit an online application specifically designed for GRUPH claims, instead of submitting a paper application.

    7 The Office is issuing a separate notice of proposed rulemaking (published elsewhere in this volume of the Federal Register, and referred to herein as the “GRCP Rulemaking”) on a proposed rule that will modify the group option for contributions to periodicals (“GRCP”). Among other changes, the rule proposed in the GRCP Rulemaking will require applicants to submit an online application specifically designed for GRCP claims, instead of submitting a paper application.

    8 As discussed above in footnote 4, the rule proposed in the Photo Rulemaking will modify the requirements for registering a group of published photographs. Among other things, applicants will be allowed to submit no more than 750 photographs with each application. The limit on the number of photographs, in turn, will affect the procedure for correcting or amplifying an existing registration for a group of published photographs. If the basic registration covers 750 photographs or less, the applicant will be able to correct or amplify the registration record with a single supplementary registration. By contrast, multiple supplementary registrations may be needed in cases where the basic registration had been issued before the issuance of a final rule in the Photo Rulemaking and where the basic registration covers more than 750 photographs.

    9 Under the Proposed Rule, applicants will be required to obtain prior authorization and instructions from the Visual Arts Division if they intend to correct or amplify the information set forth in a basic registration for a photographic database. This is due to the fact that a supplementary registration for a photographic database will be processed under the pilot program mentioned in footnote 4. The Visual Arts Division will continue to monitor claims submitted under this program to ensure that applicants complete the online application in an appropriate manner.

    Once the Proposed Rule goes into effect, applicants will not be allowed to submit a paper application on Form CA to correct or amplify the basic registration for any types of works that are capable of being registered through the electronic system. If the Office receives such a paper application, it will ask the applicant to resubmit the claim using the online application.

    To correct or amplify the registration record for works that cannot be registered through the electronic system, applicants will be required to submit a paper application using Form CA.10 This includes group registrations issued under 37 CFR 202.3(b)(5) for a database that does not consist predominantly of photographs,11 and GATT registrations issued under 37 CFR 202.12 for a foreign work restored to copyright protection under the Uruguay Round Agreements Act.12 It also includes a renewal registration for a work registered or first published before January 1, 1978.13 While instructions for completing Form CA are provided with Form CA and in section 1802.8 of the Compendium, the specific requirements for the paper application will no longer be listed in the regulation itself.

    10 A supplementary registration cannot be used to correct or amplify the registration record for a vessel design or a mask work. The Office has no authority and no procedure for correcting substantive errors in these types of registrations. See 17 U.S.C. 1319; see also 71 FR 46402 (Aug. 14, 2006). However, if the applicant made a clerical or typographical error in an application for a vessel design, the owner of the registered design or its duly authorized agent may be able to correct the error by submitting an application for a certificate of correction using Form DC. See 37 CFR 212.8(a)(3), (c)(2).

    11 Currently, applicants must submit these types of claims using a paper application “that best reflects the subject matter of the material in the database.” 37 CFR 202.3(b)(5)(ii)(A).

    12 Currently, applicants must submit these types of claims using a paper application submitted on Form GATT. 37 CFR 202.12(c)(2).

    13 Currently, applicants must submit these types of claims using a paper application submitted on Form RE. 37 CFR 202.17(g)(1).

    2. Policy Considerations Supporting Online-Only Registration

    A substantial majority of the U.S. population has access to the internet,14 and the Office expects that most copyright owners will be able to use the electronic registration system.15 However, the Office recognizes that millions of Americans do not have broadband service, and that the Proposed Rule may impose a burden on copyright owners who fall within this segment of the population.16 Nevertheless, the Office believes that the benefits of phasing-out the paper application and replacing it with an online application outweigh the potential burden on copyright owners who do not have direct access to the internet.

    14 The Pew Research Center found that 84% of adults use the internet, including 85% of the people in urban and suburban communities and 78% of the people in rural communities. Pew Research Center, Americans' Internet Access: 2000-2015 (June 26, 2015), available at http://www.pewinternet.org/2015/06/26/americans-internet-access-2000-2015/c.

    15 Approximately 94% of the claims filed in fiscal year 2015 were submitted through the electronic system, while 6% of the claims were submitted with a paper application.

    16 The Federal Communications Commission (“FCC”) reported that 17% of the population does not have access to a broadband service with connection speeds of twenty-five megabits per second (“mbps”) for downloads and three mbps for uploads. This figure includes 8% of the people who live in urban areas, 53% of the people in rural areas, and 63% of the people in U.S. territories and Tribal lands. Federal Communications Commission, 2015 Broadband Progress Report at 4 (Jan. 29, 2015), available at https://www.fcc.gov/reports/2015-broadband-progress-report.

    Paper applications are extremely burdensome for both applicants and the Office. Describing an error or omission in a basic registration can be tedious and time consuming, especially when the applicant needs to make a significant number of changes to the registration record. The Office routinely receives applications that are hundreds of pages long, such as when a stock photography company wants to add thousands of titles to the record for a photographic database. Examining these applications imposes tremendous burdens on the Office, because each correction or amplification must be copied from Form CA and entered into the record by hand. In some cases, registration specialists have spent several days on a single application. This increasing demand on the Office's limited resources causes delays in issuing supplementary registrations, and it prevents specialists from examining other types of claims thereby increasing the overall backlog within the Office.

    If a copyright owner does not have broadband at home, at the home of a relative, friend, or neighbor, or at his place of employment, there are other options for submitting an application for supplementary registration. If the copyright owner has a tablet or laptop, he could complete and submit the online application at a coffee shop, a bookstore, or any other place where wi-fi or cellular service is available.17 He also could log onto the electronic registration system by going to a public library that provides computers with internet access.

    17 When filing an application for a supplementary registration there is no need to upload a copy of the work that is covered by the basic registration. Thus, applicants will be able to submit these types of claims with a tablet or other wi-fi enabled device. In some cases, the registration specialist may need to compare the information provided in the application for supplementary registration with the copy of the work that was submitted with the application for the basic registration. For instance, this may be necessary if the supplementary registration changes the publication status of the work or adds additional authors to the registration record. If the Office does not have a copy of the work in its possession, the registration specialist may ask the applicant to submit a replacement copy. See Compendium section 1802.9(C). But in all cases, the replacement copy could be sent by first class mail, courier, or hand delivery; the copy does not need to be uploaded to the electronic system (though this would be an option if the applicant has broadband service).

    In the alternative, the copyright owner could hire an attorney to submit the application on his behalf, either by paying for the attorney's services or by obtaining pro bono representation.18 The Office also notes that a number of companies will prepare and submit an application for a fee. These companies typically provide this service for copyright owners seeking a basic registration, but they could conceivably expand their offering to include supplementary registrations.

    18 The Office does not require applications to be prepared or submitted by an attorney. In certain special cases the Office may suggest that the copyright owner consider seeking legal advice, but the Office does not furnish the names of copyright attorneys, publishers, agents, or other similar information. See 37 CFR 201.2(a)(2).

    For the foregoing reasons, the Office believes that requiring applicants to use the online application is a reasonable trade-off for improving the overall efficiency of the supplementary registration process. The Office invites comment on this proposal, including whether the Office should eliminate the paper application for seeking a supplementary registration, phase out this option after a specified period of time, or continue to offer this option for applicants who prefer to use the paper-based system.

    B. Fees

    Under the Proposed Rule, the applicant will be required to pay the same filing fee, regardless of whether the application is submitted through the electronic registration system or on Form CA. In addition, the applicant may be required to pay a fee to locate and obtain a copy of the basic registration that is referenced in the application. Each of these fees is discussed below.

    1. Filing Fee

    In 2012 the Office conducted a study pursuant to section 708 of the Copyright Act, which authorizes the Register to establish, adjust, and recover fees for certain services that the Office provides to the public. After reviewing its costs, the Office decided to increase the filing fee for a supplementary registration from $100 to $130.19 The Office explained that paper applications “are considerably less efficient than electronic registration” and that the prior fee did not offset a sufficient percentage of the costs associated with these types of claims. U.S. Copyright Office, Proposed Schedule and Analysis of Copyright Fees To Go Into Effect On Or About April 1, 2014, at 18 (Nov. 14, 2013), available at http://www.copyright.gov/docs/newfees/USCOFeeStudy-Nov13.pdf. For example, in Fiscal Year 2011 the filing fee for a supplementary application was $100, but the actual cost of processing these claims was $184 per application. Id. Appendix B.

    19 This increase went into effect on May 1, 2014.

    Section 708(b) authorizes the Register to adjust the fees that the Office charges for certain services (including the fee for seeking a supplementary registration), but before doing so the Register must conduct a study of the costs incurred by the Office for registering claims, recording documents, and providing other services. In conducting this study, the Register must consider the timing of any fee adjustments and the Office's authority to use the fees consistent with its budget. 17 U.S.C. 708(b)(1). Section 708(b) provides that the Register may adjust these fees no “more than necessary to cover the reasonable costs incurred by the Copyright Office for . . . [such services], plus a reasonable inflation adjustment to account for any estimated increase in costs.” 17 U.S.C. 708(b)(2). It also provides that the Office must submit a proposed fee schedule to Congress and that the Office may implement the schedule 120 days thereafter (unless Congress enacts a law stating that it does not approve the schedule). 17 U.S.C. 708(b)(5).

    Once the Proposed Rule has been implemented, the Office will monitor the cost of processing supplementary claims to determine if future fee adjustments may be warranted or if the Office should charge a different fee for claims submitted through the electronic registration system and claims submitted on Form CA. The Office will use this information in conducting its next fee study.

    2. Fee for Additional Certificate of Registration

    When the Office receives an application for a supplementary registration, the registration specialist will compare the information set forth in the application with the information set forth in the basic registration. If the Office has made a digital copy of the certificate of registration, the specialist may be able to conduct his or her review without obtaining a physical copy of the certificate.20 If the certificate has not been digitized, the specialist will ask the applicant to submit a copy of the certificate. If the applicant is unable to do so, the Office will charge an additional fee to make a copy of the basic registration in order to conduct the requisite review.21

    20 The Office has digitized the certificates of registration for claims registered between 1994 and the present. Certificates issued before that year may be stored in electronic form, on microfilm, in bound volumes, or in other physical formats.

    21 The current fee for obtaining an additional copy of a certificate of registration is $40 (http://copyright.gov/docs/fees.html).

    C. Examination Practices

    The Proposed Rule also updates examination practices in several areas, including, among other things, to reflect changes to the Compendium of Copyright Office Practices, to update rules regarding when supplementary registration will be declined, and to update practices regarding cross-references in the Office's public record.

    Changes to Reflect Compendium. The Compendium is the manual of the Register of Copyrights setting forth and explaining key administrative duties of the Copyright Office under title 17 of the United States Code. It serves as both a technical manual for the Office's staff, as well as a guidebook for authors, copyright licensees, practitioners, scholars, the courts, and members of the general public. In 2014 the Office released a comprehensive revision of the Compendium that makes the Office's practices more accessible and transparent to the public, and sets the stage for a number of long-term improvements in registration and recordation policy. See 79 FR 78911 (Dec. 31, 2014).

    The Proposed Rule updates a number of practices that are reflected in the Compendium. 22 It clarifies that the Office may issue a supplementary registration to correct an error in a basic registration issued on or after January 1, 1978, or a renewal registration for a work that was registered or first published on or before December 31, 1977. See Compendium section 1802.3.

    22 Corresponding changes will be made to the Compendium when the Proposed Rule goes into effect.

    Updating Rules for When Supplementary Registration Will Be Denied. The Proposed Rule also clarifies that the Office may decline to issue a supplementary registration for a basic registration that covered the first twenty-eight years of the copyright term, because any registration issued before January 1, 1978 has expired by now.23 See id. section 1802.4. Allowing interested parties to correct or amplify the information in a registration after the initial term expired creates a potential for error, mistake, or even fraud. This could have significant consequences in a legal dispute, given that a certificate of registration may create an evidentiary presumption concerning the facts stated in the certificate.24 17 U.S.C. 410(c). Therefore, the Proposed Rule explains that the Office may issue a supplementary registration for a basic registration that covered the first twenty-eight years of the copyright term only in exceptional circumstances, if the proposed correction or amplification is supported by clear, convincing, and objective documentation. In this respect, the Proposed Rule tracks a similar provision in the current regulation that specifies when the Office may issue a supplementary registration for a basic renewal registration.25

    23 Registrations issued under the 1909 Act expired at the end of the first twenty-eight years of the copyright term. If the copyright was renewed, the renewal registration expired at the end of the renewal term.

    24 For similar reasons, the Proposed Rule clarifies that the Copyright Office will not issue a supplementary registration for a registration that has been cancelled. Cancellation is an administrative procedure for invalidating a registration that has been issued by the Office. The Office has the authority to cancel a registration if “the material deposited does not constitute copyrightable subject matter” or if “the claim is invalid for any other reason.” 17 U.S.C. 410(b). It also has the authority to cancel a registration if the registration was made in error or if it was issued in the wrong class or series. See generally 37 CFR 201.7.

    25 37 CFR 201.5(b)(2)(iv). In addition, the Proposed Rule removes a sentence from this provision which states that the Office may correct an error in a renewal registration if the Office received an application for supplementary registration in the last year of the first twenty-eight years of the copyright term. This sentence is no longer needed now that the deadline for submitting such claims has passed.

    Cross-references to Basic Registration. Under the current regulations, when the Office issues a supplementary registration, it will cross-reference the records for the supplementary registration and the basic registration only if the application for supplementary registration was submitted by or on behalf of the copyright claimant named in the basic registration.26 See 37 CFR 201.5(b)(1) n.1. If the application was submitted by or on behalf of any other party, the records will not be cross-referenced with each other. See Compendium section 1802.1.

    26 Specifically, the Office will place a note in the record for the basic registration that identifies the registration number and the effective date of registration for the supplementary registration, and it will place a corresponding note in the record for the supplementary registration that identifies the registration number and the year of registration for the basic registration. See Compendium section 1802.1.

    After further consideration, the Office has concluded that these cross-references should be included regardless of who has submitted the application for supplementary registration. This amendment will improve the accuracy and usefulness of the public record by making it easier to find supplementary registrations that may contain additional information pertaining to the basic registration (regardless of who submitted the application for supplementary registration). If an interested party wishes to identify the person who made the correction or amplification, that information can be obtained by reviewing the records for the supplementary registration.27

    27 The Proposed Rule retains the requirement that an application for a supplementary registration must be submitted by an author of the work, a claimant of the work, an owner of any of the exclusive rights in the work, or a duly authorized agent of any of the foregoing parties. 37 CFR 201.5(b)(1).

    Clarifying Relationship Between Basic and Supplementary Registration. An additional change is being made to clarify the nature of a supplementary registration. As a general rule, the Office will issue only one registration for each work—meaning that the Office will issue one basic registration for a particular work, but will not issue additional basic registrations once the first basic registration has been made. See Compendium section 510. There are several exceptions to this rule, which are set forth in 37 CFR 202.3(b)(11)(i)-(iv).

    One of the exceptions relates to supplementary registrations, stating that “[s]upplementary registrations may be made . . . to correct or amplify the information in a registration made under this section.” 28 This erroneously suggests, however, that supplementary registrations are treated as basic registrations. The Proposed Rule will accordingly remove this exception; because a supplementary registration is not considered a basic registration, there is no limit on the number of supplementary registrations that may be issued for a particular basic registration, and in any event, the Office does not view supplementary registration as an exception to the general rule against issuing one basic registration per work.

    28 37 CFR 202.3(b)(11)(iv).

    Certification that Applicant Has Reviewed Basic Registration. It has come to the Office's attention that applicants often submit an application for supplementary registration without reviewing the information that is set forth in the basic registration. In some cases, applicants review the records that are posted in the Office's online database, but those records do not contain all the information that is set forth in the certificate of registration for a particular work. This may create a discrepancy between the registration record and the changes proposed in the application for supplementary registration. This complicates the examination of the claim, which, in turn, delays the issuance of the supplementary registration.

    The Proposed Rule addresses this issue by requiring applicants to sign a certification stating that they reviewed the certificate of registration for the basic registration before submitting the application for supplementary registration.29 If the applicant does not have a copy of the certificate, he or she may obtain a copy from the Record Research and Certification Section by following the procedure set forth in section 2408 of the Compendium. If it appears that the applicant did not review the basic registration before seeking a supplementary registration, the Office may ask the applicant to resubmit the application or may refuse registration.

    29 If the applicant fails to sign the certification in the online application, the application will not be accepted by the electronic registration system. If the applicant fails to sign the certification on Form CA, the registration specialist will communicate with the applicant.

    Referral Procedure for Office Error. Finally, the Proposed Rule clarifies that if an error in a basic registration was caused by the Office's own action, it will correct that error on its own initiative through an internal procedure known as a “referral.” In such cases, there is no need to seek a supplementary registration, and there is no fee for referral. See Compendium section 1804. It also clarifies that the referral procedure does not apply if the error was caused by the applicant's action—even if the examiner should have recognized that error when he or she examined the claim. In such cases, the Office will correct the error only if the applicant submits an application for a supplementary registration together with the appropriate filing fee.

    D. Technical Amendments

    The Proposed Rule will improve the readability of the regulation by reorganizing or revising awkward provisions, and by adopting the appropriate format for providing cross-references within the Code of Federal Regulations (as recommended by the Federal Register Document Drafting Handbook).30 In all cases, these technical amendments are intended to clarify the existing regulation, but they do not represent a substantive change in policy.

    30 The regulation repeatedly states that title 17 of the United States Code was “amended by Pub. L. 94-553.” The Office recently issued a notice of proposed rulemaking that would remove this phrase. See 81 FR 67940, 67944 (Oct. 3, 2016).

    III. Conclusion

    The Proposed Rule will increase the efficiency of the supplementary registration process and create a more robust record of the claim. The Office invites public comment on these proposed changes.

    List of Subjects in 37 CFR Part 201

    Copyright, General provisions.

    Proposed Regulations

    For the reasons set forth in the preamble, the Copyright Office proposes amending 37 CFR parts 201 and 202 as follows:

    PART 201—GENERAL PROVISIONS 1. Revise the authority citation for part 201 to read as follows: Authority:

    17 U.S.C. 702.

    2. Amend § 201.3 by revising paragraph (c)(9) to read as follows:
    § 201.3 Fees for registration, recordation, and related services, special services, and services performed by the Licensing Division.

    (c) * * *

    (9) Registration of a correction or amplification to a claim: (i) Supplementary registration: electronic filing or paper filing 130 (ii) Correction of a design registration (Form DC) 100
    3. Revise § 201.5 to read as follows:
    § 201.5 Supplementary registration.

    (a) General. This section prescribes conditions relating to the filing of an application for supplementary registration under section 408(d) of title 17 of the United States Code to correct an error in a copyright registration or to amplify the information given in a registration. No correction or amplification of the information in a basic registration will be made except pursuant to the provisions of this section. As an exception, where it is discovered that a basic registration contains an error caused by the Copyright Office's own action, the Office will take appropriate measures to rectify its mistake.

    (b) Definitions. (1) A basic registration means any of the following:

    (i) A copyright registration made under sections 408, 409, and 410 of title 17 of the United States Code;

    (ii) A renewal registration made under section 304 of title 17 of the United States Code; or

    (iii) A copyright registration or a renewal registration made under title 17 of the United States Code as it existed before January 1, 1978.

    (2) A supplementary registration means a registration issued under section 408(d) of title 17 of the United States Code and the provisions of this section.

    (c) Persons entitled to file an application for supplementary registration. Supplementary registration can be made only if a basic copyright registration for the same work has already been completed. After a basic registration has been completed, any author or other copyright claimant of the work, or the owner of any exclusive right in the work, or the duly authorized agent of any such author, other claimant, or owner, who wishes to correct or amplify the information given in the basic registration for the work may file an application for supplementary registration.

    (d) Basis for issuing a supplementary registration. (1) Supplementary registration may be made either to correct or to amplify the information in a basic registration.

    (2) A correction is appropriate if information in the basic registration was incorrect at the time that basic registration was made.

    (3) An amplification is appropriate:

    (i) To supplement or clarify the information that was required by the application for the basic registration and should have been provided, such as the identity of a co-author or co-claimant, but was omitted at the time the basic registration was made; or

    (ii) To reflect changes in facts, other than those relating to transfer, license, or ownership of rights in the work, that occurred since the basic registration was made.

    (4) Supplementary registration is not appropriate:

    (i) To reflect a change in ownership that occurred on or after the effective date of the basic registration or to reflect the division, allocation, licensing or transfer of rights in a work;

    (ii) To correct errors in statements or notices on the copies of phonorecords of a work, or to reflect changes in the content of a work; or

    (iii) To correct or amplify the information set forth in a basic registration that has been cancelled under § 201.7.

    (5) If an error or omission in a basic renewal registration is extremely minor, and does not involve the identity of the renewal claimant or the legal basis of the claim, supplementary registration may be made at any time. In an exceptional case, however, supplementary registration may be made to correct the name of the renewal claimant and the legal basis of the claim if clear, convincing, and objective documentation is submitted to the Copyright Office which proves that an inadvertent error was made in failing to designate the correct living statutory renewal claimant in the basic renewal registration.

    (6) In general, the Copyright Office will not issue a supplementary registration for a basic registration made under title 17 of the United States Code as it existed before January 1, 1978. In an exceptional case, the Copyright Office may issue a supplementary registration for such a registration, if the correction or amplification is supported by clear, convincing, and objective documentation.

    (e) Application for supplementary registration. (1) To seek a supplementary registration for a work registered in Class TX, PA, VA, SR, or SE, an unpublished collection or a unit of publication registered under § 202.3(b)(4)(i) of this chapter, or a group of related works registered under § 202.3(b)(6) through (10) or § 202.4 of this chapter, an applicant must complete and submit the online application designated for supplementary registration.

    (2) To seek a supplementary registration for a database that consists predominantly of photographs registered under § 202.3(b)(5) of this chapter, an applicant must complete and submit the online application designated for supplementary registration after consultation with and under the direction of the Visual Arts Division.

    (3) To seek a supplementary registration for a restored work registered under § 202.12 of this chapter, a database that does not consist predominantly of photographs registered under § 202.3(b)(5) of this chapter, or a renewal registration, an applicant must complete and submit a paper application using Form CA.

    (4) Before submitting the application, the applicant must sign a certification stating that the applicant reviewed a copy of the certificate of registration for the basic registration that will be corrected or amplified by the supplementary registration. To obtain a copy of the certificate, the applicant may submit a written request to the Records Research and Certification Section using the procedure set forth in Chapter 2400 of the Compendium of U.S. Copyright Office Practices, Third Edition.

    (5) The appropriate filing fee, as required by § 201.3(c), must be included with the application or charged to an active deposit account. At the Office's discretion, the applicant may be required to pay an additional fee to make a copy of the certificate of registration for the basic registration that will be corrected or amplified by the supplementary registration.

    (6) Copies, phonorecords, or supporting documents cannot be made part of the record for a supplementary registration and should not be submitted with the application.

    (f) Effect of supplementary registration. (1) When the Copyright Office completes a supplementary registration, it will issue a certificate of supplementary registration bearing a new registration number in the appropriate class. The Office will cross-reference the records for the basic registration and the supplementary registration by placing a note in each record that identifies the registration number and effective date of registration for the related registration.

    (2) As provided in section 408(d) of title 17 of the United States Code, the information contained in a supplementary registration augments but does not supersede that contained in the basic registration. The basic registration will not be expunged or cancelled.

    PART 202—PREREGISTRATION AND REGISTRATION OF CLAIMS TO COPYRIGHT 4. The authority citation for part 202 continues to read as follows: Authority:

    17 U.S.C. 408(f), 702.

    § 202.3 Registration of copyright.
    5. Amend § 202.3 as follows: a. In paragraph (b)(11)(iii), remove the phrase “by that applicant; and” and add in its place “by that applicant.” b. Remove paragraph (b)(11)(iv). Dated: November 22, 2016. Sarang V. Damle, General Counsel and Associate Register of Copyrights.
    [FR Doc. 2016-28701 Filed 11-30-16; 8:45 am] BILLING CODE 1410-30-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R09-OAR-2016-0245; FRL-9955-60-Region 9] Approval of California Air Plan Revisions, Yolo-Solano Air Quality Management District AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Proposed rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is proposing to approve a revision to the Yolo-Solano Air Quality Management District (YSAQMD) portion of the California State Implementation Plan (SIP). This revision concerns emissions of volatile organic compounds (VOCs) and particulate matter (PM) from confined animal facilities (CAFs). We are proposing to approve a local rule to regulate these emission sources under the Clean Air Act (CAA or the Act). We are taking comments on this proposal and plan to follow with a final action.

    DATES:

    Any comments must arrive by January 3, 2017.

    ADDRESSES:

    Submit your comments, identified by Docket ID No. EPA-R09-OAR-2016-0245 at http://www.regulations.gov, or via email to Andrew Steckel, Rulemaking Office Chief at [email protected] For comments submitted at Regulations.gov, follow the online instructions for submitting comments. Once submitted, comments cannot be removed or edited from Regulations.gov. For either manner of submission, the EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. 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 (i.e. on the web, cloud, or other file sharing system). For additional submission methods, please contact the person identified in the FOR FURTHER INFORMATION CONTACT section. For the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

    FOR FURTHER INFORMATION CONTACT:

    Nancy Levin, EPA Region IX, (415) 972-3848, [email protected]

    SUPPLEMENTARY INFORMATION:

    Throughout this document, “we,” “us” and “our” refer to the EPA.

    Table of Contents I. The State's Submittal A. What rule did the State submit? B. Are there other versions of this rule? C. What is the purpose of the submitted rule? II. The EPA's Evaluation and Action A. How is the EPA evaluating the rule? B. Does the rule meet the evaluation criteria? C. EPA Recommendations To Further Improve the Rule D. Public Comment and Proposed Action III. Incorporation by Reference IV. Statutory and Executive Order Reviews I. The State's Submittal A. What rule did the State submit?

    Table 1 lists the rule addressed by this proposal with the dates that it was adopted by the local air agency and submitted by the California Air Resourced Board (CARB).

    Table 1—Submitted Rule Local agency Rule No. Rule title Adopted Submitted YSAQMD 11.2 Confined Animal Facilities Permit Program 06/14/06 10/05/2006

    On October 24, 2006, the EPA determined that the submittal for YSAQMD Rule 11.2 met the completeness criteria in 40 CFR part 51 Appendix V, which must be met before formal EPA review.

    B. Are there other versions of this rule?

    There are no previous versions of Rule 11.2 in the SIP.

    C. What is the purpose of the submitted rule?

    VOCs help produce ground-level ozone, smog and PM, which harm human health and the environment. Section 110(a) of the CAA requires States to submit regulations that control VOC emissions. PM, including PM equal to or less than 2.5 microns in diameter (PM2.5) and PM equal to or less than 10 microns in diameter (PM10), contributes to effects that are harmful to human health and the environment, including premature mortality, aggravation of respiratory and cardiovascular disease, decreased lung function, visibility impairment and damage to vegetation and ecosystems. Section 110(a) of the CAA requires states to submit regulations that control PM emissions. This rule prohibits any person from operating a CAF without first obtaining a “CAF Permit” from the YSAQMD Air Pollution Control Officer (APCO). The rule defines a CAF as a “facility where animals are corralled, penned, or otherwise caused to remain in restricted areas for commercial purposes and primarily fed by means other than grazing.” 1 The rule exempts a CAF from permit requirements if it does not meet the definition of a large CAF (LCAF).2 The rule defines a LCAF as a CAF that meets or exceeds a threshold of 1,000 milking cows per dairy, 3,500 beef cattle per beef feedlot, 7,500 “other cattle” 3 per facility, 100,000 turkeys per facility, 650,000 chickens per facility or 3,000 swine per facility.4 The permit application must contain an emissions mitigation plan that implements best available retrofit control technology (BARCT) for existing CAFs and best available control technology (BACT) for new facilities, as applicable. The rule does not include specific measures that the CAF may or must use to implement BARCT or BACT. The EPA's technical support document (TSD) has more information about this rule.

    1See YSAQMD Rule 11.2, section 206 “Confined Animal Facility (CAF).”

    2See YSAQMD Rule 11.2, sections 103 “Exemptions” and 211 “Large Confined Animal Facility.” All CAFs must comply with section 502 “Number of Animals—Exemption Demonstration,” which requires the owner or operator of any CAF that exceeds 50 percent of the large CAF (LCAF) threshold to maintain records demonstrating that the CAF meets the exemption criteria of the rule. Rule 11.2 also exempts a CAF if it is subject to YSAQMD Rule 3.8 “Federal Operating Permits.” See Rule 11.2 section 103.

    3 “Other Cattle” includes heifers and calves.

    4See YSAQMD Rule 11.2, section 211. This section also includes LCAF thresholds for sheep, lamb or goat CAFs (15,000 head), horse CAFs (2,500 head), duck CAFs (650,000 head), and CAFs for any other type of livestock not listed (30,000 head).

    II. The EPA's Evaluation and Action A. How is the EPA evaluating the rule?

    SIP rules must be enforceable (see CAA section 110(a)(2)), must not interfere with applicable requirements concerning attainment and reasonable further progress or other CAA requirements (see CAA section 110(l)), and must not modify certain SIP control requirements in nonattainment areas without ensuring equivalent or greater emissions reductions (see CAA section 193).

    Guidance and policy documents that we use to evaluate enforceability and revision/relaxation requirements for the applicable criteria pollutants include the following:

    1. “Issues Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations,” EPA, May 25, 1988 (the “Bluebook,” revised January 11, 1990).

    2. “Guidance Document for Correcting Common VOC & Other Rule Deficiencies,” EPA Region 9, August 21, 2001 (the “Little Bluebook”).

    B. Does the rule meet the evaluation criteria?

    We believe this rule is consistent with CAA requirements and relevant guidance regarding enforceability and SIP revisions. The submitted rule strengthens the SIP by establishing a permit program for CAFs and by prohibiting any person from operating a CAF without first obtaining a CAF permit from the APCO. The CAF permit application must include an emissions mitigation plan. The TSD has more information on our evaluation.

    C. EPA Recommendations To Further Improve the Rule

    The TSD describes additional rule revisions that we recommend for the next time the local agency modifies the rule.

    D. Public Comment and Proposed Action

    As authorized in section 110(k)(3) of the Act, the EPA proposes to fully approve the submitted rule because we believe it fulfills all relevant requirements. We will accept comments from the public on this proposal until January 3, 2017. Unless we receive convincing new information during the comment period, we intend to publish a final approval action that will incorporate this rule into the federally-enforceable SIP.

    III. Incorporation by Reference

    In this rule, the EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is proposing to incorporate by reference the YSAQMD rule as described in Table 1 of this preamble. The EPA has made, and will continue to make, these materials available through www.regulations.gov and at the EPA Region IX Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information).

    IV. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this proposed action merely proposes to approve State law as meeting federal requirements and does not impose additional requirements beyond those imposed by State law. For that reason, this proposed 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 et seq.);

    • 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 et seq.);

    • Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4);

    • 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 disproportionate human health or environmental effects with practical, appropriate, and legally permissible methods under Executive Order 12898 (59 FR 7629, February 16, 1994).

    In addition, 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. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

    List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Particulate matter, Reporting and recordkeeping requirements, Volatile organic compounds.

    Authority:

    42 U.S.C. 7401 et seq.

    Dated: November 14, 2016. Alexis Strauss, Acting Regional Administrator, Region IX.
    [FR Doc. 2016-28741 Filed 11-30-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 52 and 81 [EPA-R04-OAR-2016-0361; FRL-9955-80-Region 4] Air Plan Approval and Designation of Areas; KY; Redesignation of the Campbell County, 2010 1-Hour Sulfur Dioxide Nonattainment Area to Attainment AGENCY:

    Environmental Protection Agency.

    ACTION:

    Proposed rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is proposing to approve two separate but related submissions (one of which includes multiple components) provided by the Commonwealth of Kentucky, through the Kentucky Division of Air Quality (KDAQ), in relation to attainment of the 2010 Sulfur Dioxide (SO2) national ambient air quality standards (NAAQS) for the Kentucky portion of the Campbell-Clermont, Kentucky-Ohio 2010 1-hour SO2 nonattainment area (hereafter referred to as the “Campbell-Clermont, KY-OH Area” or “Area”). On March 31, 2015, KDAQ submitted a request for EPA to determine that the Campbell-Clermont, KY-OH Area attained the 2010 1-hour SO2 NAAQS per EPA's “Clean Data Policy.” Subsequently, on February 22, 2016, KDAQ submitted a request for EPA to redesignate the Campbell County portion of Kentucky that is within the Campbell-Clermont, KY-OH Area to attainment for the 2010 1-hour SO2 NAAQS, and to approve a State Implementation Plan (SIP) revision containing a maintenance plan, base year inventory, and reasonably available control measures (RACM) determination for the Kentucky portion of the Area. EPA is proposing to approve the Commonwealth's RACM determination and incorporate it into the SIP; to approve the base year emissions inventory for the Kentucky portion of the Area and incorporate it into the SIP; to approve the Commonwealth's request for a clean data determination; to approve the Commonwealth's plan for maintaining attainment of the 2010 1-hour SO2 NAAQS and incorporate it into the SIP; and to redesignate the Kentucky portion of the Area to attainment for the 2010 1-hour SO2 NAAQS.

    DATES:

    Comments must be received on or before January 3, 2017.

    ADDRESSES:

    Submit your comments, identified by Docket ID No. EPA-R04-OAR-2016-0361 at http://www.regulations.gov. Follow the online instructions for submitting comments. Once submitted, comments cannot be edited or removed from Regulations.gov. EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. 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. EPA will generally not consider comments or comment contents located outside of the primary submission (i.e., on the web, cloud, or other file sharing system). 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 http://www2.epa.gov/dockets/commenting-epa-dockets.

    FOR FURTHER INFORMATION CONTACT:

    Steven Scofield of the Air Regulatory Management Section, Air Planning and Implementation Branch, Air, Pesticides and Toxics Management Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW., Atlanta, Georgia 30303-8960. Mr. Scofield may be reached by phone at (404) 562-9034 or via electronic mail at [email protected]

    SUPPLEMENTARY INFORMATION:

    Table of Contents I. What are the actions EPA is proposing to take? II. What is the background for EPA's proposed actions? III. What are the criteria for redesignation? IV. Why is EPA proposing these actions? V. What is EPA's analysis of the redesignation request and SIP revisions? VI. What is the effect of EPA's proposed actions? VII. Proposed Actions VIII. Statutory and Executive Order Reviews I. What are the actions EPA is proposing to take?

    EPA is proposing to take the following five separate but related actions regarding Kentucky's aforementioned requests and SIP submission: (1) To approve Kentucky's RACM determination for the Kentucky portion of the Campbell-Clermont, KY-OH Area pursuant to Clean Air Act (CAA or Act) section 172(c)(1) and incorporate it into the SIP; (2) to approve the base year emissions inventory for the 2010 1-hour SO2 NAAQS for the Kentucky portion of the Area pursuant to CAA section 172(c)(3) and incorporate it into the SIP; (3) to approve the Commonwealth's March 31, 2015, request for EPA to determine that the Area attained the 2010 1-hour SO2 NAAQS per EPA's “Clean Data Policy;” (4) to approve Kentucky's plan for maintaining the 2010 1-hour SO2 NAAQS (maintenance plan) in the Area and incorporate it into the SIP; and (5) to redesignate the Kentucky portion of the Campbell-Clermont, KY-OH Area to attainment for the 2010 1-hour SO2 NAAQS. The Campbell-Clermont, KY-OH Area consists of a portion of Campbell County in Kentucky and a portion of Clermont County in Ohio.1 These proposed actions are summarized below and described in greater detail throughout this notice of proposed rulemaking.

    1 The Kentucky portion of the Area emits less than nine tons of total SO2 emissions per year, but it contains the SO2 monitor that violated the SO2 standard in 2011. The Ohio portion of the Area contains the Walter C. Beckjord power plant (Beckjord Facility) which shut down in 2014.

    Based on the 1-hour SO2 nonattainment designation for the Area, Kentucky was required to develop a nonattainment SIP revision addressing certain CAA requirements. Among other things, the Commonwealth was required to submit a SIP revision addressing RACM and base year inventory requirements pursuant to CAA section 172(c)(1) and section 172(c)(3), respectively, for its portion of the Area. Although EPA does not believe that section 172(c)(1) RACM must be approved into a SIP prior to redesignation of an area to attainment once that area is attaining the NAAQS, EPA is proposing to approve Kentucky's RACM determination into its SIP pursuant to a recent decision by the United States Court of Appeals for the Sixth Circuit (Sixth Circuit), as discussed in Section V.A, below. EPA is also proposing to approve Kentucky's 2011 base year inventory as satisfying section 172(c)(3) requirements.

    On November 21, 2016, EPA published its final approval of the redesignation request and maintenance plan for the Ohio portion of the Area. See 81 FR 83158. As part of that final action, EPA determined that the entire Area has attained the 2010 1-hour SO2 NAAQS. Based on EPA's final determination of attainment, EPA is proposing to approve Kentucky's March 31, 2015, request for EPA to determine that the Campbell-Clermont, KY-OH Area has attained the 2010 1-hour SO2 NAAQS per EPA's “Clean Data Policy.” Under the Clean Data Policy, a determination that an area is attaining the NAAQS suspends the obligations to submit an attainment demonstration and associated RACM, RFP plans, contingency measures, and certain other planning-related requirements until EPA redesignates the Area to attainment (at which time the requirements no longer apply) or EPA determines that the Area violates the standard.2

    2 Following enactment of the CAA Amendments of 1990, EPA promulgated its interpretation of the requirements for implementing the NAAQS in the general preamble for the Implementation of Title I of the CAA Amendments of 1990 (General Preamble) 57 FR 13498, 13564 (April 16, 1992). In 1995, based on the interpretation of CAA sections 171 and 172, and section 182 in the General Preamble, EPA set forth what has become known as its “Clean Data Policy” for the 1-hour ozone NAAQS. See Memorandum from John S. Seitz, Director, Office of Air Quality Planning and Standards, “RFP, Attainment Demonstration, and Related Requirements for Ozone Nonattainment Areas Meeting the Ozone National Ambient Air Quality Standard” (May 10, 1995). Since 1995, EPA has applied its interpretation under the Clean Data Policy in many rulemakings, suspending certain attainment-related planning requirements for individual areas, based on a determination of attainment and that interpretation has been upheld by federal courts.

    EPA is also proposing to approve Kentucky's maintenance plan for its portion of the Campbell-Clermont, KY-OH Area as meeting the requirements of section 175A (such approval being one of the CAA criteria for redesignation to attainment status) and incorporate it into the SIP. The maintenance plan is designed to keep the Area in attainment of the 2010 1-hour SO2 NAAQS through 2027.

    EPA also proposes to determine that the Kentucky portion of the Campbell-Clermont, KY-OH Area has met the requirements for redesignation under section 107(d)(3)(E) of the CAA. Accordingly, in this action, EPA is proposing to approve a request to change the legal designation of the portion of Campbell County, Kentucky, within the Campbell-Clermont, KY-OH Area, as found at 40 CFR part 81, from nonattainment to attainment for the 2010 1-hour SO2 NAAQS.

    In summary, this proposed rulemaking is in response to Kentucky's March 31, 2015, submittal requesting a clean data determination and to Kentucky's February 22, 2016, redesignation request and associated SIP submission that address the necessary elements described in section 107(d)(3)(E) of the CAA for redesignation of the Kentucky portion of the Campbell-Clermont, KY-OH Area to attainment for the 2010 1-hour SO2 NAAQS.

    II. What is the background for EPA's proposed actions?

    On June 2, 2010, EPA revised the primary SO2 NAAQS, establishing a new 1-hour SO2 standard of 75 parts per billion (ppb). See 75 FR 35520 (June 22, 2010). Under EPA's regulations at 40 CFR part 50, the 2010 1-hour SO2 NAAQS is met at a monitoring site when the 3-year average of the annual 99th percentile of 1-hour daily maximum concentrations is less than or equal to 75 ppb (based on the rounding convention in 40 CFR part 50, appendix T). See 40 CFR 50.17. Ambient air quality monitoring data for the 3-year period must meet a data completeness requirement. A year meets data completeness requirements when all four quarters are complete, and a quarter is complete when at least 75 percent of the sampling days for each quarter have complete data. A sampling day has complete data if 75 percent of the hourly concentration values, including state-flagged data affected by exceptional events which have been approved for exclusion by the Administrator, are reported.3

    3 40 CFR part 50, appendix T, section 3(b).

    Upon promulgation of a new or revised NAAQS, the CAA requires EPA to designate as nonattainment any area that does not meet (or that contributes to ambient air quality in a nearby area that does not meet) the NAAQS. At the time EPA conducted the initial round of designations for the 2010 1-hour SO2 primary NAAQS, Campbell County contained an SO2 monitor which registered violations of the standard based on the three most recent years of complete, quality assured, and certified ambient air quality data. Using 2009-2011 ambient air quality data, EPA designated the Area as nonattainment for the 2010 1-hour SO2 NAAQS on August 5, 2013 (78 FR 47191), which became effective on October 4, 2013. This nonattainment designation established an attainment date five years after the October 4, 2013, effective date for areas designated as nonattainment for the 2010 1-hour SO2 NAAQS. Therefore, the Campbell-Clermont, KY-OH Area's attainment date is October 4, 2018. KDAQ was also required to submit a SIP to EPA that meets the requirements of CAA sections 172(c) and 191-192 within 18 months following the October 4, 2013, effective date of designation (i.e., April 4, 2015).

    As mentioned above, on March 31, 2015, KDAQ submitted a request for EPA to determine that the Campbell-Clermont, KY-OH Area has attained the 2010 1-hour SO2 NAAQS per EPA's “Clean Data Policy.” Subsequently, on February 22, 2016, KDAQ submitted to EPA a request for redesignation of the Campbell-Clermont, KY-OH Area to attainment and a SIP revision containing a maintenance plan for the Kentucky portion of the Area.

    III. What are the criteria for redesignation?

    The CAA provides the requirements for redesignating a nonattainment area to attainment. Specifically, section 107(d)(3)(E) of the CAA allows for redesignation provided that the following criteria are met: (1) The Administrator determines that the area has attained the applicable NAAQS; (2) the Administrator has fully approved the applicable implementation plan for the area under section 110(k); (3) the Administrator determines that the improvement in air quality is due to permanent and enforceable reductions in emissions resulting from implementation of the applicable SIP and applicable federal air pollutant control regulations, and other permanent and enforceable reductions; (4) the Administrator has fully approved a maintenance plan for the area as meeting the requirements of section 175A; and (5) the state containing such area has met all requirements applicable to the area for purposes of redesignation under section 110 and part D of the CAA.

    On April 16, 1992 (57 FR 13498), EPA provided guidance on redesignation in the General Preamble for the Implementation of title I of the CAA Amendments of 1990 and supplemented this guidance on April 28, 1992 (57 FR 18070). EPA has provided further guidance on processing redesignation requests in several guidance documents. For the purposes of this proposed action, EPA will be referencing three of these documents: (1) The September 4, 1992, memorandum from John Calcagni titled “Procedures for Processing Requests to Redesignate Areas to Attainment” (hereinafter referred to as the “Calcagni Memo”); (2) the October 14, 1994, memorandum from Mary D. Nichols titled “Part D New Source Review (Part D NSR) Requirements for Areas Requesting Redesignation to Attainment” (hereinafter referred to as the “Nichols Memo”); and (3) the April 23, 2014 memorandum from Stephen D. Page titled “Guidance for 1-Hour SO2 Nonattainment Area SIP Submissions” (hereinafter referred to as “2010 SO2 Nonattainment Area Guidance”).

    IV. Why is EPA proposing these actions?

    On March 31, 2015, KDAQ submitted a request for EPA to determine that the Campbell-Clermont, KY-OH Area has attained the 2010 1-hour SO2 NAAQS per EPA's “Clean Data Policy.” Subsequently, on February 22, 2016, KDAQ requested that EPA redesignate the Kentucky portion of the Campbell-Clermont, KY-OH Area to attainment for the 2010 1-hour SO2 NAAQS. On November 21, 2016, EPA determined that the entire Area has attained the 2010 1-hour SO2 NAAQS as part of its final action redesignating the Ohio portion of the Area. EPA's evaluation indicates that the Kentucky portion of the Campbell-Clermont, KY-OH Area meets the requirements for redesignation as set forth in section 107(d)(3)(E), including the maintenance plan requirements under section 175A of the CAA. As a result, EPA is proposing to take the five related actions summarized in section I of this notice.

    V. What is EPA's analysis of the redesignation request and SIP revisions?

    As stated above, in accordance with the CAA, EPA proposes to: (1) Approve Kentucky's Subpart 1 RACM determination for the Kentucky portion of the Campbell-Clermont, KY-OH Area and incorporate it into the SIP; (2) approve the base year emissions inventory for the 2010 SO2 NAAQS for the Kentucky portion of the Area and incorporate it into the SIP; (3) approve Kentucky's March 31, 2015, request for a clean data determination; (4) approve the 2010 1-hour SO2 NAAQS maintenance plan for the Kentucky portion of the Area and incorporate it into the SIP; and (5) redesignate the Kentucky portion of the Area to attainment for the 2010 1-hour SO2 NAAQS.

    A. RACM Determination 1. Relationship Between Subpart 1 RACM and the Redesignation Criteria

    EPA does not believe that Subpart 1 nonattainment planning requirements designed to provide for attainment, including RACM, are “applicable” for purposes of CAA section 107(d)(3)(E)(ii) once an area is attaining the NAAQS and, therefore, does not believe that these planning requirements must be approved into the SIP before EPA can redesignate an area to attainment. See, e.g., 57 FR 13498, 13564 (April 16, 1992); Calcagni Memo. However, the Sixth Circuit issued an opinion in Sierra Club v. EPA, 793 F.3d 656 (6th Cir. 2015), that is inconsistent with this longstanding interpretation regarding section 107(d)(3)(E)(ii). In its decision, the Court vacated EPA's redesignation of the Indiana and Ohio portions of the Cincinnati-Hamilton nonattainment area to attainment for the 1997 Fine Particulate Matter (PM2.5) NAAQS because EPA had not yet approved Subpart 1 RACM for the Cincinnati Area into the Indiana and Ohio SIPs. The Court concluded that “a State seeking redesignation `shall provide for the implementation' of RACM/RACT [reasonably available control technology], even if those measures are not strictly necessary to demonstrate attainment with the PM2.5 NAAQS. If the State has not done so, EPA cannot `fully approve' the area's SIP, and redesignation to attainment status is improper.” Sierra Club, 793 F.3d at 670.

    EPA is bound by the Sixth Circuit's decision in Sierra Club v. EPA within the Court's jurisdiction.4 Although EPA continues to believe that Subpart 1 RACM is not an applicable requirement under section 107(d)(3)(E) for an area that has already attained the 2010 1-hour SO2 NAAQS, EPA is proposing to approve Kentucky's RACM determination into the SIP pursuant to the Court's decision.5

    4 The states of Kentucky, Michigan, Ohio, and Tennessee are located within the Sixth Circuit's jurisdiction.

    5 The EPA Region 4 Regional Administrator signed a memorandum on July 20, 2015, seeking concurrence from the Director of EPA's Air Quality Policy Division (AQPD) in the Office of Air Quality Planning and Standards to act inconsistent with EPA's interpretation of CAA sections 107(d)(3)(E) and 172(c)(1) when taking action on pending and future redesignation requests in Kentucky and Tennessee because the Region is bound by the Sixth Circuit's decision in Sierra Club v. EPA. The AQPD Director issued her concurrence on July 22, 2015. This memorandum is not required to satisfy EPA's regional consistency regulations. See 40 CFR 56.5(b)(1); 81 FR 51102 (August 3, 2016).

    2. Subpart 1 RACM Requirements

    Subpart 1 requires that each attainment plan “provide for the implementation of all reasonably available control measures as expeditiously as practicable (including such reductions in emissions from the existing sources in the area as may be obtained through the adoption, at a minimum, of reasonably available control technology), and shall provide for attainment of the national primary ambient air quality standards.” See CAA section 172(c)(1). EPA has consistently interpreted this provision to require only implementation of potential RACM measures that could advance attainment.6 Thus, when an area is already attaining the standard, no additional RACM measures are required. EPA's interpretation that Subpart 1 requires only the implementation of RACM measures that would advance attainment was upheld by the United States Court of Appeals for the Fifth Circuit 7 and by the United States Court of Appeals for the D.C. Circuit.8

    6 This interpretation was adopted in the General Preamble, see 57 FR 13498 (April 16, 1992), and has been upheld as applied to the Clean Data Policy, as well as to nonattainment SIP submissions. See NRDC v. EPA, 571 F.3d 1245 (D.C. Cir. 2009); Sierra Club v. EPA, 294 F.3d 155 (D.C. Cir. 2002).

    7Sierra Club v. EPA, 314 F.3d 735, 743-745 (5th Cir. 2002).

    8Sierra Club v. EPA, 294 F.3d 155, 162-163 (D.C. Cir. 2002); NRDC v. EPA, 571 F.3d 1245, 1252 (D.C. Cir. 2009).

    3. Proposed Action on RACM Based on Attainment of the NAAQS

    In its February 22, 2016, SIP revision, Kentucky determined that no additional control measures are necessary in the Area to satisfy the section 172(c)(1) RACM requirement. EPA is proposing to approve this determination on the basis that the Area has attained the 2010 1-hour SO2 NAAQS and, therefore, no emission reduction measures are necessary to satisfy Subpart 1 RACM. As noted above, EPA has determined that the Area has attained the 2010 1-hour SO2 NAAQS and is proposing to determine that the Area continues to attain the standard. See 81 FR 47144. Because the Area is attaining the standard, there are no emissions controls that could advance the attainment date; thus, no emissions controls are necessary to satisfy Subpart 1 RACM.

    4. Proposed Action on RACM Based on the Commonwealth's Analysis

    Additionally, Kentucky's Subpart 1 RACM determination is approvable on the basis that the SIP revision demonstrates that no additional reasonably available controls would have advanced the attainment date. In Kentucky's RACM analysis, the Commonwealth notes that the only large point source of SO2 emissions in the Area—the Walter C. Beckjord power plant—was permanently shut down and removed from service in 2014. The Beckjord Facility has been demonstrated to be the primary SO2 source that caused the monitored exceedances, and since the closure of the Beckjord Facility, there has been a significant monitored improvement in SO2 air quality (see Table 2 in section V.C, below). The closure results in a reduction of 90,835 tons per year (tpy) based on the Facility's 2011 emissions (representing emissions from the time period for which the design value for the Area was above the NAAQS) and a reduction of 32,602 tpy based on the Facility's 2014 emissions (representing emissions from a time period for which the design value was below the NAAQS) (see Tables 3-5 in section V.C, below). Because the only large point source of SO2 emissions in the Area is permanently shut down and because total point source SO2 emissions in the Kentucky portion of the Area were only approximately 0.8 tons per year in 2011, the Commonwealth concludes that there are no potential emission reduction measures that would advance attainment by one year or more. EPA has reviewed the RACM portion of Kentucky's February 22, 2016, SIP revision and preliminarily agrees with the Commonwealth's determination that it was not necessary to adopt or implement additional SO2 control measures in the Area to satisfy section 172(c)(1).

    B. Emission Inventory

    Section 172(c)(3) of the CAA requires states to submit a comprehensive, accurate, and current inventory of actual emissions from all sources of the relevant pollutant or pollutants in each nonattainment area. This inventory can be submitted for a year that contributed to the three-year design value used for the original nonattainment designation and should be consistent with the emissions inventory data requirements in 40 CFR part 51, subpart A.

    Kentucky submitted a base year emissions inventory for 2011 to satisfy section 172(c)(3). This base year is one of the three years of ambient data used to designate the Area as a nonattainment area and therefore represents emissions associated with nonattainment conditions. The emissions inventory is based on data developed and submitted by Kentucky to EPA's 2011 National Emissions Inventory (NEI), and it contains data elements consistent with the detail required by 40 CFR part 51, subpart A. Kentucky's base year emissions inventory for its portion of the Area provides 2011 emissions data for SO2 for the following general source categories: electric generating unit (EGU) point, non-EGU point, area, non-road mobile, and on-road mobile. All base year emissions data are taken from the NEI with the exception of point source emissions which were obtained from Kentucky's Emission Inventory database and mobile emissions which were generated by the Ohio-Kentucky-Indiana Regional Council of Governments (OKI). Projections were developed for each sector as follows:

    • Area source emissions were compiled from the 2011 NEI and projections were developed by Kentucky. Kentucky developed its inventory according to the current EPA emissions inventory guidance for area sources.

    • Mobile source emissions were calculated from MOVES2014b-produced emission factors. As performed by OKI, mobile source emission projections are based on the EPA MOVES model. The analysis is described in more detail in Appendix E of Kentucky's February 22, 2016, SIP submission. Kentucky developed its inventory according to the current EPA emissions inventory guidance for on-road mobile sources using MOVES version 2014.

    • Non-EGU point source information was compiled from Kentucky's 2011 Emissions Inventory Database, while Ohio's EGU point source information was compiled from the 2011 data in the CAMD database. Projections were developed by Kentucky as described in Appendix C of Kentucky's February 22, 2016, SIP submission.

    • Non-road emissions were compiled from the 2011 NEI and projections were developed by Kentucky.

    • Biogenic emissions are negligible and are not included in these summaries.

    A detailed discussion of the inventory development is located in Appendices C and E to Kentucky's February 22, 2016, SIP submittal which is provided in the docket for this proposed action. Table 1, below, provides a summary of the base year emissions inventory.

    Table 1—2011 Emissions Inventory for the Kentucky Portion of the Campbell-Clermont, KY-OH Area (tpy) County EGU point Non-EGU point Non-road
  • mobile
  • Area On-road
  • mobile
  • Total
    Campbell County 0 0.78 0.20 6.03 1.55 8.56

    For the reasons discussed above, EPA has preliminarily determined that Kentucky's 2011 base year emissions inventory meets the requirements under CAA section 172(c)(3). Approval of Kentucky's redesignation request is contingent upon EPA's final approval of the base year emissions inventory for the 2010 1-hour SO2 NAAQS.

    C. Redesignation Request and Maintenance Demonstration

    The five redesignation criteria provided under CAA section 107(d)(3)(E) are discussed in greater detail for the Area in the following paragraphs.

    Criteria (1)—The Campbell-Clermont, KY-OH Area Has Attained the 2010 1-Hour SO2 NAAQS

    For redesignating a nonattainment area to attainment, the CAA requires EPA to determine that the area has attained the applicable NAAQS (CAA section 107(d)(3)(E)(i)). The two primary methods for evaluating ambient air quality impacted by SO2 emissions are through dispersion modeling and air quality monitoring. For SO2, an area may in some circumstances be considered to be attaining the 2010 1-hour SO2 NAAQS if it meets the NAAQS as determined in accordance with 40 CFR 50.17 and Appendix T of part 50, based on three complete, consecutive calendar years of quality-assured air quality monitoring data. To attain the NAAQS based on monitoring, the 3-year average of the annual 99th percentile (fourth highest value) of 1-hour daily maximum concentrations measured at each monitor within an area must be less than or equal to 75 parts per billion (ppb). The data must be collected and quality-assured in accordance with 40 CFR part 58 and recorded in the EPA Air Quality System (AQS).

    As discussed in EPA's 2010 SO2 Nonattainment Area Guidance, two components are needed to support an attainment determination: (1) A review of representative air quality monitoring data, and (2) a further analysis, generally requiring air quality modeling, to demonstrate that the entire area is attaining the standard, based on current actual emissions or the fully implemented control strategy. In EPA's action redesignating the Ohio portion of the Area, EPA determined that the Area has attained the 1-hour SO2 NAAQS based on these two components. For EPA's full analysis underlying its final attainment determination, see 81 FR 47144, 47145-47 (July 20, 2016). As part of that analysis, EPA reviewed 2012-2015 SO2 monitoring data from the monitoring station in the Campbell-Clermont, KY-OH Area for the 2010 1-hour SO2 NAAQS and preliminary data for 2016. The 2012-2015 data have been quality-assured, are recorded in Aerometric Information Retrieval System (AIRS-AQS), and the 3-year design values for 2012-2014 and 2013-2015 are below the NAAQS. The fourth-highest 1-hour SO2 values at each monitor for 2012-2015, and the 3-year averages of these values (i.e., design values), are summarized in Table 2, below.

    Table 2—Design Value Concentrations for the Campbell-Clermont, KY-OH Area Location Site 4th Highest 1-hour sulfur dioxide value
  • (ppb)
  • 2012 2013 2014 2015 3-Year design values
  • (ppb)
  • 2012-2014 2013-2015
    Campbell County, KY 21-037-3002 85 71 61 18 72 50

    Preliminary monitoring data for the Area for 2016 does not indicate a violation of the NAAQS.9 EPA will not take final action to approve the redesignation if the 3-year design value exceeds the NAAQS prior to EPA finalizing the redesignation. As discussed in more detail below, the Commonwealth has committed to continue monitoring in this Area in accordance with 40 CFR part 58.

    9 This preliminary data is available at EPA's air data Web site: http://aqsdr1.epa.gov/aqsweb/aqstmp/airdata/download_files.html#Daily.

    Criteria (2)—Kentucky Has a Fully Approved SIP Under Section 110(k) for the Kentucky Portion of the Campbell-Clermont, KY-OH Area; and Criteria (5)—Kentucky Has Met All Applicable Requirements Under Section 110 and Part D of Title I of the CAA

    For redesignating a nonattainment area to attainment, the CAA requires EPA to determine that the state has met all applicable requirements under section 110 and part D of title I of the CAA (CAA section 107(d)(3)(E)(v)) and that the state has a fully approved SIP under section 110(k) for the area (CAA section 107(d)(3)(E)(ii)). EPA proposes to find that Kentucky has met all applicable SIP requirements for the Kentucky portion of the Area under section 110 of the CAA (general SIP requirements) for purposes of redesignation. Additionally, EPA proposes to find that the Kentucky SIP satisfies the criterion that it meets applicable SIP requirements for purposes of redesignation under part D of title I of the CAA in accordance with section 107(d)(3)(E)(v). Further, EPA proposes to determine that the SIP is fully approved with respect to all requirements applicable for purposes of redesignation in accordance with section 107(d)(3)(E)(ii). In making these determinations, EPA ascertained which requirements are applicable to the Area and, if applicable, that they are fully approved under section 110(k). SIPs must be fully approved only with respect to requirements that were applicable prior to submittal of the complete redesignation request.

    a. The Kentucky Portion of the Campbell-Clermont, KY-OH Area Has Met All Applicable Requirements Under Section 110 and Part D of the CAA

    General SIP requirements. General SIP elements and requirements are delineated in section 110(a)(2) of title I, part A of the CAA. These requirements include, but are not limited to, the following: Submittal of a SIP that has been adopted by the state after reasonable public notice and hearing; provisions for establishment and operation of appropriate procedures needed to monitor ambient air quality; implementation of a source permit program; provisions for the implementation of part C requirements (Prevention of Significant Deterioration (PSD)) and provisions for the implementation of part D requirements (NSR permit programs); provisions for air pollution modeling; and provisions for public and local agency participation in planning and emission control rule development.

    Section 110(a)(2)(D) requires that SIPs contain certain measures to prevent sources in a state from significantly contributing to air quality problems in another state. To implement this provision, EPA has required certain states to establish programs to address the interstate transport of air pollutants. The section 110(a)(2)(D) requirements for a state are not linked with a particular nonattainment area's designation and classification in that state. EPA believes that the requirements linked with a particular nonattainment area's designation and classifications are the relevant measures to evaluate in reviewing a redesignation request. The transport SIP submittal requirements, where applicable, continue to apply to a state regardless of the designation of any one particular area in the state. Thus, EPA does not believe that the CAA's interstate transport requirements should be construed to be applicable requirements for purposes of redesignation.

    In addition, EPA believes that other section 110(a)(2) elements that are neither connected with nonattainment plan submissions nor linked with an area's attainment status are not applicable requirements for purposes of redesignation. The area will still be subject to these requirements after the area is redesignated. The section 110(a)(2) and part D requirements which are linked with a particular area's designation and classification are the relevant measures to evaluate in reviewing a redesignation request. This approach is consistent with EPA's existing policy on applicability (i.e., for redesignations) of conformity and oxygenated fuels requirements, as well as with section 184 ozone transport requirements. See Reading, Pennsylvania, proposed and final rulemakings (61 FR 53174-53176, October 10, 1996), (62 FR 24826, May 7, 2008); Cleveland-Akron-Loraine, Ohio, final rulemaking (61 FR 20458, May 7, 1996); and Tampa, Florida, final rulemaking at (60 FR 62748, December 7, 1995). See also the discussion on this issue in the Cincinnati, Ohio, redesignation (65 FR 37890, June 19, 2000), and in the Pittsburgh, Pennsylvania, redesignation (66 FR 50399, October 19, 2001).

    EPA has reviewed Kentucky's SIP and has concluded that it meets the general SIP requirements under section 110(a)(2) of the CAA to the extent they are applicable for purposes of redesignation. These requirements are statewide requirements that are not linked to the SO2 nonattainment status of the Area. Therefore, EPA believes that these SIP elements are not applicable requirements for purposes of review of Kentucky's SO2 redesignation request.

    Title I, Part D, applicable SIP requirements. Subpart 1 of part D, comprised of CAA sections 171-179B, sets forth the basic nonattainment requirements applicable to all nonattainment areas, and subpart 5 of part D, which includes section 191 and 192 of the CAA, establishes additional plan deadline and attainment date requirements for SO2, nitrogen dioxide, and lead nonattainment areas. A thorough discussion of the requirements contained in sections 172(c) can be found in the General Preamble for Implementation of Title I (57 FR 13498).

    Subpart 1 Section 172 Requirements. Under section 172, states with nonattainment areas must submit plans providing for timely attainment and meeting a variety of other requirements. As discussed in section V.A, above, EPA's longstanding interpretation of the attainment-related nonattainment planning requirements of section 172 is that once an area is attaining the NAAQS, those requirements are not “applicable” for purposes of CAA section 107(d)(3)(E)(ii) and therefore need not be approved into the SIP before EPA can redesignate the area. In the 1992 General Preamble for Implementation of Title I, EPA set forth its interpretation of applicable requirements for purposes of evaluating redesignation requests when an area is attaining a standard. See 57 FR 13498, 13564 (April 16, 1992). EPA noted that the requirements for RFP and other measures designed to provide for attainment do not apply in evaluating redesignation requests because those nonattainment planning requirements “have no meaning” for an area that has already attained the standard. Id. This interpretation was also set forth in the Calcagni Memo. EPA's understanding of section 172 also forms the basis of its Clean Data Policy, articulated with regard to the 2010 1-hour SO2 NAAQS in the 2010 SO2 NAA Guidance, which suspends a state's obligation to submit most of the attainment planning requirements that would otherwise apply, including an attainment demonstration and planning SIPs to provide for RFP, RACM, and contingency measures under section 172(c)(9). However, as discussed above, EPA is proposing to approve Kentucky's RACM determination into the SIP in response to the Sixth Circuit's decision that section 172(c)(1) RACM is an applicable requirement under 107(d)(3)(E)(ii) and must be approved into the SIP before EPA can redesignate an area that is subject to section 172(c)(1) requirements.

    Because attainment has been reached in the Area, the section 172(c)(2) requirement that nonattainment plans contain provisions promoting reasonable further progress toward attainment is not relevant for purposes of redesignation. In addition, because the Area has attained the standard and is no longer subject to a RFP requirement, the requirement to submit the section 172(c)(9) contingency measures is not applicable for purposes of redesignation. Section 172(c)(6) requires the SIP to contain control measures necessary to provide for attainment of the NAAQS. Because attainment has been reached, no additional measures are needed to provide for attainment.

    Section 172(c)(3) requires submission and approval of a comprehensive, accurate, and current inventory of actual emissions. As noted above, Kentucky submitted a 2011 base year emissions inventory for the Kentucky portion of the Area, and EPA is proposing to approve that inventory as satisfying the requirements of section 172(c)(3). Kentucky's section 172(c)(3) inventory must be approved before EPA can take final action to approve the Commonwealth's redesignation request for the Kentucky portion of the Area.

    Section 172(c)(4) requires the identification and quantification of allowable emissions for major new and modified stationary sources to be allowed in an area, and section 172(c)(5) requires source permits for the construction and operation of new and modified major stationary sources anywhere in the nonattainment area. EPA has determined that, since PSD requirements will apply after redesignation, areas being redesignated need not comply with the requirement that a NSR program be approved prior to redesignation, provided that the area demonstrates maintenance of the NAAQS without part D NSR. A more detailed rationale for this view is described in the Nichols Memo. Kentucky has demonstrated that the Area will be able to maintain the NAAQS without part D NSR in effect, and therefore Kentucky need not have fully approved part D NSR programs prior to approval of the redesignation request. Kentucky's PSD program will become effective in Campbell County upon redesignation to attainment.

    Section 172(c)(7) requires the SIP to meet the applicable provisions of section 110(a)(2). As noted above, EPA believes the Kentucky SIP meets the requirements of section 110(a)(2) applicable for purposes of redesignation.

    Section 176 Conformity Requirements. Section 176(c) of the CAA requires states to establish criteria and procedures to ensure that federally supported or funded projects conform to the air quality planning goals in the applicable SIP. The requirement to determine conformity applies to transportation plans, programs, and projects that are developed, funded, or approved under title 23 of the United States Code (U.S.C.) and the Federal Transit Act (transportation conformity) as well as to all other federally supported or funded projects (general conformity). State transportation conformity SIP revisions must be consistent with federal conformity regulations relating to consultation, enforcement, and enforceability that EPA promulgated pursuant to its authority under the CAA.

    EPA believes that it is reasonable to interpret the conformity SIP requirements 10 as not applying for purposes of evaluating the redesignation request under section 107(d) because state conformity rules are still required after redesignation and federal conformity rules apply where state rules have not been approved. See Wall v. EPA, 265 F.3d 426 (upholding this interpretation) (6th Cir. 2001); See 60 FR 62748 (December 7, 1995). Furthermore, due to the relatively small, and decreasing, amounts of sulfur in gasoline and on-road diesel fuel, the EPA's transportation conformity rules provide that they do not apply to SO2 unless either the EPA Regional Administrator or the director of the state air agency has found that transportation-related emissions of SO2 as a precursor are a significant contributor to a fine particulate matter (PM2.5) nonattainment problem, or if the SIP has established an approved or adequate budget for such emissions as part of the RFP, attainment, or maintenance strategy. See 40 CFR 93.102(b)(1), (2)(v); 2010 SO2 Nonattainment Area Guidance. Neither of these conditions have been met; therefore, the EPA's transportation conformity rules do not apply to SO2 for the Area.

    10 CAA Section 176(c)(4)(E) requires states to submit revisions to their SIPs to reflect certain federal criteria and procedures for determining transportation conformity. Transportation conformity SIPs are different from the motor vehicle emission budgets that are established in control strategy SIPs and maintenance plans.

    For these reasons, EPA proposes to find that Kentucky has satisfied all applicable requirements for purposes of redesignation of the Campbell-Clermont, KY-OH Area under section 110 and part D of title I of the CAA.

    b. The Kentucky Portion of the Campbell-Clermont, KY-OH Area Has a Fully Approved Applicable SIP Under Section 110(k) of the CAA

    EPA has fully approved the Commonwealth's SIP for the Kentucky portion of the Campbell-Clermont, KY-OH Area under section 110(k) of the CAA for all requirements applicable for purposes of this proposed redesignation with the exception of the Subpart 1 RACM and emissions inventory requirements. In today's proposed action, EPA is proposing to approve the Commonwealth's Subpart 1 RACM determination and the Subpart 1 emissions inventory for the Kentucky portion of the Area into the Kentucky SIP.

    As indicated above, EPA believes that the section 110 elements that are neither connected with nonattainment plan submissions nor linked to an area's nonattainment status are not applicable requirements for purposes of redesignation. If EPA finalizes approval of the Commonwealth's Subpart 1 RACM determination and Subpart 1 emissions inventory, EPA has approved all part D requirements applicable under the 2010 1-hour SO2 NAAQS, as identified above, for purposes of this proposed redesignation pursuant to the Sixth Circuit's decision.

    Criteria (3)—The Air Quality Improvement in the Campbell-Clermont, KY-OH Area Is Due to Permanent and Enforceable Reductions in Emissions Resulting From Implementation of the SIP and Applicable Federal Air Pollution Control Regulations and Other Permanent and Enforceable Reductions

    For redesignating a nonattainment area to attainment, the CAA requires EPA to determine that the air quality improvement in the area is due to permanent and enforceable reductions in emissions resulting from implementation of the SIP, applicable Federal air pollution control regulations, and other permanent and enforceable reductions (CAA section 107(d)(3)(E)(iii)). EPA has preliminarily determined that Kentucky has demonstrated that the observed air quality improvement in the Area is due to permanent and enforceable reductions in emissions primarily resulting from the permanent shutdown of the Beckjord Facility.

    When EPA designated the Campbell-Clermont, KY-OH Area as a nonattainment area for the 2010 1-hour SO2 NAAQS, EPA determined that operations at the Beckjord Facility were the primary cause of the 2010 1-hour SO2 NAAQS violations in the Area. See 78 FR 47191.11 As mentioned above, operations at the Beckjord Facility ceased in 2014. Specifically, its six coal-fired EGUs were permanently shut down and removed from service by October 1, 2014, and its four oil-fired EGUs were permanently shut down and removed from service by the end of 2014.12 These units are no longer authorized to operate by the state of Ohio and cannot restart without new air permits. The shutdown reduced SO2 emissions in the Area by approximately 90,835 tpy (based on 2011 emissions) and resulted in a significant improvement in SO2 air quality. There are no other large point sources of SO2 emissions located in the Campbell-Clermont, KY-OH Area.

    11See Final Technical Support Document, July 2013, Kentucky First Round of Nonattainment Area Designations for the 2010 SO2 Primary NAAQS, Prepared by EPA Region 4. Available in Docket EPA-HQ-OAR-2012-0233.

    12 The letters from Duke Energy notifying Ohio of the shutdowns are located in the appendices to Kentucky's February 22, 2016 redesignation request and SIP submittal.

    Because the Beckjord Facility which was the primary SO2 emissions source that caused the monitored exceedances is permanently shut down, and cannot reopen without applying for a new operating permit, EPA proposes to find that the improvement in air quality in the Campbell-Clermont, KY-OH Area is due to permanent and enforceable reductions in SO2 emissions.

    Criteria (4)—The Kentucky Portion of the Campbell-Clermont, KY-OH Area Has a Fully Approved Maintenance Plan Pursuant to Section 175A of the CAA

    For redesignating a nonattainment area to attainment, the CAA requires EPA to determine that the area has a fully approved maintenance plan pursuant to section 175A of the CAA. See CAA section 107(d)(3)(E)(iv). In conjunction with its request to redesignate the Kentucky portion of the Campbell-Clermont, KY-OH Area to attainment for the 2010 1-hour SO2 NAAQS, KDAQ submitted a SIP revision to provide for the maintenance of the 2010 1-hour SO2 NAAQS for at least 10 years after the effective date of redesignation to attainment. EPA is proposing to determine that this maintenance plan meets the requirements for approval under section 175A of the CAA.

    a. What is required in a maintenance plan?

    Section 175A of the CAA sets forth the elements of a maintenance plan for areas seeking redesignation from nonattainment to attainment. Under section 175A, the plan must demonstrate continued attainment of the applicable NAAQS for at least 10 years after the Administrator approves a redesignation to attainment. Eight years after the redesignation, the state must submit a revised maintenance plan demonstrating that attainment will continue to be maintained for the 10 years following the initial 10-year period. To address the possibility of future NAAQS violations, the maintenance plan must contain contingency measures as EPA deems necessary to assure prompt correction of any future 2010 1-hour SO2 violations. The Calcagni Memorandum provides further guidance on the content of a maintenance plan, explaining that a maintenance plan should address five requirements: the attainment emissions inventory, maintenance demonstration, monitoring, verification of continued attainment, and a contingency plan. As is discussed more fully below, EPA is proposing to determine that Kentucky's maintenance plan includes all the necessary components and is thus proposing to approve it as a revision to the Kentucky SIP.

    b. Attainment Emissions Inventory

    On November 21, 2016, EPA determined that the Campbell-Clermont, KY-OH Area has attained the 2010 1-hour SO2 NAAQS based on quality-assured monitoring data for the 3-year period from 2013-2015. Kentucky began development of the attainment inventory by first generating a baseline emissions inventory for the Commonwealth's portion of the Campbell-Clermont, KY-OH Area. The Commonwealth selected 2011 as the base year and 2014 as the attainment emissions inventory year for developing a comprehensive emissions inventory for SO2. To evaluate maintenance through 2027 and satisfy the 10-year interval required in CAA section 175A, Kentucky prepared projected emissions inventories for 2017-2027. The emissions inventories are composed of the following general source categories: EGU point, non-EGU point, area, non-road mobile, and on-road mobile. The emissions inventories were developed consistent with EPA guidance and are summarized in Tables 3 through 5 of the following subsection discussing the maintenance demonstration. For additional information regarding inventory development, please see section V.B., above, and Appendices C and E to Kentucky's February 22, 2016, SIP submittal.

    c. Maintenance Demonstration

    Maintenance of the SO2 standard is demonstrated either by showing that future emissions will not exceed the level of the attainment emissions inventory year or by modeling to show that the future mix of sources and emission rates will not cause a violation of the NAAQS. KDAQ determined that a modeling analysis of maximum concentration location was not warranted given the unique circumstances of this specific redesignation request. Therefore, Kentucky compared the final year of the maintenance plan (2027) to the attainment emissions inventory year (2014) and compared interim years to the attainment emissions inventory year to demonstrate continued maintenance of the 2010 1-hour SO2 standard. See Tables 3 through 6, below. After the shutdown of the Beckjord Facility in 2014, there are no significant point sources of SO2 emissions located in the Area.

    Table 3—Kentucky Portion SO2 Emission Inventory Totals for Base Year 2011, Attainment 2014, Projected 2017 & 2022, 2020 Interim, and 2027 Maintenance (tpy) Sector 2011
  • Base
  • 2014
  • Attainment
  • 2017
  • Projected
  • 2020
  • Interim
  • 2022
  • Projected
  • 2027
  • Maintenance
  • EGU Point 0 0 0 0 0 0 Non-EGU 0.78 0.78 0.79 0.79 0.78 0.78 Non-road 0.20 0.20 0.20 0.20 0.20 0.20 Area 6.03 6.04 6.06 6.08 6.03 6.02 On-road 1.55 1.51 1.44 1.40 1.37 1.26 Total 8.56 8.53 8.49 8.47 8.38 8.26
    Table 4—Ohio Portion SO2 Emission Inventory Totals for Base Year 2011, Attainment 2014, Projected 2017 & 2022, Interim 2020, and 2027 Maintenance (tpy) Sector 2011
  • Base
  • 2014
  • Attainment
  • 2017
  • Projected
  • 2020
  • Interim
  • 2022
  • Projected
  • 2027
  • Maintenance
  • EGU Point 90,834.50 32,602.44 0 0 0 0 Non-EGU 0 0 0 0 0 0 Non-road 0.17 0.18 0.18 0.18 0.18 0.19 Area 7.51 7.63 7.75 7.88 7.86 8.00 On-road 0.34 0.33 0.32 0.31 0.30 0.28 Total 90,842.52 32,610.58 8.25 8.37 8.34 8.47
    Table 5—Combined Campbell-Clermont, KY-OH Area SO2 Emission Inventory Totals for Base Year 2011, Attainment 2014, Projected 2017 & 2022, Interim 2020, and 2027 Maintenance (tpy) SO2 2011
  • Base
  • 2014
  • Attainment
  • 2017
  • Projected
  • 2020
  • Interim
  • 2022
  • Projected
  • 2027
  • Maintenance
  • Ohio Portion 90,842.52 32,610.58 8.25 8.37 8.34 8.47 Kentucky Portion 8.56 8.53 8.49 8.47 8.38 8.26 Combined SO2 Total 90,851.08 32,619.11 16.74 16.84 16.72 16.73
    Table 6—Campbell-Clermont, KY-OH Area Comparison of 2014 Attainment Year and 2020 and 2027 Projected Emission Estimates (tpy) 2014
  • Attainment
  • 2020
  • Interim
  • 2020
  • Projected
  • decrease
  • 2027
  • Maintenance
  • 2027
  • Projected
  • decrease
  • SO2 32,619.11 16.84 −32,602.27 16.73 −32.602.38

    As shown in the tables above, the closure of the Beckjord Facility in 2014 resulted in a reduction of 90,835 tpy based on the Facility's 2011 emissions and a reduction of 32,602 tpy based on the Facility's 2014 emissions. After the shutdown, total SO2 emissions in the Area remain relatively constant through 2027. Therefore, EPA is proposing to determine that the maintenance plan demonstrates continued maintenance through 2027.

    d. Monitoring Network

    There is one SO2 monitor located within the Kentucky portion of the Campbell-Clermont, KY-OH Area, and the 2010 1-hour SO2 nonattainment designation was based on data collected from 2009-2011 at this monitor. There are no SO2 monitors located in Clermont County, Ohio. The Kentucky monitor is operated by the KDAQ's, Florence Regional office. In its maintenance plan, Kentucky has committed to continue operation of the monitor in the Kentucky portion of the Campbell-Clermont, KY-OH Area in compliance with 40 CFR part 58 and has thus addressed the requirement for monitoring. KDAQ's monitoring network plan was submitted on July 1, 2015, and approved by EPA on October 28, 2015.13

    13  Kentucky's approved monitoring network plan can be accessed at www.regulations.gov using Docket ID No. EPA-R04-OAR-2014-0426.

    e. Verification of Continued Attainment

    The Commonwealth of Kentucky, through KDAQ, has the legal authority to enforce and implement the maintenance plan for the Kentucky portion of the Area. This includes the authority to adopt, implement, and enforce any subsequent emissions control contingency measures determined to be necessary to correct future SO2 attainment problems. The Commonwealth has committed to track the progress of the maintenance plan by updating its emissions inventory at least once every three years and comparing these updated inventories to the 2011 base year and the 2027 projected maintenance year inventories to assess emission trends, as necessary, and to assure continued compliance with the standard.

    Additionally, monitoring, recordkeeping, and reporting requirements are incorporated into permits to ensure ongoing compliance. Kentucky has an active enforcement program to address violations discovered by the field office. For all of the reasons discussed above, EPA is proposing to find that Kentucky's maintenance plan meets the “Verification of Continued Attainment” requirement.

    f. Contingency Measures in the Maintenance Plan

    Section 175A of the CAA requires that a maintenance plan include such contingency measures as EPA deems necessary to assure that the state will promptly correct a violation of the NAAQS that occurs after redesignation. The maintenance plan should identify the contingency measures to be adopted, a schedule and procedure for adoption and implementation, and a time limit for action by the state.14 A state should also identify specific indicators to be used to determine when the contingency measures need to be implemented. The maintenance plan must include a requirement that a state will implement all measures with respect to control of the pollutant that were contained in the SIP before redesignation of the area to attainment in accordance with section 175A(d).

    14 In cases where attainment revolves around compliance of a single source or a small set of sources with emissions limits shown to provide for attainment, the EPA interprets “contingency measures” to mean that the state agency has a comprehensive program to identify sources of violations of the SO2 NAAQS and to undertake aggressive follow-up for compliance and enforcement, including expedited procedures for establishing enforceable consent agreement pending the adoption of revised SIPs. See 2010 SO2 Nonattainment Area Guidance.

    Kentucky will rely on enforcing the applicable requirements in source permits. All measures in the permits and the SIP are being implemented prior to redesignation of the Area to attainment. In the event that a monitored exceedance of the SO2 NAAQS occurs in the future, the Commonwealth will expeditiously investigate and perform culpability analyses to determine the source that caused the exceedance and/or violation, and enforce any SIP or permit limit that is violated. Enforcement and compliance programs exist in the Commonwealth to identify sources of violations of the NAAQS and to follow-up for compliance and enforcement.

    Further, if all sources are found to be in compliance with applicable SIP and permit emission limits, the Commonwealth will perform the necessary analysis to determine the cause of the exceedance, and determine what additional control measures are necessary to impose on the Area's stationary sources to continue to maintain attainment of the 2010 1-hour SO2 NAAQS.

    The Commonwealth will inform any affected stationary sources of SO2 of the potential need for additional control measures. If there is an exceedance of the NAAQS for SO2, it will notify the stationary source(s) that the potential exists for a NAAQS violation.

    Within six months, the source(s) must submit a detailed plan of action specifying additional control measures to be implemented no later than 18 months after the notification. The additional control measures will be submitted to EPA for approval and incorporation into the SIP. Kentucky noted that, since the only source in the nonattainment area has shut down, it is not possible at this time to develop specific contingency measures until the cause of the elevated concentrations is known. EPA is proposing to find that Kentucky's maintenance plan meets the requirement for contingency measures.

    EPA preliminarily concludes that the maintenance plan adequately addresses the five basic components of a maintenance plan: The attainment emissions inventory, maintenance demonstration, monitoring, verification of continued attainment, and a contingency plan. Therefore, EPA proposes that the maintenance plan SIP revision submitted by Kentucky for the Commonwealth's portion of the Area meets the requirements of section 175A of the CAA and is approvable.

    VI. What is the effect of EPA's proposed actions?

    EPA's proposed actions establish the basis upon which EPA may take final action on the issues being proposed for approval today. Approval of Kentucky's redesignation request would change the legal designation of the portion of Campbell County that is within the Campbell-Clermont, KY-OH Area, as found at 40 CFR part 81, from nonattainment to attainment for the 2010 1-hour SO2 NAAQS. Approval of Kentucky's associated SIP revision would also incorporate a plan for maintaining the 2010 1-hour SO2 NAAQS in the Campbell-Clermont, KY-OH Area through 2027 into the SIP as well as the State's section 172(c)(1) RACM determination. This maintenance plan includes an emissions inventory that satisfies the requirements of section 172(c)(3) and contingency measures to remedy any future violations of the 2010 1-hour SO2 NAAQS.

    VII. Proposed Actions

    EPA is taking five separate but related actions regarding Kentucky's request for a clean data determination, the redesignation request, and the SIP revision associated with the redesignation request for the Kentucky portion of the Campbell-Clermont, KY-OH Area.

    First, EPA is proposing to determine that the Commonwealth's Subpart 1 RACM determination for the Area meets the requirements of CAA section 172(c)(1) and to incorporate this RACM determination into the SIP.

    Second, EPA is proposing to approve Kentucky's 2011 base year emissions inventory for the Kentucky portion of the Campbell-Clermont, KY-OH Area as meeting the requirements of 172(c)(3) and to incorporate this inventory into the SIP.

    Third, EPA is proposing to approve Kentucky's March 31, 2015, request for the EPA to make a clean data determination for the Area.

    Fourth, EPA is proposing to approve the maintenance plan for the Kentucky portion of the Area into the SIP. The maintenance plan demonstrates that the Area will continue to maintain the 2010 1-hour SO2 NAAQS through 2027.

    Finally, contingent upon EPA's final approval for Kentucky's RACM analysis pursuant to section 172(c)(1) and the Commonwealth's base year inventory pursuant to section 172(c)(3), EPA is proposing to determine that the Kentucky portion of the Campbell-Clermont, KY-OH Area has met the criteria under CAA section 107(d)(3)(E) for redesignation from nonattainment to attainment for the 2010 1-hour SO2 NAAQS. On this basis, EPA is proposing to approve Kentucky's redesignation request for the Kentucky portion of the Area.

    If finalized, approval of the redesignation request would change the official designation of the portion of Campbell County that is within the Campbell-Clermont, KY-OH Area, as found at 40 CFR part 81, from nonattainment to attainment for the 2010 1-hour SO2 NAAQS.

    VIII. Statutory and Executive Order Reviews

    Under the CAA, redesignation of an area to attainment and the accompanying approval of a maintenance plan under section 107(d)(3)(E) are actions that affect the status of a geographical area and do not impose any additional regulatory requirements on sources beyond those imposed by state law. A redesignation to attainment does not in and of itself create any new requirements, but rather results in the applicability of requirements contained in the CAA for areas that have been redesignated to attainment. Moreover, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. See 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, these proposed actions merely propose to approve state law as meeting Federal requirements and do not impose additional requirements beyond those imposed by state law. For this reason, these proposed actions:

    • Are not significant regulatory actions subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

    • Do not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);

    • Are 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 et seq.);

    • Do not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4);

    • Do not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

    • Are not economically significant regulatory actions based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

    • Are not significant regulatory actions subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

    • Are 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 CAA; and

    • Will not have disproportionate human health or environmental effects under Executive Order 12898 (59 FR 7629, February 16, 1994).

    The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.

    List of Subjects 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Sulfur dioxide, Reporting and recordkeeping requirements.

    40 CFR Part 81

    Environmental protection, Air pollution control.

    Authority:

    42 U.S.C. 7401 et seq.

    Dated: November 21, 2016. Heather McTeer Toney, Regional Administrator, Region 4.
    [FR Doc. 2016-28821 Filed 11-30-16; 8:45 am] BILLING CODE 6560-50-P
    DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration 49 CFR Parts 390 and 391 [Docket No. FMCSA-2016-0333] RIN 2126-AB97 Process for Department of Veterans Affairs (VA) Physicians To Be Added to the National Registry of Certified Medical Examiners AGENCY:

    Federal Motor Carrier Safety Administration (FMCSA), DOT.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    FMCSA proposes amendments to the Federal Motor Carrier Safety Regulations (FMCSRs) to establish an alternate process for qualified physicians employed in the Department of Veterans Affairs (VA) (qualified VA physicians) to be listed on the Agency's National Registry of Certified Medical Examiners (National Registry). After training and testing, they become certified VA medical examiners that can perform medical examinations of commercial motor vehicle (CMV) operators who are military veterans, and issue Medical Examiner's Certificates (MECs) to those same operators as required by the Fixing America's Surface Transportation (FAST) Act.

    DATES:

    Comments on this notice must be received on or before January 3, 2017.

    ADDRESSES:

    You may submit comments identified by Docket Number FMCSA-2016-0333 using any of the following methods:

    Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments.

    Mail: Docket Management Facility, U.S. Department of Transportation, 1200 New Jersey Avenue SE., West Building, Ground Floor, Room W12-140, Washington, DC 20590-0001.

    Hand Delivery or Courier: West Building, Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    Fax: 202-493-2251.

    To avoid duplication, please use only one of these four methods. See the “Public Participation and Request for Comments” portion of the SUPPLEMENTARY INFORMATION section for instructions on submitting comments, including collection of information comments for the Office of Information and Regulatory Affairs of the Office of Management and Budget.

    FOR FURTHER INFORMATION CONTACT:

    Ms. Christine A. Hydock, Medical Programs Division, MC-PSP, Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue SE., Washington, DC 20590-0001 by telephone at 202-366-4001 or by email, [email protected] If you have questions on viewing or submitting material to the docket, contact Docket Services, telephone (202) 366-9826.

    SUPPLEMENTARY INFORMATION: I. Public Participation and Request for Comments A. Submitting Comments

    If you submit a comment, please include the docket number for this NPRM (Docket No. FMCSA-2016-0333), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. FMCSA recommends that you include your name and a mailing address, an email address, or a phone number in the body of your document so that FMCSA can contact you if there are questions regarding your submission.

    To submit your comment online, go to http://www.regulations.gov, put the docket number, FMCSA-2016-0333, in the keyword box, and click “Search.” When the new screen appears, click on the “Comment Now!” button and type your comment into the text box on the following screen. Choose whether you are submitting your comment as an individual or on behalf of a third party and then submit.

    If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 81/2 by 11 inches, suitable for copying and electronic filing. If you submit comments by mail and would like to know that they reached the facility, please enclose a stamped, self-addressed postcard or envelope.

    FMCSA will consider all comments and material received during the comment period and may change this proposed rule based on your comments. FMCSA may issue a final rule at any time after the close of the comment period.

    B. Viewing Comments and Documents

    To view comments, as well as any documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov. Insert the docket number, FMCSA-2016-0333, in the keyword box, and click “Search.” Next, click the “Open Docket Folder” button and choose the document to review. If you do not have access to the Internet, you may view the docket online by visiting the Docket Management Facility in Room W12-140 on the ground floor of the DOT West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., e.t., Monday through Friday, except Federal holidays.

    C. Privacy Act

    In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, including any personal information the commenter provides, to www.regulations.gov, as described in the system of records notice (DOT/ALL-14 FDMS), which can be reviewed at www.dottransportation.gov/privacy.

    D. Advance Notice of Proposed Rulemaking Not Required

    Under the provisions of 49 U.S.C. 31136(f) and (g) (added by section 5202 of the FAST Act), FMCSA is required to publish an advance notice of proposed rulemaking when a rulemaking is likely to lead to the promulgation of a major rule, unless the Agency finds good cause that an ANPRM is impracticable, unnecessary, or contrary to the public interest. This NPRM is not subject to these provisions, because it is not likely to lead to the promulgation of a major rule.

    II. Executive Summary A. Purpose of the Proposed Rule

    The purpose of this proposed rule is to amend the Federal Motor Carrier Safety Regulations (FMCSRs) to establish a process for qualified physicians employed in the Department of Veterans Affairs (VA) (qualified VA physicians) to be listed on the Agency's National Registry of Certified Medical Examiners (National Registry). After training and testing they become certified VA medical examiners that can perform medical examinations of commercial motor vehicle (CMV) operators who are military veterans, and issue Medical Examiner's Certificates (MECs) to those same operators as required by the Fixing America's Surface Transportation Act (FAST Act), Public Law 114-94, div. A, title V, § 5403, Dec. 4, 2015, 129 Stat. 1548 (set out as a note to 49 U.S.C. 31149).

    As stated in the FAST Act, qualified VA physicians must (a) be employed in the Department of Veterans Affairs; (b) be familiar with FMCSA's standards for, and physical requirements of, a CMV operator requiring medical certification; and (c) have never “acted fraudulently” with respect to such certification. Qualified VA physicians would be listed on the National Registry after completing training and testing provided by FMCSA and delivered through a web-based training system operated by the VA, and, upon successful completion, be allowed to conduct medical examinations of and issue MECs only to CMV drivers who are veterans enrolled in the health care system established under 38 U.S.C. 1705(a) that operate a CMV (veteran operator).

    B. Summary of Major Provisions

    Through this rulemaking, FMCSA would establish an alternate process for qualified VA physicians to complete comparable training and testing developed by FMCSA and delivered through the VA's Web-based training system prior to being listed on the National Registry. This is an alternative to VA physicians obtaining training and testing through the private sector.

    Qualified VA physicians are subject to the same provisions of 49 CFR 390 subpart D, except for the differences in the eligibility, training, and testing requirements for any other healthcare professional seeking Medical Examiner (ME) certification. Qualified VA physicians must be either a doctor of medicine or doctor of osteopathy currently employed in the VA; be licensed, certified, or registered in accordance with applicable State laws and regulations to perform physical examinations; be familiar with FMCSA's standards for, and physical requirements of, a CMV operator requiring medical certification by completing training provided by FMCSA and delivered through a web-based training system operated by the VA; pass the medical examiner certification test provided by FMCSA and administered through a web-based training system operated by the VA; and have never “acted fraudulently” with respect to such certification of a CMV operator, including by fraudulently awarding a medical certificate. Qualified VA physicians register on the National Registry System, complete the training and testing provided by FMCSA and delivered through a web-based training system operated by the VA, and after fulfilling the requirements would be listed on the National Registry. Once certified and listed on the National Registry, qualified VA physicians become certified VA MEs.1 This will allow such physicians to conduct medical examinations of and issue MECs only to veteran operators enrolled in the VA health care system.

    1 For clarification, FMCSA is using the term qualified VA physician to define VA physician prior to becoming certified and listed on the National Registry while the term certified VA medical examiner refers to the individual who has been certified and listed on the National Registry.

    If a certified VA medical examiner is no longer employed in the VA, but would like to remain listed on the National Registry, the physician must update his or her registration information within 30 days or submit such a change in registration information prior to conducting any physical examination of a CMV driver or issuing any medical examiner's certificates. Therefore, after the registration is updated the certified VA medical examiner becomes a certified medical examiner who may perform physical examinations and issue certificates to any CMV driver.

    C. Benefits and Costs

    The Agency estimates that costs of the proposed rule would be minimal, with an annualized value of $101,739 at a 7% discount rate. The costs would consist of Federal government information technology (IT)-related expenses, Help Desk operating costs, and curriculum and testing development. Insufficient data are available to quantify the benefits of the proposed rule, as FMCSA does not know how many qualified VA physicians will complete the certification process. FMCSA estimates the per-physician savings (for certifying qualified VA physicians seeking to become certified VA MEs listed on the National Registry) at $614, resulting from the use of online-only training and testing that eliminates travel costs. Non-quantifiable benefits may result from the increased availability for veteran operators to receive their DOT physical.

    III. Abbreviations and Acronyms CDL Commercial Driver's License CLP Commercial Learner's Permit CMV Commercial Motor Vehicle DOT Department of Transportation FMCSA Federal Motor Carrier Safety Administration FMCSR Federal Motor Carrier Safety Regulations FAST Act Fixing America's Surface Transportation Act FR Federal Register IRFA Initial Regulatory Flexibility Analysis IT Information Technology ME Medical Examiners MEC Medical Examiner's Certificates MER Medical Examination Report National Registry National Registry of Certified Medical Examiners RFA Regulatory Flexibility Act § Section symbol SDLA State Driver Licensing Agency U.S.C. United States Code VA Department of Veterans Affairs IV. Legal Basis for the Rulemaking

    The legal authority for this proposed rule is derived from 49 U.S.C. 31136 and 31149, as supplemented by section 5403 of the FAST Act. Section 31136(a)(3) requires that operators of CMVs be physically qualified to operate safely, as determined and certified by an ME listed on the National Registry. Section 31149(d) requires FMCSA to ensure that MEs listed on the National Registry are qualified to perform the physical examinations of CMV operators, and to certify that such operators meet the physical qualification standards. In order to ensure that MEs are qualified for listing on the National Registry, 49 U.S.C. 31149(c)(1)(D) requires them to receive training based on core curriculum requirements developed by FMCSA in consultation with the Medical Review Board (established under 49 U.S.C. 31149(a)), to pass a certification examination, and to demonstrate an ability to comply with reporting requirements established by FMCSA.

    Section 5403 of the FAST Act supplements the general provisions of section 31149 by providing for physicians employed in the VA to be listed on the National Registry and to perform the physical examination of veterans who require a physical examination and a medical certificate to operate a CMV. In order to be qualified for listing on the National Registry, such physicians must be familiar with the physical standards and requirements for operators of CMVs. They must also have never been found to have acted fraudulently with respect to a medical examiner's certificate for a CMV operator. Certified VA MEs on the National Registry may perform examinations on, and issue medical examiner's certificates to, only veterans enrolled in the health care system operated by the VA.

    There is general authority to adopt regulations to implement these provisions from both 49 U.S.C. 31136(a) and 49 U.S.C. 31149(e). Such authority has been delegated to the Administrator of FMCSA by 49 CFR 1.87.

    V. Background A. National Registry of Certified MEs

    Prior to the National Registry, there was no required training program for the medical professionals who conduct driver physical examinations, although the FMCSRs required MEs to be knowledgeable about the regulations (49 CFR 391.43(c)(1)). No specific knowledge of the Agency's physical qualification standards was required or verified by testing. As a result, some of the medical professionals who conducted these examinations were unfamiliar with FMCSA's physical qualification standards and how to apply them. These medical professionals may have also been unaware of the mental and physical rigors that accompany the occupation of CMV drivers, and how various medical conditions (and the therapies used to treat them) can affect the ability of drivers to safely operate CMVs.

    In 2012, FMCSA issued a final rule establishing the National Registry (77 FR 24104, April 20, 2012) to improve highway safety and driver health by requiring that MEs be trained and certified so they can effectively determine whether a CMV driver's medical fitness for duty meets FMCSA's standards. The program implements the requirements of 49 U.S.C. 31149 and requires MEs who conduct physical examinations for CMV drivers to meet the following criteria: (1) Complete certain training concerning FMCSA's physical qualification standards; (2) pass a test to verify an understanding of those standards; and (3) maintain and demonstrate competence through periodic training and testing. Following the establishment of the National Registry, the FMCSRs were amended to require drivers to be examined and certified by only those MEs listed on the Agency's National Registry, and only MECs issued by MEs listed on the National Registry will be acceptable as valid proof of medical certification.

    To be listed on the National Registry, MEs are required to attend an accredited training program and pass a certification test to assess their knowledge of FMCSA's physical qualifications standards and how to apply them to drivers. To maintain their certification and listing on the National Registry, MEs are required to complete training at five-year intervals and to complete training and pass a recertification test every 10 years.

    Certified MEs listed on the National Registry who conduct medical examinations of CMV drivers are required to submit on a monthly basis via their individual password-protected National Registry account a CMV Driver Medical Examination Results Form, MCSA-5850, to FMCSA for each physical examination conducted. Certified MEs also are required to retain a copy of the Medical Examination Report (MER) Form, MCSA-5875, and MEC, MCSA-5876, for all drivers they examine and certify, for at least three years from the examination date. The MER Form, MCSA-5875, lists the driver's health history and specific results of the various medical tests and assessments used to determine if a driver meets the physical qualification standards set forth in 49 CFR part 391, subpart E. In addition, certified MEs are required to issue a MEC, Form MCSA-5876, to those drivers who they determine meet FMCSA's physical qualification standards.

    B. Medical Examiner's Certification Integration

    On April 23, 2015, FMCSA published the Medical Examiner's Certification Integration final rule (80 FR 22790), a follow-on rule to the National Registry, which requires MEs performing physical examinations of CMV drivers to use a newly developed MER Form, MCSA-5875, in place of the former MER Form and to use Form MCSA-5876 for the MEC. In addition, beginning June 22, 2018, this rule will require certified MEs to report results of all CMV drivers' physical examinations performed (including the results of examinations where the driver was found not to be qualified) to FMCSA by midnight (local time) of the next calendar day following the examination. For commercial learner's permit (CLP) and commercial driver's license (CDL) applicants/holders, FMCSA will electronically transmit driver identification, examination results, and restriction information from the National Registry to the State Driver's Licensing Agencies (SDLAs). The Agency will also electronically transmit medical variance information for all CMV drivers to the SDLAs. MEs will still be required to provide drivers of CMVs that do not require a CDL/CLP with an MEC, Form MCSA-5876.

    VI. Discussion of Proposed Rule A. Overview

    As required by 5403 of FAST Act, FMCSA consulted with the Secretary of Veterans Affairs and is now proposing to establish a process for qualified VA physicians employed in the VA to be included on FMCSA's National Registry, perform medical examinations of CMV drivers who are veteran operators, and issue MECs to qualified drivers. Qualified VA physicians would be listed on the National Registry after registering on the National Registry System, and completing training and testing provided by FMCSA and delivered through a web-based training system operated by the VA. Upon successful completion, certified VA MEs will be allowed to conduct medical examinations of, and issue MECs only to, veteran operators enrolled in the VA health care system. In addition to the requirements proposed, certified VA MEs will be subject to some of the other provisions of 49 CFR 390 subpart D as are all other certified MEs listed on the National Registry.

    B. Eligibility

    National Registry eligibility requirements for medical examiner certification require that the person be an advanced practice nurse, doctor of chiropractic, doctor of medicine, doctor of osteopathy, physician assistant, or other medical professional authorized by applicable State laws and regulations to perform physical examinations. As required by the statute, this proposed rule limits eligibility of qualified VA physicians to only those who are either doctors of medicine or doctors of osteopathy and employed in the VA.

    Consistent with the FAST Act, this proposed rule adds the requirement that qualified VA physicians must never have “acted fraudulently” with respect to such certification of a CMV operator, including fraudulently awarding a MEC.

    This proposed rule has different licensure requirements in that qualified VA physicians may be able to practice in additional States without being licensed, certified, or registered in each State. In accordance with the provisions of 38 U.S.C. 7402(a) and (b)(1), the VA Handbook 5005/85,2 Staffing (Qualification Standard for the Appointment of Physicians, GS-0602, in VA), that provides the physician qualification standards, states that physicians must possess a current, full and unrestricted license to practice medicine or surgery in a State, Territory, or Commonwealth of the United States, or in the District of Columbia, and must maintain current registration in the State of licensure if it is a requirement for continuing active, current licensure. The VA Handbook does not specify that physicians must be licensed in each State where they practice medicine. Assuming they meet licensure requirements prescribed by statute and VA policy, they may practice at any VA facility, regardless of its location or the practitioner's State of licensure. Therefore, this proposed rule would require qualified VA physicians who become certified to continue to be licensed, certified, or registered in a State to perform physical examinations. Similarly, this proposed rule would require qualified VA physicians who become certified to maintain documentation of State licensure, registration, or certification to perform physical examinations.

    2http://www1.va.gov/vapubs/search_action.cfm?dType=2, accessed September 20, 2016.

    C. Training Requirements

    Instead of completing a training program conducted by a private training organization that meets the requirements of 49 CFR 390.105, including providing training based on the core curriculum specifications developed by FMCSA, qualified VA physicians must become familiar with FMCSA's standards for, and physical requirements of, a CMV operator requiring medical certification. This would be accomplished by completing training provided by FMCSA and delivered through a Web-based training system operated by the VA. Since the training is being provided by FMCSA, it will be comparable to the core curriculum guidelines provided to private training organizations.3 The training would be an interactive, online training course and would include at least the following: (1) An overview of all FMCSA medical standards; (2) an overview of how the Federal medical exemption programs factor into the qualification decision; (3) an administrative component that includes an overview of the driver examination forms; and (4) information regarding the use of the National Registry and the National Registry System.

    3 See 78 FR 28403 (May 17, 2011) and https://www.regulations.gov/document?D=FMCSA-2008-0363-0096.

    D. Testing Requirements

    Instead of completing the testing requirements of 49 CFR 390.107 by using a testing organization that has been approved by FMCSA to deliver the test, qualified VA physicians must pass a comparable certification test provided by FMCSA and administered through a Web-based training system operated by the VA. After completing the training described above, qualified VA physicians would be required to take a test and receive a passing grade. The grade received by each qualified VA physician would be electronically transmitted from the Web-based training system to the National Registry System for posting to the physician's National Registry account.

    E. Maintaining Certification

    One of the requirements for maintaining certification and continued listing on the National Registry is that certified MEs must continue to be licensed, certified, or registered, and authorized to perform physical examinations, in accordance with applicable State laws and regulations of each State in which the ME performs examinations. This proposed rule would require qualified VA physicians who become certified to continue to be licensed, certified, or registered in a State to perform physical examinations.

    Another requirement for maintaining certification and continued listing on the National Registry is that certified MEs must maintain documentation of State licensure, registration, or certification to perform physical examinations for each State in which the ME performs examinations. Because certified VA medical examiners may be able to practice in additional States without being licensed, certified, or registered in each State, this proposed rule would only require certified VA medical examiners to maintain documentation of State licensure, registration, or certification to perform physical examinations, again without reference to each State in which the physician performs examinations.

    If a certified VA medical examiner is no longer employed in the VA, but would like to remain listed on the National Registry, the physician must update his or her registration information within 30 days or submit such a change in registration information prior to conducting any physical examination of a CMV driver or issuing any medical examiner's certificates. Pursuant to its broad authority under 49 U.S.C. 31149(c)(1)(D), FMCSA proposes to recognize the comparable training received by qualified VA physicians to be suitable for such physicians to continue to be listed on the National Registry. But physicians wishing to continue such listing must be licensed to perform physical examinations in any State where examinations of CMV drivers will be conducted. Therefore, after the registration is updated the previously certified VA medical examiner becomes a certified medical examiner who may perform physical examinations and issue certificates to any CMV driver.

    F. Performing DOT Medical Examinations

    The National Registry regulations allow for certified MEs to perform examinations of all drivers requesting a DOT medical examination. This proposed rule would limit certified VA medical examiners, to conducting examinations of only veteran operators, while they are employed in the VA. This process would provide veteran operators with the option of utilizing their enrollment in the VA healthcare system to obtain their MECs.

    G. Proposed Changes to Certification Requirements for All MEs

    After several years of evaluating the operation of the National Registry System, FMCSA proposes changes to the existing requirements for becoming a certified ME. FMCSA proposes to add a requirement that to receive ME certification from FMCSA, prior to taking the training and testing, a person must register on the National Registry System and receive a unique identifier. This has always been how the National Registry System has operated and is the first step in becoming a certified ME but was not specifically included in the regulation.

    Additionally, FMCSA proposes to remove the prohibition against an applicant taking the test more than once every 30 days. Since the regulation does not specify any actions that must be taken within the 30-day waiting period (such as additional training), the Agency proposes to remove the provision.

    VII. Section-by-Section Analysis Part 390 Section 390.5 Definitions

    The Agency proposes adding new definitions for the terms “certified VA medical examiner,” “qualified VA physician” and “veteran operator.”

    Section 390.103 Eligibility Requirements for Medical Examiner Certification

    As a whole, FMCSA has reorganized and restructured the paragraphs of this section to introduce separate eligibility requirements for a qualified VA physician. Specifically, the Agency adds the word “either” after “must” in paragraph (a). Additionally, it adds a new paragraph (a)(1)(ii). Third, FMCSA adds a new paragraph (a)(2) and deletes from (a)(3) the sentence stating “An applicant must not take the test more than once every 30 days.” Finally, the Agency adds the citation “or (a)(2)” to paragraph (b).

    Section 390.105 Medical Examiner Training Programs

    The Agency adds a new paragraph (c) setting out the training requirements for qualified VA physicians.

    Section 390.107 Medical Examiner Certification Testing

    FMCSA adds a new paragraph (e) setting out the testing requirements for qualified VA physicians.

    Section 390.111 Requirements for Continued Listing on the National Registry of Certified Medical Examiners

    In paragraph (a)(2), FMCSA creates new paragraphs (i) and (ii). In new (a)(2)(i), the Agency deletes the word “application” and replaces it with “registration.” Additionally, in this paragraph, the cross-reference is changed to “§ 390.103(a)(1)(ii).” Finally, the Agency adds a new paragraph (a)(2)(ii) that states what happens when a certified VA medical examiner is no longer employed by the VA.

    FMCSA divides both paragraphs (a)(3) and (a)(4) into two separate paragraphs: paragraph (i) with the existing requirements and new paragraph (ii) with the new requirements for certified VA MEs. In the new paragraph (a)(4)(i), FMCSA adds “and (b)” after § 390.105(a). In paragraph (a)(5)(ii)(B), the cross-reference is updated to read “§ 390.103(a)(1)(iv) or (a)(2)(ii).”

    Finally, in paragraph (b), FMCSA changes the reference from “(4)” to “(5).”

    Section 390.115 Procedures for Removal From the National Registry of Certified Medical Examiners

    In paragraph (d)(2)(ii), the Agency changed the cross-reference to read “§ 390.103(a)(1)(ii).” Additionally, paragraph (d)(2)(v) is redesignated as (d)(2)(vi) and the Agency inserts new language for (d)(2)(v).

    In paragraph (f)(2), the cross-reference is changed to read “§ 390.103(a)(1)(ii).” Paragraph (f)(4) is divided into two separate paragraphs: (i) With the existing requirements and new paragraph (ii) with the new requirements for certified VA MEs.

    Part 391 Section 391.43

    Paragraph (b) is revised by adding “Exceptions. (1)” before “A licensed optometrist” and dividing the paragraph into two separate paragraphs: Paragraph (1) relating to an optometrist and new paragraph (2) relating to veteran operators.

    VIII. Regulatory Analyses A. E.O. 12866 (Regulatory Planning and Review and DOT Regulatory Policies and Procedures as Supplemented by E.O. 13563)

    This proposed rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by E.O. 13563 (76 FR 3821, January 21, 2011). It is also not significant within the meaning of DOT regulatory policies and procedures (DOT Order 2100.5 dated May 22, 1980; 44 FR 11034, February 26, 1979) and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. Therefore, the Office of Management and Budget has not reviewed the proposed rule under that Order. However, as required by 49 U.S.C. 31136(c)(2)(A), the Agency will consider the cost and benefits of this proposed rule. The Agency estimates the economic benefits and costs of the proposed rule would be less than $100 million annually.

    The objective of the proposed rule is to develop a direct process to allow qualified VA physicians employed in the VA to perform physical examinations for veteran operators and to list such physicians on the National Registry. Absent this proposed rule, qualified VA physicians may choose to become certified MEs listed on the National Registry; however, the resource and qualification burden to do so is greater than under the proposed rule. There are just 10 VA physicians certified and listed as MEs on the National Registry under the current process, a small fraction of the 49,943 listed MEs.4 The Agency lacks data to estimate whether the proposed rule would impact the number of qualified VA physicians who would obtain certification as certified VA MEs; however, as this proposed rule reduces the cost to do so, the Agency assumes that this number would increase or, at minimum, remain constant relative to the baseline.

    4 A total of 25 medical professionals employed in the VA are listed on the National Registry as of September 16, 2016; of these, 10 are physicians. Nationwide, a total of 49,943 medical professionals are listed on the National Registry as of September 12, 2016. See https://nationalregistry.fmcsa.dot.gov/NRPublicUI/home.seam (Accessed September 16, 2016).

    A detailed list of requirements to become a certified ME is in § 390.103. The three requirements are:

    • Must be licensed, certified, or registered according to State laws and regulations to perform physical examinations;

    • Must complete required training from a training organization;

    • Must pass the medical examiner certification test at an FMCSA-approved testing center.

    The requirements are modified by the proposed rule in order to make training and testing readily accessible to qualified VA physicians. In summary, the quantifiable benefits and costs of the proposed rule are: (1) Benefits in the form of cost savings for qualified VA physicians seeking to become certified VA MEs on the National Registry, through reductions in time and travel expenses; (2) costs associated with the development of an online training and testing module, and (3) information technology (IT) tasks required to construct an interface between the National Registry System and VA's web-based training system. The interface will provide a seamless transfer of completed training and testing information for each registered qualified VA physician to be listed on the National Registry.

    To estimate the benefits resulting from cost savings of the proposed rule, the Agency utilized estimated health care professionals' ME training and testing-related travel costs from the December 2011 regulatory evaluation of the National Registry final rule.5 For the evaluation of the proposed rule, those costs are adjusted to 2015 dollars in order to subsequently estimate the reduction in those costs attributable to the proposed rule. In the aforementioned 2011 regulatory evaluation, the Agency estimated that 50 percent of health care professionals seeking to become certified MEs will complete the required training and testing online, while the remaining 50 percent will participate in classroom-based training. At present, there are no testing providers offering online testing. Adjusting for a 50/50 online vs. classroom split for training and the current absence of online testing, FMCSA estimates that in the baseline, a qualified VA physician seeking to become a certified VA ME would, on average, incur 4.5 hours of travel time costs and 105 miles of vehicle mileage expenses.6 Under the proposed rule, training and testing for qualified VA physicians will be online-only, using the VA's web-based training system. This eliminates the travel time costs and the vehicle mileage costs that would otherwise be incurred in the absence of the proposed rule. Four and a half hours of travel time per participating qualified VA physician would be saved. The Bureau of Labor Statistics (BLS) Occupational Employment Statistics, May 2015, data indicate the weighted average hourly wage for general practitioners, internists, physicians, and surgeons is $93.96.7 Adjusting this value for fringe benefits using data from the BLS Employer Costs for Employee Compensation database, a fringe benefit markup of 31 percent is applied, resulting in an hourly valuation of $123.09, rounded to $123 for purposes of this analysis.8 At an average of 4.5 hours of travel time saved per participating qualified VA physician, the proposed rule would provide a per-physician savings of $554 ($553.50 = 4.5 × $123, rounded to the nearest whole number).

    5 The 2011 regulatory evaluation can be accessed at https://www.regulations.gov/document?D=FMCSA-2008-0363-0115 (Accessed September, 6, 2016).

    6 4.5 hours assumes 3 hours roundtrip travel for training (incurred by 50% of qualified VA physicians) and 3 hours of roundtrip travel for testing (for 100% of qualified VA physicians). 4.5 hours = (3 × 0.50 + 3 × 1.0). 105 miles of travel by vehicle assumes a 70-mile roundtrip distance for training (incurred by 50% of qualified VA physicians) and a 70-mile roundtrip distance for testing (incurred by 100% of qualified VA physicians). 105 = (70 × 0.50 + 70 × 1.0). Distance and time inputs are consistent with those in the 2011 regulatory evaluation of the National Registry final rule.

    7 See http://www.bls.gov/oes/current/oes_nat.htm (Accessed September 6, 2016).

    8 The 31 percent fringe benefit markup is obtained from BLS series “All Civilian Total benefits for Professional and related occupations; Percent of total compensation” and corresponds to the Q1 2016 value.

    FMCSA separately estimates the cost savings resulting from the average reduction of 105 miles of travel per physician subsequent to the proposed rule. Consistent with the approach of the 2011 regulatory evaluation for the National Registry final rule, the Agency monetizes this benefit using the standard Internal Revenue Service (IRS) mileage rate. The 2015 standard IRS mileage rate is 57.5 cents per mile.9 By this measure, the per-physician travel expense savings is $60 ($60 = 57.5 cents per mile × 105 miles, rounded to the nearest whole number).

    9 See https://www.irs.gov/tax-professionals/standard-mileage-rates/ (Accessed September 21, 2016).

    The total quantifiable benefit of the proposed rule (per qualified VA physician seeking to become a certified VA ME) is estimated to be $614. This estimate is the sum of the projected savings of $554 in travel time costs and $60 in travel expenses.

    Participation of qualified VA physicians in the National Registry is voluntary. It is important to note that the cost savings to the Federal government are specific to the elimination of time and travel expenses associated with initial ME certification training and testing requirements, and not to subsequent refresher training and recertification testing.10

    10 49 CFR 390.111(a)(5)(i) and (ii) require MEs to complete periodic training every 5 years after the date of issuance of their credential, and complete training and testing no later than 10 years after the date of issuance of their credential.

    There may also be non-quantifiable benefits of the proposed rule to veteran operators if qualified VA physicians' participation in the National Registry increases the availability of and access to certified VA MEs. This may reduce waiting periods for appointments for veteran operators enrolled in the VA health care system. Shorter waiting periods may expedite a veteran operator's ability to begin driving for personal income. Also, the potential addition of qualified VA physicians to the list of certified MEs in closer proximity to a veteran operator's residence may reduce the cost of travel time and the use of a personal vehicle for those veteran operators seeking to be examined by a certified VA ME.11 The Agency lacks data on the number of veterans enrolled in the VA healthcare system now, or in the future, who might take advantage of this benefit, or their proximity to a VA ME who might be added to the National Registry under this proposed rule. Therefore, FMCSA is unable to quantify this benefit of the proposed rule.

    11 The geographic diversity of VA medical professionals listed on the National Registry is limited in scope and number. The 25 VA practitioners listed on the National Registry are located in 16 states. Of these VA practitioners, a total of 13 are located in California (2), Colorado (4), North Dakota (3) and Wisconsin (4). See https://nationalregistry.fmcsa.dot.gov/NRPublicUI/home.seam (Accessed September 16, 2016).

    The costs of the proposed rule are strictly IT systems-related and will be borne by the Federal government. These costs consist of: (1) Development of an online medical examiner certification training and testing module for qualified VA physicians; (2) development and maintenance of an interface between the VA's web-based training system and the National Registry System so that qualified VA physicians' certification training and test results can be transmitted to the National Registry; and (3) operation of the National Registry Help Desk to assist qualified VA physicians with registration for, and completion of, the online training and testing. The VA and FMCSA are responsible for developing the interface between their respective IT systems.

    FMCSA has executed a contract with consultants who will develop the online curriculum. The training module will include a test at the end to ensure that qualified VA physicians seeking to become certified VA MEs complete and fully understand the standards for, and physical requirements of, a CMV operator. The results of the test will be posted to his or her National Registry account. The estimated cost of this contract is $84